Calculating cash investment of new partner RR

AJD Company recognizes construction revenue and expenses using the percentage of
completion method. During 20x4, a single long-term project was begun which continued
through 2005. Information on the project were as follows:
20x4 20x5
Accounts Receivables from Construction Contract. P 200,000 P 600,000
Constructions expenses 210,000 384,000
Construction in progress 244,000 728,000
Partial billings on contract 200,000 840,000
1. The profit recognize from the long-term construction contract should amount to:
20x4 20x5
a. P 44,000 P 456,000
b. 44,000 200,000
c. 34,000 256,000
d. 34,000 100,000
2. Remington Construction Company uses the percentage-of-completion method.

During 20x4, the company entered into a fixed-price contract to construct a building
for Sherman Company for P30,000,000. The following details pertain to the
contract:
At December 31,20x4 At December 31,20x4

Percentage of completion 25% 60%
Estimated total cost of contract P 22,500,000 P 25,000,000
Gross profit recognized to date 1,875,000 3,000,000
The amount of construction costs incurred during 20x5 was

a. P 15,000,000 c. P 5,625,000
b. P 9,375,000 d. P 2,500,000
3. Karen and Andrea are currently changing their partnership profit and loss ratios from
75/25 to 60/40. They have created a list of assets that have market and book value
differences. One of the assets is building with a P300,000 market value and book
P200,000 book value. Two years after changing the profit and loss ratios, the building
is sold for P380,000. How much of the profit is allocated to Karen?
1 |Practical Accounting 2
a. P 108,000 c. P 135,000
b. P 123,000 d. P 183,000
4. The JPB partnership reported net income of P160,000 for the year ended December
31, 20x4. According to the partnership agreement, partnership profits and losses are
to be distributed as follows:
J P B
Salaries P 50,000 P 60,000 P 30,000
Bonus on net in income 10% 5% 10%
Remainder (if positive) 60% 30% 10%
Remainder (If negative) 30% 40% 30%
How should partnership net income for 20x4 be allocated to J, P, and B?

J P B
a. P 96,000 P 48,000 P 16,000
b. P 58,000 P 64,000 P 38,000
c. P 60,000 P 60,000 P 40,000
d. P 66,000 P 68,000 P 46,000
5. William desires to purchases a one-fourth capital and profit and loss interest in the
partnership of Eli, George, and Dick. The three partners agree to sell William one-
fourth of their respective capital and profit and loss interests in exchange for a total
payment of P40,000. The capital accounts and the respective percentage interests in
profits and losses immediately before the sale to William are as follows:
Eli capital . . . . . . . . . . . . . . . . .. . . . . . . (60%) P 80,000

George capital . . . . . . . . . . . . . . .. . . . . (30%) 40,000
Dick capital . . . . . . . . . . . . . . . . . . . . . . (10%) 20,000
P140,000
All other assets and liabilities are fairly valued, and implied goodwill is to be recorded
prior to the acquisition by William. Immediately after William’s acquisition, what should
be the capital balances of Eli, George, and Dick, respectively?
a. P60,000, P30,000, P15,000 c. P77,000, P38,500, P19,500
b. P69,000, P34,500, P16,500 d. P92,000, P46,000, P22,000
Use the following information for questions 6 and 7: A
partnership has the following capital balances:
Partners Capital Balance

William (40% of gains and losses) P 220,000
Jennings (40%) Bryan 160,000
(20%) 110,000
6. Darrow invests P270,000 in cash for a 30 percent ownership interest. The money
goes to the original partners. Goodwill is to be recorded. How much goodwill should
be recognized, and what is Darrow’s beginning capital balances?
a. P410,000 and P270,000 c. P140,000 and P189,000
b. P140,000 and P270,000 d. P410,000 and P189,000
7. Darrow invests P250,000 in cash for a 30 percent ownership interest. The money
goes to the business. No goodwill or other revaluation is to be recorded. After the
transaction, what is Jenning’s capital balance?
a. P160,000 c. P170,200
b. P168,000 d. P171,200
8. If a partnership has only non-cash assets, all liabilities have been properly disbursed,
and no additional liquidation expenses are expected, the minimum potential loss to
the partnership in the liquidation process is:
a. the fair market value of the non-cash assets
b. the book value of the non-cash assets
c. the estimated proceeds from the sale of the assets less the book value of the
noncash assets
d. none of the above
9. On January 1, 20x4, Orton Co. sold a used machine to King Inc. for P350,000. On this
date, the machine had a depreciated cost of P245,000. King paid P50,000 cash on
January 1, 20x4 and signed a P300,000 note bearing interest at 10%. The note was
payable in three annual installments of P100,000 beginning January 1, 20x5. Orton
appropriately accounted for the sale under the installment method. King made a
timely payment of the first installment on January 1, 20x5 of P130,000, which
included interest
of P30,000 to date of payment At December 31, 20x5, Orton has deferred gross profit of
a. P70,000 c. P60,000
b. P66,000 d. P51,000
10. Cost estimates on a long term contract may indicate that a loss will result on the
completion of the entire contract. In this case, the entire expected loss should be- a.
Amortized over the total construction period
b. Recognized in the current period
c. Deferred and recognized when the contract is 50% complete
d. Deferred and recognized when the contract is completed
11. When A retired from the partnership of A, B, and C, the final settlement of A’s
interest is less than his capital balance. Under the bonus method, the excess would:
a. Reduce the capital balances of B and C
b. Increase the capital balances of B and C
c. Be recorded as an expense
d. Had no effect on the capital of B and C
12. Which of the following statement is true?

a. An income reported by the branch is recorded by the home office as a debit
to income Summary-Branch
b.. The elimination entries on the book of either the home office at the branch are
made only for the purpose of preparing financial statements for external users.
c.. The transfer of branch net income to the Home Office account represents a branch
closing entry.
d.. Upon instruction by the home office, Palawan branch sends cash to Bohol branch.
The entry to record this transfer in the home office books is a debit to investment in
Palawan Branch and a credit to investment in Bohol Branch.
Use the following information for question 13 and 14:

OO and PP are partners sharing profits in this proportion- 60:40. A balance sheet
prepared for the partners on April 1, 20x4 shows the following:
Cash. . . . . . . . . . . . . . . . .. . . . . . . P 48,000 Accounts payable. . . . . . . . . . .P 89,000

Accounts Receivables. . . . . . . . 92,000 OO, capital. . . . . . . . . . . . . . . . 133,000
Inventories. . . . . . . . . . . . . . . . . 165,000 PP, capital. . . . . . . . . . . . . . . . . 108,000
Equipment. . . . . . . .. . . . . . . . . . . 70,000
Less: Accumulated
Depreciation. . . . 45,025,000
Total Assets. . . . . . . . . . . . . . . P330,000 Total Liabilities and Capital. . . P330,000
On this date, the partners agree to admit RR as a partner. The terms of the agreement
are summarized below.
Assets and Liabilities are to be restated as follows:
• An allowance for possible uncollectible of P4,500 is to be established.
• Inventories are to be restated at their present replacement value of
P170,000.
• Accrued expenses of P4,000 are to be recognized.
OO, PP and RR will divide profits in the ratio of 5:3:2. Capital balances of the partners
after the formation of the new partnership are to be in the aforementioned ratio, with
OO and PP making cash settlement between them outside of the partnership to adjust
their capitals, and RR investing cash in the partnership for his interest.
13. The cash to be invested by RR is:

a. P60,250 c. P50,000
b. P47,500 d. P59,375
14. The total capital of the partnership after the admission of RR is:
a. P296,875 c. P237,500
b. P301,250 d. P286,850
15. Cash settlement between OO and PP is:

a. OO will pay PP P17,537.50 c. OO will invest P17,537.50
b. PP will pay OO P17,537.50 d. PP will withdraw P17,537.50
16. DO is admitted into the partnership of RE and MI by investing cash equivalent to ¼ of

their capital. Which of the following is true after the admission of DO? a. Assets of
the following will increase
b. Total partner’s equity remain the same
c. RE and MI capital decreased by ¼
d. Assets of the partnership will remain the same
CC admits DD for partnership interest in his business. The balance sheet accounts of CC
on November 30, 20x4 prior to the admission of DD are as follows:
Debit Credit
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P ?
Accounts Receivable . . . . . . . . . . . . . . . . . 96,000
Merchandise Inventory . . . . . . . . . . . . . . 144,000
Accounts Receivable . . . . . . . . . . . . . . . P49,000
.CC, capital . . . . . . . . . . . . . . . . . . . . . . . . ?
It is agreed that for purposes of establishing CC’s interest, the following adjustments
should be made:
1. An allowance for doubtful account of 2% of account receivable is to be established.
2. The merchandise inventory is to be valued at P160,000.
3.Prepaid expenses of P5,200 and accrued expenses of P3,200 are to be
recognized. DD is to invest cash of P113,640 to give him a one-third (1/3) interest in the
firm.
17. The balance of the capital of CC before the adjustments is:

a. P227,280 c. P211,200
b. P230,00 d. P250,000
18. The total assets of the partnerships after the formation is:
a. P393,720 c. P291,320
b. P340,920 d. P309,520
19. A partnership begins its first year of operations with the following capital balances:
Winston, Capital. . . . . . . . . . . . . . . . . . . . . . .P 110,000

Durham, Capital . . . . . . . . . . . . . . . . . . . . . . . 80,000
Salem, Capital . . . . . . . . . . . . . . . . . . . . . . . . . 110,000
According to the articles of partnership, all profits will be assigned as follows:

• Winston will be awarded an annual salary of P20,000 assigned to Salem.
• The partners will be attributed interest equal to 10 percent of the capital
balance as of the first day of the year.
• The remainder will be assigned on a 5:2:3 basis, respectively.
• Each partner is allowed to withdraw up to P10,000 per year.
Assume that the net loss for the first year of operations is P20,000 and that net income
for the subsequent year is P40,000. Assume also that each partner withdraws the
maximum amount from the business each period. What is the balance in Winston’s
capital account at the end of the second year?
a. P102,000 c. P108,600
b. P104,400 d. P109,200
20. A branch journal entry debiting Home Office and crediting cash may be prepared for
a. A home office’s transmittal of cash to the branch.
b. A branch office’s collection of branch’s accounts receivable.
c. A branch’s acquisition for cash of plant assets to be carried in the home office
accounting records.
d. A home office’s payment of branch expenses.
21. Partner A first contributed P20,000 of capital into an existing partnership on

February 1, 20x4 On June 1, 20x4, the partner contributed another P20,000. On
September 1, 20x4, the partner withdrew P15,000 from the partnership. Withdrawals in
excess of 5,000 are charged to the partner’s capital account. The partnership’s fiscal year
end is December 31.
The annual weighted-average capital balance is:
a. P25,000 c. P28,334
b. P26,667 d. P30,000

BB and CC share profits and losses in a ratio of 2:3, respectively. BB and CC receive salary
allowances of P10,000 and P20,000, also respectively, and both partners receive 10%
interest based upon the balance in their capital accounts on January 1. Partner’s
drawings are not used in determining the average capital balances. Total net income for
20x4 is P60,000. If net income after deducting the interest and salary allocations is
greater than P20,000, CC receives a bonus of 5% of the original amount of net income.
BB CC
January 1 capital balances P 200,000 P 300,000
Yearly Earnings (P 1,500 a month) 18,000 18,000
22. What are the total amounts for the allocation of interest, salary, and bonus, and,
how much over-allocation is present?
a. P60,000 and P0 c. P83,000 and P0
b. P80,000 and P20,000 d. P83,000 and P23,000
23. If the partnership experiences a net loss of 20,000 for the year, what will be the final
amount of profit or (loss) closed to each partner’s capital account?
a. (P30,000) to BB and P10,000 to CC c. (P8,000) to BB and (P12,000) to CC
b. (P10,000) to BB and (P10,000) to CC d. P10,000 to BB and (P30,000) to CC
24. Under the cost-recovery method

a. revenue, cost, and gross profit are recognized during production.
b. revenue and cost are recognized during production, but gross profit
recognition is deferred until all costs are incurred.
c. revenue, cost, and gross profit are recognized at the time the contract is
completed.
d. none of these.

John, Jeff and Jane decided to engage in a real estate venture as a partnership. John
invested P100,000 cash and Jeff provided office equipment that is carried on his books at
P82,000. The partners agree that the equipment has a fair value of P110,000. There is a
P30,000 note payable remaining on the equipment to be assumed by the partnership.
Although Jane has no physical assets to invest in the partnership, both John and Jeff
believe that her experience as a real estate appraiser is a valuable skill needed by the
partnership and is a basis for granting her a capital interest in the partnership. Assuming
that each partner is to receive an equal capital interest in the partnership.
25. Under the bonus method, what amounts should be recorded as capital for John, Jeff
and Jane at the formation at the partnership?
John Jeff Jane
a. P 60,000 P 60,000 P 60,000
b. P100,000 P 80,000 P 0
c. P 90,000 P 90,000 P 90,000
d. P100,000 P 80,000 P 0
26. Under the revaluation (goodwill) approach, what amounts should be recorded as
capital for John, Jeff, and Jane at the formation of the partnership?
John Jeff Jane
a. P 60,000 P 60,000 P 60,000
b. P100,000 P 80,000 P 0
c. P 90,000 P 90,000 P 90,000
d. P100,000 P 80,000 P 0
27. A partnership agreement calls for allocation of profits and losses by salary
allocations, a bonus allocation, interest on capital, with any remainder to be
allocated by preset ratios. If a partnership has a loss to allocate, generally which of
the following procedures would be applied?
a. Any loss would be allocated equally to all partners.
b. Any salary allocation criteria would not be used.
c. The bonus criteria would not be used.
d. The loss would be allocated using the profit and loss ratios, only.
28. On June 30, 20x4 the balance sheet of partnership of Williams, Brown, and Lowe,
together with their respective profit and loss ratios, is summarized as follows:
Assets, at cost . . . . . . . . . . . . P300,000 Williams loan. . . . . . . . . . . . . . P 15,000
Williams capital (20%). . . . . . . 70,000
Brown capital (20%) . . . . . . . . 65,000
Lowe capital (60%) . . . . . . . . . . 150,000
Williams has decided to retire from the partnership, and by mutual agreement the
assets are to be adjusted to their fair value of P360,000 at June 30, 20x4. It is agreed that
the partnership will pay Williams P102,000 cash for his partnership interest exclusive of
his loan, which is to be repaid in full. Goodwill is to be recorded in this transaction, as
implied (total) by the excess payment to Williams. After William’s retirement, what are
the capital account balances of Brown and Lowe, respectively?
a. P65,000 and P150,000 c. P73,000 and P174,000
b. P97,000 and P246,000 d. P77,000 and P186,000
29. James Dixon, a partner in an accounting firm, decided to withdraw from the
partnership. Dixon’s share of the partnership profits and losses was 20%. Upon
withdrawing from the partnership, he was paid P74,000 in final settlement for his
partnership interest. The total of the partner’s capital accounts before recognition of
partnership goodwill prior to Dixon’s withdrawal, the remaining partner’s capital
accounts, excluding their share of goodwill, totaled P160,000. The total agreed-upon
goodwill (revaluation of asset) of the firm was:
a. P120,000 c.P160,000
b. P140,000 d.P250,000
30. A local partnership was considering the possibility of liquidation since one of the
partners (Ding) was insolvent. Capital balances at that time were as follows. Profits
and losses were divided on a 4:2:2:2 basis, respectively.
Ding, capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .P 60,000
Laurel, capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .P 67,000
Ezzard, capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 17,000
Tillman, capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 96,000
Ding’s creditors filed a P25,000 claim against the partnership’s asset. At that time, the
partnership held assets reported at P360,000 and liabilities of P120,000. If the assets
could be sold for P228,000 what is the minimum amount that Ding’s creditors would
have received?
a. P -0- c. P 36,000
b. P 2,500 d. P 38,250
31. A local partnership was in the process of liquidating and reported the following
balances:
Justice, capital (40% share of all profits and losses) . . . . . . . . . . . P 23,000
Zobart, capital (35%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,000
Douglas, capital (25%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,000)
Douglas indicated that the P14,000 deficit would be covered by a forthcoming
contribution. However, the two remaining partners asked to receive the P31,000 that
was then available. How much of this money Justice receive?
a. P 15,000 c. P 17,333
b. P 15,467 d. P 15,533
32. A business combination whereby the company taking over the properties of other
companies retains its identity and continues operations as a longer unit and the
other companies are dissolved is known as a
a. Consolidation c. Stock Acquisition
b. Merger d. Quasi-reorganization
33. Which of the following statement is false?

a. Only the home office can debit or credit the Branch Current account in its
books.
b. When a transaction affects a reciprocal account, entries are required on both
home office and branch books.
c. The scope of activity of an agency is essentially the same as that of the
branch.
d. The transactions of the agency may be merged with the transactions of the
home office or they may be accounted for separately.
Use the following information for questions 34 and 36

Orville Company recently petitioned for bankruptcy and is now in the process of
preparing a statement of affairs. The carrying values and estimated fair values of the
assets of Orville Company are as follows:
Carrying Value Fair Value

Cash. . . . . . . . . . . . . . . . . . . . P 20,000 P 20,000
Accounts Receivables. . . . . . 45,000 30,000
Inventory . . . . . . . . . . . . . . . . 60,000 35,000
Land . . . . . . . . . . . . . . . . . . . . 75,000 70,000
Building (net) . . .. . . . . . . . . . 180,000 100,000
Equipment (net) . . . . . . . . . . 170,000 80,000
Total . . . . . . . . . . . . . . . . . . . . P 550,000 P 335,000
Debts of Orville are as follows:
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 60,000
Wages Payable (all have priority) . . . . . . . . . . . . . . . 10,000
Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Notes payable (secured by 120,000
receivable and inventory)
Interest on Notes Payable. . . . . . . . . . . . . . . . . . . . . 6,000
Bonds Payable (secured by land and building) . . . . 150,000
Interest on bonds Payable . . . . . . . . . . . . . . .. . . . . . 7,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 363,000
34. What is the total amount of unsecured claims?

a. P 93,000 c. P 121,000
b. P113,000 d. P 126,000
35. What estimated amount will be available for general unsecured creditors upon
liquidation?
a. P 28,000 c. P 113,000
b. P 93,000 d. P 121,000
36. What is the estimated dividend percentage?

a. 23% c. 77%
b. 93% d. 68%
Use the following information for 37 and 38:

Partners Dennis and Lilly have decided to liquidate their business. The following
information is available:
Cash . . . . . . . . . . . . . . . P 100,000 Accounts Payable . . . . . . . . . . P 100,000
Inventory . . . . . . . . . . . . 200,000 Dennis, Capital . . . . . . . . . . . . . 200,000
Lilly Capital . . . . . . . . . . . . . . . . 80,000
Total . . . . . . . . . . . . . . P 300,000 Total . . . . . . . . . . . . . . . . . . . . .P 300,000
Dennis and Lilly share profits and losses in a 3:2 ration. During the first month of
liquidation, half the inventory is sold for P60,000 of the accounts payable is paid. During
the second month, the rest of the inventory is sold for P45,000, and the remaining
accounts payables are paid. Cash is distributed at the end of each month, and the
liquidation is completed at the end of the second month.
37. Using a safe payments schedule, how much cash will be distributed to Dennis at the
end of the first month?
a. P 64,000 c. P 24,000
b. P 60,000 d. P 36,000
38. Assume instead that the remaining inventory was sold for P 10,000 in the second
month. What payments will be made to Dennis and Lilly at the end of the end of the
second month?
Dennis Lilly
a. P 0 P0
b. P10,000 P0
c. P 5,000 P 5,000
d. P 6,000 P 4,000
39. An entity acquired a 30% interest in another entity on year 1. In year 2 it acquired
another 50% equity interest in the same entity. Which of the following statement is
true?
I. The entity’s per-existing 30% equity interest should be remeasured at fair
value at the acquisition date.
II. The entity’s net assets should be remeasured at fair value at acquisition date.
a. I only c. Both I and II
b. II only d. Neither I nor II
40. The Naples Company uses the percentage-of-completion method and cost-to-cost
method for its long-term construction contracts. On one such contract, Naples
expects total revenues of P260,000 and total costs of P200,000. During the first year,
Naples incurred costs of P50,000 and billed the customer P30,000 under the
contract. At what net amount should Naples’ Construction in Progress for this
contract be reported at the end of the first year?
a. P 30,000 c. P 50,000
b. P 35,000 d. P 65,000
41. Lark Corp. has a contract to construct a P 5,000,000 cruise ship at an estimated cost
of P 4,000,000. The company will begin construction of the cruise ship in early
January 20x4 and expects to complete the project sometime in late 20x4. Lark Corp.
has never constructed a cruise ship before, and the customer has never operated a
cruise ship. Due to this and other circumstances, Lark Corp. believes there are
inherent hazards in the contract beyond the normal, recurring business risks. Lark
Corp. expects to recover all its costs under the contract. During 20x4 and 20x5, the
company has the following activity:
20x4 20x5
Costs to date P 980,000 P 2,040,000
Estimated costs to complete 3,020,000 1,960,000
Progress billings during the year 1,000,000 1,000,000
Cash collected during the year 648,000 1,280,000
On its statement of financial position at December 31, 20x5, what amount will be
reported related to the Construction in Process account? a. P40,000 costs in excess of
billings.
b. P1,020,000 costs in excess of billings.
c. P40,000 billings in excess of costs.
d. P20,000 billings in excess of costs.
Seasons Construction is constructing an office building under contract for Cannon Café.
The contract calls for progress billings and payments of P620,000 each quarter. The total
contract price is P7,440,000 and Seasons estimates total costs of P7,100,000. Seasons
estimates that the building will take 3 years to complete, and commences construction
on January 2, 20x4.
42. At December 31,20x4, Seasons estimates that it is 30% complete with the
construction, based on costs incurred. What is the total amount of Revenue from
Longterm Contracts recognized for 20x4 and what is the balance in the Accounts
Receivable account assuming Cannon Café has not yet made its last quarterly
payment?
Accounts
Revenue Receivable
a. P 2,480,000 P 2,480,000
b. P 2,130,000 P 620,000
c. P 2,232,000 P 620,000
d. P 2,130,000 P 2,480,000
43. At December 31,20x5, Seasons Construction estimates that it is 75% complete with
the building; however, the estimate of total costs to be incurred has risen to P
7,200,000 due to unanticipated price increases. What is the total amount of
Construction Expenses that Seasons will recognize for the year ended December
31,20x5?
a. P 5,400,000 c. P 3,195,000
b. P 3,150,000 d. P 3,270,000
Use the following information for questions 44 and 45:

Chicane Builders, Inc. employs the cost-to-cost method in determining the percentageof
–completion for revenue recognition. The company’s records show the following
information on a recently completed project for a contract price of P 5,000,000
20x4 20x5 20x6
Costs incurred to date . . . . . . . . . P 900,000 P 2,550,000 P ?
Gross profit (loss) . . . . . . . . . . . . . 100,000 350,000 (50,000)
44. The estimated costs to complete the project at December 31, 20x4:
a. P 850,000 c. P 2,300,000
b. P1,700,000 d. P 2,550,000
45. The actual costs incurred during the year 20x5.

a. P 2,550,000 c. P 2,200,000
b. P 2,300,000 d. P 2,050,000
Use the following information for questions 46 and 47:

Pasig Garment Company operates a branch in Cabanatuan City. At the end of the year,
the Branch account in the books of the home office at Manila shows a balance of
P150,000. The following information are ascertained.
• The home office has billed the branch the amount of P37,500 for the
merchandise, which was in transit on December 31.
• A home office accounts receivable for P10,500 was collected by the branch. Said
collection was not reported to the home office by the branch.
• Supplies of P4,500 was returned by the branch to the home office but the home
office has not yet reflected in its records the receipt of the supplies.
• The branch made a profit of P10,100 for the month of December but the home
office erroneously recorded it as P11,180.
• The branch has not received the cash in the amount of P25,000 sent by home
office on December 31. This was charged to General Expense account. All
transactions are presumed to have been properly recorded.
46. What is the balance of the Home Office account on the books of the branch as of
December 31, before adjustments?
a. P121,920 c. P117,420
b. P123,000 d. P106,920
47. What is the adjusted balance of the reciprocal accounts?

a. P96,420 c. P117,420
b. P106,920 d. P179,920
48. Continuing franchise fees should be recorded by the franchisor a. as revenue

when earned and receivable from the franchisee
b. as revenue when received.
c. in accordance with the accounting procedures specified in the franchise
agreement.
d. as revenue only after the balance of the initial franchise fee has been
collected.
49. Inventory is reported at cost plus gross profit recognized to date under which of the
following revenue recognition methods?
a. completed contract c. cost recovery
b. installment method d. percentage of completion

Selected balances from the Cebu Company’s Branch A and B as follows:
AccountsBranchBranch
AB
Inventory, 1/1/20x4 . . . . . . . . . . . . . . . . . . . P21,000 P19,000
Imprest Branch Fund . . . . . . . . . . . . . . . . . . . . . . . .2,000 1,500
Inventory, 12/31/20x4 . . . . . . . . . . . . . . . . . . . . . 19,000 12,000
A/Receivable, 1/1/20x4 . . . . . . . . . . . . . . . .. . . . ..55,000 43,000
Merchandise from Home Office . . . . . . . . . . . . . .61,000 47,000
Accounts Receivable, 12/31/20x4 . . . . . . . . . . . . 70,000 53,500
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 80,000 Cash
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,000 14,300
All sales, collections, and expenses are handled at the branch. All cash received from
sales and collections are sent directly to the Home Office. Expenses are paid by the
branch from the imprest fund and immediately reimbursed by the Home Office and
credited to the Home Office account. All expenses paid by the branch are recorded in
the books of the branch.
50. Compute the balance of the Home Office account in the books of Branch on January
1, 20x4:
A B
a. P163,000 P 67,000
b. P 64,000 P 78,000
c. P139,000 P111,000
d. P 78,000 P 64,000
51. Compute the balance of the Home Office account on December 31, 20x4.
A B
a. P110,000 P152,000
b. P 91,000 P 67,000
c. P 64,000 P 78,000
d. P 78,000 P 64,000
52. If a partnership requires the adjustments of assets when a partner retires from the
partnership, the appropriate journal entry for the partner’s retirement is: a. Debit
assets for the entire amount computed
b. Debit assets for the retiring partner’s share only
c. Debit retirement expense for the retiring partners’ share computed
adjustment
d. Debit the capital accounts of the remaining partners for a bonus to the
retiring partner
53. Selected information from the trial balances for the home office and the branch of
Gerty Company at December 31, 20x4 is provided. These trial balances cover the
period from December 1 to December 31, 20x4. The branch acquires some of its
merchandise from the home office (the branch is billed at 20% above the cost to the
home office and some of it from outsiders). Difference in the shipments accounts
result entirely from the home office policy of billing at 20% above cost.
Home OfficeBranch
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 60,000 P30,000
Shipment to branch . . . . . . . . . . . . . . . . . . . . 8,000 -0-
Shipment to branch-loading/Unrealized profit
in branch inventory . . . . . . . . . . . . . . . . .. . 3,600 -0-
Purchases (outsiders) . . . . . . . . . . . . . . . . 35,000 5,000
Shipment from home office . . . . . . . . . . . . . . . . -0- 9,600
Merchandise inventory, December 1, 20x4 . . . . . 20,000 15,000
Expenses . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000 6,000
Additional information:
Merchandise Inventory, December 31,20x4:
Home Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 20,000
Branch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
54. How much of the December 1, 20x4 inventory of the branch represents purchases
from outsiders and how much represents goods acquired from the home office?
Outsiders Home Office
a. P -0- P 15,000
b. P 5,000 P 10,000
c. P 12,000 P 3,000
d. P 3,000 P 12,000

The Best Corporation operates a branch in Dagupan City. The home office ships
merchandise to the branch at 125 percent of its cost. Selected information from the
December 31,20x4 trial balance are as follows:
Home OfficeBranch
BooksBooks
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .P 600,000 P300,000
Shipment to branch . . . . . . . . . . . . . . . . . . . . . 200,000
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000
Shipments from home office . . . . . . . . . 250,000
Inventory, January 1, 20x4 . . . . . . . . . . . . . . . .100,000 40,000
Allowance for overvaluation of branch
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58,000
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .120,000 50,000
Inventory at December 31, 20x4: Home Office, P30,000; Branch, P60,000
54. The realized profit on sales made by the branch or overvaluation of cost of goods
sold is:
a. P40,000 c. P46,000
b. P86,000 d. None of the above
55. The combined net income of the home office and the branch after adjustments is:
a. P226,000 c. P496,000
b. P326,000 d. P500,000
The Brooke Corporation has branches, Branch P and Branch Q. The home office shipped
P80,000 in merchandise to Branch P and prepaid the freight charges of P500. A short
time thereafter, Branch P was instructed to ship this merchandise to Branch Q at a
prepaid freight cost of P700. Freight charges for this merchandise normally cost P800
when shipped from the home office directly to Branch Q.
56. Compute the excess freight on transfer of merchandise:

a. P700 c. P500
b. P800 d. P400
Use the following information for 57 and 58:

Porpoise Corporation acquired Sims Company through an exchange of common shares.
All of Sim’s assets and liabilities were immediately transferred to Porpoise. Porpoise
Company’s common stock was trading at P20 per share at the time of exchange. The
following selected information for Porpoise Corporation is also available:
Before After
Acquisition Acquisition
Par value of shares outstanding P200,000 P250,000
Additional Paid in capital 300,000 550,000
57. What is the par value of Porpoise’s common stock?

a. P10 c. P4
b. P 5 d. P1
58. What is the fair value of Sim’s net assets, if goodwill of P56,000 is recorded?
a. P194,000 c. P300,000
b. P244,000 d. P306,000
59. Betzler Company’s branch in Malate began operations on January 1, 20x4. During the
first year of operations, the home office shipped merchandise to the Malate branch
that cost P250,000 at a billed price of P300,000. One-fourth of the merchandise
remained unsold at the end of 20x4. The home office records the shipments to the
branch at the P300,000 billed price at the time shipments are made. Freight-in of
P2,000 on the shipments from the home office was paid by the branch. The home
office should an adjusting entry for freight-in as follows:
a. A year-end adjusting entry debiting the branch account for P500.
b. A year-end adjusting entry debiting the branch account for P2,000.
c. A year-end adjusting entry crediting the branch account for P500.
d. No year-end adjusting entry for the freight charge.
60. Virtuoso has a sales agency in Cebu. Agency revenues and expenses are recorded in
separate agency accounts, with the operating results of both the agency and the
home office generated at each month-end. For the month of October 20x4, the
home office paid P10,000 for advertising costs on behalf of the agency and recorded
this as follows:
a. Cash Agency . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Cash . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . .. . . 10,000
b. Advertising Expense . . . . . . . . . . . . . . . . . . . . 10,000 Cash . . . . . . . . . . . . . . . .
. . . . . . . .. . . . 10,000
c. Accounts Receivable-Cebu Agency . . .. . . . . . .10,000
Cash . . . . . . . . . . . . . . . . . . . . . . . .. . . . 10,000
d. Advertising Expense-Cebu Agency . . . . . . . . . 10,000
Cash . . . . . . . . . . . . . . . . . . . . . . . .. . . . 10,000
61. On October 1, 20x4, The Tingling Company acquired the net assets of The Greenbank
Company when the fair value of Greenbank’s net assets was P116 million and their
carrying amount was P120 million. The consideration transferred comprised P200
million in cash transferred at the acquisition date, plus another P60 million in cash to
be transferred 11 months after the acquisition date if a specified profit target was
met by Greenbank. At the acquisition date there was only a low probability of the
profit target being met, so the fair value of the additional consideration liability was
P10 million. In the event, the profit target was met and the P60 million cash was
transferred. What amount should Tingling present for goodwill in its statement of
consolidated financial position on December 31,20x4, according to PFRS3 Business
combinations?
a. P80 million c. P94 million
b. P84 million d. P144 million
62. Which of the following statement is true?

a. Upon write-off of the uncollectible account, the Uncollectible Accounts
Expense id debited and the Installment Accounts Receivable account is
credited.
b. The branches involved in an interbranch transfer generally account for the
transfers as if they are dealing with the home office rather than with another
branch.
c. The account Shipments from Home Office is the counterpart of two accounts
in the home office books, namely the Branch Current account and the
Shipments to Branch account.
d. The franchisor may receive initial franchise fees from the franchisee for the
continuing rights granted by the franchise agreement and for general and
specific services during the life of the franchise agreement.
63. Statement 1: If partners X, Y and Z agreed to divide profit in the ratio of 1:2:3, this
indicated that partner Z will always receive the largest share.
Statement 2: To distribute profit/loss equally, simply divide the amount of profit/loss
by two. a. True; False
b. False; True
c. True; True
d. False; False
Use the following information for 64 to 67:

Bullen Inc. acquired assets and liabilities of Vicker Inc. on January 1, 20x4. The book
value and fair value of Vicker’s account on that date (prior to crediting the combination)
follow, along with the book value of Bullen’s account:
BullenVickerVicker
Item Book ValueBook ValueFair Value
Retained Earnings 1/1/x4 P 160,000 P 240,000
Cash and receivables 170,000 70,000 P 70,000
Inventory 230,000 170,000 210,000
Land 280,000 220,000 240,000
Buildings (net) 480,000 240,000 270,000
Equipment (net) 120,000 90,000 90,000
Liabilities 650,000 430,000 420,000
Common stock 360,000 80,000 Additional
Paid-in capital 20,000 40,000
64. Assume that Bullen issued 12,000 shares of common stock with a par value and a
P47 fair value to obtain all of Vicker’s outstanding stock. In this transcation how
much goodwill should be reorganized?
a. P144,000 d. P60,000
b. P104,000 e. P -0-
c. P 64,000
65. Assume that Bullen issued 12,000 shares of common stock with a P5 par value and a
P42 fair value for all of the outstanding shares of Vicker. What will be the Additional
Paid-In Capital and Retained Earnings after the combination?
a. P20,000 and P160,000 d. P464,000 and P160,000
b. P20,000 and P260,000 e. P380,000 and P260,000
c. P380,000 and P160,000
66. Assume that Bullen issued preferred stock with a par value of P240,000 and a fair
value of P500,000 for all of the net assets of Vicker in abusiness combination. What
will be the balance in the inventory and Land accounts after the business
combination?
a. P440,000, P496,000 d. P402,000, P520,000
b. P440,000, P520,000 e. P427,000, P510,000
c. P425,000, P505,000
67. Assume that Bullen paid a total of P480,000 in cash for all of the shares of Vicker. In
addition, Bullen paid P35,000 to a group of attorneys for their work in arranging the
|Practical Accounting 2
combination to be accounted for as an acquisition. What will be the balance in
goodwill?
a. P-0- c. P35,000
20
b. P20,000 d. P55,000
68. Which of the following is not considered a legitimate expense of the partnership?
a. Depreciation on assets contributed to the partnership by the partners
b. Salaries for managers hired by firm
c. Supplies used in the partners office
d. Interest to partners on the amount of their invested capital
69. Contract revenue in construction contract comprises

a. The initial amount of revenue agreed in the contract only
b. Variation in contract work, claim and incentive payment only
c. The initial amount of revenue agreed in the contract and progress billings
d. The initial amount of revenue agreed in the contract, variation in contract
work, claim and incentive payment.
70. Statement 1: In installment liquidation, cash priority program and schedule of safe
payment would result to different available cash to be distributed to partners.
Statement 2: The partner with the highest capital balance will always have the
highest share in the net profit/loss of the partnership.
a. True; False c. True; True
b. False; True d. False; False
THE FOLLOWING CHOICE ANSWERS PERTAIN TO QUESTIONS NUMBERS 1 TO 6:

A B C D
P2,844,700 1,035,000 1,099,500 36,300
6,453,750 3,455,000 2,180,000 273,750
1,784,000 835,000 1,030,000 28,350
3,220,000 1,930,000 180,000 673,900
968,000 479,750 1,406,100 150,000
Mango acquired 85% of the outstanding common stock of Lacoste on January 1, 2015,
for cash of P1,357,150. On this date, Lacoste’s common stock and retained earnings
balances were P1,000,000 and P300,000, respectively. The fair values of Lacoste’s net
assets were equal to book values except for a patent, which had a book value of
P63,000, a fair value of P42,000, and a remaining life of 7 years and goodwill uniformly
impaired for 12 years, financial statements for both companies as of December 31, 2018,
are presented below: (minority is measured as a direct percentage of the fair value of
Lacoste’s net assets)
Mango Lacoste
Income Statement
Sales P2,184,700 P1,600,000
Income from subsidiary 182,200
Gain on sale of land 7,000
Loss on sale of equipment (25,000)
Cost of goods sold (1,050,000) (920,000)
Depreciation and other expenses (650,000 (445,000)
Net income P673,900 P210,000
Statement of Retained Earnings

Retained earnings, 1-1-18 P1,406,100 P700,000
Net income 673,900 210,000
Dividends (150,000) (90,000)
Retained earnings, 12-31-18 P1,930,000 P820,000
Balance Sheet
Cash P255,750 P224,000
Accounts receivable 718,000 250,000
Inventory 1,040,000 800,000
Investment in Lacoste 1,596,250
Equipment 1,900,000 1,150,000
Accumulated depreciation (500,000) (300,000)
Land 490,000 340,000
Patent ______ 36,000__
Total assets P5,500,000 P2,500,000
Accounts payable P350,000 P680,000
Common stock 3,220,000 1,000,000
Retained earnings 1,930,000 820,000__
Total liabilities and stockholders’ equity P5,500,000 P2,500,000
• During 2018, Lacoste sold merchandise costing P280,000 to Mango for
P340,000. The 2018 ending inventory of Mango consisted of 30% of the 2018
intercompany transfers of merchandise. The 2018 beginning inventory of Mango
consisted of unconfirmed gross margins of P27,000 in intercompany transfers of
merchandise.
• During the year 2018 Lacoste purchased P600,000 of merchandise from Mango.
Mango sells merchandise to all customers at 25% above cost. Lacoste’s
beginning and ending inventories for 2018 contained P120,000 and P190,000,
respectively, of merchandise purchased from Mango
• On June 1, 2016, Lacoste sold land costing P42,000 to Mango for P30,000.
• On November 20, 2018, Mango sold land costing P17,000 to Lacoste for P24,000
• On July 1, 2016, Mango sold Lacoste equipment that had cost Mango P300,000.
At the time of the equipment sale, accumulated depreciation was P170,000.
Lacoste paid P270,000 for the equipment; its estimated remaining life is seven
years. Straight-line depreciation is used.
• On January 1, 2018, Lacoste sold Mango equipment that had cost Lacoste
P700,000. At the time of the equipment sale, accumulated depreciation was
P350,000. Mango paid P325,000 for the equipment; its estimated remaining life
is five years, straight-line depreciation is used.
What amounts must appear in the consolidated financial statements for the year 2018?
71. Cost of sales B
72. Depreciation and other expenses C
73. Minority interest income (MIN) D
74. Minority interest D
75. Consolidated goodwill C
76. Consolidated asset A
On January 1, 2017, Supremo Company established a branch in a nearby city. At the

close of the fiscal year ended December 31, 2017, the investment in branch account on
the books of the home office had s balance of P66,000. The branch books reflected
another amount thus the difference in the reciprocal accounts is due to the following
data
• Cash of P10,000 forwarded to the home office by the branch is in transit and
has not been recorded on the home office books.
• Merchandise costing the home office P8,000 was transferred to the branch
at a billing price of P9,000. The merchandise is in transit and has not been
recorded on the branch books.
• Notification sent by the home office to the branch, informing the branch of
P5,000 of operating expenses that the home office paid on behalf of the
branch, has not been received by the branch and thus has not been
recorded by the branch.
• Cash of P2,000 received by the branch from the home office was
erroneously recorded by the branch as P20,000
• The branch purchased, for cash P15,000 of equipment for its use; fixed asset
accounts of the branch are maintained at the home office. Notification sent
to the home office by the branch, informing the home office of the branch’s
action has not been received by the home office and this has not been
recorded by the home office.
77. The unadjusted balance of home office account on branch’s books must be:
a. P41,000 c. P62,000
b. P45,000 d. P87,000
S, Inc., an 80 percent owned subsidiary of P, Inc., began operations on January 1, 2018.

The following information is from the condensed 2018 income statements of P and S:
P, Inc. S, Inc.
Sales to S P100,000
Sales to others 400,000_
500,000
Cost of goods sold:
Acquired from P 80,000
Acquired from others 350,000_ 190,000_
Gross profit 150,000 30,000
Depreciation 40,000 10,000
Other expenses 60,000__ 15,000__
Income from operations 50,000 5,000
Gain on sale of equipment from S 12,000__ -
Income before income taxes P62,000 P5,000
• Sales by P to S are made on the same terms as those made to third parties.
• Equipment purchased by S from P for P36,000 on January 1, 2018, is depreciated
using the straight-line method over four years.
78. Determine the consolidated net income for the year 2018 attributable to the owners
of the patent.
a. P62,000 c. P67,000
b. P51,000 d. P52,000
On January 1, 2017, Rockford Company sold equipment to Jung Company for 20,000,000
Korean won, with payment to be received in 2 years on January 1, 2011, the exchange
rate of January 1, 2017, is 800 won = P1. Or the same date, Rockford enters into a
futures contract and agrees to sell 20,000,000 won on January 1, 2011, at the rate of 800
won = P1.
Or December 31,2017, the exchange rate is 790 won = P1. On the December 31, 2018,
the exchange rate is 830 won = P1. The appropriate discount rate throughout this period
is 10%. For purpose of estimating future settlement payments under the future contract,
assume that the current exchange rate is the best forecast of the future exchange rate.
79. What is the notional value of the Korean won futures contract?
a. P20,661 c. P25,000
b. P22,727 d. P25,316
80. What is the value of won receivable on December 31, 2017?

a. P210,661 c. P25,000
b. P22,727 d. P25,316
The trustee for RT Corp. prepares a statement of affairs which shows that unsecured
creditors whose claims total P540,000 may expect to receive approximately P405,000 if
assets are sold for the benefit of creditors.
a) REH Corp. holds a note for P22,500 on which interest if P1,350 is accrued,
property with a book value of P18,000 and a realizable amount of P27,000 is
pledged on the note.
b) TIU, an employee is owed P6,750 for his salary.
c) JGS Corp. holds a note of P54,000 on which interest of P2,700 is accrued,
securities with a book value of P58,500 and a realizable amount of P45,000 is
pledged on the note.
d) CDE Corp. holds a note for P9,000 on which interest of P500 is accrued, nothing
has been pledged for the note.
81. How much may each of the following creditors receive? REH Corp.; TIU Corp.; JGS
Corp.; CDE Corp., respectively.
a. P27,000; P5,063; P53,775; P0
b. P23,850; P6,750; P56,700; P7,125
c. P27,000; P6,750; P56,700; P0
d. P23,850; P6,750; P53,775; P7,125
ACE provided the following information for the transaction occurred during August. The
production plant uses the JIT costing system.
- Raw materials costing P750,000 were purchased
- All direct materials costing P750,000 were requisitioned for production
- Direct labor costs of P500,000 were incurred
- Actual factory overhead costs amounted to P2,487,500
- Applied conversion cost totaled P3,250,000. This includes the direct labor cost
- All units are completed and immediately sold
82. The total RIP used to be backflushed to FG and the adjusted COGS, respectively
a. P750,0000 ; 3,737,500 c. P4,000,000 ; 3,737,500
b. P4,000,000 ; 4,262,500 d. P750,000 ; 4,262,500
Rodrigo, Donald, and Ferdinand intend to start a business together that will be organized
as a partnership. The partners are considering adopting one of the following two
alternative profit-sharing agreements.
Agreement#1 Agreement#2
Salaries:
Rodrigo P70,000 P29,200
Donald 30,000 30,000
Ferdinand
Bonus to Rodrigo as a percentage of profit after the bonus 5% 15%
Interest on average capital 8 10
Estimated average capital balances:
Rodrigo P50,000 P50,000
Donald 100,000 100,000
Ferdinand 150,000 150,000
Remaining profit percentage:
Rodrigo 40% 50%
Donald 40 35
Ferdinand 20 15
83. Rodrigo seeks your advice as to which agreement would be best for him to accept.
Calculate the level of income at which Rodrigo is indifferent between the choices.
a. P254,673 c. 57,240
b. 210,545 d. 240,000
The SMDC Construction Company was the lowest bidder on an office building
construction contract. The contract bid was P70 million, with an estimated cost to
complete the project of P60 million. The contract period was 34 months starting January
2016. The company uses the cost-to-cost method of estimating earnings. Because of
changes requested by the customer, the contract price was adjusted downward to P65
million on January 1, 2017.
A record of construction activities for the years 2016-2019 follows: (in millions)
2016 2017 2018
2019
Actual cost-current year P25 P33 P4.1 -
Progress billings 21 31 13 -
Cash receipts 18 30 10 P7
Estimated cost to complete 35 4 - -
84. Compute the gross profit (loss) realized in 2017.
a. P4.167 million c. P(1.360) million
b. P2.806 million d. P3.317 million
Congestions have always been a way of life most especially in Metro Manila. One way to
decongest traffic and minimize use of gasoline is to phase out the international known
jeepneys as well as use of dilapidated, smoke-belching and fully depreciated buses. To
partially solve the problem as well as to motivate car owners to use public
transportation, an underground monorail system similar to that of Hongkong was the
solution. the system covered the stretch of the famous Edsa, from Roxas Boulevard to
Bonifacio Monument and would go as far as the area of Malabon as well as Navotas, a
thickly populated fishermen’s village. The project covers several and was awarded to
different contractors here and abroad.
Competitive bids were held for stage one of the project. The bids are:
Northern City Construction P560 billion
Hongkong Systems 392 billion
JJ Ram Construction Company 400 billion
A project that undergoes competitive bid is normally awarded to the lowest bidder.
However, the government reserves the right to reject any and all bids after a careful
review of the track record of the bidders. Even though JJ Ram Construction
Company had the second lowest bid. Stage one of the project was awarded to the.
The contract price was P400 billion pesos which was covered by a two-year
construction contract. The following data were available from the records for the
years 2016 and 2017:
2016 2017
Costs incurred P120 P216

Progress billings 100 300
Cash collections on billing 96 304
Estimated cost to complete 216
85. How much is the income from construction in 2017, using the cost to cost
percentage of completion method?
a. P64 billion c. P41.143 billion
b. P22.857 billion d. P161.143 billion
RJ Corporation manufactures brass musical instruments for use by high school students.
The company uses a normal costing system, in which manufacturing overhead is applied
on the basis of direct-labor hours. The company’s budget for 2017 included the following
predictions.
Budgeted total manufacturing overhead 411,600
Budgeted total direct-labor hours 19,600
During March of 2017, the firm worked on the following two productions jobs:
Job number 181, consisting of 76 trombones.
Job number C40, consisting of 110 cornets.
The event of March are described as follows:
a) One thousand square feet of rolled brass sheet metal was purchased for P5,000
on account
b) Four hundred pounds of brass tubing was purchased on account for P4,000
c) The following requisitions were filed on March 5.
Requisition number 112 (for job T81): 250 squares feet of brass sheet metal, at
P5 per square foot.
Requisition number 113 (for job C40): 1,000 pounds of brass tubing, at P10 per
pound.
Requisition number 114: 10 gallons of valve lubricant, at P10 per gallon.
All brass used in production is treated as direct material. Valve lubricant is an indirect
material.
d) An analysis of labor time cards revealed the following labor usage for March.
Direct labor: job number T81, 800 hours at P20 per hour.
Direct labor: job number C40, 900 hours at P20 per hour.
Indirect labor: general factory clean-up P4,000
Indirect labor: factory supervisory salaries, P9,000
e) Depreciation of the factory building and equipment during March amounted to
P12,000.
f) Rent paid in cash for warehouse space used during March was 1,200.
g) Utility cost incurred during March amounted to P2,100. The invoices for these
costs were received, but the bills were not paid in March.
h) March property taxes on the factory were paid in cash, P2,400.
i) The insurance cost covering factory operations for the month of March was
P3,100. The insurance policy had been prepaid.
j) The costs of salaries and fringe benefits for sales and administrative personnel
paid in cash during March amounted to P8,000
k) Depreciation on administrative office equipment and space amounted to P4,000
l) Other selling and administrative office equipment and space amounted to
P4,000
m) Job number T81 was completed during March
n) Half of the trombones in job number T81 were sold on account during March for
P7,000 each.
86. Calculate the cost of finished goods ending inventory in March

a. P34,050 c. P46,900
b. P17,025 d. P23,450
Cecilia Textiles Company manufactures a variety of natural fabrics for the clothing
industry. The following data pertain to the Weaving Department for the month of
September.
Weighted average FIFO
Equivalent units of direct materials 60,000 40,000
Equivalent units of conversion 52,000 44,000
Units completed and transferred 50,000 50,000
out during September
The cost data for September is as follows:

Work in process, September 1 20,000 units
Direct material P94,000
Conversion 44,400
Cost incurred during September
Direct material P164,000
Conversion 272,800
87. Under the average method, how much is the cost of units transferred out during
September.
a. P520,000 c. P521,800
b. P515,000 d. P447,400
88. Under the FIFO method, what is the cost of work in process ending inventory during
September.
a. P55,200
b. P53,400
c. P60,200 d. P127,800
PNB has two service departments, the Personnel Department and the Computing
Department. The bank has two other departments that directly service customers, the
Deposit Department and the Loan Department. The usage of the two service
departments’ output in 2017 is as follows:
Provider of service
User of service personnel computing
Personnel 15%
Computing 10%
Deposit 60% 50%
Loan 30% 35%
The budgeted cost in the two service departments in 2017 were as follows:
Personnel P153,000
Computing P229,500
89. Under the direct method of allocating service department cost, the amount
allocated to Deposit Department must be:
a. P237,000 c. P235,800
b. P238,431 d. P191,250
90. Under the step method of allocating service department cost, the amount allocated
to Loan Department must be (PNB allocates Personnel Department first):
a. P145,500 c. P144,069
b. P146,700 d. P191,250
LANDERS Stores sell appliances for cash and also on the installment plan. Entries to
record cost of sales are made monthly. The following information appears on the trial
balance of the company as of December 31, 2018.
Cash P153,000
Installment Accounts Receivable,2017 48,000
Installment Accounts Receivable, 2018 91,000
Inventory – new merchandise 123,000
Inventory – Repossess Merchandise 24,000
Accounts payable P98,500
Deferred gross profit, 2017 45,600
Capital stock 170,000
Retained earnings 93,900
Sales 343,000
Installment sales 200,000
Cost of sales 255,000
Cost of installment sales 128,000
Gain or loss on repossessions 800
Selling and administrative expenses - 128,000
P951,000 P951,000
The accounting department has prepared the following analysis of cash receipts for the
year:
Cash sales (including repossessed merchandise) P424,000
Installment accounts receivable, 2017 104,000
Installment accounts receivable, 2018 109,000
Other 36,000
Total P673,000
Repossessions recorded during the year are summarized as follows:

2017
Uncollected balance P8,000
Loss on repossession 800
Repossessed merchandise 4,800
91. How much must be the total realized gross profit net of loss from repossession in
2018?
a. P161,710 c. P158,440
b. P157,640 d. P73,710
CASA VERDE sells franchises to independent operators throughout the northwestern

part of the United States and some other countries. The contract with four (4)
franchisees includes the following provisions:
1) The franchisee is charged an initial fee of P800,000. Of this amount, P300,000 is
payable when the agreement is signed, and a P100,000 non-interest-bearing note
at the end of each of five subsequent years.
2) All of the initial franchise fee collected by CASA VERDE is to be refunded and the
remaining obligation cancelled if, for any reason, the franchisee fails to open his or
her franchise.
3) In return for the initial franchise fee, CASA VERDE agrees to (a) assist the franchise
in selecting the location of the business, (b) negotiate the lease for the land, (c)
obtain financing and assist with building design , (d) supervise construction, (e)
establish accounting and tax records, and (f) provide expert advice over a five-year
period relating to such matters as employee and management training, quality
control, and promotion.
4) In addition to the initial franchise fee, the franchisee is required to pay to CASA
VERDE a monthly fee of 2% of sales for menu planning, recipe innovations, and the
privilege of purchasing ingredients from CASA VERDE at or below prevailing
market prices.
5) The franchisees will replace all equipments at the end of the 10 th year and agree to
buy them from INASAL at a discount of P50,000.
92. The percentage of completion of a construction contract is based on all of the following
except:
a. the proportion that contract cost incurred for work performed to date bear
to the estimated total
contract cost
b. survey at work per formed
c. completion of physical proportion
d. progress payments and advances received from customers
93. Management of CASA VERDE estimates that the value of the services rendered to each
franchisee at the time the contract is signed amounts to at least P300,000. All franchisee
to date have opened their locations at the schedule time and none have defaulted on
any of the notes receivable. The credit ratings of all franchisees would entitle them to
borrow at the current interest rate of 10%. The franchise revenue earned during the year
must be:
a. P2,716,000
b. P1,200,000
c. P1,516,000
d. P1,440,000
Greentech Company owns a subsidiary in Canada whose balance sheets in Canadian

Dollar for the last two years follow (in thousands):
Dec 31, 2017 Dec 31, 2018
Assets
Cash and cash equivalents C$ 25,000 C$ 20,000
Receivables 112,500 137,500
Inventory 170,000 180,000
Property and equipment – net 250,000 225,000
Total C$ 557,500 C$ 562,500
Liabilities and Equity

Accounts payable C$ 65,000 C$ 85,999
Long-term debt 312,500 275,000
Common stock 125,000 125,000
Retained earnings 55,000 77,500
Total C$ 557,500 C$ 562,500
Greentech formed the subsidiary on January 1, 2017 when the exchange rate was 40
Canadian Dollar for 1 Philippine Peso. The exchange rate for 1 Philippine peso on
December 31, 2017 had increased to 45 Canadian Dollar and to 35 Canadian Dollar on
December 31, 2018. Income earned evenly over the year, and the subsidiary declared no
dividends during its first two years of existence.
94. How much is the cumulative translation adjustment for 2018? (round-off to 3 decimals
places)
a. P1,350,000
b. P1,912,500
c. P975,000
d. P865,000
Bamboo Furniture’s Company, a local company, bought furniture from Ailments

Corporation, a US company, for 35,000 US Dollars in 2017. Pertinent exchange rates
relating to this transaction are as follows:
Buying Rate Selling Rate
Receipt of order P47. 10 P47.20
Date of shipment 47.25 47.45
Balance sheet 49.50 49.60
Settlement date 49.45 49.50
95. What is the foreign exchange gain or loss of Bamboo Furniture’s Company for 2017?
a. P78,750 loss
b. P75,250 loss
c. P78,750 gain
d. P75,520 gain
On November 30, 2017, Leather Company authorized shipped-line Corp. to operate as a

franchisee for an initial franchise fee of P1,950,000. Off this amount, P750,000 was
received upon signing the agreement and the balance, represented by a note, is due in
four annual payments starting November 30, 2018. Present value of P1 at 12% for 4
periods is 0.6355. present value of an ordinary annuity of P1 at 12% for 4 periods is
3.0374. The period of refund will elapsed on January 31, 2018. The franchisor has
performed substantially all of the initial services but the operations of thestore have yet
to start. Collectability of the note is reasonably certain.
96. How much is the unearned franchise fee
a. P1,661,220 c. P911,220
b. P750,000 d. P0
Overhead Construction Company entered into two construction jobs which both
commenced in 2018 (in thousands).
Project 1 Project 2
Contract price P52,500 P37,500
Costs incurred during 2018 30,000 35,000
Estimated cost to complete 15,000 8,700
General and administrative expenses 2,500 1,250
Billings for clients during 2018 31,500 30,000
97. Based on the information given, how much is the gross profit would Overhead
Construction report in its 2018 income statement?
Percentage of completion Zero Profit
a. (6,200,000) (1,200,000)
b. 5,000,000 (6,200,000)
c. (1,200,000) (6,200,000)
d. 1,300,000 (1,200,000)
On January 2, 2018, BDO Company acquired 80% interest in MBTC Company for
P4,125,000 cash. On this date, the outstanding capital stock and retained earnings of
BDO Company and MBTC Company are as follows:
BDO MBTC
Common shares P2,250,000 P1,312,000
Share premium 1,500,000 -
Retained earnings 5,250,000 3,187,500
There was no issuance of capital stock during the year. Non-controlling interest is initially
measured at fair value. Fair value of the following assets of MBTC exceeded their book
values as follows: Inventories, P210,000; Property and equipment (useful life, 10 years),
P 127,500. All other assets and liabilities are fairly valued. Goodwill if any is not
impaired. On December 31, 2018 the two companies reported the following operating
results:
BDO MBTC
Net income P1,785,000 P975,000
Dividend paid 525,000 262,500
98. What is the consolidated stockholders’ equity to be reported in the consolidated

statement of financial position on December 31, 2018?
a. P10,651,800 c. P7,035,000
b. P13,500,000 d. P11,781,000
On January 1, 2017, Fortune Company purchased 80% of the outstanding shares of Hope
Company at a cost of P8,800,000. On that date, Hope Company had P5,000,000 of
capital stock and P5,000,000 of retained earnings. Fortune used the proportionate share
in the identifiable net assets at acquisition date in valuing NCI. For 2017, fortune
Company had income of P2,800,000 from its own operations ( excluding its share of
income from Hope) and paid dividends of P1,000,000. Hope Company reported net
income of P650,000 and paid dividends of P300,000. All assets and liabilities of Hope
Company have book value equal to their respective market values.
99. On January 1, 2017, Fortune Company sold equipment to Hope Company for
P1,000,000. The book value of the equipment on that date was P1,200,000. The loss of
P20,000 is reflected in the income of Fortune Company indicated above. The equipment
is expected to have a useful life of five years from the date of the sale. In the December
31, 2017 consolidated statement of financial position, the NCI should be presented at:
a. P2,000,000 c. P2,070,000
b. P2,200,000 d. P2,130,000
CSI Company has a branch in San Carlos City. Shipments of merchandise to the branch
totaled P297,000 for the year, which included a 25% mark-up on cost.
The following data summarizing branch operations for the period ended December
31, 2017:
Sales on account P407,000
Sales on cash basis 121,000
Collections of accounts 330,000
Expenses paid 149,000
Expenses unpaid 41,000
Purchase of merchandise for cash 143,000
Inventory on hand, January 1 (60% from outside purchases) 114,000
Inventory on hand, December 31 (70% from home office) 165,000
Remittances to home office 302,500
100. Allowance for overvaluation of branch inventory amounted to P67,000 in the

home office books. In the home office books, the branch net income (loss) is:
a. P16,000 c. (P7,100)
b. (P51,000) d. (P5,580)
Questions 30 to 32 are based on the following:

The following are the account balances appearing on the books of accounts of O Trading
Company as of December 31, 2018:
Home Office Branch
Cash P9,500 P9,600
Prepaid expenses 2,500 900
Property and equipment, net 35,800 29,400
Branch current 63,000
Cost of sales 160,000 95,000
Operating expenses 29,600 15,400
Accounts payable (15,900) (10,300)
Home office current (39,400)
Capital stock (50,000)
Retained earnings (17,700)
Sales (280,000) (127,700)
Shipments to branch were billed at 120% and 125% of cost in 2017 and 2018,
respectively, and were credited to sales. An analysis of the inventories of the branch
shows the following breakdown.
January 1 December 31
From home office (billed value) P12,000 P8,000 (based on shipments received)
From other suppliers 3,000 4,700
During the year, branch purchases from other suppliers amounted to P27,700. Home
office books show shipments to branch (at cost) of P64,000. Some shipments were still in
transit as of December 31st. a branch remittance of P8,600 was made on December 28,
2018 and has not yet been received by the home office as of December 31 st.
101. What amount of cost of sales must be reported on the combined income
statement of O Trading for 2018?
a. P177,600
b. P255,000
c. P236,400
d. P241,600
102. The correct income of the branch must be:

a. P17,300 c. P35,900
b. P30,700 d. P42,700
103. The ending inventory of O Company must be:

a. P37,300 c. P47,700
b. P35,700 d. P67,300
The partnership of Joaquin, Larry and Philip is to be liquidated as soon as possible and all
cash on hand except for P20,000 contingency balance is to be distributed at the end of
each month until the liquidation is complete. Profit and losses are shared 5:3:2 to
Joaquin, Larry and Philip, respectively. A balance sheet of the partnership at December
31, 2017 contains the following:
Cash P240,000 Liabilities P500,000
Other assets 1,080,000 Loan from Larry 20,000
Loan to Philip 40,000 Joaquin, capital 340,000
Goodwill 40,000 Larry, capital 340,000
________ Philip, capital 200,000
P1,400,000 P1,400,000
104. In January 2018, the loan to Philip was offset against his capital balance, the
goodwill is written off, P400,000 was realized from the other assets, and cash is
distributed.
If available cash is distributed on January 31, 2018, Joaquin, Larry and Philip should
receive:
a. P0, P132,000 and P8,000, respectively
b. P0, P120,000 and P0, respectively
c. P0, P100,000 and P0, respectively
d. P0, P120,000 and P8,000, respectively
GESTENTER Company sells its product directly and also through a branch opened at the
beginning of the year. The income statement of the company shows total sales of
P2,840,000; cost of sales of P1,988,000 and expenses of P576,500. The account with a
branch was treated as an ordinary account receivable. For example, shipments to the
branch, billed at selling price, which is 20% above cost, were charged to Accounts
Receivable and credited to Sales. When the branch made a sale, a duplicate sale invoice
was forwarded to the home office, which took up the receivable on its books, giving the
branch credit for it, and then made the collection itself.
105. A petty cash fund of P5,000 was kept at the branch, and its closing inventory was
P192,000. No other assets or liabilities were kept on the branch books. The correct
net income of GESTETNER Company is:
a. P275,500 b. P243,500
c. P238,500 d. P83,500
106. Brett and Troy are partners whose total capital is P1,200,000. The capital ratio is
6:4 and the profit and loss ratio is 3:2 to Brett and Troy, respectively. David is
admitted as a partner upon investing P600,000 for a 1/4 interest in the firm, and
profits are to be shared 3:2:2, to Brett, Troy and David, respectively. Given the
choice between goodwill and bonus methods, David will
a. Prefer bonus method due to David’s advantage P75,000
b. Prefer goodwill method due to David’s advantage of P75,000
c. Prefer bonus method due to David’s advantage of P150,000
d. Prefer goodwill method due to David’s advantage of P150,000
SUN Construction Corporation contracted with the province of Pampanga to construct a

bridge at a contract price of P16,000,000. SUN Corporation expects to earn P1,520,000
on the contract. The percentage of completion method is to be used and the completion
stage is to be determined by estimates made by the engineer. The following schedule
summarizes the activities of the contract for years 2017-2019.
Year Cost Estimate Engineer’s Billings On billings incurred

cost to estimate of collection
complete completion on contract
2017 P4,600,000 P9,640,000 31% P5,000,000 P4,500,000*
2018 4,500,000 5,100,000 58% 6,000,000 5,400,000*
2019 5,250,000 -0- 100% 5,000,000 6,100,000
107. *A 10% retainer accounts for the difference between billings and collections.
Under the percentage of completion method, using the engineer’s estimate as the
measure of completion to be applied to revenues and costs, how much is the gross
profit earned each year?
2017 2018 2019
a. P545,600 P498,400 P606,000
b. P545,600 P1,044,000 P1,044,000
c. P1,760,000 P6,400,000 P1,650,000
d. P1,760,000 P1,800,000 P1,650,000
SM Corporation, which began business on January 1, 2017, appropriately uses the
installment sales method of accounting for tax purposes, but records net income under
the accrual method. The following data were obtained for the years 2017 and 2018:
2017 2018
Installment sales P7,500,000 P8,400,000
Cost of installment sales 5,250,000 6,048,000
General and administrative expense 700,000 840,000
Outstanding accounts on sales of 2017 4,400,000 1,400,000
Outstanding accounts on sales of 2018 -0- 4,000,000
108. A 2017 sale resulted in default in 2018. At the date of default, the balance on the
installment receivable was P120,000, and the repossessed merchandise had a fair value
of P80,000. Determine the net income for the year 2018 under the installment method
and full accrual method.
a. Installment method, P1,252,000; full accrual method, P1,472,000.
b. Installment method, P1,472,000; full accrual method, P1,252,000.
c. Installment method, P2,132,000; full accrual method, P2,352,000.
d. Installment method, P1,288,000; full accrual method, P1,392,000.
Anton Noble, a careless employee, left some combustible materials near on open flame
in CELBA Company’s plant. The resulting explosion and fire destroyed the entire plant
and administrative offices. Jerold Silverio, the company’s controller, and Andrea
Agoncillo, the operations manager, were able to save only a few bits of information as
they escaped from the roaring blaze.
“What a disaster,” cried Jerold. “and the worst part is that we have no records to use in
filing an insurance claim,”
“I know,” replied Andrea. “I was in the plant when the explosion occurred, and I
managed to grab only this brief summary sheet that contains information on one or two
of our costs. It says that our direct labor cost this year has totaled P180,000 and that we
have purchased P290,000 in raw materials. But I’m afraid that doesn’t help much; the
rest of our records are just ashes.”
“Well, not completely,” said Jerold. “I was working on the year-to-date income statement
when the explosion knocked me out of my chair. I instinctively held onto the page I was
working on, and from what I can make out, our sales to date this year have totaled
P1,200,000 and our gross margin rate has been 40% of sales. Also, I can see that our
goods available for sale to customers has totaled P810,000 at cost.”
“Maybe we’re not so bad off after all” exclaimed Andrea. “My sheet says that prime cost
has totaled P410,000 so far this year and that manufacturing overhead is 70% of
conversion cost. Now if we just had some information on our beginning inventories.”
“Hey, look at this,” cried Jerold. “it’s a copy of last year’s annual report, and it shows
what our inventories were when this year started. Let’s see, raw materials was P18,000,
work in process was P65,000, and finished goods was P45,000.
“Super.” yelled Andrea. “Let’s go to work.”
109. To file an insurance claim, the company must determine the amount of cost in
its inventories as of the date of the fire.
Determine the amount of cost in the Raw Materials, Work in Process, and Finished
Goods inventory accounts as of the date of the fire. You may assume that all materials
used in production during the year were direct materials.
a. P78,000 c. P90,000
b. P130,000 d. P298,000
110. HERMO and TIU formed a joint venture to purchase and sell a special type of
merchandise. The venturers agreed to contribute cash of P270,000 each to be used in
purchasing the merchandise, and to share profits and losses equally. They also agreed
that each shall record his purchases, sales, and expenses in their own books.
Upon termination of the joint venture, the following data are made available:
HERMO TIU
Joint venture P234,000 credit P170,600 debit
Inventory Taken 10,800 33,750
Expenses paid from Joint venture cash 5,400 9,900
How much cash is to be received by TIU in the final settlement?

a. P267,950 c. P323,975
b. P290,225 d. P280,325
REH makes a single product in two Departments. The production data for Dept. 2 for
August 2017 follows:
Production cost Last month This month

Transferred in 40,750 222,750
Materials 9,500 168,750
Conversion 4,850 202,500
Quantities
In beg (40% done) 10,000
Received from Dept. 1 75,000
Completed and transferred 62,500
In process end (60% done) 15,000
Materials are added at the start of the process, and losses normally occur during the
early stages of operation.
111. Compute the cost the WIP end using average and COGM using FIFO method,
respectively:
a. 111,600; 535,200 c. 114,000; 488,125
b. 111,600; 488,125 d. 114,000; 535,200
On July 1, 2017, P Corporation acquired 90% of the 2,000 outstanding shares of the
common stock of S Inc., from shareholders for cash of P400,000. The balance sheet for
both companies immediately after acquisition are presented below. Also shown are the
agreed-upon fair values of the assets of S Inc.; liabilities are fairly valued as shown:
P Corp. S Inc.
Book value Book value Fair value
Assets
Cash P300,000 P100,000 P100,000
Accounts receivable (net) 30,000 20,000 15,000
Notes receivable 10,000*
Inventories 100,000 50,000 60,000
Investment in S Inc. 400,000
Property, plant and equipment 500,000 400,000 450,000
(net)
Patent __5,000__ __5,000__ __5,000__
Total P1,345,000 P575,000 P630,000
Liabilities and stockholders’
equity
Notes payable 10,000*
Long-term liabilities 40,000 90,000
Common stock (P100 par) 600,000 200,000
Additional paid-in capital 85,000 45,000
Retained earnings _600,000_ _140,000_
Total P1,345,000 P575,000
112. *S Inc. owed P Corp. P10,000 (notes payable) due to a cash loan on the date of
acquisition.
The acquisition resulted in a cost-book-value differential of:
a. P53,500 c. P4,000
b. P40,000 d. P50,000
Samsung Corporation owns 70 percent of Sony Company’s common stock, acquired

January 1, 2017. Goodwill from the investment is impaired for P20,000 during the
current year (minority is measured as a direct percentage of the fair value of Sony’s net
assets). Sony regularly sells merchandise to Samsung at 150 percent of Sony’s cost.
Samsung’s December 31, 2017 and 2018 inventories include goods purchased
intercompany of P112,500 and P33,000, respectively. The separate incomes (do not
include investment income) of Samsung and Sony for 2018 are summarized as follows:
Samsung Sony
Sales P1,200,000 P800,000
Cost of sales (600,000) (500,000)
Other expenses (400,000) (100,000)
Separate income P200,000 P200,000
113. Total consolidated income should be allocated to the owners of the parent and
minority interest income in the amounts of:
a. P338,550 and P67,950, respectively
b. P344,550 and P61,950, respectively
c. P346,500 and P60,000, respectively
d. P346,500 and P67,950, respectively
P Corporation acquired a 90 percent interest in S1 Corporation and 80 percent interest in

S2 Corporation both at book value on January 1, 2017. P Corporation exclusively sells
merchandise to S1 and S1 exclusively sells merchandise to S2. Comparative income
statement for the year ended December 31, 2017 are as follows:
P Corp. S1 Corp. S2 Corp.
Sales P 1,000,000
P800,000 300,000
Cost of sales 800,000 200,000 500,00
Gross profit 200,000 60,000 160,000
Operating expenses 80,000 P140,000 P340,000
Net income P120,000
Inventory, Dec. 31 P400,000 P600,000 P300,000
2017
114. The consolidated cost of sales for 2017 should be:

a. P1,500,000
b. P300,000
c. P160,000
d. P120,000
Presented below is the unadjusted trial balance, as of December 31, 2017, of VITA Corp.
Cash P50,000 Trade accounts payable P500,000
Installment accounts 400,000 Unrealized gross profit- 100,000
receivable-2016 2015
Installment accounts 1,400,000 Unrealized gross profit- 860,000
receivable-2017 2016
Inventory, December 31, 2017 2,000,000 Unrealized grossprofit- 1,000,000
2017
Other assets 4,970,000 Capital stock 6,000,000
Operating expenses 500,000 Retained earnings 800,000
________ Repossession gain 60,000
9,320,000 9,320,000
The cost of goods sold had been uniform over the years at 60% of sales and the company
adopts perpetual inventory procedures. On installment sales, the company charges
installment accounts receivable and credits inventory and unrealized gross profit
accounts.
Repossessions of merchandise have been made during 2017 due to some customers,
failure to pay maturing installments. The analysis of those transactions have been
summarized as follows:
Inventory P75,000
Unrealized gross profit-2015 8,000
Unrealized gross profit-2016 24,000
Installment accounts receivable-2015 P20,000
Installment accounts receivable-2016 60,000
Repossession gain 27,000
The repossessed merchandise were unsold at December 31, 2017 and it was ascertained
that these were booked upon repossession, at their original cost. A fair valuation would
be a sales price of P100,000 after reconditioning cost of P5,000 and cost to dispose them
of P5,000.
115. The realized gross profit on 2017 installment sales before gain/loss on repossession
is:
a. P440,000
b. P560,000
c. P1,208,000
d. P1,360,000
In 2017, Crown Builders Corp., successfully bided on a fixed-price contract for a factory
building at a price of P26,000,000. Crown uses the percentage-of-completion method
and the following data are obtained on the project
Percentage of Estimated total Income recognized completion cost of completion to-
date
December31, 2018 60% P20,800,000 P3,120,000 December 31, 2017 20%
19,500,000 1,300,000
116. What is the contract cost incurred in 2018 assuming that costs incurred are used to
measure the extent of progress toward project completion?
a. P12,480,000 c. P8,580,000
b. P9,100,000 d. P8,320,000
The following data were taken from the records of DR Company:

Raw Materials Work in Process Finished Goods
August 1, 2017 ? P80,000 P60,000
August 31, 2017 P50,000 95,000 78,000
Raw materials purchases, P46,000

Factory overhead, 75% of direct labor cost, P63,000.
Selling and administrative expenses, 12.5% of sales, P25,000. Net
income for August, P25,000.
117. The inventory of raw materials at August 1, 2017 was:

a. P30,000 c. P46,000
b. P40,000 d. P50,000
The following information were taken from the records of Good Shepherd Corporation.
Units Costs
Work in process inventory (50% complete) 300,000 P660,960
Finished goods inventory 200,000 1,009,800
Materials are added to production at the beginning of the manufacturing process and
overhead is applied to each product at the rate of 60% of direct labor costs. There was
no finished goods inventory on Jan. 1. A review of Sexy inventory cost records disclosed
the following information:
Costs
Units Materials Labor
Work in process January 1 (80% 200,000 P200,000 P315,000
complete)
Units started – production 1,000,000
Materials costs 1,300,000
Labor costs 1,995,000
Units completed 900,000
118. Using weighted average method, the correct cost assigned to the 300,000 units in
the ending work in process inventory is
a. P900,000 c. P918,000
b. P875,000 d. P903,000
Assume that process conversion costs are uniform but a number of materials are added
at different points in process. Material 1 is added at the beginning of the process. The
transferred-in costs are added at the 20% point in the process. Material 2 is added
uniformly from the 50% to 70% points in the process. Material 3 is added at the 75%
point in the process, and Material 4 is added uniformly at the 90% to the 100 points in
the process.
The beginning work in process, was 10,000 units 60% complete, 60,000 units were
added, and ending work. In process was 20,000 units 95% complete.
119. What was the Material 2 equivalent units for the month?
FIFO weighted average
a. 50,000 60,000
b. 60,000 70,000
c. 65,000 70,000
d. 63,000 67,000
RITEMED, Inc. manufactures products P, Q, & R, from joint process. Additional

information is as follows:
P Q R Total
Units produced 4,000 2,000 1,000 7,000
Joint costs 36,000 ? ? 60,000
Sales value at spit-off ? ? 15,000 100,000
Additional costs if further 7,000 5,000 3,000 15,000
processed
Sales value if further 70,000 30,000 20,000 120,000
processed
120. Assuming that joint costs are allocated using the relative sales value at split-off
approach, what were the joint costs allocated to product Q and R?
a. P12,000 for Q and P12,000 for R
b. P14,400 for Q and P9,600 for R
c. P15,000 for Q and P9,000 for R
d. P16,000 for Q and P8,000 for R
Buffalo Corp. awarded its franchise to Wings Company in Cebu on July 28, 2018 for a
total fee of P200,000. Of said amount, P100,000 was payable upon the signing of the
franchise agreement and the balance, payable in two annual payments of P50,000 each.
No future service is required and fees paid are non refundable.
Buffalo had been very successful in Metro Manila with 100 franchisee but Cebu was the
first outside Metro Manila. Buffalo’s agreement with Wings provided that in the event
the first year of operations would result to an operating loss, the franchising agreement
may be cancelled without need of returning any portion of paid franchise fee and there
would be no need to pay any balance of the unpaid franchise fee. The interest rate of
this type of loan is 16%.
121. The total unearned franchise fee on July 28, 2017 is:
a. P100,000 c. P200,000
b. P80,262 d. P180,262
Fil-Am Corporation, a U.S. firm owns an 80% interest in Pinoy Corp.. of the Philippines,
purchased several years ago at book value equal to fair value. The functional currency of
Pinoy Corp.. is the U.S. dollar. Pinoy uses the FIFO inventory method. Data in peso
relating to Pinoy’s cost of sales and inventory are as follows:
Exchange rate January 1, 2017 P49.000 Exchange rate

December 31,2017 P50.80
Average exchange rate for 2017 P51,500
122. Determine cost of sales and ending inventory amounts in U.S. dollars that will
appear in Pinoy’s remeasured financial statements.
a. $1,771,523 and $98,425, respectively
b. $1,772,861 and $97,087, respectively
c. $1,764,705 and $98,425, respectively
d. $1,418,298 and $77,670, respectively
The accounts of Arellano Corporation, a Filipino Corporation, shows P81,300,000

accounts receivable and 38,900 accounts payable at December 31, 2009, before
adjusting entries are made. An analysis of the balance reveals the following:
Accounts receivable
Receivable denominated in Philippine peso P28,500,000
Receivable denominated in 34,000 Japanese Yen 11,800,000
Receivable denominated in 804,000 U.S. dollars 41,000,000
Accounts payable
Payable denominated in Philippine Pesos P6,850,000
Payable denominated in 200,000 Canadian dollars 7,600,000
Payable denominated in 72,000,000 Japanese yen 24,450,000
Current exchange rates for Japanese Yen, U.S. Dollars, and Canadian Dollars at December
31, 2009 are P0.3456, P51.39, and P38.55, respectively.
123. Determine the foreign currency exchange gain or loss that must appear on the
income statement of Arellano Corporation for the year ended December 31, 2009.
a. P509,880 gain c. P33,320 gain
b. P543,200 loss d. P33,320 loss
The unadjusted accounts of Okada at December 31, 2017 that related to its forward
exchange contracts are summarized as follows:
Debit Balances
Accounts receivable from Solaire Company of Finland (billing was 330,000P220,000,110
markka)
Contract receivable from exchange broker in Phil. Pesos (to hedge the 2,100,000
receivable from Solaire for 60 days from December 1, 2017)
Contract receivable from exchange broker in Yen (to hedge the payable 1,300,000
Contract receivable from exchange broker in Canadian dollars (to hedge 840,000
a 27,000 Canadian dollar purchase commitment from sterling Corp. of
Toronto for 60 days from December 1, 2017)
Credit Balances
Accounts payable to Tako Textile Company of Japan (billing was for P1,200,000
3,000,000 Japanese yen)
Contract payable to exchange broker in markka (for Solaire hedge) 2,100,000
Contract payable to exchange broker in Phil. Pesos (for Tako hedge) 1,300,000
Contract payable to exchange broker in Phil. Pesos (for Sterling hedge) 840,000
Exchange rates at December 31, 2017 were as follows:
Finnish markka Japanese yen Canadian

dollars
Current rate 6.776 .428 31.038
Forward rates to sell markka and
purchase yen and dollars
30-day future 6.595 .436 31.125
60-day future 6.425 .445 31.250
124. What is the foreign currency transaction gain or loss on the forward contracts?
a. P89,380 loss c. P40,999 loss
b. P40,975 loss d. P76,350 loss
The controller for Diaz Supply Company has established the following activity cost pools
and cost drivers.
Activity cost pool Budgeted Cost driver Budgeted Pool rate

overhead cost level for cost
driver
Machine setups P200,000 Number of setups 100 P2,000/setup
Material handling 100,000 Weight of raw 50,000 pounds P2/pound

material
Hazardous waste 50,000 Weight of 10,000 pounds P5/pound
control hazardous
chemical
used
Quality control 75,000 Number of 1,000 P75/inspection
inspections
Other overhead _200,000_ Machine hours 20,000 P10/machine
costs hr.
Total P625,000
An order for 2,000 boxes of film development chemicals has the following production
requirements:
Machine setups 4 setups
Raw materials 10,000 pounds
Hazardous materials 2,000 pounds
Inspections 10 inspections
Machine hours 500 machine hours
125. Under the activity based cost system, how much is the overhead cost per box of
chemicals?
a. P21.875 c. P15.625
b. P43.75 d. P7.8125
126. Using a single predetermined overhead rate cased on machine hours, compute the
rate per box of chemicals.
a. P21.875 c. P15.625
b. P43.75 d. P7.8125
On January 1, 2017, Mario Products Corp. issues 12,000 shares of its P10 par value stock
to acquire the net assets of Lucas Steel Company. Underlying book value and fair value
information for the balance sheet items of Lucas Steel Company at the time of
acquisition are as follows:
Balance Sheet Item Book value Fair value
Cash P60,000 P60,000
Inventory 60,000 115,000
Land 50,000 70,000
Buildings and Equipment 400,000 350,000
Less: Accumulated depreciation (150,000)_ _-________
Total assets P520,000 P695,000
Bonds payable 200,000 180,000
Common stock (P5 par value) 150,000
Additional paid-in capital 70,000
Retained earnings _90,000_
Total liabilities and equities P520,000
Lucas Steel shares were selling at P18 and Mario Products shares were selling at P50 just
before the merger announcement. Additional cash payments made by Mario
Corporation in completing the acquisition were:
Finder’s fee paid to firm that located Lucas Steel P10,000

Audit fee for stock issued by Mario Products 3,000
Stock registration fee for new shares of Mario Products 5,000
Legal fees paid to assist in transfer of net assets 9,000
Cost of SEC registration Mario Products shares 1,000
127. How much would be the resulting goodwill assuming, Mario measures minority
interest at market price and acquires only 18,000 of Lucas shares?
a. P297,000
b. P316,000
c. P311,000
d. P472,000
128. Which of the following statements is FALSE?

a. On the balance sheet date, the account Forward Contract Receivable which
is the receivable from the bank is credited to recognize foreign exchange
loss the decrease in the forward rate under a derivative instrument which is
a forward contract to purchase foreign currency.
b. Assuming CG Company a Philippine Company acquired an “at the money”
foreign currency call option contract, under a fair value hedge, if the spot
rate decreases from transaction date to year-end then the intrinsic value at
year-end is also equal to the gain on derivates as to the effective portion
which affects current earnings or profit and loss.
c. A Philippine Company sold and delivered merchandise on account to a
customer in another country in 2016, the transaction is denominated in the
country’s local currency to be settled in 2017, the said transaction is not
automatically a hedge item even if the bid spot rate is decreasing.
d. On the settlement date, in the books of XYZ Company a Philippine Company
with importing transaction which is also a hedge item and a forward
contract to buy foreign currency which is also a hedging instrument the
amount of each debited is measured in pesos but denominated in a foreign
currency.
129. Which of the following statement is TRUE?

a. On the transaction date of a forward contract to sell foreign currency, both
the receivable from the bank and the payable to the bank are measured in
pesos, but only the liability to the bank is denominated in a foreign currency.
b. If at a given whether transaction date balance sheet date or settlement
date, the spot price is higher than the strike price then an option contract
“to buy” is said to be in the money’ a situation whereby the holder may
exercise his right to buy since it is favorable to him.
c. The premium paid in acquiring an option contract to buy or sell a foreign
currency within specified days at a specified price is always equal to the fair
value of the derivative asset on the first day, it may also be equal to the time
value or ineffective portion on the first day of the contract.
d. A transaction involving a 120-day forward contract derivative instrument on
October 1, 2016 used in a speculation to sell foreign currency for a price set
today, delivery of which is on a specific future date result to a gain at
yearend if the forward rate increase from the 120-day futures on the
transaction date to the 30-day futures on the following sheet date.
130. A franchisor signed a contract with a franchisee on September 1, 2016. The

franchisor receives a partial payment of the initial franchise fee it changes to its
franchisee and the balance of the franchise fee is due in the next several years. The
franchisor does not recognize revenue from franchise fee in 2016 when-
a. The period of refund has elapsed, collection of the note is certain, the
franchisor has a fair measure of services already period performed, but
substantial services remain to be performed.
b. The refundability period has expired and no future services are required by
the franchisor but collection of the note is highly uncertain.
c. The down payment is refundable and substantial future services remain to
be performed by the franchisor.
d. The down payment is nonrefundable, collection of the note is reasonably
assured, and the franchisor has performed substantially all of the services
required by the initial fee.
131. Which of the following statements is TRUE regarding accounting for home office
and branch?
a. Assuming the home office ships merchandise to the branch at a mark-up
above cost, the account Shipments from Home Office in the published
income statement is reported at billed price.
b. In the home office purchased an equipment to be used by the branch but
the record of the asset is being maintained by the home office for uniform
depreciation policy, no entry is required on the art of the branch.
c. The allowance for overvaluation account must be debited in the separate
books of the home office to adjust the results of operations of the branch
whether it is a net income or net loss per branch books.
d. A credit memo received by the branch may be a notification from the home
office about allocation of expense incurred by the latter.
132. Which of the following is correct?

a. All joints arrangements are not structured through a separate vehicle are
classified as joint ventures
b. For a joint venture, the rights pertain to the rights and obligations associated
with individual assets and liabilities, whereas with a joint operation, the
rights and obligations pertain to the net assets
c. In considering the legal form of the separate vehicle if the legal form
establishes rights to individual assets and obligations, the arrangement is a
joint operation. If the legal form establishes rights to the net assets of the
arrangement, then the arrangement is a joint venture
d. When the joint operators have designed the joint arrangement so that its
activities primarily aim to provide the parties with an output it will be
classified as a joint control?
133. Which of the following is not correct?

a. Joint arrangements may be entered into to manage risks involved in a
project
b. Joint arrangements may be entered into to provide the parties with access
to new technology or new markets.
c. Joint arrangements require investors to have equal interests in the joint
arrangement
d. The key feature of a joint arrangement is that the parties involved have joint
control over the decision making in relation to the joint arrangement.
134. The particular relationship between parties that signifies the existence of a joint
arrangement is:
a. Significant influence by one party over the other party
b. Control over the operating policies of one party by another party
c. Shared influence by two parties over the activities of another party
d. Joint control by the parties over the activities of an operation
135. The matters generally dealt with in a joint arrangement contract include the
I II III IV
Activity, duration and reporting obligations Yes Yes Yes Yes
Capital contribution of the venturers Yes Yes Yes No
Sharing of the output, expenses or results No Yes Yes Yes
Voting rights of the venturers No No Yes No
a. I
b. II
c. III
d. IV
136. Which of the following statements is correct?

a. All joint arrangements are accounted for under PAS 28
b. Joint arrangements classified as joint ventures are accounted for under PFRS
11
c. Joint arrangements classified as joint ventures are accounted for under PAS
28
d. Joint arrangements classified as joint operations are accounted for under
PAS 28

a. If actual overhead is less than applied overhead, upon closing, overhead is
underapplied and Cost of Goods Sold is credited
b. Actual overhead exceeds applied overhead and the amount is immaterial,
upon closing, overhead is underapplied and Cost of goods sold will increase
c. Applied overhead consist of estimated activity times predetermined
overhead rate.
d. In order to obtain more accurate product costs, many companies now
allocate overhead using just-in-time method.

a. The intercompany profit in inventory transfer between affiliates is computed
by multiplying the inventory held by the buying affiliate which was acquired
from the selling affiliate by the gross profit rate based on sales of the buying
affiliate.
b. The income and expenses of a subsidiary are included in the consolidated
financial statements from the acquisition date
c. Recognition of the realized profit in beginning inventory requires a working
paper debt to cost of goods sold
d. The non-controlling interest in profit is affected by the bargain purchase or
gain on acquisition
139. Which of the following statements is TRUE?

a. When a subsidiary has borrowed cash from the parent company, the related
receivable and payable are eliminated in their own set of books in preparing
a consolidated statement of financial position
b. In purchase type business combination, the stockholders’ equity section of a
consolidated parent’s stockholders’ equity accounts only
c. Parent company owns 75% of Subsidiary company. During 2016, parent sold
goods with a 30% gross profit to Subsidiary, Subsidiary sold all of these
goods in 2016. For 2016 consolidated financial statements, sales and cost of
goods sold should be reduced by 75% of the intercompany sales.
d. Amortization of excess affects the computation of non-controlling interest in
net assets and the non-controlling interest in profit.
140. Which of the following statements is TRUE?

a. A term endowment fund and board designated funds are classified as
unrestricted and temporary restricted funds respectively.
b. In the Statement of Cash Flow, all types of contributions/donations that are
unrestricted will be classified as operating activity and
contributions/donations that are restricted will be classified as financing
activity
c. A not for profit organization receives P12,500 from a donor. The donor
receives two ticket to a theatre show and an acknowledgement in the
theatre program. The tickets have a fair value of P8,750. The amount
recorded as contribution revenues is P12,500
d. In 2016, the Board of Trustee of Ayala Foundation designated an amount of
P175,000 of tis current funds for college scholarships. Also in 2016, the
foundation received a bequest of P225,000 from an estate of a benefactor
who specified that the bequest was to be used for hiring teachers to tutor
handicapped students. The amount of P225,000 should be accounted for in
the current restricted fund.
A, B and C decided to form ABC Partnership. It was agreed that A will contribute an
equipment with assessed value of P200,000 with historical cost of P1,600,000 and
accumulated depreciation of P1,200,000. A day after the partnership formation, the
equipment was sold for P600,000.
B will contribute a land and a building with carrying amount of P2,400,000 and a fair
value of P3,000,000. The land and building are subject to the mortgage payable
amounting to P600,000 to be assumed by the partnership. The partners also agreed the
C will contribute sufficient cash to the partnership.
141. What is the total agreed capitalization of the ABC Partnership?

a. 3,000,000 c. 5,000,000
b. 4,000,000 d. 6,000,000
142. What is the cash to be contributed by C in the ABC Partnership?

a. 1,000,000 c. 1,400,000
b. 1,200,000 d. 1,600,000
On January 1, 2018, A,B and C formed ABC Partnership with original capital contribution
of P600,000, P1,000,000 and P400,000. A is appointed as managing partner.
During 2018, A, B and C made additional investments of P1,000,000, P400,000 and

P600,000, respectively. At the end of 2018, A, B and C made drawings of P400,000,
P200,000 and P800,000, respectively. At the end of 2018, the partnership had a credit
balance in the income summary account of P2,100,000. The profit or loss agreement of
the partners is as follows:
• 10% interest on original capital contribution of the partners.

• Quarterly salary of P80,000 and P20,000 for A and B, respectively.
• Bonus to A equivalent to 20% of net Income after interest and salary to all
partners
• Remainder is to be distributed equally among the partners.
143. What is A’s share in the partnership profit for 2018?
a. 380,000 c. 1,080,000
b. 680,000 d. 400,000
On December 31, 2018, the statement of Financial Position of ABC Partnership provided
the following data with profit or loss ratio of 5:1:4:
Current Asset 3,000,000 Total Liabilities 1,000,000
Noncurrent Assets 4,000,000 A, Capital 2,200,000
B, Capital 2,400,000
C, Capital 1,400,000
On January 1, 2019, D is admitted to the partnership by investing P1,000,000 to the

Partnership for 10% capital interest . The total agreed capitalization of the new
partnership is P6,000,000.
144. What is the capital balance of C after the admission of D to the partnership?
a. 1,160,000 c. 1,000,000
b. 1,640,000 d. 1,560,000
On December 31,2018, the Statement of Financial Position of ABC Partnership with

profit or loss ratio of 6:1:3 of partners A, B and C respectively, revealed the following
data:
Cash 2,000,000 Other Liabilities 4,000,000
Receivable from A 1,000,000 Payable to B 2,000,000
Other noncash assets 4,000,000 Payable to C 200,000
A, Capital 1,400,000
B, Capita ( 1,300,000)
C, Capital 700,000
On January 1, 2019, the partners decided to liquidate the partnership. All partners are
legally declared to be personally insolvent. The other noncash assets were sold for P
3,000,000. Liquidation expenses amounting to P200,000 were incurred.
145. How much cash was received by B at the end of partnership liquidation?
a. 500,000 c. 580,000
b. 300,000 d. 540,000
On December 31,2018, the Statement of Financial Position of ABC Partnership with

profit or loss ratio of 5:3:2 of respective partners A,B and C. showed the following
information:
Cash 3,200,000 Total Liabilities 4,000,000
Noncash assests 2,800,000 A,Capital 200,000
B,Capital 1,000,000
C,Capital 800,000
On January 1, 2019, the partners decide to liquidate the partnership in installment . All
partners are legally declared to be personally insolvent.
As of January 31,2019, the following transactions occurred:

• Noncash assets with a carrying amount P2,000,000 were sold at a gain of

P200,000.
• Liquidation expenses for the month of January amounting to P100,000 were
paid.
• It is estimated that liquidation expenses amounting to P300,000 will be incurred
for the month of February, 2019.
• 20% of the liabilities to third person were settled.
• Available cash was distributed to the partners.
146. What is the amount of cash received by partners C on January 31, 2019? a.
520,000 c. 600,000
b. 480,000 d. 700,000
147. What is the amount of total cash withheld on January 31,2019?

a. 1,100,000 c. 3,500,000
b. 3,200,000 d. 3,400,000
148. At the date of Partnership formation of ABC partnership, the amount credited to
A’s capital is less than the fair market value of the property he contributed. Which
of the following is the most valid reason?
a. The property contributed by A is impaired.
b. The property contributed by A has been subjected to positive asset
revaluation.
c. Bonus has been given by partner A to the other partners.
d. Goodwill arising from partnership formation has been recognized.
AAA Company is bankrupt and has undergone corporate liquidation. Presented below is
its statement of financial position before the start 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 building (fair value equal its book value).
• At the end of liquidation, the holder of loan payable received P340,000.
149. What is the amount received by the holder of accounts payable at the end of
liquidation?
a. 85,000 c. 40,000
b. 15,000 d. 60,000
150. What is the amount of net free assets available at the end of liquidation?
a. 80,000 c. 120,000
b. 40,000 d. 200,000
151. In every corporate liquidation, which of the following creditors will always fully
recover their claims from a liquidating corporation? a. Unsecured creditors
with priority
b. Unsecured creditors without priority
c. Partially secured creditors
d. Fully secured creditors
152. It refers to the term used when the total shareholders’ equity has a negative
balance.
a. Deficit
b. Deficiency
c. Surplus
d. Insufficiency
Entity A and Entity B incorporated Entity C to manufacture a microchip to be used by the
incorporating entities as 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 2,000,000 Accounts payable 4,000,000

Land 6,000,000 Note payable 2,000,000
Building 10,000,000 Loan payable 8,000,000
Share capital 2,000,000
Retained earnings 2,000,000
Sales revenue 10,000,000
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 payable of Entity C.
• 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 Entity C includes sales to Entity A and Entity B in the
amount of P2,000,000 and P4,000,000, respectively. As of the end of the first
year, Entity A and Entity B were able to resell 30% and 60% of the inventory
coming from Entity C to third persons.
153. What is the amount of total assets to be reported by Entity A concerning its
interest in Entity C?
a. 10,800,000 c. 7,200,000
b. 6,000,000 d. 10,000,000
154. What is the amount of sales revenue to be reported by Entity A concerning its
interest in Entity C?
a. 4,600,000 c. 6,000,000
b. 4,200,000 d. 5,000,000
155. Federal Land and SMDC establish a joint arrangement in an incorporated entity,
Star Inc. The assets and liabilities of Star Inc. will be in the name of the said
established entity. The activities of the arrangement will be decided by its own
board directors. The rights of Federal Land and SMDC are limited only to the net
assets of Star Inc. How shall SMDC account for its investment in Star Inc.?
a. It shall be accounted for using proportionate consolidation.
b. 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.
On January 1,2018,Entity A, a public entity , and Entity B, a public entity, incorporated

Entity C by investing P6,000,000 and P4,000,000 for capital interest ratio of 60:40. 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 will have rights to the net assets of Entity C.
The financial statements of Entity C provided the following data for 2018:
• Entity C reported net income of P2,000,000 for 2018 and paid cash dividends of
P800,000 on December 31,2018.
• During 2018, Entity C sold inventory to Entity A with gross profit of P100,000.
Eighty percent of those inventories were resold by Entity A to third persons
during 2018 and the remainder was resold to third person during 2019.
• On July 1,2018, Entity C sold a machinery to Entity B at a loss of P40,000. At the
time of sale,the machinery has remaining useful life of 2 years.
156. What is the investment income to be reported by Entity A for the year ended
December 31, 2018?
a. 1,206,000 c. 1,188,000
b. 1,212,000 d. 1,194,000
157. What is the balance of Investment in Entity C to be reported by Entity B on

December 31, 2018?
a. 4,492,000 c. 4,476,000
b. 4,482,000 d. 4,496,000
On January 1, 2018, an entity sold a car to a customer at a price of P400,000 with a

production cost of P300,000. It is the entity’s policy to employ installment method to
recognize gross profit from installment sales.
At the time of sales, the entity received cash amounting to 25% of the selling price and
old car with trade-in allowance of P50,000. The said old car has fair value of P150,000.
The customer issued a 5-year note for the balance to be payable in equal annual
installments every December 31 starting 2018. The note payable is interest bearing with
10% rate due on the remaining balance of the note.
The customer was able to pay the first annual installment and corresponding interest
due. However, after the payment of the second interest due, the customer defaulted on
the second annual installment which resulted to the repossession of the car sold with
appraised value of P110,000. On December 31,2019, the repossessed car was resold for
P140,000 after reconditioning cost of P10,000.
158. What is the entity’s realized gross profit for the year ended December 31,2018?
a. 50,000 c. 108,000
b. 120,000 d. 128,000
159. What is the loss on repossession for the year ended December 31, 2019?
a. 30,000 c. 10,000
b. 20,000 d. 40,000
160. If the sale transaction provides for periodic installments over an extended period
of time and the collectability of the sales price cannot be reasonably estimated,
what method of revenue recognition is the most appropriate?
a. Cost recovery method c. Installment method
b. Accrual basis d. Cash basis
On January 1, 2018, an entity granted a franchise agreement to a franchisee. The

contract provided that the franchise shall pay an initial franchise fee of P500,000 and on-
going payment of royalties equivalent to 8% of the 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 a present value of P240,183 with effective
interest rate of 12%.
On June 30,2018, the entity completed the performance obligation of the franchise at a
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.
161. If the collection of the note receivable is reasonably assured, 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 c. 22,009
b. 44,014 d. 88,037
162. If 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 c. 70,028
b. 94,850 d. 92,037
162. Under IFRS 15, in which of the following instances shall an entity recognize
revenue through satisfaction of performance obligation at a point in time instead
of satisfaction of performance obligation over time?
a. The customer simultaneously receives and consumes the benefits provided
by the entity’s performs.
b. The entity’s performance creates or enhances an asset that the customer
controls as the asset is created or enhanced.
c. The entity’s performance does not create an asset with an alternative use to
the entity and the entity has an enforceable right to payment for
performance completed to date.
d. The entity has transferred the legal title,control and physical possession of
the asset at a specific date.
On January 1, 2018, BBB Company started the construction of a building at a fixed

contract price of P2,000,000. On the same date, the customer paid a mobilization fee
equal to 5% of contract price that will be deductible from the first billing. The outcome
of construction contract cannot be estimated reliably.
During 2018, the entity billed the customer equivalent to 30% of the contract price.
During 2019, the entity billed again the customer amounting to 20% of the contract
price. During 2020, the entity billed again the customer amounting to 40% of the
contract price.The remaining billing was made at the year of completion of the project.
163. The percentage of completion of a construction contract is based on all of the

following except:
a. the proportion that contract cost incurred for work performed to date
bear to the estimated total
contract cost
b. survey at work per formed
c. completion of physical proportion
d. progress payments and advances received from customers
The entity made collection from the customer at the end of 2018,2019 and 2020, in the
amount of P240,000, P900,000 and P360,000, respectively. The entity provided the
following data concerning the direct costs related to the said project.
2018 2019 2020
Cumulative costs incurred at year-end 720,000 1,600,000 1,740,000

Remaining estimated costs to complete 1,680,000 500,000 100,000
164. What is the realized gross profit for the year ended December 31, 2019?
a. 100,000 c. 300,000
b. 400,000 d. 0
165. What is the excess of construction in progress over progress billings or excess of
Progress billings over construction in progress on December 31,2020? a.
60,000 excess billings
b. 160,000 excess billings
c. 40,000 excess construction in progress
d. 100,000 excess construction in progress
166. What is the balance of accounts receivable on December 31, 2020?

a. 300,000 c. 240,000
b. 200,000 d. 100,000
167. When it is probable that total contract costs will exceed total contract revenue ,
how shall the long-term contractor account for the difference?
a. The expected loss shall be recognized as an expense immediately.

b. The expected profit shall be recognized as a profit immediately.
c. The expected loss shall be recognized as an expense taking into account the
percentage of completion as of the end of the period.
d. The expected loss shall be recognized as a profit taking into account the
percentage of completion as of the end of the period.
168. When the outcome of a construction contract cannot be estimated reliably, what
accounting method shall be used by a long term construction revenue and
construction cost?
a. Percentage of completion method
b. Cost recovery method
c. Installment method
d. Accrual Basis
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 2,000,000 1,000,000
Beginning Inventory 100,000 60,000
Purchases from outside supplier 800,000 200,000
Shipment to branch 400,000
Shipment from home office 500,000
Ending Inventory 160,000 100,000 Operating expenses 300,000
80,000
• The home office to branch markup based on cost is 25% this year and last year
• 20% of the beginning inventory of the branch came from outside supplier
• 24% of the ending inventory of the branch came from the last year’s shipment
from the home office
169. What is the net income reported by the branch in its separate income statement
for the current year?
a. 260,000 c. 228,000
b. 248,000 d. 190,000
170. An advance cash distribution plan is prepared

a. Each time cash is distributed to partners in an installment liquidation.
b. Each time a partnership assets is sold in an installment liquidation.
c. To determine the order and amount of cash each partner will receive as it
becomes available for distribution. d. None of these.
171. In the cash distribution plan, which partner gets the first cash distribution?
a. The partner with the largest loan balance
b. The partner with the largest loss absorption potential
c. The partner with the largest capital balance
d. The partner with the largest profit or loss ratio
On January 1, 2018, Mabolo Company signed an agreement to operate as a franchisee of

Guava Corporation for an initial fee of P337,500. On the same date Mabolo paid
P112,500 and agreed to pay the balance in four equal annual payments of P56,250 to
part on December 31,2018. The collection of the non-interest bearing notes issued is not
reasonably assured and no initial services required of the franchisor. Mabolo’s credit
rating indicates that it can borrow money at 14% interest for a loan of this type. The
present and future value factors that may be relevant are as follows:
Present value of 1 at 14%or 4 periods 0.59
Future amount of 1 and 4% for 4 periods 1.69
Present value of annuity of 1 at 14% for 4 periods 2.91
172. The revenue from franchise fees to be recognized by Guava corporation on

January
1,2018 is
a. P0 c. P163,687.50
b. P337,500 d .P112,500.00
173. The revenue from franchise fees recognized by the franchisor on December
31,2018 is
a. P56,250 c. P33,333.75
b. P22,916.25 d. P0
Papaya Corporation issued 100,000 shares of P28.50 par ordinary shares for all the
outstanding shares of Pine Enterprise on August 5,2018. It also paid cash of P30,000 at
the acquisition date and transferred used equipment with a carrying value of P50,000
and a current value of 70% thereof. Papaya’s ordinary stock was selling P30 when the
business combination was consummated. Pine Enterprise was to be liquidated. Out of
stock costs for the acquisition follows:
Finder’s fee P50,000

Accountant’s fee(Advisory) 10,000
Legal fee’s 20,000
Indirect acquisition costs 5,000
SEC registration costs and fees 12,000
174. If Papaya Corporation is a non-SME, the acquisition cost of the combination will be:
a. P3,080,000 c. P3,065,000
b. P3,145,000 d. P3,162,000
175. If Papaya Corporation is an SME, the acquisition cost of the combination will be:
a. P3,080,000 c.P3,065,000
b. P3,145,000 d. P3,162,000
176. The net increase (decrease) in Papaya’s share premium from the above-mentioned
information will be:
a. P (12,000) c. P (17,000)
b. P138,000 d. P150,000
Partners Alex and Zander, who share profits and losses at 60% and 40%, respectively ,
have the following balances at December 31, 2014.
Cash P 96,000 Accounts payable P137,600
Accounts Accumulated
Receivable 80,000 depreciation 6,400
Merchandise Alex, Capital 112,240
Inventory 112,000
Equipment 64,000 Zander, Capital 95,760
Total P352,000 Total P352,000
They agreed to incorporate their partnership, with the new corporation absorbing the
net assets after the following adjustments to reflect their fair values: (All shares are
to be issued at P100 par value per share.)
a. Additional allowance for bad Debts P 8,000
b. Understatement of merchandise inventory 16,000
c. Additional depreciation on the equipment 2,400
177. The number of shares received by Zander from the Corporation is

a. 980 shares c. 1,156 shares
b. 1,165 shares d. 1,165 shares
GREEN BERET, INC. is very financially distressed and the Securities and Exchange
Commission ordered its prompt liquidation. The company has the following assets at this
point:
Book Value Fair Value
Current Assets P 64,000 P 28,000
Land 80,000 72,000
Buildings 56,000 61,600
Equipment 24,000 26,400
178. Calculate the estimated net amount available for the payment of non-priority
claims
a. P 88,800 c. P 86,400
b. P100,000 d. P109,600
179. Calculate the amount of estimated payment to holders of note payable in the
event of liquidation.
a. P 88,800 c. P 86,400
b. P100,000 d. P109,600
EVERGREEN COMPANY started operations on January 2, selling its merchandise on

regular and on installment plans. The following data are available for its first two years
operation.
2017 2018
Regular Installment Regular Installment
Sales P400,000 P320,000 P500,000 P400,000
Cost of Sales 260,000 192,000 Cash 325,000 280,000
collection during the year
2017 Regular sales 100,000 150,000
2018 regular sales --- 200,000
2017 Installment sales 168,000 120,000
2018 installment sales --- 240,000
180. Calculate the realized gross profit recognized in EVERGREEN’s income statement
for 2018
a. P120,000 c. P423,000
b. P342,000 d. P295,000
181. Calculate the total deferred gross profit in the balance sheet of EVERGREEN at
December 31, 2018.
a. P104,000 c. P12,800
b. P 60,800 d. P48,000
The FOREVERMORE PARTNERSHIP started operation on January 2,2017 with the

following capital balances:
Xander P 88,000
Agnes 64,000
Kate 90,000
Their profit and loss agreement provide the following provisions

• Xander will be given an annual salary of P16,000 and Kate, P8,000.
• All partners will be given interest at 10% of beginning capital balances every
year.
• The balance of the profit, or the (loss) will be divided on a 5:2:3 to Xander,
Agnes, and Kate, respectively.
• Each partner is allowed to withdraw up to P8,000 every year
In 2017, partnership operations resulted in a net loss of P16,000, while in 2018 it

was a net profit of P32,000. All partners withdrew the maximum amount of P8,000
each year.
182. Calculate the balance of Xander’s capital at the end of 2017
a. P72,700 c. P49,600
b. P77,600 d. P64,900
183. Calculate the balance of Agnes’ capital at the end of 2018.

a. P82,080 c. P81,760
b. P44,076 d. P77,600
The partnership ABC is currently liquidating and on February 15,2015, the following
balances in capital and their profit and loss (P&L) ratios are shown:
Ariston, capital (P&L-50%) P19,000
Bernardo, Capital (P&L-30%) 18,000
Conrado, capital (P&L-20%) (12,000)
Assume non-cash assets have been all disposed and Conrado has promised to pay his
deficiency in a week’s time.
184. Calculate the amount to be received by one of the partners if cash is paid
immediately on February 15,2015.
a. Ariston, P13,000 c. Bernardo, P14,000
b. Bernardo, P12,000 d. Ariston, P11,500
On December 31, 2018, MEGABUCK, INC. authorized HORSESHOE ENTERPRISE to

operate as a franchisee for an initial franchise fee of P150,000. Of this amount,
P60,000 was received upon signing of the agreement , and the balance, represented by
a 15% P interest-bearing note is due in three annual payments of P30,000 beginning
December 31,2019. According to the agreement the down payment is nonrefundable
because it represents a fair measure of initial services already provided by the
franchisor. Substantial future services are required of MEGABUCK. The collectability of
the note is reasonably certain.
185. In MEGABUCK’s December 31,2018 balance sheet, unearned franchise fees from
the HORSESHOE franchise should be reported as
a. P72,000 c. P30,000
b. P90,000 d. P150,000
On January 1,2018, DREAM DAD PASTRIES signed an agreement with EVERLASTING

ENTERPRISES for the production of food products that will first be marketed in Luzon,
and hopefully in the Visayas and Mindanao if initial operations become successful. The
participants are both non-SMEs and the joint arrangement is classified as a “joint
venture” undertaking.
Joint Venture FASTFOOD, INC. is established to carry on the business venture, with the
venturers contributing the same amount for equal shares in the company ‘s 200,000,
P20 par value shares. They will also share profits and losses equally.
On December 31,2018, FASTFOOS, INC., provided the following financial statements:
COMBINED STATEMENT OF INCOME and RETAINED EARNINGS

Revenues P800,000
Expenses 616,000
Net Income P184,000
Retained earnings, January 1,2018 -
Cash dividends in 2018 -
Retained earnings, December 31,2018 P184,000
BALANCED SHEET
Cash P 144,000 Liabilities P1,160,000
Accounts receivable 640,000 Share Capital 4,000,000
Inventory 1,000,000 Retained earnings 184,000
PPE, net 3,560,000
Total Assets P5,344,000 Total equities P5,344,000
186. Determine the amount to be shown for the Investment in Joint Venture account in
the balance sheet of DREAM DAD PASTRIES at December 31,2018.
a. P2,029,000 c. P2,092,000
b. P2,209,000 d. P2,290,000
On January 1,2018, Venturer DD, an SME, acquired 35% equity in XX CORPORATION

for P37,000. Venturer DD will share in the joint control over the strategic financial and
operating decisions of XX CORPORATION. Transaction cost of 5% of the purchase price
of the shares were incurred by SME DD.
On December 31,2018, XX CORPORATION declared and paid dividends of P24,000 for

the year 2018. XX CORPORATION reported a net profit of P18,000 for that year.
Using appropriate valuation technique, venturer DD determined the fair value of its
investment in the joint venture as P49,000. Costs to sell are estimated at P4,410.
187. Assuming Venturer DD is to use the fair value model in accounting for its
investment, what is the investment of JV account balance Venturer DD will show
in its December31, 2018 balance sheet?
a. P52,325 c. P49,000
b. P57,575 d. P47,075
188. Now assume that Venture DD is to use the equity model in accounting for its
investment , what is the investment of JV account balance Venturer DD will show
in its December 31, 2018 balance sheet?
a. P44,590 c. P36,750
b. P49,000 d. P37,000
The SOLID ERECTORS started work on three job site during the current year. Any costs
incurred are expected to be recoverable. Data relating to the three jobs are given
below:
Estimated collection
Contract Actual Cost to Billings on
From
Site Price cost complete Contract
customers
Cebu P500,000 P375,000 - P500,000
P500,000
Bohol 600,000 254,167 P381,250 180,000
100,000
Davao 250,000 100,000 100,000 150,000
100,000
189. Calculate the net amount to be reported on the balance sheet for the above
projects under the percentage of completion method:
a. Due to customers P (11,250)
b. Due to customers P (13,750)
c. Due from customers P 13,750 D. Due from customers
P 11,250
190. Calculate the net amount to be reported on the balance sheet for the above
projects under the zero profit method.
a. Due to customers P (11,250)
b. Due from customers P 11,250
c. Due from customers P13,750
d. Due to customers P(13,750)
191. Calculate the difference in net income for the year between using the % of
completion method and using the zero profit method over the afore-mentioned
transactions.
a. P35,417 c. P34,715
b. P45,317 d. P25,000
Under a consignment arrangement, CONSIGNOR COMPANY ships 24 units of special

electronic gadgets called Tsamba Bebe to CONSIGNEE ENTERPRISES. The cost per unit
to consignor, Inc. is P1,500 and the goods will be sold at P4,400 each for a 10%
commissions on gross sales. Freight charges paid by the consignor on the shipments
was P1,500. At the end of 30 days the consignee rendered an account sales for 18 units
sold and reimbursable charges for: Delivery expenses , P1,000 and Advertising , P1,500,
among others. The consignor uses the consignment-out account in accounting for the
consignments. On the other hand, the consignee uses the Consignment-In account.
192. How much is the net remittance by the consignee?

a. P36,380 c. P33,680
b. P36,830 d. P30,638
193. How much is the net profit of the consignor?

a. P8,705 c. P8,255
b. P5,555 d. P2,513
194. How much is the adjusted balance of the Consignment Out account after
recognition of the net profit?
a. P7,935 c. P5,973
b. P9,375 d. P3,957
195. The reclassification entry to be recorded by the consignor to recognize the

deferred cost in its balance sheet will include
a. a debit to Consignment-Out of P7,935
b. a credit to Consignment profit of P8,255
c. a credit to Consignment-Out of P9,375
d. a debit to Consignment-In of P37,500
196. RMV Corp., a consignee, paid the freight cost for goods shipped from PRTC Corp.,
a consignor. These freight costs are to be deducted from RMV’s payment to PRTC
when the consigned goods are sold. Until RMV sells the goods, the freight costs
should be included in RMV’s.
a. Cost of goods sold
b. Freight-out costs
c. Selling expenses
d. Accounts receivable
197. State the proper order of partnership liquidation.

I. Outside creditors
II. Owner’s interests
III. Inside creditors
a. I, II and III c. II, I and III
b. III, I and II d. I, III and II
198. A simple partnership liquidation requires

a. Periodic credits to creditors and partners determined by a safe payment schedule
b. Periodic payments to partners as cash becomes available
c. Creditors be paid in an orderly manner
d. Partnership assets be converted into cash with full payment made to outside
creditors before remaining cash is distributed to partners in a lump sum payment.
On January 1, 2018, A company, B company, and C Company established D entity, and

agreed to share joint control a.Operation. A contributed P60,000 cash; B contributed
equipment with a book carrying value of P69,000; and C contributed machinery with a
carrying amount of P54,000. Both non-monetary contributions by B and C have a fair
value of P60,000 and an estimated useful life of 5 years.
199. The amount of cash from the joint operation that A Company will recognize as it
records its own contribution on January 1, 2018 is
a. P33,000 c. P18,000
b. P0 d. P20,000
200. The amount of (1) Equipment and (2) Machinery that B Company will record in its
books on January 1, 2018 will be
a. (1) P23,000 and (2) P20,000
b. (1) P20,000 and (2) P20,000
c. (1) P20,000 and (2) P18,000
d. (1) P23,000 and (2) P18,000
201. The amount of (1) Equipment and (2) Machinery that C will recognize in its books
on January 1, 2018 will be
a. (1) P23,000 and (2) P20,000
b. (1) P20,000 and (2) P20,000
c. (1) P20,000 and (2) P18,000
d. (1) P23,000 and (2) P18,000
202. In accounting for sales on consignment, sales revenue and the related cost of
goods sold should be recognized by the
a. Consignor when the goods are shipped to the consignee.
b. Consignee when the goods are shipped to the third party.
c. Consignor when notification is received that the consignee has sold the goods.
d. Consignee when cash is received from the customer.
Amounts related to the statement of affairs of Distressed Company as of April 30, 2019
follow:
Assets pledged for fully secured liabilities P80,000
Assets pledged for partially secured liabilities 50,000
Free Assets 272,000
Fully secured liabilities 60,000
Partially secured liabilities 80,000
Unsecured liabilities with priority 40,000
Unsecured liabilities without liabilities 330,000
203. Calculate the expected amount recoverable by partially secured creditors in the
a. P71,000 c. P69,500
b. P50,000 d. P80,000
204. In a statement of affairs, assets pledged for partially secured creditors are
a. Included in assets pledged for fully secured creditors
b. Offset against partially secured creditors
c. Included with free assets
d. Disregarded
On January 2, 2019, TAGUM Company signed an agreement to operate as a franchisee

of BALIWAG Enterprises for an initial franchise fee of P2,812,500 for 10 years. Of this
amount, P525,000 was paid when the agreement was signed and the balance payable
in four annual payment beginning on December 31, 2019. TAGUM issued a promissory
note for the balance, the relevant interest rate being 24%. Assume that substantial
services amounting to P417,450 had already been rendered by BALIWAG Enterprise
and that additional indirect franchise cost of P70,500 was also incurred. The franchisee
started operations during 2019 with a total sales of P450,000. The agreement further
provides that the franchisee must pay a continuing franchise fee equal assuming the
note to 5% of its gross sales. If needed, the PV factor is 2.40.
205. Assuming the note is non-interest-bearing and its collection is reasonably assured,
calculate the net income reported by BALIWAG for the year ended December
31,2019.
a. P598,630.50 c. P1,920,000
b. P1,761,450 d. P2,835,000
206. Assuming the note is interest-bearing and it’s collectibility is doubtful, determine
the realized gross profit for the year ended December 31, 2019. (Use 2 decimal
places for the gross profit rate, if needed for example: 75.16%)
a. P1,920,000 c. P598,630.5
b. P2,835,000 d. P934,098.75
ROMAN Contractors was recently awarded a P6,720,000 contract to construct a trade

center for SOUND Lending, Inc. ROMAN Contractors estimates it will take about four
years to complete the contract. The company uses the percentage of completion
method to report profits. (Use 2 decimal place for the percentage of completion, i.e.
64.28%)
The following information details the actual estimated costs from 2015 to 2018.
Year Actual costs each year Estimated costs to complete
2015 P3,129,000 P3,264,000
2016 P1,584,000 P1,800,000
2017 P1,152,000 P 912,000
2018 P1,080,000 -
207. Determine the realized gross profit (loss) in 2018.

a. P(168,000) c. P48,000
b. P127,000 d. P(48,000)
208. Using zero-profit-method instead, how much is the realized gross profit (loss) in
2017?
a. P(168,000) c. P48,000
b. P127,000 d. P(48,000)
GREATWITZ Company began operations on January 1, 2018 and appropriately uses the
installment method of accounting. The following information pertains to the operations
of the company for 2018.
Cost of installment sales, P525,000; Gross profit rate based on cost, 25%; Collections on
installment sales (including interest of P11,000), P297,500.
209. Determine the realized gross profit for 2018

a. P37,500 c. P35,750
b. P37,950 d. P57,300
210. Determine the deferred gross profit at December 31,2018.

a. P73,950 c. P53,750
b. P37,950 d. P93,750
Mr. Zoom and Mr. Boom formed a partnership on January 1,2019, with Zoom
contributing P16,000 in cash and Boom contributing equipment with book value of
P6,400 and fair value of P4,800 and inventory items with book value of P2,400 and fair
value of P3,200. During 2019, Boom made additional investment of P1,600 on April 1
and P1,600 on June 1, and withdrew P4,000 on September 1. Zoom had no additional
investment or withdrawals during the year.
211. What was the average capital balance of Mr. Boom during 2019?
a. P9,000 c. P8,800
b. P8,000 d. P7,200
On January 1, 2019, Zeep and Deep have capital balances of P200,000 and P160,000,
respectively. On July 1, 2019, Zeep invested an additional P40,000 while Beep withdrew
P10,000. Profits and losses are divided as follows: Beep is the managing patner and a
such shall receive P160,000 as salary with Zeep receiving P72,000; Both partners shall
receive interest of 10% on their beginning capital balances to offset whatever difference
in capital investment they have, and nay remainder shall be divided equally. The net
income of the partnership for 2019 was P96,000.
212. What was Zeep share in the net income for 2019?
a. P92,000 c. P48,000
b. P8,00 d. P6,000
Dulce Martin, a partner in a partnership that carries the name of the sweet shop, has
a30% participation in partnership profit. Her capital account had a net decrease of
P48,000 during 2019. In the same year, she withdrew P104,000 of capital and
contributed property valued at P20,000 to the partnership.
213. The net income of the partnership in 2019 was

a. P36,000 c. P120,000
b. P132,000 d. P440,000
MM, NN, and OO have a partnership. Their capital balances are P90,000, P130,000 and
P170,000, respectively. They share profits and losses 30%, 30% and 40%, respectively. PP
wants to become a partner with a 25% share in partnership capital appraisal of the
partnership reveals that the fair value of the partnership net assets (i.e. capital of MM,
NN and OO after PP’s admission) is P450,000.
214. Calculate how much PP should be asked to contribute, assuming then bonus
method is to be used.
a. P150,000 c. P210,000
b. P250,000 d. P70,000
Helen, Irene and Jessie were partners with capital balances on January 2, 2019 of
P560,000, P672,000 and P496,000, respectively. Their profits and loss ratio is 3:5:2. On
August 1, 2019, Helen retires from the partnership. On the date of retirement, the
partnership net loss from January2 is P384,000; and the partners agreed the revalue
inventories to P296,000 from P272,000. The payment to Helen for her interest is to be
P454,800.
215. Upon retirement of Helen, which of the following will result?

a. Bonus to Irene of P2,000
b. Goodwill to Jessie of P2,800
c. Bonus to Jessie of P800
d. Irene’s capital is P66,800 more than Jessie’s.
On January 1, 2016, E, F and G (all are corporation) established a joint arrangement to

manufacture a product that they will share equally. They will each contribute P200,000.
E and F are to contribute cash while G is to contribute a piece of equipment with a fair
value of P200,000. In the books of G, the carrying value of equipment is P185,000.
Assume the equipment has a remaining life of 3 years from this date.
216. On January 1, 2016, in G Corporation balance sheet, the Equipment in JO account

will be presented at:
a. P61,667 c. P66,667
b. P50,000 d. P58,500
217. On December 31, 2016, in G Corporation balance sheet, the Equipment in JO

account will be presented at:
a. P45,000 c. P60,000
b. P55,500 d. P58,500
I LEAD Corporation, is a joint venture with a 50% equity in Joint Venture ABC Company,
prepared the following draft of its combined financial statements at December 31, 2019
before the year-end adjustments under the equity method.
Revenues P10,800,000
Expenses 9,280,000
Profit P 1,520,000
Common Stock 3,000,000
Retained Earnings 920,000
Liabilities 840,000
Total P 6,280,000
Current assets P 1,830,000
Plant Assets 3,900,000
Accumulated depreciation ( 700,000)
Investment in JV 1,250,000
Total P6,280,000
Joint venture ABC reported a net profit of P115,000for the year ended December 31,
2019.
218. Determine the total assets shown in I LEAD’s balance sheet at December 31, 2019
a. P5,030,000 c. P6,337,500
b. P6,280,000 d. P5,280,000
219. Determine the total stockholder’s equity shown in I LEAD’s balance sheet at
December 31, 2019
a. P4,190,000 c. P5,440,000
b. P5,497,500 d. P4,440,000
On March 1, 2016, Ruble Construction Company was contracted to construct a factory

building for a total contract price of P8,400,000. The building was completed by October
31, 2018. The annual contract costs incurred, estimated cost to complete the contract,
and billings for 2016, 2017 and 2018 are given below:
2016 2017 2018

Contract costs incurred
during the year P3,200,000 P2,600,000 P1,450,000
Estimate costs to
complete the contract
at 12/31 3,200,000 1,450,000 P 0
Billings during the year 3,200,000 3,500,000 P1,700,000
220. The entry to record the recognized profit in 2018 includes a credit to a.
Construction revenue, P1,680,000
b. Construction in progress, P230,000
c. Contract billings, P1,700,000
d. Construction in progress, P1,450,000

following, except
a. The proportion that contract costs incurred for work performed to
date bear to the estimated total contract costs.
b. Survey of work performed.
c. Completion of a physical proportion of the contract work.
d. Progress payments and advances received from customers.
222. A Company uses the percentage of completion method to account for a four-year
construction contract. Which of the following would be used in the calculation of
the income recognized in the first year?
Progress billings Collection on progress billings
a. No No
b. No Yes
c. Yes No
d. Yes Yes
223. Patter Corporation issues 500,000 shares of its own P10 par common stock for the
net assets of Simpson Corporation in a merger consummated on July 1, 2019. On
this date, Patter stock is quoted at P20 per share. Summary balance sheet data for
the two companies at July 1, 2019, just before combination, are as follows:
Patter Simpson
Current assets P18,000,000 P1,500,000
Plant assets 22,000,000 6,500,000
Total assets 40,000,000 8,000,000
Liabilities 12,000,000 2,000,000
Common stock- P10 par 20,000,000 3,000,000
Additional pain-in capital 3,000,000 1,000,000
Retained earnings 5,000,000 2,000,000
Total Equities P40,000,000 P8,000,000
Calculate the retained earnings of Patter Corporation immediately after the combination:
a. P5,000,000 c. P7,000,000
b. P6,000,000 d. P8,000,000
224. Under the acquisition method, the retained earnings of the acquirer after the
combination is equal to
a. The sum of the retained earnings of the acquire and acquirer
b. The retained earnings of the acquirer plus any income from acquisition
c. The retained earnings of the acquirer only
d. The retained earnings of the acquirer less any amortization of goodwill
The Statement of Affairs of RBD Enterprises show the following balances

Estimate gains on realization of assets P 945,000
Estimated losses on realization of assets 1,695,000
Contingent Assets 750,000
Current assets 100,000
Other assets 1,200,000
Liabilities 400,000
Contingent liabilities 225,000
Capital stock 1,500,000
Retained earning deficit (600,000)
225. Determine the amount the stockholders may recover in the event of liquidation.
a. P0 c. P125,000
b. P675,000 d. P600,000
226. Determine the estimated deficiency to unsecured creditors

a. P 0 c. P225,000
b. P875,000 d. P600,000
The condensed balance sheets of X Company, Y Company and Z Company as of

December 31, 2019 are shown below:
X Company Y Company Z Company

Assets P2,000,000 P2,750,000 P 250,000
Liabilities P1,425,000 P 750,000 P 87,500
Share capital, P5 par 750,000 Additional 500,000 125,000
paid-in
capital - 200,000 62,500
Retained
Earnings (deficit)( 175,000) 1,300,000 ( 25,000)
Total equities P2,000,000 P2,750,000 P 250,000
X Company’s stocks has a market value of P7.50 per share while the other companies
have no available stock market quotations. X Company acquired the net assets of the
other companies by issuing, in exchange, an issued shares of its stocks as follows:
300,000 shares to Y Company and 25,000 shares to Z Company.
227. How much goodwill would X Company recognized from this acquisitions?
a. P 0 c. P325,000
b. P275,000 d. P812,500
On August 30, 2018, Chico Company sells a new car posting P825,720 for P1,209,600.
The customer was required to pay as down payments, cash of P250,000 and a traded-in
second hand car with a fair value of P220,000. The amount of allowance granted for the
traded-in asset differs with its fair value by P30,000. Further collection of P80,000, was
made from this account thro December 31, 2018. The company uses the installment
sales method in recognizing profits.
228. Assuming an over=allowance situation on the trade-in, the realized gross profit for
2018 from this installment sale is:
a. P165,000 c. P183,635
b. P188,880 d. P230,245
229. Assuming under-allowance situation on the trade-in, the unrealized gross profit at
December 31,2018 on thus sale is
a. P165,000 c . P183,635
b. P320,880 d. P230,245
The Duhat Company manufactures giant plastic toys and in appropriate way uses the
installment sales method to account for credit terms with customers. The following data
were taken from its balance sheet at December 31,2017 and December 31,2018.
2017 2018
Installment sales P480,000 P620,000
Gross profit rate based on sales 25% 28%
Cash collections, 2017 sales 150,000 240,000
2018 sales - 106,400
230. Compute the amount of realized gross profit to be recognized in 2018 using
installment sales method.
a. P89,792 c. P173,600
b. P143,808 d. P263,600
231. Compute the amount of deferred gross profit to be recognized in 2018 using the
installment sales method.
a. P173,600 c. P166,308
b. P143,808 d. P263,600
232. Compute the amount of deferred gross profit to be recognized in 2018 using the
cost recovery method.
a. P89,792 c. P166,308
b. P263,600 d. P22,500
The BACOLOD Company bills its branch for merchandise at 135% of cost. On December
31, the following items are contained in the branch records:
Merchandise Merchandise
from HO (at from other Merchandise
billed price) vendors total
Merchandise Inventory, P162,000 P 40,000 P202,000
12/1
Merchandise for stock, 202,500 120,000 322,500 in
Dec.
Merchandise Inventory, 189,000 50,000 239,000
12/31
233. What is the balance of the Allowance for Overvaluation account in the home office
books before any adjustment is made for branch sales to outsiders in December?
a. P 94,500 c. P100,000
b. P 45,500 d. P 99,500
A reconciliation of the Makati branch account of Manila Head Office and the Head Office
account carried in the books of the branch office shows the following reconciliation
items at December 31, 2018.
1. A credit for merchandise allowance of P9,562.50 was taken up by the branch as
P8,437.50.
2. A charge by the branch of P6,750 for an advance taken by the Branch Operations
manager when he visited the branch was recorded twice by the Home Office.
3. The branch has not taken up P4,375 covered by a credit memo from the home office.
The Makati branch account in the head office books has a debit balance of P380,625 at
December 31, 2018. The reciprocal accounts were in agreement at the beginning of the
year.
234. The unadjusted balance of the Head Office account in the branch books at
December 31, 2018:
a. P392,875 c. P387,375
b. P379,375 d. P381,875
Bulacan Corporation operates a main store in Baliwag and a branch store in San Rafael.
The branch substantially acquires all its merchandise from the main store, billed at 30%
above the latter’s cost. At August 31,2016, the records of the branch indicated the
following:
August sales P87,500
Inventory, August 1 21,250 (50% from outside suppliers)
Shipment from home office 34,375 at billed prices
Purchase from outsiders 15,000
Expenses 25,000
Inventory, August 31 18,750 (P5,000 from outside suppliers)
235. The net income reported by the branch for the month of August, 2016 is
a. P12,560 c. P15,260
b. P16,520 d. P10,625
236. The inventory allowance realized from branch’s sales to outsiders in August is
a. P7,509 c. P5,239
b. P7,212 d. P 5,539
Selected items from the records of the QC Home Office and its Manila branch office for
2018 follow:
QC Home Office MNLA Branch
Inventory, January 1 P 12,000 P ?
Purchases P150,000 P30,000
Shipment from Home Office 93,750
Shipment to Branch Office 75,000
Allowance for overvaluation of BI 19,750
Inventory, December 31 14,000 10,875
Sales 200,000 150,000
There are no shipments in transit at December 31. Forty percent (40%) of the branch
inventory at year-end is acquired from other vendors. The beginning inventory in the
branch from the Home Office at actual cost is P5,000 and the beginning inventory in the
branch from other vendors was P2,000.
237. The amount of inter-office inventory profit realized from branch sales to outsiders
in 2018 is
a. P17,430 c. P18,205
b. P18,445 d. P18,545
238. The combined net income to be reported for 2018 will be

a. P193,750 c. P139,750
b. P319,750 d. P139,570
GREENPEACE ENTERPRISES operates a number of branches nationwide. The Home Office

is currently performing a reconciliation between the PRTC Branch account in the books
of the Home Office and the Home Office account in the boos of PRTC Branch. The branch
account in the Home Office books has an unadjusted balance of P49,600 at December
31, 2014.
The following information will be relevant:
• Collection of branch account receivable by the Home Office, P800. The branch
has not been notified.
• Merchandise shipment in transit to branch, P3,200.
• Acquisition of branch furniture by branch, P1,200, in the late afternoon of
December 31,2014. It is Home Office policy to account for all company fixed
assets in the Home Office books.
• A return of excess merchandise by the branch, P1,500 but not recorded yet by
Home Office.
• Cash remittance in transit by the branch, P500.
239. Calculate the balance of the Home Office account in the books of PRTC Branch,
before adjustment, at December 31,2014.
a. P47,200 c. P46,400
b. P47,400 d. P44,000
The following selected accounts appeared in the trial balance of Melrose Sales as of
December 31, 2018.
Debit Credit
Installment accounts receivable – 2017 P15,000
Installment accounts receivable – 2018 200,000
Inventory, December 31, 2017 70,000
Purchases 555,000
Repossessions 3,000
Installment sales P425,000
Sales 385,000
Unrealized gross profit – 2017 54,000
Additional information: as of December 31,2017

Installment accounts receivable – 2016 as of December 31, 2017 P135,000
Inventory of new and repossessed merchandise as of December 31, 2018 95,000
Gross profit percentage on regular sales during the year 30% Repossession was
made during the year. It was a 2017 sale, and the corresponding uncollected account at
the time of repossession was 7,800.
240. The total realized gross profit in 2018, net of loss on repossession is
a. P130,380 c. P244,200
b. P201,000 d. P245,880
The following balance sheet was prepared for the X, Y and Z Partnership on March 31,
2018:
Assets Liabilities and Capital

Other assets 180,000 X, capital (40%) 40,000
Y, capital (40%) 65,000
Z, capital (20%) 48,000__
Total assets P205,000 Total liabilities & capital P205,000
241. The partnership is being liquidated by the sale of assets in installments. The first
sale of non-cash assets having a book value of P90,000 realizes P50,000.
Assume that each partner properly received some cash after the second sale of assets.
The cash to be distributed amount to P14,000 from the third sale of assets, and unsold
assets with a P6,000 book value remain. How should the P14,000 be distributed to X, Y
and Z respectively.
a. P5,600; P6,500; P2,800
b. P5,000; P5,000; P4,000
c. P0; P11,200; P2,800
d. P5,600; P5,600; P2,800
Partners Joy and Rachel have profit and loss agreement with the following provision:
Sales of P30,000 and P45,000 for Joy and Rachel respectively; a bonus to Joy of 10% of
net income after salaries and bonus; and interest of 10% on average capital balances of
P20,000 and P35,000 for Joy and Rachel, respectively. One-third of any remaining profits
are allocated to Joy and the balance to Rachel.
242. If the partnership had net income of P102,500, how much should be allocated to
Partner Joy?
a. P44,250 c. P41,000
b. P47,500 d. P41,167
On December 31, 2017, Joseph Inc. signed an agreement authorizing Bernard Company
to operate as a franchisee of an initial franchisee fee of P50,000. Of this amount,
P20,000 was received upon signing of the agreement and the balance is due in three
annual payments of P10,000 each beginning December 2018. The agreements provide
that the down payment (representing a fair measure of the service already performed by
Nike, Inc.) is not refundable and substantial services are required of Joseph. Bernard
Company’s credit rating is such the collection of the note is reasonably assured. The
present value of December 31, 2017 of the three annual payments discounted at 14%
(the implicit rate for a loan of this type) is P23,220.
243. On December 31 2017, Bernard Company should record unearned franchise fees
of:
a. P50,000 c. P43,220
b. P30,000 d. P23,229
CRC-ACE Corporation transfers merchandise inventory from its home office to its branch
at an amount above cost. The average cost margin on the transfer is 40 percent. At the
beginning of the year, the branch held merchandise purchased from the home office in
amount of P35,000. During the year, the home office made three shipments of inventory
to the branch at transfer prices of P30,000, P64,000, and P50,000. At the end of the year,
the branch had on hand inventory purchased from the home office at an amount of
P40,000.
244. What entry should the home office make to record intra company profit realized
during the year?
a. Unrealized intra company profit 41,600
Branch income summary 41,600
b. Unrealized intra company profit 55,600
c. Branch income summary 55,600
Unrealized intra company profit 55,600
d. Investment in branch 55,600
Partial list of accounts from the trial balances of the ALIBABA Corporation, Branch A and
Branch B at December 31, 2018 are as follows:
Home Office Branch A Branch B

Inventory, Jan 2018 34,000 5,500 8,800
Branch A 100,000 - -
Branch B 81,000 - -
Purchases 500,000 - -
Expenses 120,000 35,000 38,000
Shipments from home - 68,200 41,800
office
Home office 94,000 75,000
Sales 500,000 150,000 120,000
Shipments to Branch A 73,700
Shipments to Branch B 46,200
Loading in Branch Inventory – Jan 1 1,300
Shipments to the branches are made at billed prices. Inventory on hand on December
31, 2018 –
Home office – P 31,000; Branch A – P 7,260; Branch B – P 8,250.
245. Combine cost of goods sold

a. P601,900 c. P482,000
b. P503,000 d. P383,000
246. The merchandise inventory on the combined balance sheet as of December 31,
2018.
a. P68,400 c. P46,500
b. P65,000 d. P45,100
On December 1, Philip Company opened a branch in Cebu to which merchandise billed

at P30,000 was shipped. During the month, additional shipments were made at billed
prices of P12,000. During December, Cebu branch returned merchandise that was
defective and received credits of P750 on the returns. At the end of the month, the
branch record its inventory at P18,500, which is from the following sources:
Merchandise acquired from home office at billed price P16,500

Merchandise acquired from outsiders 2,000
Total inventory P18,500
A branch loss for December is calculated at P2,600. The home office has followed the
practice of billing the branch at 20% above merchandise cost.
247. Compute 1) the balance of the allowance for overvaluation of branch inventory at
December 31, before adjustments, and 2) the net income (loss) of the branch in so
far as the home office is concerned:
a. (1) P4,125; (2) P(2,600)
b. (1) P6,875; (2) P1,525
c. (1) P7,000; (2) P1,525
d. (1) P6,875; (2) P(2,600)
On March 1, 2016, Cameron Construction Company was contracted to construct a

townhouse for Will Company for a total contract price of P8,400,000. The building was
completed by October 31, 2018. The annual contract cost incurred, estimated costs to
complete the contract, and billings for 2016, 2017 and 2018 are giving below:
2017
Contract cost incurred during the year 2,600,00
Estimated cost at completion 6,400,000 7,250,000 7,250,000
Billing during the year 3,200,000 3,500,000 1,700,000
248. The entry to record the recognized profit in 2018 includes a credit to:
a. Construction revenue P1,680,000
b. Construction in progress 230,000
c. Construction revenue 1,700,000
d. Construction in progress 1,450,000
Hilda, Irma and Julie were partners with capital balances on January 2, 2018 of
P560,000, P672,000, and P496,000, respectively. Their profit and loss ratio is 3:5:2. On
August 1, 2018, Hilda retires from the partnership. On the date of retirement, the
partnership net loss from January 2 is P384,000; and the partners agreed to revalue
inventories to P296,000 (from the carrying amount of P272,000). The payment to Hilda
in settlement of her interest to be P454,800.
249. Upon the retirement of Hilda, which of the following will result?
a. Bonus to Irma of P2,000
b. Bonus to Julie of P800
c. Goodwill to Julie of P2,800
d. Irma’s capital is P66,800 more than Julie’s
On September 2, 2018, Nino, Olan and Pete formed a partnership investing cash of
P945,000, P850,500 and P264,600., respectively. The partners share profits and losses in
the ration of 3:2:2 and October 31, 2018 the firm has cash of P63,000, other assets of
P2,992,500, and liabilities of P1,612,800. On this date they decided to go out of business
and sell all the assets for P1,890,000. Pete has personal assets of P94,500 that may, if
necessary, be used to meet partnership obligations. Loss from operations was P617,400.
250. How much should be distributed to Olan upon liquidation of the partnership?
a. P128,520 c. P0
b. P306,180 d. P268,380
E, J and N agree to liquidate their consulting practice as soon as possible after the close
of business on July 31, 2018. The trial balance on that date shows the following account
balances.
Cash P130,000 Accounts payable P60,000
Accounts receivable 120,000 Loan to E 40,000
Furniture and fixtures 350,000 E, capital 200,000
J, capital 150,000
N, capital 150,000
P600,000 P600,000
The partners share profits and losses 50%, 20%, and 30% to E, J, and N, respectively,
after N is allowed a monthly salary of P40,000.
August transactions and events are as follows:
1) The accounts payable are paid.
2) The accounts receivable of P80,000 are collected in full. N accepts accounts
receivable with a face value and fair value of P30,000 in partial satisfaction of his
capital balance. The remaining accounts receivable are written off as
uncollectible.
3) Furniture with a book value of P250,000 is sold for P150,000
4) Furniture with a book value of P40,000 and an agreed upon fair value of P10,000
is taken by J in partial settlement of his capital balance. The remaining furniture
and fixtures are donated to Goodwill Industries.
5) Liquidation expenses of P30,000 are paid.
6) Available cash is distributed to partners on August 31.
251. How much of J’s equity was recovered from the partnership liquidation? a. P25,000
b. P51,000
c. P94,000
d. None
The N, R, and W Partnership has not been successful. Hence, the partners have sadly
concluded that operations must be terminated and their partnership liquidated. Profits
and losses are shared as follows: N, 45 percent; R, 35 percent; and W, 20 percent. As the
accountant placed in charge of this partnership, you have responsibility for the
liquidation and distribution of assets. When you assume your responsibilities, the
partnership balance sheet is as follows:
Other assets 540,000 Loan from N 180,000
N, capital 60,000
R, capital 300,000
W, capital 60,000
P720,000 P720,000
During the first two months of your duties, the following events occur:
1) Assets having a book value of P400,000 are sold for P120,000

2) Previously unrecorded liabilities of P10,000 are recognized
3) Before distributing available cash balances to creditors and partners, you
conclude that a cash reserve of P10,000 should be set aside for future potential
expenses.
4) Remaining cash balances are distributed to creditors and partners.
252. How much cash N should receive?

a. P42,000
b. P26,250
c. P31,875
d. P180,000
Marcus and Wellington are partners with capital balances of P32,000 and P68,000,
respectively, as of July 1, 2018. Marcus has a 30% interest in profits and losses. All assets
of the partnership are at fair market value except as follow:
Book value Market value Book value Market value

Equipment P150,000 P142,000 Building P274,000 P250,000
Inventory 43,000 50,000 Land 60,000 105,000
The partnership has decided to admit Kelly and Springer as new partners, Kelly
contributes cash of P55,000 for a 20% interest in capital and 30% interest in profits and
losses. Springer contributes cash of P10,000 and equipment with a fair market value of
P50,000 for a 25% interest in capital and a 35% interest in profits and losses. Springer is
also bringing special expertise and client contracts to the new partnership.
253. The capital balance of Marcus after Kelly and Springer’s admission under the bonus
method is:
a. P40,775 c. P38,000
b. P34,775 d. P70,500

254. method (bonus or goodwill) advantageous to Kelly and Springer and the total
amount of advantage is:
a. Bonus method for an advantage of P2,055
b. Bonus method for an advantage of P5,944
c. Bonus method for an advantage of P12,750
d. Bonus method for an advantage of P4,111
255. Edward and Ferdinand are partners sharing profits at 60% and 40% respectively. On
January 1, Edward and Ferdinand decided to admit Gerald as a new partner upon
the investment of P8,000. On this date, their interest in the firm are as follows:
Edward, P11,500 and Ferdinand, P9,300. Assuming the new partner is given a 1/3
interest in the firm with bonus allowed to the new partner the new capital balances
of Edward, Ferdinand and Gerald would be:
Edward Ferdinand Gerald
a. P11,500 P9,300 P8,000
b. P12,480 P8,320 P8,000
c. P11,520 P7,680 P9,600
d. P10,540 P8,660 P9,600
256. How much is the income from construction in 2018, using the cost to cost
percentage of completion method?
a. P41.143 billion c. P22.857 billion
b. P64 billion d. P161.143 billion
On July 1, 2017, BMW Motors sold a new car to WIR Enterprises for P850,000. The car
costs BMW P650,626. WIR paid 25% cash down payment and received an P80,000 trade-
in allowance on an old car. The price balance will be paid in equal monthly installments.
The monthly amortization amounts to P30,000 inclusive of 12% interest on the unpaid
amount of the obligation. The car traded in has a wholesale value of P120,000 after
reconditioning and repainting cost of P22,500. After paying three (3) installments, the
buyer was unable to continue paying so the car was subsequently repossessed. When
reacquired, the car was appraised to have a fair value of P300,000.

257. How much is the realized gross profit on installment sales during the year?
a. P96,003 c. P20,180,000
b. P91,623 d. P71,627
258. On January 1, 2018, Tom Bravo sells 20 acres of farmland for P6,000,000 taking in
exchange a 10% interest-bearing note. Tom Bravo purchased the farmland in 1984
at a cost of P5,000,000. The note will be paid in three installments of P2,412,690
each December 31, 2018, 2012 and 2013. How much must be the deferred grow
profit at the end of 2018 under the installment method of revenue recognition?
a. P1,000,000 c. P637,462
b. P697,885 d. P597,885
A construction contractor has a fixed price contract for P10,000,000 to construct a

building project.
The contractors initial estimate of total contract costs is P6,000,000. It will take two years
to construct the building. At the end of the first year of the project (December 31, 2018)
the contractor incurred costs of P2,000,000 on the contract, including P2,000 on cement
that is held offsite. The entity’s estimate of total contract costs has stayed the same.
The contractor determines the stage of completion of the construction contract by

reference to the proportion that costs incurred for work performed to date bear to the
estimated total costs.
259. Determine the revenue, expenses and profit for the year 2018.
Revenue Expense Profit
a. P3,000,000 P1,800,000 P1,200,000
b. P3,200,000 P2,000,000 P1,200,000
c. P3,133,333 P1,800,000 P1,333,333
d. P3,333,333 P2,000,000 P1,333,333

If the contractor determines the stage of completion of the construction contract by the
reference to independent surveys of work performed. At the end of 2018 the project
was certified to be 28% complete:
260. Determine the revenue, expenses and profit for the year 2018.
Revenue Expense Profit
a. P2,800,000 P1,800,000 P1,000,000
b. P2,800,000 P2,000,000 P800,000
c. P2,900,000 P1,800,000 P1,120,000
d. P3,120,000 P2,000,000 P1,120,000
Building Corporation was contracted by Mr. E to construct 35 condominium units, the

estimated total cost of construction was P49 million. Building bills its client at 120% of
total costs estimated to complete a project. Details regarding the construct are given
below:
Units Finished Cost Incurred to date Estimated cost at completion
2015 10 P14,721,875 P58,887,500
2016 18 P36,286,250 P55,825,000
2017 7 P55,125,000
?
261. What was the realized gross profit during 2016 using the output measures?
a. 2,975,000 c. 2,467,500
b. 2,380,000 d. 1,933,750
262. Tweety sold a restaurant franchise to Silvester. The sale agreement signed on
January 2, 2017 called for a P30,000 down payment plus an interest bearing note of
P20,000 payable in two annual payments representing the value of initial franchise
services rendered by Tweety. In addition, the agreement required the franchisee to
pay 5% of its gross revenues to the franchisor; this was deemed sufficient to cover
the cost and provide a reasonable profit margin on continuing franchise services to
be performed by franchisee. The restaurant opened early in 2017, and its sales for
the year amounted to P500,000. The management of Silvester has estimated that
they can borrow a loan of this type at the rate of 10%. Tweety should recognize
total revenue from the franchise amounting to:
a. 77,000 c. 75,000
b. 74,069 d. 72,335
Nancy, Franchisor entered into a franchise agreement with Kyle, Franchisee on July 1,
2018. The total franchise fee agreed upon if P550,000, of which P50,000 is payable upon
signing and the balance is covered by a non-interest bearing note payable in four equal
annual installments. It was agreed that the down payment is not refundable,
notwithstanding lack of substantial performance by the franchisor. The direct franchise
cost incurred was P325,000. Indirect franchise expense of P31,250 was also incurred.
The management of Kyle has estimated that they can borrow a loan of this type at the
rate of 12%. The franchised commenced operations on July 31,2018.
263. How much is the net income/(loss) to be reported? (use a PV factor of 3.04)
a. 73,750 c. 119,750
b. 77,550 d. (15,240)
On January 2, 2018, Mama signed an agreement to operate as a franchise of Papa for an

initial franchise fee of P2,500,000 for 5 years. Of this mount, P500,000 was paid when
the agreement was signed and the balance in four equal annual payments beginning on
December 30, 2018. Mama signed an interest bearing note for the balance. Mama’s
rating indicated that it can borrow money at 24% for a loan of this type. Present value of
annuity of 1 for 4 periods is 2.4. Assume that substantial services amounting to
P255,000 had already been rendered by Papa and that additional indirect franchise cost
of P68,000 was also incurred.
264. If the collection of the note is not reasonably assured, what is the realized gross
profit for the year ended December 31, 2018?
a. 898,000
b. 605,200
c. 2,245,000
d. 1,445,000
265. The following are the unadjusted trial balances of Chip Corp and its branch on
December 31, 2019 follow:
Home Office Branch
Shipment 120,000
Branch inventory allowance 39,960
Shipment from home office 156,000
Purchases 56,580
Inventory Jan 1 21,840
Inventory Dec 31 19,500
Sales 216,000
Expenses 20,400
The branch ending inventory acquired from the home office is P15,600 at billed price.
The branch billed for merchandise shipments at 30% above cost.
Calculate the overstatement or (understatement) of the branch’s cost of sales.

a. 36,360 c. 4,740
b. 37,100 d. (21,840)
The following balances were taken from the partnership books of Des, Gra and Sya
immediately before liquidation:
Cash 20,000 Liabilities 25,000
Non-cash assets 90,000 Des, capital (30%) 25,000
Gra, capital (30%) 30,000
Sya, capital (40%) 30,000
Total 110,000 110,000
Included of the amount of non-cash assets is an advance to Des worth P4,000 and also
included in the amount of liabilities is an advance from Gra worth P3,000.
266. If Gra receives P15,000 in the first distribution, how much will Des receive?
a. 3,000 c. 10,000
b. 5,000 d. -0-
STONES Corporation was contracted to construct a warehouse for a price of

P13,600,000. Information below were provided by STONES:
2017 2018 2019
Cost incurred to date 5,850,000 10,275,000 13,500,000 Estimated cost at completion
13,000,000 13,700,000 -
267. How much is the realized gross profit/loss during 2018?

a. (370,000) c. 100,000
b. (100,000) d. 370,000
Presented below are the information taken from the books of IRON Corporation:
2019 2020
Installment sales 1,500,000 1,875,000
Cost of installment sales 1,050,000 1,500,000
Installment account receivable at year end

2019 sales 960,000 440,000
2020 sales 680,000
268. What is the total deferred gross profit to be presented in the statement of financial
position on year 2020 using cost recovery method?
a. 375,000 c. 385,000
b. 815,000 d. 10,000
269. OMG Corporation and its branch in Laguna maintain their respective books of
accounts. At close of books on December 31, 2018, Laguna Branch account in the
home office books showed a balance of P142,500. The interoffice accounts were in
agreement at the beginning of the year. For purposes of reconciling the interoffice
accounts, the following were ascertained:

a) Merchandise billed at P50,000 was shipped by the home office to the
branch on December 27. The goods were in transit as of the end of the year
and the branch did not recognize the transfer in its books.
b) The branch collected a home office account receivable P35,000 but such
transaction is not known to the home office.
c) The home office recorded the net income of Laguna Branch at P119,000.
Laguna Branch reported a P191,000 net income.
d) The home office is charged P83,000 by the branch due to retuned
merchandise to home office on December 28 which was in transit as of
December 31.
e) On December 22, OMG Corporation sent a debit memo for P5,400
representing allocated expense to Laguna Branch. The Branch. The branch
journalized the said transaction on December 26 and inadvertently recorded
another entry two days before year-end.
LAM, KO and TO share profits and losses as follows: LAM 20%, KO 30%, and TO 50%. The
partnership’s Statement of Financial Position is presented below:
LKT COMPANY
Statement of Financial Position
As of December 31, 2018
ASSETS LIABILITIES AND EQUITY

Noncash Assets 2,028,600 Loan from KO 67,500
Lam, capital 270,000
Ko, capital 398,250
To, capital 1,012,500
Total P2,439,000 P2,439,000
270. The partners decided to liquidate on January 2, 2019. All partners are personally
solvent except for Lam. If To received P236,250 for her interest, how much were the
noncash asset sold for?

a. 476,100 c. 1,512,000
b. 516,600 d. 1,552,500
Because of their differences, Jessica, Matt and Danny decided to liquidate their
partnership on November 40, 2018. Jessica, Matt and Danny have a profit ratio of 4:3:3.
The balance sheet of the partnership on December 31, 2017 reported P25,000; P30,000
and P10,000 capital balances of the three partners respectively. Cash on the most recent
balance sheet date amount to 30% of total liabilities. Debt ratio as of December 31, 2017
amounted to 20%. During the eleven months ended, revenues reported amounted to
P44,000; expenses incurred totaled P22,000 net cash flows amounted to 15,125 and
liabilities increased by P28,750.
271. If Jessica wants to receive P27,600, what should be the selling price of the non-cash
assets of the company on November 30,2017?
a. 91,875 c. 127,500
b. 94,225 d. 96,500
The balance sheet of partners DES, PA and SITO are shown below:
DPS Partnership
Balance sheet
December 31, 2018
Non-cash assets 250,000 Des, capital (50%) 100,000
Pa, capital (25%) 75,000
Sito, capital (25%) 45,000
Total P300,000 Total P300,000
On January 2019, certain non-cash assets were sold for a certain amount. Liquidation
expenses and liabilities of P4,000 and P25,000 were paid. Future liquidation expenses of
P5,000 are anticipated. Pa received P42,750 from the first distribution of available cash.
272. How much is the cash received from the realization?

a. 120,000 c. 130,000
b. 140,000 d. 75,000
273. Assuming that on February 2019, the remaining non-cash assets were sold for
P75,000 and liquidation expenses of P5,000 are paid, how much is the total cash
received by Des from two distributions of cash?
a. 37,500 c. 75,000
b. 73,000 d. 74,000
ANNA and BELL formed a partnership on January 2, 2018. ANNA and BELL contributed
capital of P350,000 and P50,000 respectively. They agreed to share profits and losses
80% and 20%, respectively. BELL is given a monthly salary of P5,000 and a 15% bonus
based on income before salaries, interest and bonus. Both partners are given an interest
of 5% of beginning capital. The income statement for the year ended prepared by the
company’s bookkeeper is shown below:
Net sales P1,750,000

Cost of sales 1,400,000_
Gross profit P350,000
Expenses (including salary, interest and bonus) 286,000___
Net income P64,000
274. What is the amount of bonus to Bell in 2018?

a. 25,412 c. 2,087
b. 18,783 d. -0-
A, B and C formed a partnership on January 1, 2018 and had the following initial
investment
A P170,000
B 255,000
C 382,500
The partnership agreement states that the profits and losses are to be shared equally by
the partners after consideration is made for the following:
- Salaries allowed to partners: P102,000 for A, P81,600 for B and P61,200 for C.
- Average partner’s capital balances during the year shall be allowed 10%
- On June 30, 2018, A investment an additional P102,000.
- C withdrew P119,000 from the partnership on September 30, 2018.
- Share in the remaining partnership profit was P8,500 for each partner.
275. What is the total partnership capital on December 31, 2018?

a. 688,500 c. 1,141,550
b. 816,000 d. 1,143,675
Following is the total balance sheet of the WXYZ Partnership at March 31, 2018, when
the partnership is to be liquidated:
Cash 6,000 Liabilities 12,400
Other assets 126,000 W, loan 12,000
X, loan 14,400
Z, loan 9,600
W, capital (25%) 16,200
X, capital (25%) 12,000
Y, capital (25%) 37,700
Z, capital (25%) 17,700
During the month of April 2018, assets having book value of P18,000 are sold at a
loss of P2,400. Liquidation expenses of P600 are paid as well as P7,200 of the
liabilities. Of the liabilities shown in the balance sheet, P240 represents salary
payable to Z and P160 represents salary payable to Y.
276. On April 30, 2018, how much cash will be distributed to the partners?
W X Y Z
a. -0- -0- -0- 9,000
b. 1,950 1,950 1,950 1,950
c. -0- -0- -0- 1,950
d. -0- -0- 9,000 -0-
MCU Company recognizes construction revenue and expenses using the percentage of
completion method. During 2017, a single long-term project was started which
continued in 2018. Information on the project was as follows:
2017 2018
Accounts receivable from construction P200,000 P600,000
contract
Construction expense 210,000 384,000
Construction in progress 244,000 728,000
Partial billings on contract 200,000 840,000
277. The profit to be recognized from the long-term construction contract should
amount to:
2017 2018
a. 44,000 456,000
b. 44,000 200,000
c. 34,000 256,000
d. 34,000 100,000
The income statement submitted by the Baguio Branch to the Home Office for the
month of December 31, 2018 follows:
Sales P600,000
Cost of sales
Inventory, December 1 P80,000

Shipments from Home Office 350,000
Local purchase 30,000 _
Total P460,000
Inventory, December 31 100,000
360,000
Gross margin P240,000
Operating expense 180,000
Net income for the month P60,000
The branch inventories consisted of:
12/1/2018 12/31/2018
Merchandise from House office P70,000 P84,000
Local purchases 10,000 16,000____
Total P80,000 P100,000
After effecting the necessary adjustments, the Home Office ascertained the true income
of the branch to be P156,000.
278. At what percentage of cost did the Home Office Bill the Branch for merchandise
shipped to it?
a. 100%
b. 120%
c. 140%
d. 150%
279. What is balance of the Allowance for Overvaluation in the Branch inventory at
December 31,2018?
a. 10,000
b. 16,000
c. 24,000
d. 34,000
Following is the income statement of DCU Branch in Davao City Company, for the six
months periods ending June 20, 2018:
Sales
P620,000
Cost of sales
Shipments from Home Office P550,000
Purchases 50,000 __
Total P600,000
Inventory, June 30, 2018
From Home Office P75,000
From Purchases 10,000 85,000 515,000__
Gross Margin P105,000
Expense 85,000 __
Net income P20,000
280. The Home Office net profit from its Branch Office in Davao City for six (6) months
ending June 30, 2018 is:
a. 14,000 c. 125,000
b. 109,000 d. 139,000
ROEL, JEK and MIKE, a partnership formed on January 1, 2018 had the following initial
investment:
ROEL P170,000
JEK 255,000 MIKE 382,000
The partnership agreement states that the profits and losses are to be shared equally by
the partners after consideration is made for the following:
- Salaries allowed to partners: P102,000 for ROEL, P81,600 for JEK, and P61,200
for MIKE
- Average partners’ capital balances during the year shall be allowed 10%
- On June 30, 2018, ROEL invested an additional P102,000
- MIKE withdrew P119,000 from the partnership on September 30, 2018
- Share the remaining partnership- profit was P8,500 for each partner
281. The total partnership capital on December 31, 2018 was:

a. 688,500 c. 816,000
b. 1,141,550 d. 1,143,675
Following is the balance sheet if the ABCD Partnership at March 31, 2018, when the
partnership is to be liquidated:
Other assets 126,000 A, loan 12,000
B, loan 14,400
D, loan 9,600
A, capital – 25% 16,200
B, capital – 25% 12,000
C, capital – 25% 37,700
D, capital – 25% 17,700
During the month of April 2018, assets having a book value of P18,000 are sold at a loss
of P2,400.
Liquidation expenses of P600 are paid as well as P7,200 of the liabilities. Of the liabilities
shown in the balance sheet, P240 represents salary payable to D and P160 represents
salary payable to D and P160 represents salary payable to C
282. On April 30, 2018 cash to be distributed to A, B, C, and D as follows:

A B C D
a. P -0- -0- -0- 9,000
b. P 1,950 1,950 1,950 1,950
c. P -0- -0- -0- 1,950
d. P -0- -0- 9,000 -0-
OCTAGON Enterprises entered into construction agreement in 2017 that called for a
contract price of P9,600,000. At the beginning of 2018, a change order increase the
initial contract price by P480,000. In relation to the project, the following data were
obtained:
` ` 2017 2018
Cost incurred to date P4,920,000 P8,640,000
Estimated cost to complete 4,920,000 2,160,000
Billing made to date 5,280,000 8,700,000

Collections made to date 4,920,000 8,700,000
Compute the amount of construction in progress (net) – due from customers or progress
billings (net) due to customers for the year 2018:
283. Percentage of completion method Cost recovery method of construction

accounting
a. P780,000 – liability P780,000 – liability
b. 780,000 – asset 780,000 – asset
c. 60,000 – liability 60,000 – liability
d. 636,000 – liability 636,000 – liability
284. Which of the following statements is false

a. The preparation of combined statements necessitates the elimination of
reciprocal accounts
b. The recording of reported branch net income on the home office books
represents a home office closing entry
c. The procedures in reconciling the home office and branch income accounts
are essentially the same as that of the bank reconciling statement
d. While the branch financial statements may be prepared for internal
reporting purposes, external accounting reports reflect the activities and
practices of the company as a whole
DMCI Builders, Inc. employs the cost-to-cost method in determining the percentage-
ofcompletion for revenue recognition. The company’s records show the following
information on a recently completed project for a contract price of P5,000,000.
2016 2017 2018
Cost incurred to date P900,000 P2,550,000 P?
Gross profit (loss) 100,000 350,000 (50,000)
285. The estimated costs to complete the project at December 31, 2017:
a. 850,000 c. 2,300,000
b. 1,700,000 d. 2,550,000

286. The actual costs incurred during the year 2018:
a. 2,550,000 c. 2,200,000
b. 2,300,000 d. 2,050,000
287. HERMO and TIU formed a joint venture to purchase and sell a special type of
merchandise. The venturers agreed to contribute cash of P270,000 each to be used
in purchasing the merchandise, and to share profits and losses equally. They also
agreed that each shall record his purchases, sales, and expenses in their own books.
Upon termination of the joint venture, the following data are made available:
HERMO TIU
Joint venture P234,000 credit P170,600 debit
Inventory Taken 10,800 33,750
Expenses paid from Joint venture cash 5,400 9,900
How much cash is to be received by TIU in the final settlement?

a. P267,950 c. P323,975
b. P290,225 d. P280,325
The after-closing trial balances of the Brenda, Peter and Timothy partnership at
December 31, 2018 included the following accounts and balances:
Assets
Cash P120,000
Accounts receivable – net 140,000
Loan to Timothy 20,000
Inventory 200,000
Plant asset – net 200,000
Trademarks 20,000
Total debits P700,000
Equities
Accounts payable P150,000
Notes payable 100,000 Loan
from Peter 10,000

Brenda capital (50%) 170,000
Peter capital (30%) 170,000
Timothy capital (20%) 100,000
Total credits P700,000
The partnership is to liquidated as soon as possible, and all available cash except for
a P10,000 contingency balance is to be distributed at the end of each month prior to
the time that all assets are converted into cash.
During January 2018, P100,000 was collected from accounts receivable, inventory
items with a book value of P80,000 were sold for P100,000, and available cash was
distributed.
During February 2018, Brenda received plant assets with a book value of P60,000
and a fair value of P50,000 in partial settlement of her equity in the partnership.
Also during February, the remaining inventory items were sold for P60,000,
liquidation expenses of P2,000 were paid, and a liability of P8,000 was discovered.
Cash was distributed on February 28, 2018.
During March 2018, Brenda received plant assets were sold for P110,000 the
remaining noncash assets were written off, final liquidation expenses of P5,000 were
paid, and non cash was distributed. The dissolution of the partnership was
completed on March 31, 2018.
288. The amount of cash to be received by Timber for the month of March:
a. -0- c. 29,000
b. 23,000 d. 60,000
REH Textile Company has a single branch in Zambales. On March 1, 2018 the home office
accounting records included an Allowance for Overvaluation on inventories – Zambales
Branch Ledger account with a credit balance of P32,000. During March, merchandise
costing P36,000 was shipped to the Zambales Branch and billed at price representing a
40% mark up on the billed price.
On March 31, 2018, the branch prepared an income statement indicating a net loss of
P11,500 for March and ending inventories at billed prices of P25,000.

289. What is the amount of adjustment for Allowance for Overvaluation on Inventories
to reflect the true branch net income?
a. 39,257 debit c. 39,333 debit
b. 46,000 credit d. 46,000debit
DAVID and EMERALD entered into a partnership as of March 1, 2018 by investing

P125,000 and P75,000, respectively. They agreed EMERALD that DAVID, as the managing
partner, was to receive a salary of P30,000 per year and a bonus computed at 10% of the
net profit after adjustment for the salary: the balance of the profit was to be distributed
in the ratio of their original capital balances.
On December 31, 2018, account balances were as follows:

Cash P70,000 Account payable P60,000
Account receivable 67,000 David, capital 125,000
Fur and fixtures 45,000 Emerald, capital 75,000
Sales returns 5,000 David, drawing (20,000)
Purchases 196,000 Emerald, drawing (30,000)
Operating expense 60,000 sales 233,000
290. Inventories on December 31, 2018 were as follows: supplies, P2,500; merchandise
P73,000. Prepaid insurance was P950 while occurred expenses were P1,550.
Depreciation rate was 20% per year. The partner’s capital balances on the December 31,
2018, after closing the net profit and drawing accounts were:
DAVID EMERALD
a. P135,940 P47,960
b. P139,540 P49,860
c. P139,680 P48,680
d. P142,350 P47,670
BAHAY-PARE CORPORATION purchases all the outstanding shares of SINAG-TALA

COMPANY on January 2, 2019 for P385, 000 cash. On this date the stockholders equity of
SINAG-TALA is as follows:
Share Capital, P10 par P 175, 000
Paid-in capital in excess of par 87, 500
Retained earnings 175, 000
Any excess of the fair value of the net assets over the fair value of the investment is
attributable to SINAG-TALA’s building which is currently overstated in its books. All other
net asset items of the acquired company are fairly valued at the acquisition date. The
building has an estimated life of 10 years from January 2, 2019 without salvage value.
The condensed trial balances of the affiliated companies on December 31, 2019 appear
as follows:
BAHAY-PARE SINAGTALA
Current Assets P 420,000 P302,750
Land 210,000 210,000
Building (net) 1,050,000 283,500
Investment in SINAGTALA 385,000 --
Current liabilities (708,750) (367,500)
Ordinary shares, P3 par (525,000) --
Share capital, P10 par -- (175,000)
Paid-in capital in excess of par (315,000) ( 87,500)
Retained earnings, Jan. 2, 2019 (446,250) (175,000)
Sales (367,500) ( 70,000)
Cost of goods sold 210,000 61,250
dividends declared 8,750 --
Totals -- --
291. Compute the consolidated net income for 2019.

a. P75,520
b. P70,525
c. P72,550
d. P75,250
292. Compute the consolidated Retained Earnings at December 31, 2019.

a. P517,250
b. P525,170
c. P515,270
d. P512,750

293. Company Y purchases an 80% controlling interest in Company Z on January 1,2019.
Which of the following would appear as the stockholders equity amount on
Company Y’s consolidated balance sheet on the date of acquisition?
a. Company Y’s shareholders equity.
b. The sum of the shareholders Equity of both companies.
c. Company Y’s shareholders equity as well as company Y’s proportional share of
company Z’s net assets at fair value.
d. The sum of company Y’s shareholders equity and the proportional share of
company Z’s non-controlling interest from the full fair value of company Z’s
outstanding shares at the acquisition date.
On January 1,2019, GININTUANG PUSO CORPORATION acquired 80% of the outstanding

shares of BAGAL SULONG COMPANY for P743,750. At this date, the stockholders’ equity
of BAGAL SULONG COMPANY follows:
Ordinary shares, P5 par P 350,000

APIC 175,000
P 700,000
The net assets of BAGAL SULONG on January 1, 2019 were fairly valued. GININTUANG
PUSO assigned the full fair value to the non-controlling interest at the date of acquisition
in analyzing the fair value of its investment.
Selected information over the first two (2) years of affiliated operations follows:
• Intercompany merchandise sales are summarized as follows:

Date Transaction sales amount GPR Purchaser’s Remaining
ending Inventory
In 2019 Upstream 35,000 25% 6,125
In 2020 Downstream 56,000 30% 10,500
• Condensed trial balances of the two (2) companies on December 31,2020

follows:
GININTUANG BAGAL SULONG
PUSO CORP. COMPANY
Current assets P1, 428,000 P 387,275
Investment in BAGAL 743,750 ---
SULONG
Equipment, net 1,891,750 262,500
Buildings, net 1,592,500 332,500
Goodwill 105,000 ---
Liabilities (1,123,500) (186,025)
Common Stocks, P1 par ( 437,500) ----
ordinary shares, P5 par (350,000)
APIC (2,187,500) (175,000)
Retained earnings, January 1, 2020 (1,933,750) (245,000)
Sales (1,540,000) (1,102,500)

Dividend income ( 42,000) ----
Cost of Goods sold 1,232,500 882,000
Other expenses 227,500 141,750
Dividends declared 43,750 52,500
Totals P 0 P 0
294. Compute the consolidated cost of goods sold for 2020.

a. P2, 050,355 c. P2,500,553
b. P2, 059,619 d. P2,056,381
295. Compute the consolidated net income for 2020.

a. P195, 125 c. P215,915
b. P161, 043 d. P157,631
296. Compute the amount of the consolidated net income for 2020 attributable to the
parent’s shareholders.
a. P175, 500.50 c. P145,000
b. P141, 575 d. P143,482.50
297. Compute the amount of consolidated net income to the non-controlling interest
a. 19,624.50 c. P15,794.00
b. 16,056.00 d. P15, 732.50
298. Any negative goodwill arising on the date of the business combination
a. Is recognized as a gain on the date of acquisition
b. Is prorated among the parent’s company identifiable net assets
c. Should be amortized over a predetermined period

d. Is recognized as a loss on the date of acquisition
299. A company owning a majority (but less than 100%) of another’s voting shares on
the date of acquisition should account for its subsidiary
a. By including only its share of the fair market values of the subsidiary’s net assets
b. By including only its share of the book values of the subsidiary’s net assets
c. By including 100% of the fair values of the subsidiary’s net assets
d. By including 100% of the fair market values of the subsidiary’s net assets and
accounting for any un-owned portion of the voting shares using the
noncontrolling interest account.
On January 1, 2019, Companies AA, BB, and CC established a “joint operations” to

manufacture a product they each need in their respective operations. They will
contribute equal amounts and agreed to share on the production output equally. AA
contributed cash of P200, 000; BB contributed equipment with a carrying cost of P215,
000; and CC contributed machinery with a carrying cost of P185,000. Both nonmonetary
contributions had a fair value of P200, 000 each. The equipment will be depreciated over
5 years and the machinery over 10 years.
300. Compute the net amount of plant assets . Equipment & Machinery CC will show in
its own balance sheet at December 21, 2019.
a. P108,833 c. P160,333
b. P55,500 d. P58,500
Pol Boba III is City Administrator of the City of LA PRESA in the Bontoc
Peninsula.Returning from the national seminar in Manila for city administrators, Boba III
presented receipts for valid disbursement of P23,500 and refunded the city Treasurer’s
Office unspent amount of P6,500 to liquidate his cash advance in relation to the seminar.
301. The entry to record the liquidation of the cash advance would be
a. Training and seminar expenses P23,000 Cash-
collecting officer 6,500
Due from officers employees
P30,000
b. Cash-Collecting office P 6,500
Training and Seminar expenses P6,500
c. Cash-NT-MDS P 6,500
Training and Seminar Expenses P6,500
d. Training and Seminar expenses P23,500
Cash-NT-MDS 6,500
Due from officers and Employees P30,000
302. The entry to record the remittance to the National Treasury of the unspent amount
would be
a. Due to National Treasury P6,500
Cash-NT-MDS P6, 500
b. Due to National Treasury P6,500
Cash- Collecting officer P6, 500
c. Memo Entry only in RAOMO --- ----
d. Subsidy Income from the NG P6,500
Cash-Collecting Officer P6,500
303. On December 31, 2019 a foreign subsidiary of ARTS-PRTC Company, a Philippine

corporation, submitted the following balance sheet measured in its local currency.
Monetary Assets FC Monetary liabilitie FC

200,000 180,000
Non monetary 800,000 non monetary 20,000
Assets liabilities
Share capital 400,000
Share premium 100,000
Total FC Total FC
1,000,000 1,000,000
The relevant exchange rates for one (1) unit of the FC are as follows: Current
rate- P0.34 Historical Rate- P0.31 Average rate -P0.30
303. Assuming the related Earnings of the subsidiary on December 31, 2019 translated
to Philippine Pesos is P91,525, what amount of cumulative translation adjustment
must be reported in the consolidated balance sheet presented in Philippine Pesos
on December 31,2019?
a. P25, 000 c. P24,525
b. P24, 255 d. P25,475
304. How much will be the Philippine peso retained earnings of the foreign subsidiary on
December 31, 2019 if the functional currency of the foreign subsidiary is also the
Philippine peso rather than the local currency?
a. P92, 000 c. P94,100
b. P93, 600 d. P91,525
305. In a Job order costing system, indirect labor used should be debited to a. Payroll
liability
b. Work in process control
c. Finished goods control
d. Factory overhead control
On July 1, 2019 Pyramid Company paid P755, 000 cash for net assets of Stir Company.
The recorded assets and liabilities to stir are: Cash, P74, 000; Inventory, P215,000; Land,
P200,000; Building(net), P208,000; and liabilities of P220,000. At the same date Stir
inventories had a fair value of P184, 000; the Land, P271, 500; and the Building (net),
P187, 500.
306. Determined the amount of goodwill resulting from the business combination.
a. P285, 000 c. P258,000
b. P280, 500 d. P250,800
On January 1, 2019, multiple Company, an SME, acquired Unilateral Company, another

SME, by issuing 600,000 of its own P10 par value ordinary shares. Subsequently,
Unilateral was liquidated and its net assets and liabilities merged into Multiple Company.
Multiples Stock was selling at P50 per share on January 1, 2019. The amount of goodwill
recorded by multiple in connection with the combination was P6, 120,000. Multiple
incurred P300, 000 of professional fees associated with the combination and P30,000 of
indirect costs.
307. Determine (i) the fair value of Unilateral’s net assets and (2) amount of increase in
multiple’s stockholders’ equity at the date of acquisitions.
a. (1) P23,880,000 and (2) P29,670,000
b. (1) P24,180,000 and (2) P29,670,000
c. (1) P23,880,000 and (2) P29,970,000
d. (1) P24,189,000 and (2) P29,970,000

308. Working paper eliminations are entered in
a. Both the parent company’s and the subsidiary’s accounting records
b. The parent company’s accounting records only
c. Neither the parent company’s nor the subsidiary’s accounting records
d. The subsidiary’s accounting records only
Agency LLL, a national government agency, incurs an obligation on April 20,2019 for the
purchase of IT Software for P120,000 for delivery on April 24,2019 and to be paid on
May 25,2019.
309. The entry to be recorded by LLL for the incurred obligation would correctly include
a. Debit to equipment and Software
b. Credit to accounts payable
c. Credit to Cash-NT_MDS
d. Memo entry in RAOCO
310. It is a system of prescribing the procedures for recording appropriations, allotments

and obligations
a. Fund accounting
b. Budgetary accounting
c. Obligation accounting
d. Treasury disbursement coding system
311. Allotment are recorded in the registries

a. At the beginning of the year
b. At the end of the year
c. Semi-annually
d. Quarterly
Amounts related to the statement of affairs of Distressed Company as of April 30,2019

follow:
Assets pledged for fully secured liabilities P 80,000
Assets pledged for partially secured liabilities 50,000
Free Assets 272,000
Fully secured liabilities 60,000
Partially secured liabilities 80,000

Unsecured liabilities with priority 40,000
Unsecured liabilities without priority 330,000
312. Calculate the expected amount recoverable by partially secured creditors in the
a. P71,000 c. P69,500
b. P50,000 d. P80,000
313. In a statement of affairs, assets pledge for partially secured creditors are
a. Included with assets pledged for fully secured creditors
b. Offset against partially secured creditors
c. Included with free assets
d. disregarded
During 2019, there was no change in either the raw material or the work in process
beginning and ending inventories. However, finished goods, which had a beginning
balance of P25,000, increased by P 15,000.
314. if the manufacturing costs incurred totalled P 600,000 during 2019, the goods
available for sale must have been:
a. P585,000 c. P610,000
b. P600,000 d. P625,000
On January 1,2019 , Robert Red and William White have formed a partnership that has
the following contributed assets that are all fairly valued.
Contributed by Partners
R. Red W. White
Cash P 16,000 P 24,000
Inventory 14,400 12,000
Building 480,000
Furniture and Fixture 200,000 --
The Building is subject to a mortgage of P96,000 that will be assumed by the

partnership. The partners also agree that profits and losses shall be divided on 4:6 ratio
to Red and White respectively.

315. What amount of capital should be recorded for Red and White at the formation of
the partnership?
a. P230,400 & P516,000
b. P226,000 & P516,000
c. P226,000 & P420,000
d. P230,400 & P420,000
In continuation with the item above, assume : (1) partnership net profit for the 1 st half of
the year 2019 was P20,000; and (2) Baby Blue was admitted as a partner on July 1, 2019;
investing P201,120 for 30% interest in Capital and profits.
A. If the admission of Blue comprises the purchase of 30% each of the old partners’
existing capital at July 1, 2019:
316. Blue’s Capital credit will be

a. P201,120 c. P211,200
b. P202,110 d. P221,100
317. The amount Red’s capital after the admission of Blue will be
a. P166,880 c. P160,680
b. P168,600 d. P186,600
318. If Blue’s investment of P201,120 is contributed into the partnership, instead of

using it to purchase existing interest:
28. Blue’s capital credit will be
a. P261,456 c. P214,266
b. P395,798 d. P201,120
319. The amount of White’s capital after the admission of Blue will be
a. P261,456 b. P395,798

c. P214,266 d. P201,120
320. Which of the following statements, in respect of foreign currency translation, are
correct according to PAS 21 The effects of changes in foreign exchange rates?
I. The functional currency of an entry is selected by management
II. The presentation currency of an entity is selected by management
III. The functional currency of an entity is identified by reference to circumstances
of the business
IV. The presentation currency of an entity is identified by reference to
circumstances of the business
a. I and II only
b. II and III only
c. I and IV only
d. III and IV only
Street Co purchased goods for FC450,000 from an overseas supplier on 30 November

2019. Street Co paid for the goods on 31 January 2020. Exchange rates were:
FC=P1
30 November, 2019 1.50
31 November, 2019 1.45
31 January, 2020 1.55
321. What is the exchange difference that should be reported in profit or loss for the
year ended 31 November 2019 and at what amount should the goods be included
in inventory in the statement of financial position at that date?
Exchange Difference Inventory
a. P9,677 gain P290,323
b. P9,677 gain P300,000
c. P10,345 loss P300,000
d. P10,345 loss P310,345
322. Which of the subsidiaries are likely to have a different functional currency from
Parent Co?
a. A Co and B Co
b. A Co and C Co
c. B Co and C Co
d. all three subsidiaries
Archway Co has an overseas subsidiary in a foreign country. This subsidiary is 75% owned
and operates independently of its parent. The exchange gain arising from the translation
of the subsidiary’s accounts for the year ended 30 June 2018 was P20,000. On 1 June
2019 Archway Co purchased raw materials from a foreign supplier for FC250,000. It paid
for the materials on 31 July 2019. Relevant exchange rates were:
FC=P1
01/June/2019 1.60
30/June/2019 1.61
31/July/2019 1.63
323. In respect of this items, what is the exchange gain that should be included in the
consolidated income statement for the year ended 30 June 2019?
a. P970
b. P2,876
c. P22,876
d. P20,970
324. When a parent has a foreign subsidiary whose functional currency is the national
currency of the country where it operates, which rates of exchange should be used to
translate the items the items below into the parent’s functional and presentation
currency?
Non-current assets Receivables Non-current liabilities
a. closing rate closing rate closing rate
b. historic rate closing rate closing rate
c. historic rate historic rate closing rate
d. historic rate historic rate historic rate

Rain Org is a subsidiary of the Weather Group. Its functional currency is the Zyco, and
the presentation currency of the group is the Peso (P). The abbreviated statement of
financial position of Rain Org at 31 December 2019 is as follows:
Zyco
Non-current assets 420,000
Total assets 630,000
Share capital 360,000

Current liabilities 170,000
Equity and liabilities 630,000
325. What cumulative exchange difference is shown in Rain Org’s balance sheet at 31
December 2019, assuming retained earnings computed by its components is
P82,500.
a. P27,500 credit c. P25,700 debit
b. P0 d. P20,750 debit
326. Which of the following provide evidence of a parent-subsidiary relationship?

I. The parent has power over more than 50% of the voting rights through
agreement with other investors
II. The parent has a power to govern the financial and operating policies of the
entity by statute
III. The parent has the power to remove a majority of members of the board of
directors.
IV. The parent has representation on the board of directors
a. I only
b. I and IV only
c. I, II and III only
d. I, II, III and IV
327. Which of the following statements are true?

I. Intra-group transactions must be eliminated on consolidation
II. A holding of 10% of ordinary voting shares in another company is accounted
for in accordance with PAS 27 Consolidated and separate financial
statements
III. Where a subsidiary does not adopt the same accounting policies as its
parent company, adjustments must be made to bring its accounting policies
into line prior to consolidation
IV. Where a group comprises a parent company and an investee over which the
parent has significant influence, consolidated accounts must be prepared
a. I and III only

b. I and IV only
c. II and III only
d. I, II, III, and IV
Comparative trial balances of the Home Office and the two branches of Aggregate
Corporation at December 31, 2019 were as follows:
Debits Home Office Branch ONE Branch TWO
Cash P5,000 P15,000 P22,000
Accounts receivable 80,000 30,000 40,000
Inventories 150,000 60,000 40,000
Branch ONE 170,000
Brach TWO 117,000
Plant assets 730,000 250,000 200,000
Purchases 900,000
Shipments fr. home office 300,000 200,000
Expenses 300,000 75,000 50,000
P2,452,000 P730,000 P552,000
Credits
Accounts payable P100,000 P45,000 P30,000
Other liabilities 80,000 15,000 5,000
Loading in branch inventories 60,000
Share capital, P10 par 500,000
Home office equity 170,000 117,000
Sales 1,000,000 500,000 400,000
Shipments to branches P2,452,000 P730,000 P552,000
The home office bills Branch ONE at 120% of cost. Since Branch TWO is relatively new, to
deal with competition, it is billed by the home office at cost. These billing policies had
been in effect over the last two years. Home office and branch office inventories at
December 31, 2019 were
Home Office, at cost P120,000
Branch ONE, at billed prices 72,000
Branch TWO, at billed prices 80,000
328. Compute Aggregate’s ending inventory at December 31, 2019.

a. P240,000 c. P272,000
b. P258,667 d. P260,000
329. Compute the amount of the inter-office profit realized from branch sales to
outsiders in 2019.
a. P62,700 c. P44,667
b. P26,667 d. P48,000
For the quarter ended September 30,2019, Victory Company consigned 80 units of 35M
truck batteries costing P6,250 each to Florida Enterprises. The freight cost incurred by
Victory for the merchandise shipments was P10,500 60% of which was paid by Victory
and balances by Florida. On September 30, an account sales was received from the
consignee reporting the 45 batteries had been sold for P9,375 each. Remittance was
made by the consignee for the amount due, net of 6% commission on sales, advertising
of P2,500, installation cost of P4,000 on units sold, and amount advance for the freight
on Victory’s shipments.
330. The inventory value of the unit unsold in the hands of the consignee is
a. P69,437.50 c. P116,725
b. P223,343.75 d. P110,312.50
331. The profit for the consignor for the units sold is
a. P102,906.25 c. P104,031.25
b. P102,793.25 d. P106,540

332. The amount of cash that will be remitted by the consignee is
a. P395,987.50 c. P389,575.00
b. P283,937.50 d. P385,862.50
Liberty Sportswear manufactures a specialty line of T-shirts using a job order costing
system. During March the following costs were incurred in completing job 007; direct
materials, P 13,700; direct labor, P4,800; administrative, P1,400; in selling P5,600.
Factory overhead was apply at the rate of P25 per machine hour, and Job 007 required
800 machine hours.
333. If Job 007 resulted in 7,000 good shirts, the cost of goods sold per unit would be:
a. P6.50 c. P5.70
b. P6.30 d. P5.50
RENDOR Contractors was recently awarded P6,720,000 contract to construct a trade

center for RICAFORT Lending Inc. RENDOR Contractors estimates it will take about
4years to complete the contract. The company uses the percentage of completion
method to report profits. (Use two decimal places for the percentage of completion, i.e.
64.28%)
The following information details the actual and estimated cost from 2016 to 2019
Year Actual cost each year Estimated cost to complete
2016 P3,120,000`` P3,264,000
2017 1,584,000 1,800,000
2018 1,152,000 912,000
2019 1,080,000
334. Determine the realized gross profit (loss) in 2019

a. (P168,000) c. P48,000
b. P127,000 d. (P48,000)
335. Using zero-profit method instead, how much is the realized gross profit (loss) in
2018?
a. (P168,000) c. P48,000
b. P127,000 d. (P48,000)
GREATWITZ Company began operations on January 1 ,2019 and appropriately uses the
instalment method of accounting. The following information pertains to the operations
Cost of instalment sales, P525,000; Gross Profit rate based on cost, 25% Collections on
instalment sales (including interest of P11,000), P297,500.
336. Determine the realized gross profit for 2019.

a. P37,500 c. P35,750
b. P37,950 d. P57,300
337. determine the deferred gross profit at December 31, 2019.

a. P73,950 c. P53,750
b. P37,950 d. P93,750
338. Under the instalment method, realized gross profit is computed at the end of year
by
a. Multiplying the total collections by the gross profit rate based on cost
b. Multiplying the total collections by the gross profit rate based on sales
c. Multiplying the selling price by the gross profit rate
d. Multiplying the cost of sales by the gross profit rate
SOLID Corporation manufactures products W,X,Y, and Z from a joint process. Additional
Information as follows:
IF PROCESSED FURTHER
Sales Value Sales
Units at Split-off Additional Value at
Products Produced point Costs Final Point
W 6,000 80,000 7,500 90,000
X 5,000 60,000 6,000 70,000
Y 4,000 40,000 4,000 50,000
Z 3,000 20,000 2,500 30,000
18,000 200,000 20,000 240,000

339. Assuming a joint production cost of P160,000 and the use of the relative sales value
at the split-off-point, what joint costs were allocated to each product?
W X Y Z
a. P40,000 P40,000 P40,000 P40,000
b. P53,333 P44,000 P35,556 P26,667
c. P60,000 P46,667 P33,333 P20,000
d. P64,000 P48,000 P32,000 P16,000
The San Lorenzo Association, a private non-profit organizations, received a contribution

of P50,000 in 2018 restricted for membership training in providing emergency aid during
calamity situations. None of the contribution was spent in 2018. In 2019, P35,000 of the
contribution was used to finance a training seminar as to the role its members may take
in helping people in flood disaster situations.
340. Unrestricted net assets are typically the assets in the

a. General fund
b. Restricted fund
c. Permanent endowment fund
d. Loan fund term endowment fund, annuity fund, life income fund and plant fund
341. In the cash distribution plan, which partner gets the first cash distribution?
a. The partner with the largest loan balances
b. The partner with the largest loss absorption potential
c. The partner with the largest capital balance
d. The partner with the largest profit or loss ratio
342. Determined the true statements under PFRS 11

a. Joint arrangement is either joint venture or joint operation
b. Joint operation is either joint arrangement or joint venture.
c. Joint venture is either joint arrangement or joint operation
d. Joint arrangement, joint venture are joint operation are one and the same
PANDI COMPANY manufactures job order at the specifications of its customers. A job
order with exacting specifications for 20,000 units has been received and was
immediately placed in process. The original cost amounted to a total of P360,000. Upon
final inspection, it was discovered that 500 units were defective and 300 units were
spoiled. The defective units were reworked at a total cost of P3,500 and the spoiled units
were sold as seconds at P10 each.
The customer has agreed to accept only the good units although they were less than the
number ordered.
343. Calculate the increase in the original unit cost of the good units produced as a
result of the customer’s strict and exacting specifications.
a. P0.2950 c. P0.3073
b. P0.1795 d. P0.2995
On January 2, 2019 TAGUM company signed an agreement to operate as a franchisee of

BALIWAG Enterprises for an initial franchise fee of P2,812,500 for 10 years. Of this
amount P525,000 was paid when the agreement was signed and the balance payable in
four annual payments beginning on December 31, 2019. TAGUM issued a promissory
note for the balance, the relevant interest rate being 24%. Assume that substantial
services amounting to P417,450 had already been rendered by BALIWAG Enterprises and
that additional indirect franchise cost of P70,500 was also incurred. The franchisee
started operations during 2019 with a total sales of P450,000. The agreement further
provides that the franchisee must pay a continuing franchise fee equal to 5% of its gross
sales. If needed, the PV factor is 2.40.
344. Assuming the notes is non-interest-bearing and its collection is reasonably assured,
calculate the net income reported by BALIWAG for the year ended December 31, 2019
a. P598,630.50 c. P1,920,000
b. P1,761,450 d. P2,835,000
In 2019, QUICK Builders agreed to construct a commercial building at a price of P

3,000,000. QUICK Builders uses the percentage of completion method. The information
relating to the costs and billings for the contract were as follows:
2017 2018 2019

Cost incurred to date 840,000 1,800,000 2,355,000
Estimated cost yet to be incurred 1,560,000 600,000 --
Customer billing to date 450,000 1,200,000 3,000,000
Collection of billing to date 360,000 960,000 2,820,000
345. How much is the excess of construction in progress over progress billings or
progress billings over construction in progress in QUICK Builders December 31,
2018 balance sheet?
a. P1,050,000 b. P1,650,000
c. P600,000 d. P2,355,000
346. Over the same data in the item above, but using the zero-profit-method instead,
how much is construction in progress, net of progress in QUICK Builders December
31, 2018 balance sheet?
a. P1,050,000 c. P600,000
b. P1,650,000 d. P2,355,000
347. Under PFRS 11, joint arrangement that are joint ventures are accounted for under
a. cost method in accordance with PAS 39
b. equity method in accordance with PAS 28
c. fair value method in accordance with PFRS 9
d. proportionate consolidation method in accordance with PAS
BIGLANG-AYAW CORPORATION is financially distress and the court has ordered its
liquidation. It has the following liabilities: Income taxes, P16,000; Notes payable (secured
by land), P240,000; Bonds payable (secured by plant and equipment), P120,000; and
administrative expenses for liquidation, P20,000.The distressed company has the
following assets with their respective book value and fair value: Current assets, P160,000
and P67,000; Land, P200,000 and P220,000; and plant and Equipment, P140,000 and
P130,000, respectively
348. Compute the estimated amount that the holders of the notes payable would collect
following liquidation.
a. P220,800 c. P282,000
b. P280,800 d. P228,000
PURONG KILATIS FOODS, INC. charges new franchises an initial fee of P2,500,000. Of this
amount, P1,000,000 is payable in cash when the agreement is signed, and the remainder
is to be paid in four equal annual instalments through the issuance of 12% interest
bearing notes. In consideration thereof, PURONG KILATIS FOODS promises to assist the
franchisee in locating the business site; in conducting market study to estimate earnings
potential; in supervising the construction of the building; and in the initial training of
management and employees. The agreement also includes the payment monthly by the
franchisee of continuing franchise fees calculated at 3% of the franchisee’s monthly
gross sales revenues.
On July 1, 2019 PURONG KILATIS FOODS entered into franchising agreement with a
known retailer, SHELLY’SSPECIALTIES. PURONG KILATIS FOODS had completed all of the
initial services required at a cost of P800,000. In direct expenses were P18,000 in 2019.
SHELLY’S SPECIALTIES had started operations on November 2, 2019 with the total sales
revenue of P450,400 from its 2019 operations. It was ascertained that collection of the
notes provided by SHELLY’S SPECIALTIES is reasonably assured.
349. Compute the net income reported by PURONG KILATIS FOODS from the SHELLY’S
franchise in 2019.
a. P1,875,215 c. P1,758,512
b. P1,785,512 d. P1,578,512
350. A private not-for-profit organization (NPO) should recognize contributed services

which would be purchased if not donated as an increase in both expenses and
contributions, if the following requirement(s) for such recognition is/are met.
I. The contributed service creates or enhances a non-financial assets II.
It must be performed by a professional or by a specialist.
a. Both I and II
b. I only
c. Neither I or II
d. II only
BIGLANG-SIGAW MANUFACTURERS uses process costing in its manufacturing operations

and adopts the FIFO method in costing its production. In December 2, conversion cost
are incurred uniformly throughout the process. Materials are added following
inspection, which occurs at the 90% stage of completion. In view of simplicity of the
production process, losses are not expected, thus any spoiled units are deemed
abnormal and their costs charged to Factory Overhead Control account. The following
information relates to Department 2 for April, 2019.
Units Pesos
In process, April 1 (40% converted) 2,000 P16,000
Received from Department 1 12,000 84,000
Transferred to finished product 8,000
In process, April 30 (70% converted) 5,000
Lost units 1,000
Cost incurred in Department 2 during the current month are given below
Materials 24,000
Labor and overhead 45,240
In answering question XX through XX that follow, assume the following unit costs for
April were determined from the above mentioned information
Preceding department P7.00
Materials 3.00
Labor and overhead 3.90
Cumulative P13.90
351. Compute the cost of units completed from the In-Process, April 1
a. P25,364 c. P26,680
b. P25,436 d. P25,463
352. Compute the cost of units completed from those received during April
a. P83,400 c. P87,490
b. P89,470 d. P84,970
353. Compute the cost of production charged to factory overhead control

a. P9,549 c. P9,954
b. P9,945 d. P10,510
354. Compute the cost of unit still in process at April 30, 2019
a. P46,850 c. P45,680

b. P48,560 d. 48,650
The FOREVERMORE INDUSTRIES manufactures products X, A, and K from a joint

production process at a cause of P58,800. Additional information for the current period
follows:
Units Sales Value Estimated costs Units
After
Products Produced Further to to sell sold
Processing Complete
X 800 P40,000 P5,000 P4,000 700

A 600 34,200 4,000 4,200 382
K 400 32,000 3,000 2,000 350
1,800 P106,000 P12,000 P10,200 1,600
355. Compute the unit cost for product A under the NRV method of joint cost allocation.
a. P33.38 c. P54.75
b. P37 d. P38.33
Selected accounts from the trial balance of PAIYAKAN SALES, INC. as of December 31,
2019 follow:
Instalments receivable Repossessions 2018 sales P4,500
22,500
Instalments receivable- Instalment sales 637,500
2019 sales 300,000
Inventory 105,000 Regular sales 577,500
Purchases 832,500 Deferred gross 58,800
Profit- 2018
Instalments receivable-2018, January 1, 2019 P180,000
Inventory of new and repossessed merchandise, December 31, 2019 142,500
Gross Profit Rates based on sales: Regular sales, 30%; Instalment
Sales-2018, 35%; and Instalment sales-2019, 38%

Repossession recoded during the year was from the 2018 instalment sales with an
uncollected balance at the time of repossession of P12,000.
356. Compute the total realized gross profit for 2019

a. P325,245 c. P325,425
b. P352,245 d. P352,425
357. Compute the total deferred gross profit at December 31, 2019
a. P121,587 c. P112,785
b. P121,875 d. P121,785
Liza –S Company has a wholly owned subsidiary in a foreign country called EG which was
acquired on January 1, 2019. The foreign subsidiary submitted its financial statements
for 2019 to Liza-S. Selected exchanges rates in effect throughout 2019 are shown below.
January 01, 2019 FC 1 = P0.8150
December 31, 2019 FC 1 = P0.8175
Average for 2019 FC 1 = P0.8250 Date when
inventory
on hand was purchased FC 1 = P0.8300
Date dividends were
declared FC 1 = P0.8125
EG’s financial result for 2019 were as follows
EG Financial statements
December 31, 2019
INCOME STATEMENT
Sales FC 5,000,000
Cost of sales FC 3,500,000
Depreciation expense 150,000
Other expenses 850,000
Net income FC 500,000

STATEMENT OF RETAINED EARNINGS
January 1, 2019 FC 400,000
Net income 500,000
Dividends (100,000)
December 31, 2019 FC 800,000
BALANCE SHEET
Cash FC 1,200,000
Accounts receivable 1,900,000
Inventory
(FC 500,000 AT January 1) 700,000
Plant and equipment, net 400,000
FC 4,200,000
Accounts payable FC 400,000

Long-term-debt 2,000,000
Share capital 1,000,000 Retained earnings 800,000
4,200,000
Assume that EG is considered to be an independent self- sustaining subsidiary and Liza=S

will consolidate in its peso functional currency.
358. How much will be EG’s net income for 2019 translated in pesos?
a. P412,500 c. P606,060
b. P408,750 d. P611,621
359. What is the amount of gain or loss arising from translation?

a. P750 loss c. P3,750 gain
b. P5,000 loss d. P307 loss
Celso, Dario, and Ermo formed the CDE Partnership on August 30,2018, with the
following assets, measured at book values in their respective records, contributed by
each partner:
Celso Dario Ermo
Cash P 259,200 P 86,400 P103,680
Inventory 58,464 75,200
PPE 1,296,000 240,000
Totals P1,613,664 P 326,400 P 178,880
A part of Celso’s cash distribution, P172,800, comes from personal borrowings. Also, the
PPE of Celso and Dario are mortgage with the bank for P777,600 and P57,600,
respectively. The partnership is to assume responsibility for these PPE mortgages. The
fair value of the inventories contributed by Ermo is P73,440 while the PPE contributed
by Dario at this date is P272,160. The partners have agreed to share profits and losses on
a 5:2:3 ratio, to Celso, Dario and Ermo, respectively.
360. What is the capital balance for each partner at the opening of business on August
30,2018?
a. Celso, P836,064; Dario, P300,960; and Ermo, P177,120
b. Celso, P1,161,200; Dario, P418,000; and Ermo, P246,000
c. Celso, P1,987,500; Dario, P189,000; and Ermo, P217,500
d. Celso, P1,095,120; Dario, P547,560; and Ermo, P182,520
361. What is the capital balance for each partner at August 30, 2018, instead, if the
interest ratio is given at 5:2:3 to Celso, Dario and Ermo, respectively?
a. Celso, P657,072; Dario, P262,829; and Ermo, P394,243
b. Celso, P985,608; Dario, P492,804; and Ermo, P164,268
c. Celso, P1,987,500; Dario, P189,000; and Ermo, P217,500
d. Celso, P821,340; Dario, P492,804; and Ermo, P328,536
On January 1, 2018, Flor and Grace fromed a partnership by contributing cash of

P324,000 and P216,000, respectively. On February 1, 2018, Partner Flor contributed an
additional P109,000 cash to the partnership and ion August 1, 2018, Partner Flor made a
permanent withdrawal of P54,000. On May 1, 2018 , Partner Grace contributed
machinery with a fair market value of P72,000 and a net book value of P60,000 when
contributed. On November 1, 2018, Partner Grace contributed an additional P36,000
cash to the partnership. Both partners withdrew one-fourth of their salary allowances in
2018.

The partnership reported a net income of P205,920 in 2018 anf the profit and loss
agreement are as follows:
a. Interest at 6% is allowed on average capital balances;
b. Salaries of P2,160 pero month to each partner;
c. Bonus to Flor of 10% of net income after interest, salaries and bonus; and
d. Balance to be divided in the ratio of 6:4 to Flor and Grace, respectively.
362. Determine how the net income will be allocated to the partners:
a. Flor, P160,000 and Grace, P126,000
b. Flor, P180,000 and Grace, P106,000
c. Flor, P170,000 and Grace, P116,000
d. Flor, P122,400 and Grace, P83,520
363. Determine the capital balances of the partners at December 31,2018:

a. Flor, P493,920 and Grace, P401,040
b. Flor, P551,000 and Grace, P686,000
c. Flor, P688,000 and Grace, P449,000
d. Flor, P683,000 and Grace, P554,000
Haidee and Irma are partners sharing profits and losses in the ratio of 60% and 40%,
respectively. The partnership balance sheet at August 30, 2018 follows:
Cash P 9,720 Accounts Payable P 10,800

Other Assets 95,760 Haidee, Loan 4,680
Irma, Loan 7,200 Haidee, Capital 64,800
Irma, Capital 32,400
Total P 112,680 Total P 112,680
At this date, Jessa was admitted as a partner for a consideration of P35,100 cash for a
30% interest in capital and in profits.
364. Assume Jessa is admitted by purchased of 30% each of the original partner’s
interest, determine how the P35,100 will be proportioned to Haidee and Irma,
respectively.
a. Haidee, P32,850 and Irma, P15,900
b. Haidee, P32,450 and Irma, P16,300
c. Haidee, P23,004 and Irma, P12,096
d. Haidee, P32,950 and Irma, P15,800
365. Assume Jessa is admitted y investing the P35,100 to the partnership, determine the
effects of any bonus over the capital balances of the original partners:
a. Haidee, (P9,900) and Irma, (P14,850)
b. Haidee, P9,900 and Irma, P14,850
c. Haidee, (P14,850) and Irma, (P9,900)
d. Haidee,( P2,754) and Irma, (P1,836)
The following balances as at October 31,2018 for the Partnership of Kiks, Leila, and Mimi
were as follows:
Cash P 50,000 Liabilities P 15,000

Leila, Loan 15,000 Kiks, Loan 22,000
Non-Cash Assets 400,000 Kiks, Capital 105,000
Leila, Capital 97,500
Mimi, Capital 225,000
Totals P 465,000 Totals P 465,000
Kiks has decided to retire from the partnership on October 31. Partners agreed to adjust
the non-cash assets to their fair market value of P490,000. The estimated profit to
October 31 is P100,000. Kiks will be paid P173,000 for her partnership interest inclusive
of her loan which is repaid in full. Their profit and loss ratio is 3:3:4 to Kiks, Leila and
Mimi, respectively.
366. What will be the balance of Leila’s capital account after the retirement of Kiks?
a. P 129,444 c. P 144,429
b. P 159,429 d. P 149, 424
The accounts of the partnership of BDO at December 31, 2018 are as follows:
Cash P 59,000 Liabilities P 45,000
Non-Cash Assets 524,700 Loan from D 14,400
Loan to B 10,800 B, Capital 148,500
D, Capital 263,500
O, Capital 123,300
Totals P 594,900 Totals P 594,900
They divide profits and losses 3:5:2 to B, D, and O, respectively. They have decided to
liquidate the partnership at this date.
367. Determine the amount Partner B and Partner D would have received by the time
Partner O would have received a cumulative amount of P32,400.
a. B, P1,785 and D, P72,650
b. B, P1,578 and D, P70,265
c. B, P1,875 and D, P70,625
d. B, P1,350 and D, P50,850
VENUS and WILMA partnership’s balance sheet at December 31, 2017, reported the
following:
Total Assets P 100,000
Total Liabilities 20,000
Venus, Capital 40,000
Wilma, Capital 40,000
On January 2, 2018, VENUS and WILMA dissolved their partnership and transferred all
assets and liabilities to a newly formed corporation. At the date of incorporation, the fair
value of the net assets was P12,000 more than the carrying amount on the partnership’s
books. Of which P7,000 was assigned to tangible assets and P5,000 was assigned to
patent. VENUS and WILMA were issued 5,000 shares of the corporation’s P1 par
common stock.
368. Immediately following incorporation, additional paid-in capital in excess of par

should be credited for
a. P68,000 c. P77,000
b. P70,000 d. P82,000
JOINT AGREEMENTS

On January 1, 2018, HHH, III and JJJ (all are corporations) establish a joint operation to
manufacture a product they agree to share equally. Each will contribute P200,000 into
the operation. HHH and III are to contribute cash while JJJ is to contribute equipment
with a cost of P185,00. The equipment has a remaining life of 10 years when
contributed.
369. Determine the net amount JJJ will show the equipment in JO account in its
balance sheet at December 31, 2018.
a. P45,000 c. P60,000
b. P55,000 d. P58,500
370. Determine the net amount HHH (or III) will show the equipment in JO account in
its balance sheet at December 31, 2018.
a. P45,000 c. P60,000
b. P55,000 d. P58,500
Now assume the book carrying value of the equipment contributed by JJJ is P215,000,
and the fair value P200,000.
371. At what amount will each of the operators show the equipment in JO in its (1)
January 1, 2018 and in its (2) December 31, 2018 balance sheet?
a. (1) P61,667 and (2) P55,500
b. (1) P66,667 and (2) P62,167
c. (1) P66,667 and (2) P60,000
d. (1) P65,000 and (2) P55,500
Trisha and Bella in a joint venture, contributes P30,000 each in order to purchase
merchandise which were sold in lots at a closing-out sale. They agreed to divide their
profits equally and each shall record her purchases, sales and expenses in her own
books. After almost all merchandise had been sold, they wind up their venture.
The following are the venture transactions: Trisha Bella

Purchases of Merchandise P 30,000 P30,000
Expenses paid from Jt Venture Cash 3,000 3,900
Jt venture credit balances (24,000) (21,000)
Undisposed merchandise upon termination of JV 900 1,400
All transactions for the joint venture are in cash. The ventures are to take over the
unsold merchandise at cost.
372. Determine the amount of cash Bella would receive/(pay) from/to Trisha upon final
cash, settlement by the venturers.
a. P (1,250) c. P (2,150)
b. P 2,150 d. P 1,250
CORPORATE LIQUIDATION
The following were taken from the statement of affairs of NOWAYOUT COMPANY.
Assets pledged with fully secured creditors P 56,800

Assets pledged with partly secured creditors 10,000
Free assets 8,960
Preferred creditors 2,400
Fully secured creditors 55,200
Partially secured creditors 16,000
Unsecured creditors without priority 14,400
373. The estimated amount recoverable by Partly-secured creditors is

a. P 11, 160 c. P 12,400
b. P 12,240 d. P 11,600
The statement of affairs of Bailout Company shows the following summarized balances:
Estimated gains on realization of assets P 756,000

Estimated losses on realization of assets 1,356,000
Contingent assets 600,000
Other assets 960,000
Liabilities 320,000
Contingent liabilities 180,000
Capital stock 1,200,000
Retained earnings (deficit) 480,000
374. Determine the estimated pro-rata payment on the peso to stockholders in the
event of corporate li quidation.
a. P 0.75 c. P 0.43
b. P 0.30 d. P 0.70
INSTALLMENT SALES
PAIYAKAN COMPANY began operations on January 1, 2018 and appropriately uses the
installment method of accounting. The following information pertains to the operations
Cost of installment sales, P656,250; Gross profit rate based on cost, 25%; Collections on
installment sales (including interest of P13,750), P371,875.
375. Determine the deferred gross profit at December 31, 2018.

a. P 92,437.50 c. P67,187.50
b. P 47,437.50 d. P 117,187.50
An item f merchandise costing P436,510 was sold for P1,000,000 under sales method.
Terms of the sales are: 20% payment upon signing of the contract on January 1, 2018, to
include a trade-in equipment with a fair value of P100,000 and a trade-in allowance of
P120,000. The balance is payable in 4 semi-annual payments to start on June 30,2018. A
non-interest-bearing note is issued, with an implicit interest rate of 12%. Present value
of annuity of 6% over 4 periods is 3.4651
376. Determine the realized gross profit for 2018

a. P272,854 c. P236, 864
b. P227,864 d. P253,171
LONG-TERM CONSTRUCTION CONTRACTS

In 2016, PRTC BUILDERS agreed to construct a commercial building at a price of
P3,750,000. PRTC BUILDERS uses the percentage of completion method. The information
relating to the costs and billings for the contract were as follows:
2016 2017 2018
Cost incurred to date 1,050,000 2,250,000 2943,750
Estimated cost yet to be incurred 1,950,000 750,000
Customer billings o date 562,500 1,500,000 3,750,000
Collection of billings to date 450,000 1,200,000 3,525,000
377. How much is the excess of construction in progress over progress billings or
progress billings over construction in progress in PRTC’s December 31, 2017
balance sheet?
a. P1,312,500 c. P750,000
b. P2,062,500 d. P2,943,750
378. Using the same problem, assuming there is no dependable or reliable estimate
available, how much is the construction in progress, net of progress billings or
progress billings net of construction in progress in PRTC’s December 31, 2017
balance sheet?
a. P1,312,500 c. P 750,000
b. P2,062,500 d. P 2,943,750
EXCEL CONSTRUCTIONS was recently awarded a P8,400,000 contract to construct a trade

center for Alaya Lending, Inc.
EXCEL CONSTRUCTIONS estimates it will take 50 months to complete the contract. The
company uses the percentage of completion method to report profits. (Use two decimal
places for the percentage of completion, i.e. 64.28%)
The following information details the actual and estimated costs from 2015 to 2018
Year Actual cost each year Estimated cost to complete
2015 P3,900,000 P4,080,000
2016 1,980,000 2,250,000
2017 1,440,000 1,140,000
2018 1,350,000
379. Determine the realized gross profit (loss) in 2018

a. P(210,000) c. P60,000
b. P158,750 d. P(60,000)
380. Using zero-profit-method, how much is the realized gross profit (loss) in 2017?
a. P(210,000) c. P60,000
b. P158,750 d. P(60,000)
FRANCHISE ACCOUNTING
On January 2, 2018, SUSIE FOODS signed an agreement to operate as a franchise of
MANUNGGAY BAKERY for an initial franchise fee of P2,250,000 for 10 years. Of this
amount, P420,000 was paid when the agreement was signed and the balance payable in
four annual payments beginning on December 31, 2018. SUSIE FOODS issued a
promissory note for the balance, the relevant interest rate being 24%. Assume that
substantial services amounting to P333,960 had already been rendered by MANUNGGAY
BAKERY and that additional indirect franchise cost of P56,400 was also incurred. The
franchise started operations during 2018 with a total sales of P360,000. The agreement
further provides that the franchise must pay a continuing franchise fee equal to 3% of its
gross sales. If needed, the PV factor is 2.40.
381. Assuming the note is non-interest-bearing and its collection is reasonably assured,
calculate the net income reported by MANUNGGAY BAKERY on the SUSIE franchise
for the year ended December 31, 2018.
a. P598,630.50 c. P1,401,960
b. P1,761,450 d. P2,835,000
A and B formed a 60:40 capital interest in AB Partnership with the following

contribution:
A B
Land 1,000,000 - Building
- 800,000
Mortgage - 50,000
They agreed that the Land will be valued at 1,500,000 and the mortgage will be assumed
by the partnership. Part also of the agreement is that the Building already reflects its fair
value.
382. Assuming A is the base, what amount should B contribute or (withdraw) to be in
accordance with their capital interest?
a. (83,000) c. 200,000
b. 250,000 d. (133,333)
383. Assuming B is the base, what amount should A contribute or (withdraw) to be in

accordance with their capital interest?
a. 200,000 c. (375,000)
b. (300,000) d. 125,000
On January 1, 2020, A and B formed AB partnership with a total agreed capital of P

5,000,000 and a capital interest ratio of 70:30. The following were ascertained during
the year as to distribution of profits and losses:
a) A will receive quarterly salaries of P 100,000

B) 5% interest on their initial capital
c) Any remainder will be shared by their capital interest ratio
At the end of the year, the partnership had a P 500,000 credit balance in its income
summary account.
384. What is the share in the net income or (loss) of Partner A?

a. 380,000 c. 470,000
b. 440,000 d. 491,000
385. What is the capital balance of Partner B on December 31, 2020?

a. 1,509,000 c. 1,560,000
b. 1,602,000 d. 1,530,000
On December 31, 2018, the capital balances of partners Q, R, and S of QRS Partnership
are P312,500, P125,000, and P62,500, respectively with profit or loss agreement ration
3:2:5. On January 1, 2019, X was admitted to the partnership upon investment of P
187,500 for 25% interest in the new partnership with total agreed capitalization of P
1,000,000.
386. What is the capital balance of S immediately upon admission of X?
a. 187,500 c. 312,500
b. 62,500 d. 218,750
387. Under GAAP, what is the most valid reason for the increment credit to the capital of
a newly admitted partner in addition to his properly valued contributed capital? a.
Goodwill arising from admission of a new partner in an existing partner
b. Asset revaluation of the existing assets of the partnership
c. Impairment of the existing assets of the partnership
d. Capital bonus coming from existing partners.
388. Which of the following statements is correct in the year when the estimated
contract price of a long-term construction contact is lower than the estimated total
construction cost of the project?
a. The cumulative gross revenue recognized as of the end of this year will
be equal to the construction in progress balance as of the end of this year.
b. The construction in progress as of the end of this year computed under
percentage of completion method will be equal to the construction in progress as of the
end of this year computed under cost recovery method.
c. The costs of construction to be presented in the statement of
comprehensive income for this year will be equal to the construction costs incurred
during the year.
d. The construction in progress as of the end contract price as of this year
will be
equal to the percentage completed as of the end of this year multiplied by the estimated
contract price as of the end of this year under percentage of completion method while
the construction in progress as of the end of this year will be equal to the cumulative
costs incurred as of the end of this year under cost recovery method.
The following were taken from the statement of affairs of ZEROMONNEY Corp,:
Assets pledged for fully secured creditors (estimated market value P150,000) P 180,000
Assets pledged for partially secured creditors (estimated value 104,000) 148,000
Free assets (estimated market value P 80,000) 140,000
Salaries, Taxes, and Estimated liquidation expenses 14,000
Partially secured creditors 120,000
Fully secured creditors 60,000
Unsecured creditors without priority 224,000
The Free assets were those assets other than the assets pledged to fully and partially
secured creditors. The unsecured creditors without priority were those secured to them
from start of liquidation.
389. What is the amount of net free assets?

a. 66,000 c. 186,000
b. 216,000 d. 156,000
390. What is the estimated recovery of the partially secured creditors?

a. 114,400 c. 118,400
b. 108,400 d. 116,400
The following balances were ascertained for BLUE Co.
` 2020 2021
Deferred gross profit rate 30% 45%
Installment sales 480,000 420,000
Installment receivable (2020 sales), December 313 90,000 167,200

Installment receivable (2021 sales), December 31 37,560
Selling expenses 24,900 31,340
Additional information for the year 2021:
• BLUE Co. granted an allowance of P 69,000 for the traded-in merchandise. The
appraised value of the trade-in merchandise was P 76,000 before refurbishing
cost of P 10,000
• An installment contact was written-off and it came from the installment
receivable from 2021 sales, and the written-off balance was 210,000

• A customer defaulted pertaining to installment receivable from 2020 sales, and
the unpaid balance was 114,000. The appraised value of the repossessed
merchandise after reconditioning cost of P11,000 was P 64,700.
391. What is the realized gross profit for the year 2021?
a. 64, 548 c. 225,888
b. 97,188 d. 92,688
392. What is the net income or (loss) for the year 2021?
a. (44,412) c. 84,288
b. (33,412) d. 110,640

MOTUL Co. entered into a long term construction contact for 3 years. Contact price
agreed was P 8,300,000. The outcome of the contact was estimated reliably. The
following data were ascertained for the contract:
2020 2021 2022
Percentage of completion 30% 82.5% ?

Estimated costs to completion P3,920,000 P1,680,000 ?
393. What is the construction cost of sales for the year 2021?
a. 6, 240,000 c. 7,920,000
b. 8,956,500 d. 6, 467,500
394. What is the construction-in-progress as of 2021?

a. 6,620,000 c. 6,847,500
b. 4,940,000 d. 4,130,000
On January 1, 2020, X Co. entered into a franchise agreement with Y Co. to sell
merchandise. Stated in the contract was a straight payment of P 50,000 and the balance
of P 480,000 was payable by an 5% interest bearing note (present value factor for three
periods is 2. 7232) to be paid annually for 3 years. Collectability of the note was not
reasonably certain. The cost to establish the franchise was P 198,750 and indirect costs
were P 20,000. Stated also in the terms of the contract was a 12% continuing franchise
fee on its monthly gross sales. The following were the gross sales at the end of each
month:
April P 150,000
May 125,000
June 234,000
July 145,000
August 267,000
September 305,500
October 456,250
November 466,500
December 576,800
395. What is the realized gross profit for the five months ended May 31, 2020?
a. 31,250 b. 29,540
c. 131,250 d. 124,068
396. What is the net income for the five months ended May 31, 2020?
a. 154,250 c. 54,250
b. 147,068 d. 52,540
397. An entity grants a franchisee the right to operate a restaurant in a specific market
using the entity’s brand name, concept and menu for a period of ten years. The
entity commonly conducts national advertising campaigns, promoting the brand
name, and restaurant concept generally. The franchisee will also purchase kitchen
equipment from the entity. The entity will receive P950,000 upfront (P50,000 for
the kitchen equipment and P900,000 for the franchise right). Under PFRS 15, how
shall the entity recognize the P 950,000 transaction price as revenue from contact
with customers?
a. The whole P 950,000 upfront fee shall be recognized as revenue over a
period of time of 10 years, the term of the contract.
b. The whole P950,000 upfront fee shall be recognized as revenue at a
specific point of time which is the date delivery of the kitchen equipment.
c. The whole P 950,000 upfront fee shall be recognized as revenue at a
specific of time which is the date of expiration of the 10-year term of the contract.
d. The P 50,000 upfront fee shall be recognized as revenue at a specific
point of time which is the date of delivery of the kitchen equipment while the remaining
P 900,000 upfront fee shall be recognized over a period of time of 10 years, the term of
the contract.
The Home Office had two branches, Mandalagan and Manalangin. At the end of the
year, December 31, 2020, the reciprocal account in Mandalagan Branch was P 256,600.
However, there were transactions discovered to have errors.

• The home office shipped merchandise costing P87,000 to Mandalagan brancg,
but was record by the branch in the amount of P 78,000
• Mandalagan collected Manalangin’s customer accounts worth P25,000, but
Manalangin charged in reciprocal account in the amount of P52,000 and the
home office recorded the correct transaction.
• The Mandalangan branch brought P56,500 worth of equipment with useful life 4
years on June 1, 2020, for use of home office and it was the policy of the
company that the equipment will be recorded by the branch, but Mandalagan
recorded it as P56, 050. It was indicated also in the policy that the straight line
method of depreciation will be used.
• The home office and Mandalagan branch did not record any depreciation for the
said equipment.
398. What is the unadjusted balance of the Investment in Mandalagan account?

a. 290,600 c. 265,600
b. 273,840 d. 246,600
399. What is the net adjustment in the Home Office Current account?
a. 760 CR c. 9,000 DR
b. 1,937 CR d. 17,240 CR
400. What is the adjusted balance of the reciprocal account?

a. 258,537 c. 239, 360
b. 257,360 d. 247,600
Luzon manufactures three joint product A, B, and C and a by product D, all in single
process. Results for the month of august were as follows.
Materials used 10,000 kgs P24,000
Conversion costs P28,000
No. of kilos on hand No. of kilos sold Product SV/kilo

3,000 1,000 A 11
3,000 0 B 10
0 1,000 C 26
1,000 1,000 D 1
Revenue from by product is credited to sales account. Process costs are apportioned on
a relative sales value approach.
401. What is the cost per kilo of C for the month?

a. 13.52 c. 5.61
b. 0 d. 35.58
Paul provided the following information for the transaction occurred during August. The
production plant uses the JIT costing system.
- Raw materials costing P750,000 were purchased

- All direct materials costing P 750,000 were requisitioned for production.
- Direct labor costs of P 500,000 were incurred.
- Actual factory overhead costs amounted to P 2,487,500.
- Applied conversion cost totaled P 3,250,000. This includes the direct labor cost -
All units are completed and immediately sold.
402. What is the RIP used backflushed to FG?

a. 750,000 c. 3,737,500
b. 1,250,000 d. 4,000,000
403. What is the adjusted Cost of Goods Sold?

a. 4,500,000 c. 3,737,500
b. 4,000,000 d. 3,237,000

404. Which of the following scenarios will decrease the cost of goods sold during the
year?
a. Increase in direct labor costs during the year.

b. Increase in raw materials inventory during the year.
c. Decrease in work in process inventory during the year.
d. Decrease in finished goods inventory during the year.
Materials are added at the start of the process in Super Bless blending department, the
first stage of the production cycle. The following information is available in August:
Work in process, Aug 31 (50% complete as to conversion cost) 175,000

Transferred to next department 275,000
Started in August 375,000
Work in process, Aug 1 (60% complete as to conversion cost) 150,000
Lost in production (normal) 75,000
405. Under FIFO, what are the EUP for conversion?

a. 362,500 c. 437,500
b. 272,500 d. 347,500
406. Under Weighted Average, what are the EUP for conversion?
a. 347,500 c. 437,500
b. 272,500 d. 362,500
Barney makes a single product in two Departments. The production data for Dept 2, for
Aug 2020 follows:
Production Cost Last Month This Month
Transferred in 40,750 222,750
Materials 9,500 168,750
Conversion 4,850 202,500
Quantities
In Process beginning (40% done) 10,000
Received from Dept 1 75,000

Completed and transferred 62,500
In process end (60% done) 15,000
early stages of operation.
407. Under weighted average, what is the cost of WIP end?

a. 111,600 c. 68,600
b. 111,400 d.70,000
408. Under FIFO, what is the cost of goods completed?

a. 488,125 c. 537,500
b. 535,100 d.528,700
409. When will the equivalent unit of production under FIFO Process be the same with
equivalent unit of production under Average FIFO?
a. When there is no ending work in process inventory
b. When there is no completed inventory during the period.
c. When the excess of the actual units started over the actual units
completed is equal to the ending work in process inventory.
d. When the actual units completed is higher than the actual units started.
On January 1, 2018, Entity A acquired 90% of outstanding ordinary shares of Entity B. On

July 1, 2018, Entity A purchased 80% of outstanding ordinary shares of Entity C. Entity A,
Entity B and Entity C reported the following sales and cost of goods sold for the years
ended December 31, 2019 and Decemeber 31, 2020:
Entity A Entity B Entity C
2019 Sales P5,000,000 P3,000,000 P2,000,000

2019 Cost of Sales 3,000,000 2,100,000 1,600,000
2020 Sales P6,000,000 P 4,000,000 P3,000,000
2020 Cost of Sales 4,200,000 3,200,000 1,800,000

The following intercompany sales of goods involving different set of inventories occurred
during 2019 and 2020:
 During 2019, Entity C sold inventory to Entity A at a price of a P200,000. ¼ of

those inventories were resold by Entity A to third persons during 2019 while the
remainders were resold to third persons during 2020.
 During 2019, Entity B sold inventory to Entity C at a price of P300,000. 1/3 of
those inventories were resold by Entity C to third persons during 2019 while the
remainders were sold to third persons during 2020.
 During 2020, Entity C sold inventory to Entity B at a price of P400,000. 1/5 of
those inventories remained in the ending inventory of Entity B at the end of
December 31, 2020.
 During 2020, Entity A sold inventory to Entity B at a price of P500,000. 2/5 of
those inventories were resold by Entity B to third persons during 2020.
410. What is the consolidated sales to be reported by Entity A in its Consolidated

Statement of Comprehensive Income for the year ended Decemeber 31, 2020?
a. 12,500,000 c. 12,100,000
b. 12,600,000 d. 11,600,000
411. What is the consolidated cost of sales to be reported by Entity A in its

Consolidated Statement of Comprehensive Income for the year ended December
31,2020?
a. 8,332,000 c. 8,532,000
b. 8,912,000 d. 8,652,000
On July 1, 2020, Entity A, a public entity, acquired 80% of ordinary shares of Entity B by
issuing its own 20,000 ordinary shares with par value of P10 and quoted price of P15. In
addition to the shares issued, Entity A also issued bonds payable classified as financial
liability at amortized cost with face value of P80,000 and quoted at 125. In connection
with the acquisition. Entity A paid the following costs:
 Transaction cost related to business combination capitalized by Entity A

As part of its Investment in Subsidiary P12,000
 Indirect cost of business combination 5,000
 Stock issuance cost 30,000
 Bond issue costs 20,000
On December 31, 2019, Entity B’s net assets is reported at P550,000 in its statement of
financial position. The interim statement of financial position for the six months ended
June 30, 2020 of Entity B reported net income of P70,000 with no dividend declaration.
On July 1, 2020, Entity B’s assets and liabilities are properly valued except for an
equipment which is overvalued by P20,000 that has remaining life of 5 years on such
date. On July 1, 2020, the noncontrolling interest is appraised at a fair value of P110,000.
On September 1, 2020, Entity A leased an investment property to Entity B at a monthly

rental at P2,500 for a period of two years. On October 1, 2020, Entity B sold a machinery
to Entity A with a book value of P12,000 at a selling price at P16,000. The machinery has
remaining life of 4 years on the date of sale.
Entity A accounted its Investment in Entity B using cost method in its separate financial
statements. On Decemb er 31, 2019, the retained earnings of Entity A has balance of
P5,000,000 in its separate statement of financial position. Entity A and Entity B reported
the following information in their separate income statements for the year ended
December 31, 2020:
Entity A Entity B
Net Income P1,000,000 P100,000
Dividend declared P200,000 P20,000
412. What is the goodwill or (gain on bargain purchase) as a result of business

combination?
a. (90,000) c. 100,000
b. (80,000) d. 10,000
413. What Is the amount of noncontrolling interest in net assets to be presented by

Entity A in its December 31, 2020 Consolidated Statement of Financial Position?
a. 121,250 c. 123,650
b. 113,650 d. 125,450

414. What is the amount of consolidated retained earnings to be presented by Entity
A in its December 31, 2020 Consolidated Statement of Financial Position?
a. 5,792,600 c. 5,884,600
b. 5,888,600 d. 5,872,600
On January 1, 2020, Entity A, a public entity, acquired 60% of outstanding ordinary

shares of Entity B resulting to a gain or bargain purchase of P100,000. On January 1,
2021, Entity B acquired 80% of outstanding ordinary shares of Entity C resulting to a gain
on bargain purchase of P200,000. The following intercompany transactions occurred
during 2020 at 2021:
 On July 1, 2020, Entity A granted a two year loan to Entity B in the amount of
P1,000,000 with interest rate of 8%.
 On October 1, 2020, Entity B sold inventory to Entity A at a selling price of
P120,000 with mark up on cost of 20%. Entity A was able to sell 70% of the said
inventory to third person during 2020 while the remainder was eventually sold
to third person during 2021.
 On May 1, 2021, Entity B sold an equipment to Entity C with book value of
P100,000 at a selling price of P136,000. The equipment has remaining life of 4
years on the date of sale.
 On November 1, 2021, Entity C rendered cleaning services to Entity B at a fee of
P10,000.
Entity A and Entity B accounted their investment in subsidiary using cost method in their
separate financial statements. The three entities reported positive balance in their
retained earnings at the end of December 31, 2021.
For the year ended December 31, 2021, the three entities reported the following data in
their separate financial statements:
Entity A Entity B Entity C

Net Income (Net loss) P1,000,000 P500,000 (P100,000)
Dividend Distribution 200,000 150,000 50,000

415. What is the consolidated net income attributable to parent’s shareholders to be
presented by Entity A in its Consolidated Statement of Comprehensive Income for the
year ended December 31,2021?
a. 1,212,800 c. 1,142,300
b. 1,385,200 d.1,184,200
416. What is the non controlling interest in net income to be presented by Entity A in
its Consolidated Statement of Comprehensive Income for the year ended December 31,
2021?
a. 264,800 c. 218,400
b. 255,200 d. 235,600
On January 1, 2020, Entity A, a public entity, acquired 90% of outstanding ordinary

shares of Entity B. All the assets and liabilities of Entity B are properly valued except for
its only building with cost of P1,000,000 and accumulated depreciation of P100,000
without any residual value. On January 1, 2020, the building is already two years of age.
The fair value of the building on January 1, 2020 is P720,000. On July 1, 2020, Entitiy B,
sold the said building to Entity A at a loss of P90,000.
417. On December 31, 2020, what is the consolidated book value of the said building
to be presented in the Consolidated Statement of Financial Position of Entity A?
a. 680,000 c. 595,000
b. 850,000 d. 700,000
On January 1, 2020, Entity A acquired 90% of ordinary shares of Entity B at a price of

P900,000. On such date, the total assets of Entity B are reported at P1,500,000 while its
total liabilities are reported P200,000. All assets and liabilities of Entity B are properly
valued except for a building which is overvalued by P100,000 with remaining useful life
of 5 years from January 1, 2020.
On July 1, 2020, Entity B sold an equipment with book value of P60,000 to Entity A for a
selling price of P90,000. The equipment has a remaining life of three years from July 1,
2020. On December 31, 2020, Entity B sold inventory to Entity A at a selling price of
P100,000 with mark-up on cost of 25%. Entity A was able to resell 40% of those
inventories to third persons during 2020.
For the year ended December 31, 2020, Entity B reported net income of P200,000 in its
separate income statements and declared dividends amounting to P50,000. On
December 31, 2020, the Investment in Entity A has fair value of P1,500,000 and the
estimated cost to sell is 20% of the fair value.
It is the company policy of Entity account its Investment in Subsidiary using Equity
Method in its separate financial statements.
418. What is the book value of Investment in Entity B in the December 31, 2020
Separate Statement of Financial Position of Entity A?
a. 1,500,000 c. 900,000
b. 1,200,000 d. 1,199,700
419. Under IFRS 10, the following are the essential elements of control of an investor
(acquirer) over the investee (acquiree), except
a. The investor has power over the investee which means that the investor
has
existing right that give it the ability to direct the relevant activities of the investee.
b. The investor has exposure or rights to variable returns from its
involvement with the investee.
c. The investor has the ability to use its power over the investee to affect
the amount of the investor’s return.
d. The investor has ownership of more than 50% of the ordinary shares of
investee.
420. Under PFRS 3, which of the following statements concerning the accounting
treatment of the different types of costs incurred in relation to a business combination is
correct?
a. Direct costs of business combination shall form part of the consideration
given up for purposes of computation of goodwill or gain on bargain purchase.
b. Transaction costs incurred for the issuance of bonds payable classified as
financial liability at fair value though profit or loss that forms part of consideration given
up shall be amortized over the term of the bonds using effective interest method.

c. Costs incurred for the issuance of stocks issued as consideration given
up for business combination shall be initially charged to share premium arising from
issuance of the related shares.
d. Listing fees incurred for registering the stocks of a corporation to stock
exchange market shall be capitalized as goodwill arising from business combination.
421. Under PFRS 3, which of the following transactions is a measurement period

adjustment that must retroactively adjusted to goodwill or gain on bargain purchase
within the measurement period not exceeding one year from the acquisition date?
a. Change in the fair value of contingent consideration as a result of
meeting an earnings target that occurred after the acquisition date.
b. Change in the fair value of contingent liability as a result of additional
information that the acquirer obtained after the acquisition date about facts and
circumstances that existed at the acquisition date.
c. Change in the fair value of contingent liability as a result of reaching a
specified share price that occurred after the acquisition date.
d. Change in the fair value of contingent consideration as a result of
reaching a milestone on research and development project that occurred after the
acquisition date.
422. Parent Corporation has different investment in stocks consisting of investment in

subsidiary, investment in associate, investment in joint venture and investment in fair
value. Under PFRS 3, and PFRS 10, which of the following dividends from investee will be
presented in the consolidated Statement of Comprehensive Income of the Parent
Corporation if the latter account for all its investment in subsidiary using cost method in
its separate financial statements.
a. Dividend from subsidiary

b. Dividend from associate
c. Dividend from joint venture
d. Dividend from fair value investment
423. Under PAS 27, if the parent corporation elected to account its investment in
subsidiary using fair value model through other comprehensive income in its separate
financial statements, which is correct in the parent’s separate income statement?
a. Gain on bargain purchase will be recognized in profit or loss if the fair
value of the net assets acquired is higher than the fair value of consideration given up by
the parent corporation
b. Impairment loss on investment is subsidiary will be recognized in profit
or loss if the book value of the investment in subsidiary is lower than its recoverable
amount which is the higher between value in use or fair less cost to sell.
c. Dividend income from subsidiary will be recognized in profit or loss
when its right to receive dividends is established.
d. Share in adjusted net income (net loss) of the subsidiary will be
recognized in
profit or loss from the date the parent obtains control of the subsidiary.
424. Under PAS, which of the following statements concerning unrealized holding
gain or loss on changes in value of derivatives is correct?
a. Unrealized holding gain or loss on change in value of derivatives
designated as fair value hedge due to its effective portion shall be presented in other
comprehensive income with reclassification adjustment to profit or loss.
b. Unrealized holding gain or loss on changes in value of derivatives
designated as hedge of net investment in foreign operation due to its effective portion
shall be presented in profit or loss.
c. Unrealized holding gain or loss on changes in value of derivatives
classified as undesignated hedge due to its effective portion shall be presented in profit
or loss.
d. Unrealized holding gain or loss on changes in value of derivatives
designated
as cash flow hedge due to its effective portion shall be presented in other
comprehensive income without reclassification adjustment to profit or loss.
425. On December 1, 2018, JK Corporation, a firm engaged in international trade

located in the Philippines, sold goods on account to a company in California, USA at a
price of $5,000 collectible on March 2, 2019. In order to hedge this foreign currency
asset exposure, JK Corporation entered into a forward contract with a bank for the sale
of $5,000 to be delivered on March 2, 2019. The following direct exchange rates are
provided by the bank:

12/1/2018 12/31/2018 3/2/2019
Bid spot rate P55 P47 P44

Offer spot rate P51 P53 P55
Buying forward-30 days P48 P42 P45
Selling forward-30 days P44 P41 P46
What is the foreign currency gain or (loss) of the derivative instrument to be recognized
by JK Corporation in the December 31, 2018 financial statements?
a. 30,000 gain c. 30,000 loss
b. 25,000 gain d. 35,000 gain
426. What is the remeasured amount of the monetary asset of JK Corporation as of

December 31, 2018?
a. 256,000 c. 235,000
b. 255,000 d.225,000
427. What is the foreign currency gain or (loss) on the hedging instrument to be
recognized by JK Corporation on the settlement date?
a. 20,000 gain c. 20,000 gain
b. 5,000 gain d. 5,000 gain
Entity A, the parent corporation of Entity B, is operating in the Philippines and its
presentation currency in its consolidated financial statements in Philippine Peso, Entity
A’s subsidiary is Entity B which i9s operating in USA where the functional currency is
USA Dollar. On January 1, 2020, Entity B acquired an investment property in at a cost of
1,000 yen with useful life of 5 years. On December 31, 2020, the fair value of investment
property is 1,200 yen. It is the company policy of Entity A and Entity to account all their
investment property using fair value model. The following direct exchanges rates are
given:

January 1, 2020 1Y=3$ 1$=P45

December 31, 2020 1Y=4$ 1$=P40
428. What is the book value of such Investment Property to be presented in the
Consolidated Statement of Financial Position of Entity A on December 31, 2020?
a. 192,000 c. 96,000
b. 144,000 d. 216,000
On November 1, 2018, Entity D from Manila entered into a firm commitment with a
Company located in Alabama for the expert of furnitures with a contract price of
$9,000. The goods will be delivered by Entity D on January 30,2019. On the same day, in
order to protect itself from the risk of changes in fair value of the firm commitment due
to changes in underlying foreign currency, Entity D entered into a forward contract with
a bank for the sale of $9,000 at the forward rate on the inception date. Entity D elected
to account for the hedge of the firm commitment using fair value hedge. The following
direct exchange rates are provided:
November 1, 2018 December 31, 2018 January 30, 2019

Bid spot rate P50 P53 P52
Offer spot rate P53 P55 P56
Forward buying 90-days P51 P54 P55
Forward selling 90-days P53 P56 P57
429. What is the book value of the firm commitment (asset liability) on December 31,
2018?
a. 18,000 asset c. 18,000 liability

b. 36,000 asset d. 36,000 liability
HIJ Company purchased inventory on November 2, 2018 for $7,000 payable March 1,
2019. On December 1, 2018, the entity entered into a forward contract to purchase
$7,000 in 90 days to hedge the purchase of inventory on November 2, 2018. The
relevant exchange rates are:
Spot rate Forward rate

November 2, 2018 P45 P47
December 1, 2018 46 48
December 31, 2018 50 51
430. What is the foreign currency gain or (loss) of the forward contract recognized in
the 2018 financial statements?
a. 21,000 gain c. 28,000 gain
b. 21,000 loss d. 0
431. What is the foreign currency transaction loss on the hedged item for the year
ended 2018?
a. 28,000 c.21,000
b. 35,000 d. 0
Entity A operates in Japan where the functional currency is Yen. However, the
presentation currency of Entity A is Philippine Peso. The following data are provided
concerning Entity A’s Statement of Financial Position in Japanese Yen as of December 31,
2020:
Cash and Cash Equivalent Y100,000 Accounts Payable Y300,000

Receivables 200,000 Notes Payable 100,000
Investment 300,000 Common Stock 300,000
Property, Plant and Equipment 400,000 Preferred Stock 100,000
Total Assets Y1,000,000 Retained Earnings 200,000
Total SHE and Liability Y1,000,000
The following additional data are provided:

 Entity reported net income for year 2020 in the amount of Y50,000 and declared
cash dividends in the amount of Y30,000 when the exchange rate was P4.
 The Common Stock was issued last year when the exchange rate was P4.8 while
preferred stock was issued last year when the exchange rate was P3.
 The December 31, 2019 Retained Earnings at translated amount is P510,000.
 The following direct exchange rates are also given.
432. What is the translation gain/(loss) to be presented Other Comprehensive Income

of Statement of Comprehensive Income for the year ended December 31, 2020?
a. 335,000 gain c. 705,000 gain
b. 350,000 gain d. 710,000 gain
433. What is the cumulative translation credit/(debit) to be presented in Statement
of Financial Position as of December 31,2020?
a. 335,000 credit c. 705,000 credit
b. 370,000 credit d. 710,000 credit
434. Under PAS21, what is the accounting treatment of foreign exchange differences
arising from translating foreign currency denominated elements of financial statement
to the entity’s functional currency?
a. It shall be presented and recognized in other comprehensive income
with reclassification adjustment to profit or loss.
b. It shall be presented and recognized in other comprehensive income
without reclassification adjustment to profit or loss.
c. It shall be presented and recognized in profit or loss.
d. It shall be presented and recognized as change in accounting policy in
statement of changes in equity.
balance.
a. Deficit c. Surplus
b. Deficiency d. Insufficiency
436. Under PAS21, when translating an entity’s functional currency to entity’s
presentation currency, which is correct?

a. Monetary assets/liabilities shall be translated using closing rate while
nonmonetary assets/liabilities shall be translated using transaction rate.
b. Retained earnings shall be translated using average rate during the
period.
c. Income and expense accounts shall be translated using closing rate.
d. Contributed capital accounts shall be translated transaction rate.
437. In which type of hedging transaction or relationships will there be no gain or

loss on hedged item?
a. Fair value hedge of firm commitment importation using forward
contract receivable.
b. Cash flow hedge of forecasted exportation using put option.
c. Undesignated hedge of foreign currency denominated accounts
receivable using forward contract payable.
d. Hedge of net investment in foreign operation using foreign currency
denominated note payable.
438. On January 1, 2020, Entity A and Entity B established a new corporation named
Entity C. The common stocks of this corporation will be owned equally by Entity A and
Entity B. This corporation will manufacture car components that can be sold to be sold
to the incorporators and third persons. The contractual arrangement between Entity A
and Entity B provides that the relevant activities of Entity C will require unanimous vote
of the said parties. Entity C is normally required to operate at breakeven. The assets and
liabilities of Entity C will be directly in the name of Entity A and Entity B. During 2020,
Entity C reported total sales amounting to P5,000,000 inclusive of sales to Entity A and
Entity B in the amount of P1,000,000 and P2,000,000, respectively. During 2020, Entity A
was able to resell 80% of said inventory from Entity C to third persons while Entity B was
able to resell 70% of inventory from Entity C to third persons.
What is the amount sales revenue to be reported by Entity B Inc. in relation to his
interest to arrangement for the year ended December 31, 2020?
a. 2,100,000 c. 1,500,000
b. 2,000,000 d. 1,800,000

recover their claims from a liquidating corporation? a. Unsecured creditors with
priority
b. Unsecured creditors without priority
c. Partially secured creditors
d. Fully secured creditors
On January 1, 2018, Entity A, a public entity and Entity B, a public entity, incorporated
Entity C which has its fiscal and operational autonomy. 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 will have rights to
the net assets of Entity C. Entity A and Entity B invested P2,000,000 and P3,000,000,
respectively, equivalent to 40:60 capital interest in the ordinary shares of Entity C.
On July 1,2019, Entity C issued (10%) cumulative preference shares with par value of
P1,000,000 to other investors after Entity A and Entity B waived their preemptive rights.
The financial statement of entity C provided the following data for its two-year
operation:
Net Income (Net Loss) Dividends Declared to Ordinary Shares

2018 P1,500,000 P300,000
2019 (400,000) None
440. What is the book value of Investment in Entity C to be reported by Entity A in its
Statement of Financial Position on December 31, 2019?
a. 2,280,000 c. 2,240,000
b. 2,320,000 d. 2,440,000
441. A business combination whereby the company taking over the properties of
other companies retains its identity and continues operations as a longer unit and the
other companies are dissolved is known as a
a. Consolidation c. Stock Acquisition
b. Merger d. Quasi-reorganization

On January 1, 2018, Entity A, a public entity, invested P1,000,000 in a joint venture for
50% capital interest. The following transactions occurred:
 On July 1, 2018, the joint venture sold an equipment to Entity A at a gain of

P60,000. The equipment has remaining useful life of 5 years at the time of sale.
\
 On December 1, 2018, the joint venture sold inventory to Entity A at a gross
profit of P100,000. Entity A was able to sell 60% of the said inventory to the
third person during 2018. Afterwards, Entity A was able to sell 30% of the said
inventory to third person during 2019 and the remainder during 2020.
 On October 1,2019, the joint venture sold a land to Entity A at a loss of P50,000.
On April 1,2020, Entity A was able to sell the land to third person.
The financial statements of Entity C provided the following data for its three-year
operation:
Net Income (Net Loss) Dividends Declared to Ordinary Shares

2018 P500,000 P100,000
2019 (2,500,000) -
2020 P3,000,000 P200,000
442. What is the investment income to be reported by Entity A relation to its Investment
in Joint Venture in its Statement of Comprehensive Income for the year ended
December 31,2020?
a. 1,536,000 c.1,486,000
b. 1,435,000 d.1,492,000
443.Two parties enter into a joint arrangement which is structured through an
incorporated entity in which each party has a 50% ownership interest. The purpose of
the arrangement is to manufacture materials required by the parties operate the facility
that produces the materials to their quantity and quality specification.
The contractual arrangement between the parties specifies the following aspects of the
arrangement:
 Under the terms of the arrangement, the parties have agreed to purchase all the
output produces by the entity in a ratio of 50:50.
 The entity is not permitted to sell any of the output to third parties, unless this is
approved by the two parties to the arrangement. Because the purpose of the
arrangement is to provide the parties with output they require, such sales to
third parties are the expected to be uncommon and insignificant in volume and
value.
 The price of the output sold to the parties is set by both parties at a level that is
designed to cover the costs of production and administrative expenses incurred
by the entity. On the basis of this operating model, the arrangement is intended
to operate at a break-even level.
Under PFRS 11, what is the proper accounting classification of this joint arrangement?
a. Joint Operation c. Jointly Controlled Asset
b. Joint Venture d. Jointly Controlled Entity
444. Under PFRS 11, which is incorrect about the accounting treatment by non-SME
Venturer of its Investment in Joint Venture?
a. The venturer shall recognize impairment loss on Investment in Joint Venture
if the book value of the investment is lower that its recoverable amount
which is the higher between value in use or fair value less cost to sell.
b. The venturer shall recognize cash or property dividend from joint venture as
dividend income when its right to receive dividend is established.
c. The venturer shall recognize its share in the income of the joint venture as a
investment incomne with corresponding increase to investment in joint
venture.
d. The venturer shall recognize its share in the loss of the joint venture as a
investment loss with corresponding decrease to investment in joint venture.
445. Agency A received an unconditional donation of a piece of land with a fair value
of P2,000,000. What is the journal entry to recognize the receipt of donated land?
a. Debit Land P2,000,000 and Credit Contribution Revenue P2,000,000.
b.Debit Land P2,000,000 and Credit Income from Grants and Donation Kind
P2,000,000
c. Debit Investment Property, Land P2,000,000 and Credit Income from Grants
and Donation in Kind P2,000,000.
d. Debit PPE P2,000,000 and Credit Contribution Revenue P2,000,000.
446. The Department of Foreign Affairs remitted P300,000 cash to the Bureau of
Treasury from its various collections. What is the journal entry of The Department of
Foreign Affairs to record the remittance of collections.
a. Debit Cash in Bank, Local Currency-BSP and Credit Cash –Treasury/ Agency
Deposit, Regular
b. Debit Cash –Treasury/ Agency Deposit, Regular and Credit Cash in Bank, Local
Currency-BSP
c. Debit Cash –Treasury/ Agency Deposit, Regular and Credit Cash-Collecting
Officer
d. Debit Cash in Bank, Local Currency-BSP and Credit Cash-Collecting Officer
447. Under Government Accounting Manual, it refers to an authorization issued by

the DBM to NGAs to incur obligations for specified amounts contained in a Legislative
appropriation in the form of budget release documents.
a. Appropriation c. Obligation
b. Allotment D.Disbursement
Lover BOY, a not for profit organization, managed by CHRISTIAN, received the following:
Restricted for capital additions 1,050,000

Unrestricted pledges 1,400,000
448. All pledges are legally enforceable; however, the organization experience
indicates that 10% of all pledges prove to be uncollectible.
What amount should the organization report as pledges receivable, net of any required
allowance amount?
a. 2,450,000 c. 1,260,000
b. 945,000 d. 2,205,000
449. What is the proper classification in the statement of financial position of a

nonprofit organization of a current fund designated by the Board of Trustees for the
construction of building to be used for charitable purposes when construction will start
after a period of three years?
a. Permanently restricted net assets c. Unrestricted net assets
b. Temporarily restricted net assets d. Board of Trustees’ net assets
450. Under IFRIC 12: Service Concession Arrangements, what is the proper
classification of the infrastructure asset on the part of the operator if the latter receives
a right of license to charge users of the public service and such right to charge users of
the public service not an unconditional right to receive cash because the amounts are
contingent on the extent that the public uses the service?
a. Intangible Asset in accordance with PAS 38
b. Property, Plant and Equipment in accordance with PAS 16
c. Investment Property in accordance with PAS 40
d. Financial Asset under PFRS 9
The account balances shown below were taken from the trial balance submitted to
X’OTIC Corporation bi its Alabang branch:
12/31/x14 12/21/x15
Petty cash fund P1,500 1,500
Inventory - 37,170
Sales 173,180 195,120
Shipments from home (140% of cost) 107,450 136,080
Expenses 51,260 57,930
Accounts written off 1,220 1,920
All branch collections are remitted to the home office. All branch expenses are paid out
of the petty cash fund. When the petty cash fund is replenished, the branch debits
appropriate expense accounts and credits Home Office Current. Then petty cash is
counted every December 31, and its composition was a follows:
12/31/-14 12/31/-15
Currency and coin P 580 860
Expense voucher 920 640
451. The branch inventory on December 31, 19x15 was P41,370. The correct branch
net income for 19x5 was

a. P3,390 b. P41,070 c. P3,670 d. P41,350
KAYUMANGGI Marketing operates a branch in Makati, Metro Manila. On
October 31, 19x5, the branch Current account had a balance of P300,000. In
the process of reconciling current accounts, the items that follow were
noted:
(a) The home office had billed the branch P75,000 for merchandise shipment still in transit
as of October 31,
(b) A home office customer’s account for P21,000 collected by the branch on October 26
has not been reported to the home office.
(c) The branch has failed to recognize its 5,000 share of advertising expense paid for the
home office.
(d) The branch reported a net income of P43,500 during the fiscal period then ended; this
was erroneously taken up as P45,500 by the home office.
452. Assuming that all other transactions related to the home office and its branch are
currently recorded, the adjusted balance of the reciprocal current accounts as of
October 31, 19x5 was.
a. P300,000 c. P319,000
b. P314,000 d. P323,000
EMERALD Co. bills its branch for merchandise shipments as 25% above cost. The branch,
in turn, sells these merchandise at 33-1/3% above the billing price. On May 31, 19x6, a
fire destroyed all of the merchandise stock of the branch. The branch records show the
following:
Jan. 1inventory, at billing price P 60,000
Shipments from home office to May 31 240,000
Sales 275,000
Sales returns 25,000
Sales allowance 5,000
453. The branch has a P100,000 fire insurance policy on its merchandise. The estimated
cost of the merchandise stock burned was
a. P75,000 c. P90,000
b. P78,000 d, P93,000
c.
454. GAMMA Corp. has a branch in Davao City established on May 31, 19x6. During
19x6, the home office shipped merchandise to the branch at billed value of
P125,000 which was 25% above cost. At the end of the year, the branch reported
sales of P200,000, operating expenses of P95,000, and a net income from its
operation of
P15,000. As far as the home office is concerned, the true net income of the branch was
a. P15,000 c. P25,000
b. P18,000 d. P33,000
FIESTA Trading operates a number of branches. On October 31, 19x6 its Sta.Cruz branch
shows a Home Office account balance of P27,350, and the home office shows a Sta,Cruz
Branch account balance of P25,550. An examination of the records discloses the
following information which may help in reconciling both accounts:
- A P12,000 shipment, charged by Home Office to Sta.Cruz Branch, was

actually send to, andretained by, San Miguel Branch.
- A P15,000 shipment intended for, and charged to Quiapo Branch, was send
instead to Sta.Cruz Branch and retained by the latter.
- A P2,000 emergency cash transfer from Binondo Branch to Tondo Branch
was not taken up in the home office books.
- Home Office collected a Sta.Cruz Branch receivable but failed to notify the
branch, P3,600.
- Home Office was charged P1,200 for merchandise returned by Sta.Cruz
Branch on October 31; these are in transit.
- Home Office erroneously recorded Sta.Cruz Branch’s net income as P16,275;
Sta.Cruz Branch reported P12,675.
455. The reconciled balance of the Home Office and Sta.Cruz Branch current reciprocal
account is
a. P20,150 c. P23,750
b. P21,750 d. P27,350
456. GOLDEN Corporation started operating a branch on May 1, 19x7 with a shipment of
merchandise billed at P250,000. Additional shipments during the month were billed
at P125,000. The branch returned damaged merchandise worth P10,000. Inter-
office shipments are billed uniformly at 125% of cost. On May 31, 19x7, the branch
reported a net income(loss) reflected in the combined income statement for May,
19x7?
a. P(9,500) c. P(52,500)
b. P43,000 d. P95,500
457. LIBERTAD, Inc., established its first branch on May 1, 19x7. During the first month of
operation, the home office shipped merchandise to the branch worth P138,000
which included a markup of 15% on cost. Sales for cash were P80,000 while sales
on account were P250,000. At month’s end the branch reported operating
expenses of P38,000 and a closing inventory of P23,000 at billed price. As far as the
home office is concerned, the true branch net income for May. 19x7 is
a. P82,000 c. P177,000
b. P147,000 d. P192,000
BUSINESS COMBINATION
458. Companies A and B decide to consolidate. Asset and estimated annual earnings
contributions are as follows:
A B Total
Net Asset Contribution P 300,000 400,000 P 700,000
Estimated annual 50,000 80,000 130,000
Stockholders of the two companies agree that a single class of stock be issued, that their
contribution be measured by net assets plus allowance for goodwill, and that 10% be
considered as a normal rate of return. Earnings in excess of the normal rate of return
shall be capitalized at 20% in calculating goodwill. It was also agreed that the authorized
capital stock of the new corporation shall be 20,000 shares with a par value of P100 a
shares.

1) The amount of goodwill credited to A, and
2) The total contribution of B (net assets plus goodwill):
a. (1) P100,000; (2) P400,000
b. (1) P150,000; (2) P500,000
c. (1) P100,000; (2) P600,000
d. (1) P200,000; (2) P600,000
PPH Corp, and PFJ Co. which are both engaged in the manufacture of industrial gases are
being consolidated to form Richo Gases Corp. The constituent companies agreed to the
issuance by Richo Gases Corporation of P100 par value stock for their contributions and
goodwill. The goodwill shall be equal to earnings in excess of 8% on asset contribution
capitalized at 20%. Their asset and earnings contributions are as follows:
Net Expected
Tangible Assets Annual Earnings
PPH Corp P 250,000 P 25,000
PFJ 150,000 14,000
459. What amount shall be recognized by Richo Gases Corporation as goodwill?
a. P32,000 c. P39,000
b. P35,000 d. P45,000
Philip Company will issue shares of its P10 par value stock for all of the outstanding stock
of the Siylay Company, Philip Company stock has a market value of P40 per share. Siylay
Company’s balance sheet appears below:
Current Assets 160,000 Current Liability P50,000
PPE 440,000 Long-term dept 150,000
Common stock P4 par 40,000
Paid-in capital excess
Of par 160,000
Retained Earnings
200,000
Total P600,000 P 600,000
Philip Company estimated that the current value of the current assets would be
P200,000 and the Property, Plant and Equipment, P800,000; the liabilities were correctly

stated. According, Philip Company issued sufficient shares of its stock so that the market
value of the stock issued equable the market value if Siylay Company’s net assets.
460. Compute the stock exchange ratio for Philip shares to Siylay shares:
a. 1:2 c. 3:1
b. 2:1 d. 1:3
To comply with certain requirements, companies X,Y and Z agree to consolidate. The new
corporation will be known as AAA Corporation, and the following pertinent information
were gathered:
Company X Company Y Company Z
Total Asset P 1,100,000 1,500,000 1,200,000
Total Liabilities 800,000 900,000 800,000
Annual net income 105,000 240,000 136,000
a) The total assets and the total liabilities are at audited values, and they have
been agreed upon as the basis the consolidation.
b) AAA Corporation will issue 10%, P100 par value, cumulative preferred shares for
the net assets contributed and P100 par value common stocks for earnings in
excess of a 15% normal rate of return capitalized at 20%.
c) Cash equivalent to 30% of the par values of the common stock to be issued will
be paid by the stockholders of the three companies and will be treated as
premium on common shares.
461. The total preferred shares to be issued and premium on common shares are:
a. 13,000 shares and P429,000
b. 12,900 shares and P377,500
c. 13,000 shares and P487,500
d. 13,700 shares and P539,000

The XYZ Corporation, on June 30, 2005 has assets with fair values as follows:
Current assets, P90,000; and, non-current assets, P110,000. It had liabilities with
fair value of P20,000, and it has no investments in marketable securities.
On July 1, 2005, GHI Corporation purchased the net assets of XYZ Corporation
for P160,000 cash.
462. How should the P20,000 different between the fair value of the net assets acquired
and the acquisition cost be accounted for by XYZ Corporation ?
a. Deducted from non-current assets
b. Credited to retained earnings
c. Ratably deducted from current and non-current assets
d. Negative goodwill
463. It is the bringing together of separate entities or business into one reporting entity.
a. Business combination
b. Merger
c. Consolidation
d. Intercorporate directorship
464. It is that portion of the profit or loss and net assets of a subsidiary attributable to
equity interests that are not owned directly by the parent.
a. Controlling interest
b. Minority interest
c. Subsidiary interest
d. Residual interest
465. Which statement is correct concerning business combinations?

I. All business combinations shall be accounted for by applying the purchase method.
II. The purchase method views a business combination from the perspective of the
combining entity that is identified as the acquirer.

a. I only
b. II only
c. Both I and II
d. Neither I nor II
466. Which statement is incorrect concerning acquirer?

a. An acquirer shall be identified for all business combinations
b. The acquirer purchases net assets and recognizes the assets acquired
and liabilities and contingent liabilities assumed, including those not
previously recognized by the acquiree.
c. Because the purchase method views a business combination from the
acquirer’s perspective, it is assumed that one of the parties to the
transaction can be identified as the acquiree.
d. The acquiree is the combining entity that obtains significant influence
over the other combining entities or business.
467. Which statement is incorrect concerning the preparation of consolidated financial

statements?
a. The financial statements of the parent and its subsidiaries shall be

consolidated on a line basis by adding together like items of assets,
liabilities, equity, income and expenses.
b. Intragroup balances, transactions, income and expenses shall be
eliminated in full
c. When the reporting dates of the parent and a subsidiary are different,
the difference shall be no more than six months.
d. Consolidated financial statements shall be prepared using uniform
accounting policies for like transactions and other events in similar
circumstances.
468. A subsidiary shall be excluded from consolidation when

I. Its business activities are dissimilar from those of the enterprise within the group. II.
Control is intended to be temporary because the subsidiary is acquired and held
exclusively with a view to its disposal within 12 months from acquisition.
III. It operates under sever long-term restrictions which significantly impair its ability to
transfer funds to the parent but the parent continues to control the subsidiary. a.
I only
b. I and II
c. II and III
d. I,II and III
469. Minority interest shall be presented in the consolidated balance sheet

a. Separately from liabilities and the parent stockholders’ equity
b. Within equity, separately from the parent shareholders’ equity
c. As noncurrent liability
d. As component of the parent stockholders’ equity
470. On October 1, X company acquired for cash all the outstanding common stock of Y
Company. Both companies have a December 31 year-end and have been in
business for many years. consolidated net income for the year ended December 31
should include net income of
a. X Company for 3 months and Y Company for 3 months
b. X Company for 12 months and Y Company for 3 months
c. X Company for 12 months and Y Company for 12 months
d. X Company for 12 months but no income from Y Company distributes a
dividend
471. BCD Corporation on acquired UVW Corporation through a business combination

accounted for as a purchase. The appraised or market value of the identifiable
assets acquired less liabilities assumed exceeds the acquisition price paid by BCD
for UVW. The excess appraisal or market value should be:
a. Reported as a gain or income acquisition
b. Allocated to reduce proportionately the values assigned to current
assets and deferred credit for any unallocated portion
c. Allocated to reduce proportionately the value assigned to noncurrent
assets (except long term investment in marketable equity securities) and
a deferred credit for any unallocated portion.
d. Allocated pro-rata to reduce proportionately the values assigned current
and non-current assets and a deferred credit for any unallocated
portion.
472. Which of the following is correct?

a. The non-controlling stockholders’ claim on the subsidiary’s net asset is
based on the book value of the subsidiary’s net assets
b. Only the parent’s portion of the differences between book value and fair
value of the subsidiary’s assets is assigned to those assets
c. Goodwill represents the difference between the book value of the
subsidiary’s net assets and the amount paid by the parent to buy
ownership
d. Total assets reported by the parent generally will be less than the total
assets reported on the consolidated balance sheet
473. During 2005, Subsidiary Corporation sells land to Parent Corporation and records a
gain of P15,000 on the sales. Subsidiary Corporation reports 2005 net income of
P55,000. Parent Corporation plans to build a new general headquarters on the land
in 2007. If there is no adjustment made for unrealized profits in preparing the
consolidated financial statements as of December 31, 2005:
a. Consolidated net income will be overstated by P15,000
b. Consolidated retained earnings will be overstated by P15,000
c. Income assigned to the noncontrolling interest in the consolidated
income statement will be overstated by P9,000
d. Consolidated net income will be overstated by P9,000
e. Both a and b are correct
474. Minor Company sold land to Major Company on November 15, 2004, an recorded a
gain of P30,000 on the sale. Major company owns 80 percent of the common
shares of Minor Company. Which of the following statements is correct?
a. A proportionate shares of the P30,000 must be treated as a reduction of
income assigned to the non-controlling interest in the consolidated
income statement unless the land is resold to a nonaffiliated in 2004.

b. The P30,000 will not be treated as an adjustment in computing income
assigned to the non-controlling in 2004 unless the land is resold to a
nonaffiliated in 2004.
c. In computing consolidated net income it does not matter whether the
land is or not resold to a nonaffiliated before end of the period; the
P30,000 will not affects the computation of consolidated net income in
2004 because the profits are on the subsidiary’s book
d. The trial balance of Minor Company as of December 31, 2004, should be
adjusted to remove the P30,000 gain since the gain is not yet realized.
475. In the preparation of a consolidated income statement:

a. Income assigned to noncontrolling shareholders always is computed as
a pro rata portion of the reported net income of the consolidated entity
b. Income assigned to noncontrolling shareholders always is computed as
pro rata portion of the reported net income of the subsidiary
c. Income assigned to noncontrolling shareholders in the current period is
likely to less than pro rata portion of the reported net income of the
subsidiary in the current period if the subsidiary had an unrealized gain
on an intercorporate sale of depreciable assets in the preceding period
d. Income assigned to noncontrolling shareholders in the current period is
likely to be more than a pro rata portion of the reported net income of
the subsidiary in the current period if the subsidiary had an unrealized
gain on an intercorporate sale of depreciable assets in the preceding
period
Manila Inc. Consolidated

Current assets P 106,000 146,00
Plant Assets (net) 270,000 370,000
Investment in A Co. (cost) 100,000 -
Goodwill - 8,100
Total P 476,000 524,100
Current Liabilities P 15,000 28,000 Minority Interest - 35,100

Capital Stock 350,000 350,000 Retained Earnings
111,000 111,000
Total P 476,000 524,100
Manila Inc. acquired 70% of the outstanding capital stock of A Co. the separate balance
sheet of Manila, Inc. immediately after business combination, and the consolidated
balance sheet, are shown above. P10,000 of the excess payment of the investment in A
Co. was ascribed to undervaluation of the plant assets, and the balance to goodwill. The
current assets of A Co. include P2,000 receivable from Manila inc which arose before the
business combination.
476. What is the total of current assets on A Co.’s separate balance sheet at the time
Manila Inc acquired its 70% interest?
a. P38,000 c. P42,000
b. P40,000 d. P104,000
477. Based on the same figures given above, the total stockholders’ equity of A Co.’s
separate balance sheet at the time Manila Inc acquired its 70% interest is
a. P64,000 c. P100,000
b. P70,000 d. P117,000
478. The portion of the consolidated earnings to be assigned to the minority interest in
consolidated financial statements is determined thus:
a. Net income of the parent company is subtracted from the subsidiary’s

net income to determine the minority interest.
b. Subsidiary’s net income is all allocated to the minority interest.
c. The amount of the subsidiary’s earnings recognized for consolidation
purposes is multiplied by the minority’s percentage ownership.
d. The amount of the consolidated earnings determined on the
consolidated financial statements’ working papers is multiplied by the
minority interest percentage at the balance sheet.
On October 1. 19x3, separate statements of Goldie Co. and Bata Co. appear below:
Goldie Bata
Cash P 59,700 7,500
Inventories 57,300 9,250
Plant and Equipment 286,300 13,600
Total 539,000 54,250
Liabilities P 123,800 11,900

Capital stock 100,000 10,000
Additional pain-in-capital 25,000 -
Retained Earnings 290,500 32,350
Total P 539,000 54,250
Goldie Co. acquired an 80% interest in Bata Co. on the acquisition date, October 1, 19x3,
the fair market values of Bata Co’s assets were properly reflected in its accounts.
P40,000 was paid for this acquisition.
479. In the preparation of a consolidated balance sheet, the elimination entry as to

goodwill in the consolidated working paper will be
a. A credit to the Investment account by P6,120.
b. A credit to the Investment account by P7,650.
c. A charge to the Investment account by P3,178.
d. A credit to the Plan & Equipment account by P6,120.
480. To complete the eliminating entries, the other account affected are the capital
stock and retained earnings of Bata Co. in these amounts:
a. b. c. d.
Capital Stock P8,265 P6,470 P6,470 P8,000 Retained earnings P28,558 P28,558
P25,880 P25,880
481. The minority interest in the consolidated balance sheet will be

a. P8,470 c. P6,470
b. P8,000 d. P8,265
482. If the maximum length of time allowed for amortization of goodwill is followed,
the annual amortization will be
a. P159 c. P153
b. P332 d. P191
483. MANILA Corp. owns 80% of Makati Co. During 19x5, MANILA sold goods at a 40%
gross profit to Makati. Makati sold all of the goods in 19x5. For the 19x5
consolidated financial statements, how should the summation of MANILA’s and
Makati’s income statement items be adjusted?
a. No adjustment is necessary.
b. Sales and cost of sales should be reduced by the intercompany sales.
c. Sales and cost of sales should be reduced by 80% of intercompany sales.
d. Net income should be reduced by 80% of the gross profit on
intercompany sales.
Onyx Co., a 100% owned subsidiary of OPAL Corp. began operation on January 1, 19x5.
The following is from their 19x5 income statements:

OPAL Onyx
Sales to Onyx P100,000 P0
Sales to others 400,000 300,000
Total sales P500,000 P300,000
Cost of goods sold:
Acquired from Opal P0 80,000
Acquired from others 350,000 190,000
Total cost of goods sold P350,000 P270,000
Gross profit P150,000 30,000
Depreciation 40,000 10,000
Other expenses 52,000 15,000
Operating income P58,000 P 5,000
Gain on sale of equipment 12,000 0
Income before tax P70,000 P 5,000
Intercompany sales carry the same markup as sales to others; equipment sold by OPAL
to Onyx in January1, 19x5 for P36,000, is being depreciated over our four years by
straight line method.
484. In OPAL’s December 31, 19x5 consolidating worksheet, what amount of

intercompany profit should be eliminated from Onyx’s inventory?
a. P6,000 c. P20,000
b. P10,000 d. P30,000
485. In OPAL’s December 31, 19x5 consolidated income statement, what amount
should be reported as depreciation expense?
a. P41,000 c. P47,000
b. P44,000 d. P50,000
HAZEL Co. acquired its 60% interest in Hyper Co. four years ago for P200,000, and has
accounted for its investment by the equity method. At the time of the acquisition, the
purchase premium has been identified as follows:
Inventory = P8,000 (sold in year following purchase)

Equipment = 30,000 (15-year life)
Goodwill = 12,000 (40-year benefit)
For the first three years after acquisition, Hyper Co. had reported total earnings of
P90,000 and paid total dividends of P50,000. In 19x6, the current year, the parent
company earned P60,000 and paid P40,000 for dividends, while the subsidiary earned
P30,000 and paid P20,000 for dividends.
486. The consolidated net income for 19x6 was

a. P67,700 c. P78,000
b. P75,700 d. P90,000
487. On Hazel Company’s books, the investment’s carrying value at the end of the
current year would be
a. P200,000 c. P222,000
b. P212,800 d. P230,000
488. GAMMA Corp. acquires 80% of the issued and outstanding common stock of
Gemini Co. for P140,000 cash. Condensed balance sheet, before acquisition, are as
follows:
GAMMA Gemini
Current assets P9,240,000 P4,480,000
Plant and equipment 4,480,000 2,520,000
Goodwill 560,000
-
Total assets P13,720,000 P7,560,000
Liabilities P5,040,000 P3,360,000

Common stock 5,600,000 2,800,000
Additional paid-in capital 1,680,000 840,000
Retained earnings 1,400,000 560,000
Liabilities & equity P13,720,000 P7,560,000
In the consolidation worksheet, the difference between the consideration paid and the
book value of the shares, acquired by GAMMA should be treated as increase
(decrease) in:
a. b. c. d.
Goodwill (P560,000) (P560,000) (P560,000) P0
P&E (P2,520,000) (P2,520,000) (P2,660,000) (P2,520,000)
Deferred
Credit P140,000 P980,000 P0 P700,000
489. On December 31, 19x5, SUN Corp. acquired for P2,000,000 from Shine Inc. a
patent with a carrying amount of P1,500,000 and a residual economic life of five
years. SUB Corp. is a subsidiary of Shine Inc. to the extent of 85%. SUN Corp.
credits amortization of patents directly to the Patents account. Ignoring tax
impact, as of December 31, 19x6, the working paper elimination entries for the
consolidated statements should include a credit to Patents – SUN Corp.
amounting to
a. P400,000 c. P1,200,000
b. P500,000 d. P1,500,000
490. TOWER, Inc., a partially owned subsidiary of TORRE Corp., acquired 1,000 shares
from minority shareholders and, thereupon, placed these in treasury. How should
these treasury shares of TOWER, Inc. be considered in the consolidated financial
statements?
a. Treasury stock – Tower.
b. Treasury stock – Torre.
c. Consolidated treasury stock.
d. Retired stocks of Tower.

following, except
a. The proportion that contract costs incurred for work performed to date
bear to the estimated total contract costs.
b. Survey of work performed.
c. Completion of a physical proportion of the contract work.
d. Progress payments and advances received from customers.
The condensed balance sheets of HOLLY Corp. and Ivy Co. at the 19x6 year-end show the
following:
Holly Corp. Ivy Co.

Assets P3,125,000 P875,000
Liabilities 1,625,000 250,000
Capital stock (par P100) 1,250,000 500,000
Retained earnings 250,000 125,000
492. At the beginning of 19x7, HOLLY Corp. purchased 4,500 shares of the outstanding
shares of Ivy Co. for P140 per share. In the consolidated balance sheet after the
acquisition, the combined assets shall be
a. P3,125,000 c. P4,000,000
b. P3,437,500 d. P4,067,500
493. The following working paper elimination entry appears in the consolidation
worksheet for TRIUMPH, Inc. and its subsidiary, UNITED Company, to eliminate
unrealized intercompany profit on machinery and related depreciation (ignoring
tax effect)
Retained earnings – units (450,000x0.9) 405,000

Minority interest in Net Assets of United
(450,000x0.1) 45,000
Accum. depreciation – Triumph 300,000
Machinery – Triumph 600,000
Depreciation – Triumph (St. Line: P600,000/4) 150,000
How many years have passed since TRIUMPH acquired the machinery from its
subsidiary, UNITED?
a. ½ year c. 2 years
b. 1 year d. 3 years
BUHAY Manufacturing Co. has the following data:

Inventories: June 1 June 30
Raw materials P123,000 P187,954
Work in process 324,020 576,691
Finished goods 598,321 793,639
Equipment parts and supplies 89,300 112,729
Other data for the month of June
Purchases P412,860
Direct labor 214,108
Direct labor man hours 16,470
Overhead rate per direct labor man hour P5.50
494. Raw materials used in production amounted to

a. P383,566 c. P347,906
b. P365,301 d. P382,697
495. Prime cost added to production is

a. P562,014 c. P594,836
b. P606,975 d. P582,939
496. Conversion cost added to production is

a. P345,693 c. P304,693
b. P368,693 d. P652,599
497. Total cost of goods placed in process is

a. P925,450 c. P908,256
b. P976,619 d. P844,678
498. Cost of goods manufactured is

a. P419,924 c. P371,933
b. P399,928 d. P345,898
499. Cost of goods sold is

a. P204,610 c. P176,967
b. P190,287 d. P164,579
The following information were taken from the accounting records of YANNI MUSIC Co.
19x4:
Increase in raw materials inventory P 45,000

Decrease in finished goods inventory 150,000
Raw materials purchases 1,290,000
Direct labor payroll 600,000
Factory overhead 900,000
Freight out 135,000
500. The cost of raw materials used during the period amounted to
a. P1,245,000 c. P1,335,000
b. P1,290,000 d. P1,380,000

The following data on materials purchases and issues were reported during the past
month, by GALAXY Co.:
May 1 Balance 400 units @ P6

5 Received 100 units @ P7
13 Issued 400 units
22 Issued 250 units
27 Returned from factory to storeroom 50 units
501. Assuming that the company uses a perpetual inventory system, the total quantity
and cost of materials purchased during the month was
a. 650 units @ P5,400 c. 750 units @ P6,200
b. 700 units @ P5,800 d. 800 units @ P6,400
QUALITY Processing Co. provides the following information for 19x7:

Opening raw materials inventory P 70,000
Closing raw materials inventory 60,000
Opening work in process inventory 150,000
Raw materials available 410,000
Factory overhead (including indirect materials of P10,000) 337,500
502. If the cost of goods manufactured was P975,000, the closing work in process
inventory was
a. P102,500 c. P212,500
b. P152,500 d. P302,500
RELIABLE Production Co.’s materials purchases for May, 19x7 totaled P110,000 and its
cost of goods sold during the month was P345,000. Factory overhead was applied at
50% of direct labor cost. Inventories were as follows:
Opening Closing
Finished goods P102,000 P105,000
Work in process 40,000 36,000

Materials 20,000 26,000
503. The prime cost charged to work in process during May, 19x7 was
a. P104,000 c. P264,000
b. P240,000 d. P344,000
The following information is taken from the records of PMC Manufacturing Company for
the first calendar quarter of 1991:
Jan. 1 Mar. 31
Inventory, Raw materials P32,300 P34,100
Inventory, Goods in Process 38,500 35,050
Inventory, Finished Goods 44,600 48,800
Factory overhead cost 236,900
Cost of goods sold 676,300
504. How much is the total “cost of goods manufactured” during the first quarter of
1991?
a. P676,100 c. P680,500
b. P243,000 d. P713,350
505. How much is the total “cost of goods placed in process” during the first quarter of
1991?
a. P680,500 c. P715,550
b. P677,050 d. P719,050
506. How much is the total “cost of raw materials used” during the first quarter of
1991?
a. P263,150 c. P224,650
b. P186,150 d. P286,150
507. On January 1, 2017, Fortune Company sold equipment to Hope Company for
P1,000,000. The book value of the equipment on that date was P1,200,000. The
loss of P20,000 is reflected in the income of Fortune Company indicated above.
The equipment is expected to have a useful life of five years from the date of the
sale. In the December 31, 2017 consolidated statement of financial position, the
NCI should be presented at:
a. P2,000,000 c. P2,070,000
b. P2,200,000 d. P2,130,000
For the month of May 19x4, the finishing department of APEX, Inc. has in opening work
in process 80% complete units and in ending work in process 50% complete units.
Related data for the month follow:
Units Conversion Cost
Work in process, May 1 50,000 P88,000
Units started, and costs incurred during May 270,000 Units 572,000
completed and transferred during May 200,000
508. If the company uses FIFO costing, the conversion cost of the work in process at the
end of May would be
a. P132,000 c. P176,000
b. P156,000 d. P254,000
509. Based on the information given, how much is the gross profit would Overhead
Construction report in its 2018 income statement?
Percentage of completion Zero Profit
a. (6,200,000) (1,200,000)
b. 5,000,000 (6,200,000)
c. (1,200,000) (6,200,000)
d. 1,300,000 (1,200,000)
SOUTH SUPERSTORE has several types of allocation bases for assigning overhead costs to
its various departments. The base options include the following: square meters of space
occupied, peso sales volume, and number of employees. For the month just ended, the
overhead costs incurred amounted to 1.2 million and the allocation criteria were as
follows:
Space (Sq.M.) Total Sales Number of Employees
Garments 1,000 P1,000,000 15
Hardware 400 700,000 8
Sporting goods 600 300,000 7
510. The Garments Department would prefer the assignment criteria resulting in the
least amount of overhead costs allocated to it, which is
a. Space, at P480,000 c. Number of employees
b. Peso sales, at P560,000 d. Indifferent
Department #1 of ALPHA CORPORATION summarized the following production

information:
Opening with process 240,000 units P 120,000

Started in production 780,000 units 5,256,000
Completed and transferred 744,000 units
Closing with process, 40% done 60,000 units
511. The unit cost of production for the period is

a. P6.50 c. P7.00
b. P6.89 d. P20.22
Department Z of the CAPRICORN Mfg. Corporation had the following data for the month
of October, 19x4:
Beginning work in progress, 70% complete 40,000 units
Started in process during the month 300,000 units
Ending month in process, 80% complete 60,000 units
512. The cost of the beginning work in process was P140,000 and the production costs
for the month amounted to P1,172,000. How many equivalent production units
were completed in October, 19x4?
a. 280,000 c. 320,000
b. 300,000 d. 340,000
The plant manager of NACRE Products Co. gathered production statistics for October,
19x5 as follows:

Work in process, opening: 8,000 units (all materials but only ½ converted); material
cost, P7,968; labor and overhead cost, P8,592)
Placed in process, October: 40,000 units (materials cost, P48,000; labor and overhead
cost, P79,872)
Completed and transferred to stock during October: 42,000 units
Work in process, closing: 6,000 units (all materials but only 3/5 converter)
513. Using first-in, first-out costing method, the cost of the completed units would be
a. P130,320 c. P131,000
b. P130,660 d. P131,040
514. Using average costing method, the cost o the completed units would be
a. P130,000 c. P131,000
b. P130,452 d. P131,668
ZEBRA Mfg. Co. makes a single product in two departments. The production dept. for
Dept. 2 for May, 19x6 follows:
Quantities:
In process, May 1 (40% done) 4,000 units
Received from dept. 1 30,000 units
Completed and transferred 25,000 units
In process, May 31, (60% done) 6,000 units
Production Costs May 1 May 31

Transferred in P16,300 P89,100
Materials 3,800 67,500
Conversion cost 1,940 81,000
early stage of the operation.
515. The cost of the ending work in process inventory, using average costing is

a. P44,640 c. P46,800
b. P45,600 d. P51,680
516. The cost of goods manufactured, assuming first-in, first-out costing is

a. P187,250 c. P195,250
b. P193,040 d. P214,040
517. Statement 1: In installment liquidation, cash priority program and schedule of safe
payment would result to different available cash to be distributed to partners.
Statement 2: The partner with the highest capital balance will always have the
highest share in the net profit/loss of the partnership.
a. True; False c. True; True
b. False; True d. False; False
IVORY Mfg. Co. manufactures compact disks. In October, 19x6, production for 2,000,000
units was started. At the end of the month, the following data was assembled:
Completed units 2,700,000

Defective units 400,000
In process, ½ completed 800,000
518. How many units were in process at the beginning of the month?
a. 1,500,000 c. 2,000,000
b. 1,900,000 d. 2,300,000
ULTRA, Inc. makes a product in two manufacturing processes, Cutting and Fitting. The
product is cut out from precious stones, and then fitted with additional materials. A
process cost system using average cost flow is used. Relevant data for the Cutting Dept.
for October follow:
Beginning Inventory Added This Period

Cost charged to department
Materials P4,120 P44,880
Direct labor 522 12,638 Factory overhead 961 18,779
519. During October 9, 200 units were transferred to Fitting Dept. The Cutting Dept.
had 1,000 units in process at the end of September and 800 units still in process at
the end of October. The opening inventory is complete as to materials but only
40% converted while the closing inventory had 75% materials and only 25%
converted. Per equivalent unit, the average cost in the Cutting Dept. for October is
a. P6.40 c. P8.50
b. P8.40 d. P9.50
A, B and C decided to form ABC Partnership. It was agreed that A will contribute and
equipment with assessed value of P200,000 with historical cost of P1,600,000 and
accumulatecd depreciation of P1,200,000. A day after the partnership formation,, the
equipment was sold for P600,000. B will contribute a land and building with carrying
amount of P2,400,000 and fair value of P3,000,000. The land and building are subject to
a mortage payable amount to P600,000 to be assumed by the partnership. The partners
agreed that B will have 60% capital interest in the partnership. The partners also agreed
that C will contribute sufficient cash to the partnership.
520. What is the total agreed capitalization of the ABC Partnership?

a. 3,000,000 c. 5,000,000
b. 4,000,000 d. 6,000,000
521. What is the cash to be contribute by C in the ABC Partneship?

a. 1,000,000 c. 1,400,000
b. 1,200,000 d. 1,600,000
On January 1, 2018, A, B and C formed ABC Partnership with original capital contribution
of P600,000, P1,000,000 and P400,000. A is appointed as managing partner.
During 2018, A, B and C made additional investments of P1,000,000, P400,0000 and
P600,000, respectively. At the end of 2018, A, B and C made drawings of P400,000,
P200,000 and P800,000, respectively. At the end of 2018, the bpartnership had a credit
balance in the income summary account of P2,100,000. The profit or loss agreement of
the partners is as follows;
• 10% interest on original capital contribution of the partners.

• Quarterly salary of P80,000 and P20,000 for A and B, respectively.
• Bonus to A equivalent to 20% if Net Income after interest and salary to all
partners.
• Remainder is to be distributed equally among the partners.
522. What is A’ s share in partnership profit for 2018?

a. 380,000 c. 1,080,000
b. 680,000 d. 400,000
On December 31,2018, the Statement of Financial Positiob of ABC Partnership provide

the following data with profit or loss ratio of 5:1:4:
Current Assets 3,000,000 Total Liabilities 1,000,000
Noncurrent Assets 4,000,000 A, Capital 2,200,000
B, Capital 2,400,000
C, Capital 1,400,000
On January 1, 2019, D is admitted to the partnership by investing P1,000,000 to the

partnership for 10% capital interest. The total agreed capitalization of the new
partnership is P6,000,000.
523. What is the capital balance of C after the admission of D to the partnership?
a. 1,160,000 c. 1,000,000
b. 1,640,000 d. 1,560,000
524. At the date of partnership formation of ABC partnership, the amount credited to
A’s capital is less than the fair market value of the property he contributed. Which
of the following is the most valid person?
a. The property contributed by A is impaired
b. The property contributed by A has been subjected to positive asset
revaluation.
c. Bonus has been given by partner A to the other partners.
d. Goodwill arising from partnership has been recognized.
AAA Company is bankrupt and has undergone corporate liquidation. Presented below is
its statement of financial position before the start 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 expense amounting P600,000 were paid.

• he loan payable is secured by the machinery with fair value of P300,000
• The mortgage payable is secured by the building (fair value equal its book value
• At the end of liquidation, the holder of loan payable received P340,000
525. What is the amount received by the holder of accounts payable at the end of
liquidation?
a. 85,000 c. 40,000
b. 15,000 d. 60,000
526. What is the amount of net free assets available at the end of liquidation?
a. 80,000 c. 120,000
b. 40,000 d. 200,000
recover their claims from a liquidating corporation?
a. Unsecured creditors with priority c. Partially secured creditors

b. Unsecured creditors without d. Fully secured creditors priority
balance.
a. Deficit c. Surplus
b. Deficiency d. Insufficiency
529. What is the ending inventory to be reported by the entity in its combined
statement of financial position?
a. 256,000 c. 260,000
b. 230,000 d. 245,000
530. What is the main reason for the difference between the branch’s net income
reported by the branch and the true branch’s net income computed by the home office?
a. Because of overstatement of branch’s cost of sales for goods coming from
outsiders
b. Because of overstatement of branch’s cost of sales for goods coming from
home office
c. Because of overstatement of total goods available for sale coming from the
office
d. Because of overstatement of branch’s ending inventory coming from home
office
531. Under IFRS 3, in a business combination achieved in stages, if the acquisition

date fair value of the net of the acquisition-date amounts of the identifiable assets
acquired and the liabilities of the acquiree is lower than the aggregate of (1) acquisition
date fair value of the consideration transferred by the acquirer; (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. Goodwiil classified as noncurrent asset not subject to amortization but
subject to annual impairment test
b. Gain or bargain purchase to be recognized as part of profit or loss
c. Expense as incurred
d. Deduction directly to retained earnings
Entity A acquired the net assets of Entity B by issuing P10,000 ordinary shares with par
value of P20 and bonds payable with face amount of P1,000,000. The bonds are
classified as financial liability at amortized cost.
At the time of acquisition, the ordinary shares are publicly quoted at P40 per share. On
the other hand, the bonds payable are trading 110.

Entity A paid P20,000 share issuance costs. Entity A also paid P80,000 acquisition related
costs and P60,000 indirect costs of business combination.
Before the date of acquisition, Entity A and Entity B reported the following data:
Entity A Entity B
Current Assets 2,000,000 1,000,000
Noncurrent assets 4,000,000 2,000,000
Current Liabilities 400,000 800,000
Noncurrent liabilities 600,000 1,000,000
Ordinary shares 1,000,000 400,000
Share premium 2,400,000 600,000
Retained earnings 1,600,000 200,000
At the time acquisition, the current assets of Entity A have fair value of P2,400,000 while
the noncurrent assets of Entity B have fair value of P2,600,000. On the same date, the
current liabilities of Entity B have fair value of P1,200,000 while the noncurrent liabilities
of Entity A have fair value of P1,000,000.
532. What is the goodwill or gain on bargain purchase arising from business
combination?
a.100,000 goodwill c.240,000 goodwill
b.300,000 gain on bargain purchase d.140,000 gain on bargain purchase
533. What is Entity A’s amount of total liabilities after the business combination?
a. 4,480,000 c. 4,640,000
b. 5,020,000 d. 4,260,000
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 P40,000.
On July 1, 2018, Entity A acquired additional 60,000 ordinary shares of Entity B or 60% or
interest at a price of P4 per share or total cost of P240,000, Entity A paid P20,000
acquisition related costs and P10,000 indirect costs of business combination.
The acquisition price per share of the additional shares clearly reflected the fair value of
existing interest of Entity A in Entity B. it is the policy of Entity A to initially measure the
noncontrolling interest in net assets of the acquiree at fair value. The fair value of the
noncontrolling interest in net assets of the acquiree is reliably measure at P50,000.
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
534. What is the gain on remeasurement of the existing Investment in Entity B as an
result of step acquisition?
a. 18,000 c. 24,000
b. 30,000 d. 12,000
535. What is the goodwill or gain in bargain purchase as a result of the business
combination?
a. 18,000 goodwill c.24,000 goodwill
b.20,000 gain on bargain purchase d.30,000 goodwill
On January 1, 2018, Entity A acquired 70% of outstanding ordinary shares of Entity B at a

price of P420,000. The result of the business combination on the date acquisition was
42,000 gain on bargain purchase. On January 1, 2018 Entity A reported retained earnings
of P4,000,000 while Entity B reported retained earnings of P400,000.
All the assets and liabilities of Entity B are fairly valued except machinery which is
undervalued by P160,000 and inventory which is overvalued by P20,000. 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 P2,000,000 and
declared dividends of P300,000 in the separate financial statements while Entity B
reported net income of P300,000 and declared dividends of P40,000 in the separate
financial statements.
Entity A accounted the investment in Entity B using cost method in the separate financial
statements.
536. What is the non-controlling interest net income on December 31, 2018?
a. 90,000 c. 69,600
b. 98,400 d. 81,600
537. What is the consolidated net income attribute ton parent shareholders for the year
ended December 31, 2018?
a. 2,204,400 c. 2,282,400
b. 2,324,400 d. 2,190,400

gain on bargain purchase of P80,000. For the year ended December 31,2020, Entity A
and Entity B reported sales revenue of P4,000,000 and P2,000,000 in their respective
separate income statements. at the same year, Entity A and Entity B reported cost of
goods sold of P2,400,000 and P1,400,000 in their respective separate income
statements.
During 2019, Entity A sold inventory to Entity B at a selling price P560,000 with gross
profit rate of 40% based on cost. On the other hand, Entity B sold inventory to Entity A at
a selling price of P800,000 with gross profit rate of 30% based on sales during 2020.
On December 31,2019, 25% of the goods coming from Entity A remained in the Entity
B’s inventory but all were eventually sold to third persons during 2020. As of December
31,2020, 40% of the goods coming from Entity B were eventually sold to the third
persons.
For the year ended December 31,2020, Entity A reported net income of P1,120,000
while Entity B reported net income of P400,000 and distributed dividends of P100,000.
Entity A accounted for its inventory in Entity B using cost method in its separate financial
statements.
538. What is consolidated sales revenue for the year ended December 31, 2020?
a. 5,200,000 c. 6,000,000
b. 4,640,000 d. 5,440,000
539. What is consolidated cost of goods sold for the year ended December 31, 2020?
a. 3,800,000 c. 2,896,000
b. 3,104,000 d. 3,904,000
On January 1, 2019, Entity a acquired 80% of outstanding ordinary shares of Entity B at a

gain on bargain purchase of P360,000. The following intercompany transactions for
between the two entities:
• On January 1, 2019, Entity B sold a land to Entity A with a cost of P2,000,000 at a
selling price of P2,200,000. 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

P400,000 and accumulated depreciation of P80,000 at a selling price of
P360,000. The remaining life of the machinery from the date of sale was 16. 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

P540,000 and accumulated depreciation of P360,000 at a selling price of
P120,000. The remaining life of the machinery from the date of sale was 3. The
residual value of black machinery is immaterial.
For the year ended December 31, 2020, Entity A reported net income of P1,600,000
while Entity B reported net income of P1,000,000 and distributed dividends of P300,000.
Entity A accounted for its inventory in Entity B using cost method in its separate financial
statements.
540. What is the non-controlling interest in net income for 2020?

a. 248,000 c. 250,000
b. 210,000 d. 208,000
541. What is the consolidated net income attributable to parent shareholders for 2020?
a. 2,412,500 c. 2,197,500
b. 2,650,500 d. 2,362,500

price of P1,000,000. Entity A incurred P200,000 cost related to acquisition. At acquisition
date, the book value of net assets if Entity B is P2,500,000 but building with useful life of
10 years is overstated by P500,000.
For the year ended December 31, 2020, Entity B reported net income of P350,000 and
declared dividend in the amount of P100,000. The fair value of the Investment in Entity
B is measures at P1,700,000 on December 31,2020.
542. In the separate financial statement of Entity A, the Investment in Entity A shall be
reported on December 31, 2020 at what amount under equity method?
a. 1,610,000 b. 1,410,000

c. 1,210,000 d. 1,200,000
543. In the separate financial statement of Entity A, what is its income in relation to
Investment in Entity B for the year ended December 31, 2020 under equipment
method?
a. 480,000 c. 100,000
b. 600,000 d. 210,000
544. Which of the following items will not affected the acquisition year’s consolidated
net income in a business combination?
a. Stock issuance cost
b. Direct cost of business combination
c. Gain on bargain purchase
d. Amortization of difference between fair value and book value of net assets of
acquire
Lastikman Company, a local company, bought raw materials as ingredients in its products
from Superman Corporation, a US Company, for 35,000 US Dollars in 2020. Pertinent
exchanges rates rates relating to this transaction are as follows:
Buying Rate Selling Rate
Receipt of order P47.10 P47.20
Date of shipment 47.25 47.45
Balance sheet date 49.50 49.60
Settlement date 49.45 49.50
545. What is the foreign exchange gain or loss of Lastikman Company for 2020?
a. 78,750 loss c. 78,750 gain
b. 75,250 loss d. 75,250 gain
546. What is the value of the inventory, assuming it’s not yet sold, as of settlement date?
a. 1,652,000 c. 1,732,500
b. 1,660,750 d. 1,653,750

The following information was taken from the books of MAYON COMPANY and its Naga
City branch on December 31, 2018, before adjusting entries were recorded.
Branch books:
Sales P300,000
Inventory, January 1 19,000
Purchases 20,000
Shipment from Home Office 180,000
Expenses 80,000
Home Office Books

Sales P400,000
Inventory, January 1 40,000
Purchases 210,000
Shipments to Branch 150,000
Expenses 210,000
Allowances for overvaluation of branch inventory, December 31
31,500
There are no other merchandise shipments in transit as at the yearend. The ending
inventories are:
Home Office (all from outside suppliers) P50,000
Branch Office (40% from outside suppliers
the rest from Home Office) 40,000
547. Calculate the 2018 net income reported by the branch.

a.P121,000 c.P68,500
b.P41,000 d.140,000
548. How much is the overstatement of the branch’s 2018 cost of sales per home office
cost?
a.P12,000 c.P27,000
b.13,500 d.P27,500

549. Calculate the company’s 2018 net income.
a.P40,000 b.(160,000)
c.P181,000 d.P208,500
550. The amount of branch 2018 net income closed by the home office t its Income
Summary account in its yearend closing entries is
a.P68,500 c.P140,000
b.P41,000 d.P208,500
Robert and Sean have formed a partnership that has the following contributed assets
that are fairly valued, except Robert’s inventory that has a fair value of P12,500.
Contributed by Partners
Robert Sean
Cash P20,000 P30,000
Inventory 18,000 15,000
Building – 600,000
Furnitures and Fixtures 250,000 -
The building is subject to a mortgage of P120,000 that will be assumed by the

partnership. The partners also agreed that profits and losses shall be divided on the 4:6
ratio to Robert and Sean, respectively.
551. What amount of capital should be recorded for Robert and Sean at the formation
of the Partnership?
a.P288,000 and P645,000
b.P282,500 and P645,000
c.P282,500 and P525,000
d.P288,000 and P525,000
552. When property other than cash is invested in the partnership, at what amount
should the non-cash property be credited to the contributing partner’s capital
account? a. Fairvalue at the date of the contribution
b. Assessed value for property tax purposes

c. Contributing partner’s tax basis
Davao Company’s branch in Tagum City began operations on January 1, 2018. During the
first year of operations, the home office shipped merchandise to the Tagum City branch
that cost P250,000 for P300,000. One-fourth of the merchandise remained unsold at the
end of 2018.
553. The home office should make:

a. A year end adjusting entry or entries to establish an unrealized profit
account of P75,000
b. A year end adjusting entry or entries to establish an unrealized profit
account of P37,500
c. A year end adjusting entry or entries to establish an unrealized profit
account of P12,500
d. A year end adjusting entry because the shipment to branch (home
office
books) a shipment from home office (branch books) are reciprocal.
454. The home office will credit the branch account when:
a. Shipments of merchandise are made to the branch
b. It takes up branch profits
c. It allocates expenses to the branch that were paid by the home office
d. It records the receipt to cash from the branch
Cebu Corporation’s home office and branch pre –closing trial balances on December 31,
2018 contained the following accounts and amounts among others:
Home Office Books Branc Books
Branch P95,000
Home Office P73,400
Shipments to branch 90,000
Shipments from Home Office 75,000
Additional Information
a. On December 31,2018, in late afternoon, the home office sent a P5,000 check to
its branch to replenish working capital.
b. The home office credits the shipments to branch at cost without a loading
factor.
c. The branch had transmitted P1,600 in cash to the home office which was not
received until January 2, 2019.
555. Compute the correct balance of the branch account in the books of the home
office , before closing entries are made.
a.P78,400 c.P68,400
b.P93,400 d.P96,600
556. The adjusting entry needed in the branch books as of December 31,2018 will not
include
a. A debit to cash for P5,000
b. A debit to shipment from HO of P15,000
c. A credit to Home Office for P20,000
d. A debit to Branch for P20,000
Toughtyme Enterprises is in bankruptcy and is being liquidated. The trustee has

converted all assets into P3,060,000 cash and has prepared the following list of
approved claims:
Accounts payable, unsecured P765,000
Trustee’s fees and other cost of liquidation 408,000
Mortgage payable, secured by property that realized P2,040,000 1,530,000
Note payable to bank, secured by all the accounts receivable,
Of which P765,000 were collected and P255,000 were
Written off as uncollectible 1,020,000
Prepaid revenue (P25,000 from each of 2 customers that
Ordered products that were never delivered) 51,000
Property taxes payable 102,000
Total P3,876,000
557. How much of the Accounts Payable and the Notes payable to bank (aggregated) will
not paid due to cash deficiency?
a. P969,000 c.P816,000
b. P777,138 d.P1,007,862

558. How much aggregated amount will the Accounts payable and Notes Payable to
bank be paid?
a. 969,000 c. P816,000
b. P777,138 d. P1,007,862
559. How much total amount will be paid to Trustee’s fees, Mortgage Payable, Prepaid
Revenues, and Property Taxes Payable?
a. P2,052,413 c. P2,091,000
b. P418,200 d. P2,050,200
The NG Partnership was formed on March 1, 2018. The partnership agreement of Norma
and Gerry provides that interest of 10% per annum is to be credited to each partner on
the basis of weighted-average-capital balances. A summary of Norma’s capital account
transactions for the year ended December 31,2018 is as follows:
Balance, March 31 P140,000
Additional investment, July 1 40,000
Capital withdrawal, August (15,00)
Balance, December 31 P165,000
560. What amount of interest should be credited to Norma’s capital account for 2018?
a. P10,868 c. P13,042
b. P15,650 d. P9,657
FINDIS Corporation incurred major losses in 2017 and entered into a voluntary
bankruptcy case in early 2018. By early July the non-cash assets have all been converted
into cash. All secured creditors have been paid and P3,774,000 cash remains to pay all
remaining claims. The remaining claims are as follows:
Accounts payable P1,122,000
Property taxes payable 382,500
Wages payable 1275,000
Unsecured Notes payable 1,581,000
Administrative expenses of trustees 765,000
Total P5,125,000
561. What is the estimated recovery rate for unsecured creditors without priority?
a. 74% c. 64%
b.50% d. 40%
562. How much total amount over all these liabilities will be written off?
a. P1,351,500 c. 2,422,500
b. 1,657,500 d. 3,544,500
563. How much total amount will be paid to unsecured creditors with priority?
a. P382,500 c. P2,422,500
b. P1,657,500 d. P3,544,500
564. How much total amount will be paid to unsecured creditors with out priority?
a. 561,000 c. P1,733,500
b. P1,351,500 d. P790,000
565. When a secured claim is not fully settled by the selling of the underlying collateral:
a. The unsettled portion of the claim cannot be collected by the creditors
b. The unsettled portion remains as secured claim
c. The unsettled portion remains as an unsecured priority claim.
d. The unsettled portion is classified as an unsecured claim without priority
566. The main difference between a voluntary and involuntary bankruptcy petition lies
in the fact that:
a. The creditor files a petition in the latter situation.
b. Trustees are not used in voluntary filings.
c. Voluntary petition are not subject to bankruptcy court.
d. The debtor corporation files the petition in an involuntary filing.
Kardo and Syano are partners with capital balances of P60,000 and p20,000,
respectively. Profits and losses are divided in the ratio of 60:40. Kardo and Syano
decided to form a new partnership with Lily, who invested P15,000 cash for a 20%capital
interest in the partnership. No revaluation of assets is to take place before Lily’s
admission.
567. Assuming lily will be admitted by purchasing 20% of current partners’ respective
capital, Lily’s capital account will be credited for
a. P12,000 c. P15,000
b. P19,000 d. P16,000
568. Kardo’s share from the P15,000 cash paid directly to the partners will be
a. P12,000 c. P11,600
b. P11,400 d. P15,000
569. Assuming Lily will be admitted bi investing the P15,000 cash in to the partnership,
her capital account should be credited for
a. P12,000 c. P15,000
b. P 19,000 d. P16,000
JULIO COMPANY and AUGUSTO COMPANY are participants in the joint agreement
sharing control and profits equally. The contributed P500,000 each. JULIO’s contribution
is cash. AUGUSTO contributed an equipment with a carrying value of P480,000. The
equipment has a ten year remaining life when contributed. They APRILMAY
CORPORATION on January 2,2018 to carry on the joint undertaking, thus JULIO and
AUGUSTO have equal rights over the net assets of the business.
The following information is relevant in answering various questions:
JULIO CO. CO. AUGUSTO CO. APRILMAY
Net income during the year P72,000 P80,000 P144,000

Cash dividend paid during the year 18,000 24,000 36,000
Retained Earnings, 1/1/18 P100,000 P70,000 P 0
570. How much total amount of asset(s) will AUGUSTO COMPANY recognize on January
2,2018 to record its investment?
a.P490,000 c. P 0
b. P500,000 d. P480,000
571. At what amount will be invested of AUGUSTO COMPANY be shown in its December
31, 2018 balance sheet?
a. P432,000 c. P608,000
b. P450,000 d. P554,000
572. At what amount will JULIO COMPANY report its retained earnings at December 31,
2018?
a. P100,000 c. P154,000
b. P226,000 d. P298,000
573. The journal entry AUGUSTO COMPANY will record its investment on January 2,
2018 will include
a. A debit to cash JO of P250,000
b. A debit to equipment in JO of P240,000
c. A credit to gain on sale of P20,000
d. A credit to gain on sale of P10,000
The following condensed balance sheet is presented at February 18, 2018 for the
partnership of Dana and Janis, who share profits and losses in the ratio of 60:40,
respectively.
Cash P150,000 Accounts payable P120,000
Non cash assets 300,000 Dana, capital 195,000 Dana, loan 20,000
Janis, capital 155,000
The non cash assets realized P250,000 in actual liquidation.
574. How much would Dana receive if cash is distributed to the partners just before
the start of actual liquidation?
a. P5,000 c. P30,000
b. P18,000 d. P 0
575. How much cash would Janis receive upon final liquidation, assuming no prior
cash distribution had been made to the partners.

a. P135,000 c. P100,000
b. P145,000 d. P 0
Maribel and Olga in joint venture, contributed proportionate cash for a total
contribution of P32,000. They are to share control of operations and profits on a 6:4
ratio to Maribel and Olga, respectively. Unanimous consent has been agreed between
the venturers over the joint venture’s relevant activities. All transactions have to be in
cash. The joint venture will not have its own books but will record all its transactions in
the separate books of the venturers that they each maintain for some other business
activities. To identify the joint venture transactions in their respective records, they will
each use a Joint Venture Cash Account and a Joint Venture Account. The following are
other venture transactions:
Maribel Olga
Purchase of merchandise P19,200 P12,800
Expenses paid 3,120 2,400
JV account credit balance before
Adjustment for profits 20,000 18,000
Cost of unsold merchandise 800 450
After selling almost all the merchandise, they wind up their venture. The venturer
agreed to assume to cost of their unsold merchandise and divided the balance of the
joint venture cash between themselves.
576. Compute the total sales of the joint venture

a. P76,020 c. P75,520
b. P37,520 d. P74,270
577. Compute the amount due to (1) Maribel and (2) Olga upon final settlement
including their investment.
a. P38,025; P51,600 c. P42,250; P34,650
b. P41,950; P28,050 d. P38,825; P32,425
578. Compute the net cash settlement between Maribel and Olga.

a. P2,250
b. P1,500 d. P2,750
c. P1,750
579. the journal entry recorded by Olga in recognition of the joint venture profit it
realized from joint venture sales will include
a. A credit to inventory in JV of P19,625 c. A debit to cash of P28,050
b. A credit to P/L of P15,700 d. A credit to sales of P33,200
On January 1, 2018, TOM JONES COMPANY, an SME, acquired a 25% equity of

ENGELBERT CORPORATION for P92,800. TOM JONES will share in the joint control of the
relevant activities of ENGELBERT equally with three other venturers. Transaction costs of
3% of the purchase price of the shares were incurred by TOM JONES.
On December 24, 2018, ENGELBERT CORPORATION declared and paid dividends of
P24,000. ENGELBERT CORPORATION recognized a loss of P67,200 for the year ended
December 31, 2018. Published price quotations are not available for the shares of
ENGELBERT CORPORATION. Using appropriate valuation technique TOM JONES
COMPANY determined the fair value of its investment at December 31, 2018 as
P104,000. Cost to sell are estimated at 8%of the fair value of the investment.
580. The investment in the joint venture account TOM JONES will show in its 2018
balance sheet under the fair value will be
a. P95,680 c. P92,800
b. P104,000 d. P95,584
581. The profit /loss to be recognized by TOMJONES in its income statement for 2018
under the fair value model will be
a.P17,200 c. P14,416
b.P8,880 d. P6,096
On August 1, 2018, MERIAM ENTERPRISES sell a new car costing P810,000 for
P1134,000. A second hand car of the same make is accepted as a down payment. The
traded-in car can be resold for P243,000, after reconditioning cost of P32,400. The
company expects to make a 20% gross profit in the sale of used cars. During the period,
P135,000 is collected on the contract.

582. Assuming the trade-in car is allowed a value of P 216,000, how much is the
unrealized gross profit on the installment sale at December 31, 2018?
a. P249,750 c. P 195,750
b. P236,250 d. P209,250
583. Assuming the trade-in car is allowed a value of P145,800, how much is the gross
profit realized from this sales during 2018?
a. P87,853 c. P40,500
b. P74,250 d. P54,000
JRU TRADING sells locally manufactured jeepneys on the installment basis. Information
presented below relates to JRU’s operation for three calendar years.
2016 2017 2018
Cost of installment sales P3,960,000 P6,160,000
P7,012,500
Gross profit rate on sales 28% 30% 32%
IAR balances at the yearend
From 2016 sales P3,050,000 P1,210,000 P 0
From 2017 sales 6,710,000 2,420,000
From 2018 sales 7,782,500
584. How much total realized gross profit will be recognized in 2018?
a. P3,003,000 c. P2,345,000
b. P5,594,600 d. P2,435,400
585. How much total deferred gross profit will be recognized at December 31, 2018?
a. P4,020,500 c. P2,490,400
b. P3,300,000 d. P,216,400
UIC CORPORATION which began operation on January 1,2017 appropriately uses the
installment method of its sales to customers. The following information is available for
the year ended December 31
Of 2017 of 2018
Cost of installment sales P960,000 P1,920,000

Gross profit realized on sales made on
2017 144,000
86,400
2018 0 192,000
Gross profit rate (based on sales) 30% 40%
586. How much is the total balance of installment receivable on December 31,2018?
a. P2,265,600 c. P1,632,000
b. P3,323,429 d. P1,176,000
587. Under the installment sales method of accounting, realized gross profit is computed
at the end of the year by
a. Multiplying the total collected receivable by the gross profit rate based on
cost
b. Multiplying the total collected receivable by the gross profit rate based on
sales
c. Multiplying the selling price by the gross profit rate based on sales
d. multiplying the cost of installment sales by the gross profit rate based on
sales
588. Under the cost recovery method

a. The initial collection of the sales are treated as recovery of the inventory
sold. Thus, no gross profit or interest income is recognized until
total collection from the sale equals the cost of inventory sold.
b. The initial collection on the sales are treated as recovery of the inventory
sold.
Thus, no gross profit is recognized until total collection from the sales equals
the cost of inventory sold.
c. a or b
d. None of the above
589. In franchise agreement, there is substantial performance when:

I. The franchisor has no remaining obligation or intent to refund any cash
received or forgive unpaid notes or receivables
II. Initial services required by the franchise agreement are substantially
performed
III. No other material conditions or obligations exist
a. I, II and III
b. II and III only
c. I and II only
d. I and III only
590. The freight on shipment to branch paid by the home office is recorded by the home
office as
a. debit to freight in c. credit to investment in branch
b. credit to freight in d. credit to cash
591. DEF is the consignee for 1,000 units of product X for ABC Company. ABC should
recognize the revenue from these 1,000 units when
a. the agreement between DEF and ABC is signed
b. ABC ships the goods to DEF
c. DEF receives the goods from ABS
d. DEF sells the goods and informs ABC of the sales
PLMUN Company, a capital good manufacturing business that started on January 4, 2017
and operates on a calendar year basis uses the installment sales method of profit
recognition in accounting for all its sales. The following data were taken from the 2017
and 2018 records
2017 2018
Installment sales P480,000 P620,000
Gross profit rate, cost based 25% 28%
Cash collection on sale on 2017 130,000
240,000
Cash collections on sales on 2018 - 160,000
The amounts given for cash collections exclude amount collected for interest charges.

592. Compute the amount of realized gross profit to be recognized in 2018 under the
installment sales method
a.P35,000 c. P44,800
b.P104,800 d.P83,000

593. Compute the deferred gross profit (aggregated) to be reported in the 2018 balance
sheet.
a. P122,625 c. P156,300
b. P100,625 d. P128,200
On May 1, 2018, ADDU Enterprises consigned 80 freezers at the cost of P5,000 each to
HOLY CRISS COMPANY. The cost of shipping the freezers amounted to P8,400 and was
paid by ADDU Enterprises. On December 30, 2018, a report was received from the
consignee, indicating that 40 freezers had been sold for P7,500 each. Remittance was
made by the consignee for the amount due, after deducting a commission of 6%,
advertising of P2,000, and total installment cost of P3,200 on the freezers sold.
594. Compute the inventory value of the units unsold in the hands of the consignee.
a. P 0 c. P200,000
b. P204,200 d. P205,800
595. Compute the net profit of the consignor for the units sold
a. P72,600 c. P74,200
b. P689,400 d. P70,400
596. Compute the amount of cash that will be remitted by the consignee
a. P268,400 c. P276,800
b. P300,000 d. P294,800
597. Assuming the consignee remitted to the consignor only 90% of the total amount
due, the journal entry to be recorded by the consignor upon receipt of the account
sales will not include
a. a debit to cash of P249,120
b. a debit to expenses of P23,200
c. a debit to receivable from consignee of P27,680
d. a credit to consignment sales of P272,320
598. RMV Corporation, a consignee, paid the freight costs for goods shipped from
PRTC Inc., a consignor. These freight costs are to be deducted from RMV’s payment to
PRTC when the consigned goods are sold. Until RMV sells the goods, the freight costs
should be included in RMV’s
a. cost of goods sold c. selling expenses
b. freight in d. accounts receivable
599. In accounting for consignment sales: sales revenue and the related cost of goods
sold should be recognized by the
a. consignor, when goods are shipped to the consignee
b. consignee, when goods are shipped to third parties
c. consignor, when notification are received that the consignee has sold the
goods
d. consignee, when cash is received from the customer
The following balance sheet was prepared for Academe Company just before LCCM
Corporation acquired its entire net assets on January 1, 2018.
Particulars Book Value Fair Value
Cash P10,000 P10,000
Accounts Receivable 40,000 40,000
Inventory 100,000 145,000
Plant Assets 300,000 350,000
Goodwill 50,000 0
P500,000 P545,000
Accounts Payable P140,000 P140,000
Bonds Payable 60,000 65,000
Ordinary Shares 200,000
Share Premium 20,000
Retained Earnings 80,000 P500,000

LCCM issued 1,000 shares of stocks with a par value per share of P5 and a fair value of
P30. Additional cash payments made by LCCM in completing the acquisition were:
Broker fees paid to firm that located Academe Company P10,000
Cost to issue and register the shares 40,000
Professional fess paid to accountants 30,000
Professional fees paid to lawyers 25,000
Professional fees paid to valuers 15,000 Indirect
acquisition costs 15,000
600. Assuming that LCCM is a SME, calculate the goodwill/ (income from acquisition)
that will result from the combination
a. P20,000 c. P40,000
b.(P40,000) d. P95,000

ANSWER KEY
Practical Accounting 2
1 D 31 D 61 C 91 B 121 B 151 D
2 B 32 B 62 B 92 D 122 C 152 B
3 B 33 C 63 D 93 D 123 D 153 C
4 C 34 C 64 B 94 D 124 C 154 B
5 B 35 B 65 D 95 B 125 A 155 B
6 A 36 C 66 B 96 A 126 D 156 C
7 D 37 D 67 B 97 C 127 C 157 A
8 B 38 D 68 D 98 D 128 B 158 B
9 B 39 A 69 D 99 C 129 D 159 C
10 B 40 B 70 D 100 C 130 C 160 D
11 B 41 A 71 B 101 D 131 C 161 A
12 C 42 C 72 C 102 B 132 C 162 D
13 D 43 D 73 D 103 C 133 D 163 D
14 A 44 B 74 D 104 A 134 C 164 C
15 A 45 D 75 C 105 B 135 C 165 A
16 A 46 C 76 A 106 A 136 C 166 B
17 C 47 D 77 B 107 A 137 B 167 A
18 A 48 A 78 B 108 A 138 B 168 B
19 A 49 D 79 C 109 D 139 D 169 A
20 C 50 D 80 B 110 B 140 D 170 A
21 B 51 B 81 D 111 B 141 B 171 A
22 B 52 A 82 A 112 A 142 A 172 A
23 B 53 D 83 A 113 A 143 C 173 C
24 B 54 C 84 C 114 A 144 B 174 A
25 A 55 B 85 C 115 C 145 A 175 D
26 C 56 D 86 B 116 C 146 B 176 D
27 C 57 C 87 A 117 B 147 C 177 B

ANSWER KEY
28 B 58 A 88 B 118 D 148 C 178 A
29 A 59 D 89 A 119 C 149 C 179 D
30 B 60 D 90 B 120 C 150 A 180 D
181 A 211 B 241 D 271 D 301 A 331 A

182 D 212 D 242 C 272 C 302 D 332 D
183 D 213 B 243 D 273 B 303 D 333 D
184 A 214 B 244 B 274 A 304 B 334 A
185 D 215 A 245 C 275 D 305 D 335 D
186 D 216 D 246 B 276 D 306 C 336 D
187 A 217 A 247 B 277 D 307 D 337 A
188 B 218 A 248 A 278 C 308 C 338 B
189 A 219 D 249 D 279 C 309 D 339 D
190 D 220 D 250 B 280 B 310 B 340 A
191 B 221 B 251 C 281 D 311 D 341 B
192 A 222 D 252 B 282 D 312 A 342 A
193 C 223 C 253 A 283 A 313 B 343 D
194 B 224 D 254 D 284 B 314 D 344 B
195 D 225 C 255 D 285 B 315 D 345 A
196 B 226 D 256 A 286 D 316 A 346 C
197 A 227 B 257 A 287 B 317 A 347 B
198 C 228 D 258 B 288 C 318 A 348 D
199 A 229 A 259 A 289 D 319 B 349 B
200 D 230 B 260 A 290 B 320 B 350 A
201 D 231 D 261 C 291 D 321 C 351 C
202 B 232 D 262 A 292 D 322 B 352 A
203 D 233 A 263 B 293 D 323 A 353 D

ANSWER KEY
204 B 234 A 264 A 294 B 324 A 354 D
205 D 235 A 265 A 295 D 325 A 355 B
206 A 236 B 266 A 296 B 326 C 356 D
207 A 237 B 267 A 297 B 327 A 357 B
208 D 238 C 268 B 298 A 328 D 358 A
209 D 239 B 269 A 299 D 329 D 359 A
210 D 240 C 270 B 300 A 330 B 360 A
361 A 391 B 421 B 451 D 481 A 511 C

362 D 392 A 422 D 452 C 482 C 512 B
363 A 393 D 423 C 453 C 483 B 513 A
364 C 394 A 424 B 454 D 484 A 514 B
365 D 395 A 425 D 455 C 485 C 515 A
366 B 396 C 426 C 456 A 486 B 516 D
367 D 397 D 427 B 457 D 487 B 517 D
368 D 398 C 428 A 458 C 488 A 518 B
369 B 399 A 429 A 459 B 489 A 519 B
370 C 400 B 430 B 460 B 490 D 520 B
371 C 401 A 431 B 461 A 491 B 521 A
372 D 402 A 432 A 462 D 492 B 522 C
373 C 403 C 433 D 463 A 493 C 523 D
374 A 404 B 434 C 464 B 494 C 524 C
375 A 405 B 435 B 465 C 495 A 525 C
376 D 406 D 436 D 466 D 496 C 526 A
377 A 407 A 437 B 467 C 497 B 527 D
378 C 408 B 438 A 468 C 498 B 528 B
379 A 409 C 439 D 469 B 499 A 529 D

ANSWER KEY
380 D 410 C 440 A 470 B 500 A 530 B
381 C 411 A 441 B 471 A 501 B 531 A
382 B 412 B 442 B 472 D 502 B 532 A
383 C 413 C 443 A 473 D 503 C 533 D
384 C 414 D 444 B 474 A 504 C 534 A
385 D 415 A 445 C 475 C 505 B 535 D
386 A 416 B 446 C 476 C 506 B 536 D
387 D 417 A 447 B 477 D 507 C 537 A
388 B 418 D 448 D 478 C 508 B 538 A
389 D 419 D 449 C 479 A 509 C 539 B
390 A 420 C 450 A 480 D 510 D 540 C
541 D 571 D
542 A 572 B
543 A 573 C
544 A 574 D
545 B 575 A
546 B 576 C
547 B 577 B
548 D 578 D
549 D 579 B
550 A 580 B
551 C 581 C
552 A 582 C
553 C 583 A
554 D 584 D
555 B 585 D

ANSWER KEY
556 D 586 B
557 C 587 B
558 A 588 A
559 C 589 A
560 C 590 D
561 B 591 D
562 A 592 D
563 C 593 A
564 B 594 B
565 D 595 A
566 A 596 C
567 D 597 D
568 B 598 D
569 B 599 C
570 B 600 C


Calculating cash investment of new partner RR

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AJD Company recognizes construction revenue and expenses using the percentage of

2. Remington Construction Company uses the percentage-of-completion method.

At December 31,20x4 At December 31,20x4

The amount of construction costs incurred during 20x5 was

How should partnership net income for 20x4 be allocated to J, P, and B?

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Partners Capital Balance

12. Which of the following statement is true?

Use the following information for question 13 and 14:

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Use the following information for questions 34 and 36

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Use the following information for 37 and 38:

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Use the following information for questions 46 and 47:

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Use the following information for 57 and 58:

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62. Which of the following statement is true?

Use the following information for 64 to 67:

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