CPA REVIEW SCHOOL OF THE PHILIPPINES

MANILA

ADVANCED FINANCIAL ACCOUNTING AND REPORTING

Final Preboard Examination Solutions

1. A

Cost incurred to date: 20,000 – 2,000 = 18,000

Percentage of completion: 18,000 ÷ 60,000 = 30%
Revenue: 100,000 x 30% = 30,000
Profit: 30,000 – 18,000 =12,000

2. A

Cost incurred to date: 20,000 – 2,000 = 18,000

Revenue: 100,000 x 28% = 28,000
Profit: 28,000 – 18,000 =10,000

3. A

Cost incurred to date: 20,000 – 2,000 = 18,000

Revenue: 100,000 x 32% = 32,000
Profit: 32,000 – 18,000 =14,000

4. D

5. C

2021
AR: 517,500 - (750,000 * .68) = (7,500)
AP: 976,250 - (1,375,000 * .68) = 41,250

2022
AR: 750,000 (.68 - .675) = (3,750)
AP: 1,375,000 (.68 - .685) = (6,875)

6. A

Receivable account: (200,000 x .80) = 160,000

Gain/Loss: (.83 - .81) x 200,000 = 4,000 loss

7. D

Derivative instrument (point of view of bank): 7,000 * (43 - 41) = 14,000 positive

8. C

FC-Payable is denominated in pesos

9. C
10. C
11. D

Fair value option June 15: 3,500

Fair value option July 31: (1.375 - 1.385) x 1,000,000 = 10,000
Total Gain/Loss: (10,000 - 3,500) = 6,500

12. D
Carrying amount June 1: (1,125,000 x 1.370) = 1,541,250
Depreciation per year: 1,541,250 ÷ 6 = 256,875
Carrying amount July 31: 1,541,250 - (256,875 x 2/12) = 1,498,437.50

13. B

Estimated loss: (15,000,000 - 20,000,000) = (5,000,000)

Note: since estimated loss, recognized 100% in 2022 and will be the loss to date as of 2022
CIP: (15,000,000 - 5,000,000) = 10,000,000

14. A

Total cost of consigned goods: [(27,000 x 10) + 18,000 + 2,250] = 290,250

Sales: (45,000 x 6) = 270,000
Cost of goods sold: (290,250 x 6/10) = 174,150
Commission expense: (270,000 x 15%) = 40,500
Net income: (270,000 - 174,150 - 22,500 - 40,500) = 32,850

15. C

CFF: (300,000 x 8%) = 24,000

Interest income: (3,000,000 - 1,200,000) x 12% = 216,000
Net income: (3,000,000 - 1,800,000 + 24,000 + 216,000 - 150,000) = 1,290,000

16. C
17. C

18. A

Note receivable: (3,400,000 - 900,000) = 2,500,000

PV of Note: (2,500,000 ÷ 5) x 3.60478 = 1,802,390

19. C

Consideration transferred:
Common shares: 9,600 shares x P500 P4,800,000
Less: Fair value of identifiable assets acquired & liabilities assumed
(P7,680,000 – P4,320,000) 3,360,000
Positive excess - goodwill P1,440,000

20. B

Charge to P/L: (48,000 + 480,000 + 96,000 + 24,000) = 648,000

21. C
22. A
23. C

Note: Fair value at the date of acquisition

24. C

Total assets of acquiree at fair value: (35,000 + 60,000 + 125,000 + 250,000) = 470,000
Total liability of acquiree at fair value: (65,000 + 150,000) = 215,000
Fair value identifiable net assets of acquiree: (470,000 - 215,000) = 255,000
Goodwill: (300,000 – 255,000) = 45,000

25. C

Fair value identifiable net assets of acquiree: (1,000,000 + 100,000) = 1,100,000

Total aggregate: (956,000 ÷ 80%) = 1,195,000
Goodwill: (1,195,000 - 1,100,000) = 95,000

26. C

NCI-NI: (190,000 - 5,000) x 20% = 37,000

NCI 01/01/2022: (956,000 ÷ 80% x 20%) = 239,000
NCI 12/31/2022: [(239,000 + 37,000 - (125,000 x 20%)] = 251,000

27. C

Note: only the sales to unrelated parties

28. A

Consolidated Net Income for 2022

P Company’s net income from own/separate operations
[P100,000 – (P90,000 x 70%)] P 37,000
Realized profit in beginning inventory of S Company (downstream sales) 0
Unrealized profit in ending inventory of S Company (downstream sales)… (_0)
P Company’s realized net income from separate operations*…….….. P 37,000
S Company’s net income from own operations (P90,000 – P67,000) P23,000
Realized profit in beginning inventory of P Company (upstream sales) 0
Unrealized profit in ending inventory of P Company (upstream sales)
[P90,000 x 30% = P27,000 x (90-67/90)] ( 6,900
)
S Company’s realized net income from separate operations*…….….. P16,100 16,100
Total P 53,100
Less: Amortization of allocated excess…………………… 0
Consolidated Net Income for 2022 P 53,100
Less: Non-controlling Interest in Net Income* * 1,610
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent – 2022………….. P 51,490
29. A

The truck account will be debited for P3,000 in the eliminating entry:

Truck 3,000
Gain 15,000
Accumulated depreciation 18,000

Seller Buyer
Cash 50,000 Truck 50,000
Accumulated 18,000 Cash 50,000
Truck 53,000
Gain 15,000

30. B

Consolidated Net Income for 2024

P Company’s net income from own/separate operations…………. P 98,000
Realized gain on sale of equipment (downstream sales) through depreciation ___0
P Company’s realized net income from separate operations*…….….. P 98,000
S Company’s net income from own P 55,000
operations………………………………….
Unrealized gain on sales of equipment (upstream sales) (15,000)
Realized gain on sale of equipment (upstream sales) through depreciation
(P15,000 / 3 years) 5,000
S Company’s realized net income from separate operations*…….….. P 45,000 45,000
Total P143,000
Less: Amortization of allocated excess…………………… 0
Consolidated Net Income for 2024 P143,000
Less: Non-controlling Interest in Net Income* * 18,000
Controlling Interest in Consolidated Net Income or Profit attributable to
equity holders of parent – 2024………….. P125,000

31. A

Non-controlling Interest in Net Income (NCINI) for 2024

S Company’s net income of Subsidiary Company from its own operations P 55,000
(Reported net income of S Company)
Unrealized gain on sales of equipment (upstream sales) ( 15,000)
Realized gain on sale of equipment (upstream sales) through depreciation 5,000
S Company’s realized net income from separate operations……… P 45,000
Less: Amortization of allocated excess 0
P 45,000
Multiplied by: Non-controlling interest %.......... 40%
Non-controlling Interest in Net Income (NCINI) - partial goodwill P 18,000
Less: NCI on goodwill impairment loss on full-goodwill . . . . . . . . . . . . . . . . . . . . . 0
Non-controlling Interest in Net Income (NCINI) – full goodwill . . . . . . . . . . . . . P 18,000

32. C
33. C
34. D

Home Office Books Branch Books

(Branch Current- (Home Office Current –
Dr. balance) Cr. balance)
Unadjusted balance P150,000 P117,420
Add (deduct) adjustments:
In transit 37,500
HO A/R collected by br. 10,500
Supplies returned ( 4,500)
Error in recording Br. NI ( 1,080)
Cash sent to branch
to General Expense by HO 25,000 25,000
Adjusted balance P 179,920 P 179,920

35. C
36. C

37. B

Current assets 330,000

Equipment 1,100,000
Total free assets 1,430,000
Salaries payable (60,000)
Admin. expenses for liquidation (200,000)
Tax payable (80,000)
Net free assets 1,090,000

38. A

Bonds payable 700,000

Accounts payable 830,000
Excess notes payable from partially secured notes payable (1,200,000 - 900,000) 300,000
Total unsecured liabilities without priority 1,830,000

Net free assets 1,090,000

Total unsecured liabilities without priority ÷ 1,830,000
Estimated recovery percentage 59.56%

Land 900,000
Estimated recovery of excess note payable (300,000 x 59.56%) 178,680
Amount paid to note payable holder 1,078,680

39. A

Bonds payable 700,000

Accounts payable 830,000
Unsecured liabilities without priority 1,530,000
Estimated recovery percentage x 59.56%
Amount paid to the unsecured liabilities without priority 911,268

40. C
41. B
42. C

WIP, beginning 24,000

Total manufacturing cost (70,000 + 60,000 + 48,000) 178,000
Cost of goods manufactured (185,000)
WIP, end 17,000

43. D

Applied OH 48,000
Direct labor ÷ 60,000
Predetermined OH rate 80%

WIP, end 17,000

Overhead in the WIP, end (5,600)
Direct labor in the WIP, end (5,600 ÷ 80%) (7,000)
Direct materials in the WIP, end 4,400

44. A
45. D

46. D

Employees
A 15
B 5
C 10
Total 30

B's share in the Personnel cost (350,000 x 5/30) = 58,333

47. D

Approx. NRV of Product X [(7.50 - 3.50 - 1.00) x 1,500] 4,500

Approx. NRV of Product Z [(11.25 - 5.00 - 3.00) x 2,200] 7,150
11,650

Product X's allocation in the joint cost (8,000 x 4,500/11,650) = 3,090

Sales (7.50 x 1,500) 11,250

Cost of goods sold [3,090 + (1,500 x 1.00)] (4,590)
Gross profit 6,660
Selling expense (3.50 x 1,500) (5,250)
Net income 1,410

48. A
49. C
50. A
51. C
52. B

Beginning inventory units 5,000

Started units 60,000
Ending inventory units (7,000)
Completed units (56,500)
Total loss units 1,500
Normal lost units (60,000 x 2%) (1,200)
Abnormal lost units 300

Direct materials Conversion cost

Completed 56,500 56,500
EI EUP:
DM: (7,000 x 100%) 7,000 2,800
CC: (7,000 x 40%)
Normal lost units:
DM: (1,200 x 100%) 1,200 720
CC: (1,200 x 60%)
Abnormal lost units:
DM: (300 x 100%) 300 180
CC: (300 x 60%)
EUP 65,000 60,200

NOTE: Since all of the materials were added at the start therefore the percentage complete
of the materials as to EI is 100% complete, thus full extension of the EI units in the EUP
schedule. As for the lost units pertaining to materials, since the placement is at the start
whereas the inspection point is at the 60% completion mark, it means that the placement
happened first before the inspection. Therefore upon inspection there is spoilage and the
materials were already added, thus both normal and abnormal spoilage units will be
included in full in the direct materials EUP. As for the conversion, the lost units will be
based on the percentage of inspection which is 60%.

Direct materials Conversion cost

Beginning inventory cost 25,000 35,000
Current period cost 300,000 326,200
Total 325,000 361,200
EUP ÷ 65,000 ÷ 60,200
Cost per EUP 5 6

Normal spoilage cost

Direct materials (1,200 x 5) 6,000
Conversion cost (720 x 6) 4,320

Completed cost (56,500 x 11) 621,500

Normal spoilage cost (6,000 + 4,320) 10,320
Total cost of goods manufactured 631,820

Ending inventory cost: Direct materials (7,000 x 5) 35,000

Ending inventory cost: Conversion cost (2,800 x 6) 16,800
Total ending inventory cost 51,800

Period cost: Direct materials (300 x 5) 1,500

Period cost: Conversion cost (180 x 6) 1,080
Total period cost 2,580
NOTE: Only the completed units were affected by the normal spoilage cost because the
completed units already reached the inspection point of 60%. Since the completed units
were 100% complete already as to conversion, therefore it passed the inspection point of
60%. However as to ending inventory units, since it was only 40% complete as to
conversion, it did not reach the inspection point of 60%. Therefore no normal spoilage cost
was accounted to it.

53. D
54. A
55. A

56. B

Cash Allocation P600,000

Various expenses (240,000)
Revenue 100,000
TRA 50,000
Reversal of unused cash allocation (40,000)
-------------------------------------------------------
Surplus / (Deficit) 470,000

57. B

58. B

Amount charged to patients P1,000,000

Contractual adjustments (100,000)
-------------------------------------------------------
Net patient service revenue 900,000

59. B

60. B

Operating Financing Investing

Unrestricted cash contribution 500,000
Restricted for purchase of equipment 100,000
Purchase of equipment (100,000)

61. B
Sales revenue 4,000,000
Intercompany upstream to NS (unsold) (125,000)
Intercompany upstream to CP (unsold) (100,000)
Total 3,775,000
x share of NS 40%
Total share of NS in revenue 1,510,000

62. C

Investment in Joint Venture

1,100,000 300,000
1,250,000
250,000
2,300,000
63. B

Investment in Joint Venture

500,000
5,000
505,000 15,000
490,000

P/L
15,000 25,000
10,000

64. C
65. D
66. A

67. A
68. B

20% 50% 30%

Lucas Luna Lance
150,000 300,000 175,000
NI 8,000 20,000 12,000
Drawings (10,000) (10,000) (10,000)

Revaluation (13,000) (32,500) (19,500)

Settlement (135,000)
- 277,500 157,500
NI 112,500 67,500
Drawings (45,000) (45,000)
(69,000) 69,000
(276,000)
- 249,000
NI 20,000
Drawings (5,000)
264,000

69. A
70. B

45% 35% 20%

Cash NCA Liabilities Dianne Daniel Dale
Beginning 30,000 450,000 120,000 100,000 150,000 110,000
Sale of NCA 480,000 (450,000) 13,500 10,500 6,000
Payment of liabilities 120,000) (120,000)
Payment of expenses (50,000) (22,500) (17,500) (10,000)
Before distribution 340,000 - - 91,000 143,000 106,000
Settlement (340,000) (91,000) (143,000) (106,000)
End - - - - - -

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