No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

PREWEEK BATCH 4

Problem 1: On January 1, 2022, Paul Company established a branch in a nearby city At the close
of the calendar year ended December 31, 2019, the investment in branch account on the books of
the home office had a 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. the home office books.

• 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 thus has not been recorded by the home office.

How much is the unadjusted balance of home office account on branch's books?
a. P87,000 c. P62,000
b. P41,000 d. P45,000

Problem 2: The home office shipped merchandise to branch at 25% above cost. The branch then
sells the merchandise at 25% above billed price to customers. On November 30, all of the branch
merchandise was destroyed by fire. The following records were salvage by the branch:

Merchandise, January 1 (at billed price) 82,500

Shipments from home office 55,000
Purchases from outsiders at 20% markup on
cost 3,750
Sales 84,500
Sales return and allowances 1,875

What is the cost of inventory destroyed by fire?

a. P75,000 c. P60,000
b. P65,000 d. P70,000

Problem 3: Using the information in no. 2, how much is the cost of sales of the branch coming
from the home office at billed price?
a. P137,500 c. P60,000
b. P62,500 d. P50,000

Problem 4: Which of the following reconciling transactions will require credit to home office
current account in Branch A's Book for the adjustment?
a. Collection by Branch A of Branch B's account receivable
b. Credit memo received by Branch A from, Home Office
c. Payment by Branch A of Home Office 's accounts payable
d. Reshipment of goods received by Branch A to Branch B.

Problem 5: The Quezon City branch of ABC Corp, Manila, was billed for merchandise shipme nts
from home office at cost plus 25% in 2021 and cost plus 20% in 2022. Other pertinent data for
2022 show:

1|Pa g e RFERRER/ RL A C O/ A T A NG/ P DEJ ES US

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

Quezon City Home office

Sales 63,000 212,000
Inventory, beginning
at cost 23,000
at billed price 8,900
Purchases - 164,000
Inventory transfers
at Quezon City, at cost 42,000
from Manila, at billed price 50,400
Inventory, end
at cost 28,500
at billed price 11,700
Expenses 20,300 76,400

What is the amount of the realized gross profit from the branch sales and the ending inventory that
should be presented in the combined financial statements?
a. P8,500 and P40,200 c. P7,933 and P37,860
b. P8,230 and P38,250 c. P9,520 and P40,200

Problem 6: On January 1, 20x2, P Company formed a foreign subsidiary. On February 15, 20x2,
P Company’s subsidiary purchased 100,000 local currency units (LCU) of inventory. Of the
original inventory purchased on February 15, 20x2, 25,000 LCU made up the entire inventory on
December 31, 20x4. The exchange rates were 2.2 LCU = P1 from January 1, 20x2 to June 30,
20x2, and 2 LCU = P1 from July 1, 20x2 to December 31, 20x2. The December 31, 20x2, inventor y
balance for P Company’s foreign subsidiary should be restated in pesos in the amount of:

Functional Currency – LCU Functional Currency – Peso

a. P12,500 P11,364
b. P12,500 P12,500
c. P11,364 P12,500
d. P11,364 P11,364

Problem 7: The following assets of Sam Corporation's Romanian subsidiary have been converted
into U.S. dollars, at the following exchange rates:

Current Rates Historical Rates

Accounts receivable $850,000 $875,000
Trademark 600,000 575,000
PPE 1,200,000 900,000
Totals $2,650,000 $2,350,000

Assume the functional currency of the subsidiary is the U.S. dollar and the books are kept in a
different currency: The assets should be reported in the consolidated financial statements of Poole
Corporation and Subsidiary in the total amount of
a. $2,350,000 c. $2,325,000
b. $2,375,000 d. $2,650,000.

Problem 8: Accounts representing an allowance for uncollectible accounts are converted into U.S.
dollars at:
a. Current rates regardless of the functional currency.
b. Current rates only when the U.S. dollar is the functional currency.
c. Historical rates regardless of the functional currency.
d. Historical rates when the U.S. dollar is the functional currency.

Problem 9: ABC Inc. is a completely owned subsidiary of Sam Incorporated a US firm. The
country where ABC operates is deemed to have a highly inflationary economy under PAS 29
statement No. 52. Therefore, the functional currency is
a. its reporting currency

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

b. its current rate method currency

c. the US dollar
d. its local currency

Problem 10: Peachey has a foreign subsidiary, ABC Corporation of Germany, whose functio na l
currency is the euro. On December 31, 19X2, ABC has an account receivable denominated in
British pounds. Which one of the following statements is true?
a. Because all accounts of the subsidiary are translated into US dollars at the current rate, the
Account Receivable is not adjusted on the subsidiary’s books before translation
b. The Account Receivable is remeasured into the functional currency and remeasureme nt
obviates translation.
c. The Account Receivable is first adjusted to reflect the current exchange rates in euros and then
translated at the current rate into dollars.
d. The Account Receivable is adjusted to euros at the current exchange rate and any resulting
gain or loss is included as a translation adjustment in the stockholders’ equity section of the
subsidiary’s separate balance sheet

Problem 11: ABC Company, a Philippine company ordered inventory from XYZ Corp. for
100,000 baht on November 1, 20x1 to be settled on March 1,20x2. The goods were shipped and
delivered on December 1, 20x1. The invoiced was dated December 5, 20x1. On December 1, 20x1,
ABC entered into a 90-day forward contract to purchase 100,000 baht from UCPB. Changes in the
current value of the forward contract are measured as the present value changes in the forward
rates over time. The relevant exchange rate is 12%. The following are the exchange rates:

Spot rates Forward rates

Nov. 1, 20x1 1.48 1.52
Dec. 1, 20x1 1.50 1.51
Dec. 5, 20x1 1.51 1.54
Dec. 31, 20x1 1.53 1.55
Mar. 1, 20x2 1.56 1.56

What is the net forex gain (loss) on March 1, 20x2?

a. P1,921 net loss c. P2,000 net loss
b. P3,000 net loss d. P5,921 net loss

Problem 12: The condensed statement of financial position of A Corp; B Company and C
Company, as of December 31, 2022, are shown below:

A Corp B Co. C Co.

Assets 2,000,000 2,750,000 250,000

Liabilities 1,425,000 750,000 87,500

Ordinary shares 750,000 500,000 125,000
Share premium 200,000 62,500
Retained earnings (deficit) (175,000) 1,300,000 (25,000)
Total 2,000,000 2,750,000 250,000

A Corp. shares has a market value of P6.50 while the other companies have no available share
market quotations. A Corp. acquired the net assets of the two other companies by issuing in
exchange, unissued shares of its shares as follows: 300,000 shares to B Company and 25,000
shares to C Company. Under PFRS 3, A Corp. gain on bargain purchase would be:
a. P0 c. P325,000
b. P50,000 d. P812,500

Problem 13: ABC Corp. will issue share of P10 par ordinary shares for the net assets of XYZ Co.
ABC Corp. ordinary shares has a market price of P40 per share. XYZ Co. statement of financ ia l
position accounts is as follows:

Current Assets 320,000 Ordinary share, P4 par 80,000

Equipment 880,000 Share premium 320,000

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

Liabilities (400,000) Retained earnings 400,000

XYZ current assets and equipment, respectively are appraised at P400,000 and P1,600,000; its
liabilities are fair valued. Accordingly, ABC Corp. issued shares of its ordinary share with total
market value equal to that of XYZ net assets. To recognize goodwill of P200,000, how many
shares were issued?
a. 40,000 c. 50,000
b. 45,000 d. 55,000

Problem 14: Sam sells all of its inventory at 20% above cost to Pam Corp. Pam Corp acquires all
of its inventory from Sam. The incomes reported by the companies over the past three years are as
follows:

Year Pam Income Sam Income

2021 225,000 150,000
2022 360,000 135,000
2023 450,000 240,000

Sam Co. sold inventory for P300,000; P262,500; and P337,500 in the years 2021; 2022 and 2023,
respectively. Pam Corp. reported ending inventory of P105,000; P157,500 and P180,000 for 2021;
2022 and 2023, respectively. Pam acquired 70% pf the ownership of Sam on January 1, 2021 at
underlying book value. The fair value of the non-controlling interest at the date of acquisition was
equal to 30% of the book value of Sam.

What is the consolidated net income for 2021?

a. P357,500 c. P490,000
b. P375,000 d. P317,700

Problem 15: What would be the consolidated net income attributable to controlling interest for
2022?
a. P448.375 c. P486,250
b. P495,000 d. P615,375

Problem 16: What will be the non-controlling interest in net income for 2023?
a. P39,750 c. P71,725
b. P37,375 d. P70,875

Problem 17: Acquirer Company acquires 25% of Acquired Company’s Ordinary stock for
P190,000 cash and carries the investment using the cost method. After three months, Acquirer
purchases another 60% of Acquired’s Ordinary stock for P540,000. On this date, acquired
company reports identifiable net assets with carrying value of P720,000 and fair value of
P920,000. The liabilities of the acquired company has a book value and a fair value of P280,000.
The fair value of the 15% non-controlling interest is P125,000.

How much is the goodwill or (gain on acquisition)

a. P(17,000) c. P(30,000)
b. P250,000 d. P263,000

Problem 18: ABC organized to consolidate Paul Company and Anton Company, will issue P100
par 10% participating preferred shares for the net assets contributions and P50 par ordinary shares
for the difference between the total shares to be issued and preference shares to be issued. Total
shares to be issued by ABC shall be equal to average annual earnings capitalized at 10%. Relevant
data follows:

Paul Anton
Total Assets 1,080,000 1,382,000
Total Liabilities 648,000 518,000
Ordinary shares, P100 par 450,000 750,000
Average annual earnings 69,120 103,680

The total shares to be issued and the amount of goodwill to be recognized by ABC, respectively:

4|Pa g e RFERRER/ RL A C O/ A T A NG/ P DEJ ES US

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

a. 8,640 shares; P288,000

b. 5,760 shares; P288,000
c. 2,880 shares; P864,000
d. 7,280 shares; P864,000

Problem 19: Which of the following will increase consolidated retained earning?
a. The depreciation of a P10,000 excess in the fair value of equipment over its recorded book
value.
b. An increase in the value of goodwill associated with a subsidiary subsequent to the parent's
date of acquisition.
c. The sale of inventory by a subsidiary that had a P10,000 excess in fair value over recorded
book value on the parent's date of acquisition
d. The amortization of a P10,000 excess in the fair value of a note payable over its recorded book
value.

Problem 20: Prime Corp acquired 90% of the outstanding ordinary share of Bee Company. On
March 31, 2030, Prime sold equipment to Bee Company costing P150,000, with accumulated
depreciation of P30,000 for P100,000. The remaining useful life of the equipment is four years.
On September 30, 2030, Bee sold machinery with carrying amount of P200,000 for P240,000. The
remaining useful life of the machine is five years.

On December 31, 2030, Prime and Bee reported net income from their own operation amounting
to P1,000,000 and P600,000, respectively. Bee also paid dividend of P200,000.

What is the amount of consolidated net income attributable to parent for 2030?
a. P1,522,050 c. P1,516,625
b. P1,520,425 d. P1,342,050

What is the amount of Investment income under equity method for 2030?
a. P520,425 c. P516,625
b. P522,050 d. P524,633..33

Problem 21: Joint control is the contractually agreed sharing of control of an arrangement which
exists only when decision about the relevant activities require the parties sharing control to have:
a. Unanimous Consent c. Majority vote
b. Collective judgment d. Unbiased decision

Problem 22: Which of the following is correct?

Statement 1: When a party to a joint venture has joint control, the party shall account its investme nt
in the joint venture under PFRS 11.

Statement 2: When a party to a joint venture does not have joint control, the party shall account its
investment in the joint venture using PFRS 9 or PAS 28.
a. I only c. Both statements are correct
b. II only d. Both statements are incorrect

Problem 23: Which of the following statement is correct?

Statement 1: Joint arrangement classified as joint venture shall be accounted under PAS 28.

Statement 2: Joint arrangement requires all parties to have equal interest.

a. I only c. Both I and II
b. II only c. Neither I and II

Problem 24: Which of the following formulas would calculate the net realizable value of a product?
a. Final sales value minus separable costs
b. Sales value at the split-off point less cost to produce up to the split-off point
c. Sales value x constant gross-margin
d. Final sales value minus cost of goods sold

5|Pa g e RFERRER/ RL A C O/ A T A NG/ P DEJ ES US

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

Problem 25: Depeche Mode Corporation, which manufactures product X, Y and Z from a joint
production process. Joint costs are allocated on the basis of relative sales value at split- off.
Additional information is presented below:

X Y Z Total
Units Produced 6,000 4,000 2,000 12,000
Joint costs P72,000 ? ? P120,000
Sales value at split-off ? ? P30,000 P200,000
Additional costs if processed
further P14,000 P10,000 P6,000 P30,000
Sales value if processed further P140,000 P60,000 P40,000 P240,000

How much of the joint costs should be allocated to product Y?

a. P24,000 c. P30,000
b. P28,800 d. P32,000

Problem 26: Using the approximated net realizable value method, what is the joint cost allocated
to product X?
a. P72,000
b. P19,426
c. P28,571
d. P18,000

Problem 27: The following information is available for Detox Company for the current year:

Beginning Work in Process Costs of Beginning Work in Process:

(75% complete) 14,500 units Material P 25,100
Started 75,000 units Conversion 50,000
Ending Work in Process Current Costs:
(60% complete) 16,000 units Material P120,000
Abnormal spoilage 2,500 units Conversion 300,000
Normal spoilage 5,000 units
(continuous)
Transferred out 66,000 units

All materials are added at the start of production.

Using FIFO, what is the cost per equivalent unit for conversion costs?
a. P4.46
b. P4.15
c. P4.30
d. P3.84

Problem 28: True Faith Company uses the weighted average method. All materials are added at
the beginning of the process. The EUP for materials would be the sum of:
a. Units in beginning work in process and the started and completed.
b. Units in ending work in process and the units started and completed.
c. Units in ending work in process and the units started.
d. Units in beginning work in process and the units started.

Problem 29: Darwin Corp. manufacturing factory overhead at year-end was under-applied, which
is considered immaterial by the company. The year-end journal entry to record this amount would
include:
a. a debit to Cost of Goods Sold.
b. a debit to Manufacturing overhead, Finished Goods inventory and Cost of Goods Sold account.
c. a credit to Manufacturing overhead, Finished Goods inventory and Cost of Goods Sold
account.
d. a credit to Cost of Goods Sold.

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

Problem 30: What is the authorization issued by the DBM to NGAS to incur obligation for
specified amounts contained in a legislative appropriation in the form of budget release
documents?
a. Appropriations c. Allotment
b. Approved Budget d. Automatic

Problem 31: An agency received a Notice of Cash Allocation (NCA)in the amount of P1,226,618
It paid a total of P1,094,422. The accounting entry to recognize reversion of unused NCA shall
have a
a. credit to `Subsidy from National Government' in the amount of P1,226,618.
b. debit to `Subsidy from National Government' in the amount of P132,196.
c. debit to Subsidy from National Government' in the amount of P1,226,618.
d. credit to "Subsidy from National Government' in the amount of P132,196.

Problem 32: The gift shop of a nonprofit, private, hospital has cash revenue of P24,000. What
account will the hospital credit?
a. Temporarily restricted revenue
b. Other operating revenue - unrestricted
c. Unrestricted revenue
d. Unrestricted support

Problem 33: In a "Build-operate-transfer", the contractual obligations to maintain or restore

infrastructure, except for any upgrade element, shall be recognized and measured at the best
estimate of the expenditure that would be required to settle the present obligation at the end of the
reporting period. This is done in accordance with what standard?
a. PFRS 9 c. P PFRS 15
b. PAS 23 d. PAS 37

Problem 34: AAA and BBB are partners with capital of P60,000 and P20,000, respectively. Profits
and losses are divided in the ratio of 60:40. AAA and BBB decided to form a new partnership
with CCC, who invested land valued at P15,000 for a 20% capital interest in the new partnership.
CCC’s cost of the land was P12,000 the partnership elected to use the bonus method to record the
admission of CCC into the relationship. CCC’s capital account should be credited for
a. P12,000 c. P16,000
b. P15,000 d. P19,000
Use the following information for the next two items.
Problem 35: AA, BB and CC formed a partnership on April 1, 20X1, by contributing P150,000;
P200,000; and P250,000, respectively. Their articles of co-partnership provided for the following:
a. Annual salaries of P24,000; P18,000 and P12,000 for AA, BB and CC, respectively.
b. Interest of 12% based on the average capital
c. Remainder in the ratio of 2:4:4, respectively.

AA contributed additional cash on July 1 of P30,000 and withdrew P9,000 on October 1. BB

contributed additional assets with a value of P27,000 on August 1 and withdrew P12,000 on
October 1. CC withdrew P18,000 on November 1.

The partnership generated net income of P190,000 for the year 20X1.

How much is the average capital of AA?

A. P167,000
B. P211,000
C. P215,000
D. P170,000

Problem 36: How much is the ending capital of BB?

A. P300,476
B. P69,826
C. P284,826
D. P222,698

Use the following information for the next two items.

7|Pa g e RFERRER/ RL A C O/ A T A NG/ P DEJ ES US

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

Problem 37: The partnership of AA and BB for the year ended 20X1 shows a net income of
P800,000. The capital accounts of the partners for 20X1 at the start of the year amounted to
P400,000 and P1,000,000, respectively. The following equity transactions occurred during the
year:
April 1 AA invested additional capital of P150,000
August 1 BB invested additional capital of P30,000

Throughout the year, each partner withdrew P1,500 per month in anticipation of future partnership
income.
AA BB
Interest on average capital 5% 5%
Bonus on net income after interest and 20%
bonus
Salaries P125,00 P150,00
0 0
Remaining balance
If positive 60% 40%
If negative 50% 50%

How much is the ending capital of partner AA as of year-end?

a. P1,000,125
b. P1,361,875
c. P1,018,125
d. P1,343,875

Problem 38: How much is the ending capital of partner BB as of year-end?

a. P1,000,125
b. P1,361,875
c. P1,018,125
d. P1,343,875
Problem 39: Partners A and B share profit and loss equally after each has been credited with annual
salary allowances of P40,000 and P30,000, respectively. Under this arrangement, A will benefit
by P10,000 more than B in which of the following circumstance?
a. In all situations
b. In case the partnership generates profit during the year
c. In case the partnership reported earnings of at least P70,000.
d. In case the partnership reported a loss

Problem 40: The partners’ drawing accounts are used to:

a. record partners’ permanent withdrawals
b. record loans to the partners
c. record partners’ withdrawals in anticipation of future profits
d. All of the above

Problem 41: The partners of the AAA & BBB Partnership started liquidating their business on July
1, 2024, at which time the partners were sharing profits and losses 40% to M and 60% to N. The
balance sheet of the partnership appeared as follows:

AAA & BBB Partnership

Balance Sheet – July 1, 2024

Assets Liabilities & Capital

Cash……………………. P 8,800 Accounts payable………… P32, 400
Receivable……………… 22,400 AAA, capital…………… P31, 000
Inventory…………...….. 39,400 AAA, drawing 5,400 25, 600
Equipment….. 65, 200 BBB, capital……………… P33, 200
Accumulated BBB, drawing………………… 200 33, 000
depreciation 30, 800 34, 400 BBB, loan…………………………… … 14, 000
Total…………………… P105, 000 Total…………………………………… P105, 000

8|Pa g e RFERRER/ RL A C O/ A T A NG/ P DEJ ES US

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

During the month of July, the partners collected P600 of the receivables with no loss. The partners
also sold during the month the entire inventory on which they realized a total of P32,400.

How much of the cash was paid to AAA’s capital on July 31, 2024?
a. P -0- c. P5, 400
b. 25, 600 d. 320

Problem 42: A, B, and C are partners in ABC Partnership and share profits and losses, 5:3:2,
respectively. The partners have agreed to liquidate the partnership. Prior to liquidation, the
partnership balance sheet shows the following book values.

Cash P 25,200
Non-cash 297,600
Notes, payable to C 38,400
Other liabilities 184,800
A, capital 72,000
B, capital (12,000)
C, capital 39,600

Liquidation expenses of P 16,800 are paid. Non-cash assets with a book value of P 240,000 are
sold for P 216,000.

How much cash should C receive?

a. P 74,571
b. P 46,458
c. P 39,600
d. P 37,600
Problem 43: It is a financial report which shows information on the progress of the liquidatio n
process of a corporation.
a. statement of affairs c. statement of realization and liquidation
b. statement of liquidating affairs d. statement of changes in net assets

Problem 44: The document used to estimate amounts available to each class of claims is called
a(n)
a. Statement of Assets and Liabilities
b. Legal Statement of Affairs
c. Accounting Statement of Affairs
d. Statement of Realization and Liquidation

Problem 45: Psalm Co. filed a voluntary bankruptcy petition on August 15, 2025, and the statement
of affairs reflects the following amounts:

Estimated Current
Book Value
Value
Assets:
Assets pledged with fully secures creditors P600,000 P740,000
Assets pledged with partially secured
360,000 240,000
creditors
Free Assets 840,000 640,000
P1,800,000 P1,620,000
Liabilities:
Liabilities with priority P140,000
Fully secured creditors 520,000
Partially secured creditors 400,000
Unsecured creditors 1,080,000
P2,140,000

Assume that the assets are converted to cash at the estimated current values and the business is
liquidated. What amount of cash will be available to pay unsecured nonpriority claims?
a. P640,000

9|Pa g e RFERRER/ RL A C O/ A T A NG/ P DEJ ES US

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

b. P720,000
c. P480,000
d. P560,000

Problem 46: Psalm Corporation is in bankruptcy and is being liquidated by a court-appointed

trustee. The financial report that follow was prepared by the trustee just before the final cash
distribution:

Assets:
Cash P200,000
Approved Claims:
Mortgage payable (secured by property that was sold for P100,000) P160,000
Accounts payable, unsecured 100,000
Administrative expenses payable, unsecured 16,000
Salaries payable, unsecured 4,000
P280,000

The administrative expenses are for trustees and other costs of administering the debtor
corporation’s estate. How should the P200,000 be distributed to the following creditors?

Unsecured Partially Unsecured

Creditors with Secured Creditors
Priority Creditors without Priority
a. P20,000 P160,000 P20,000
b. P10,000 P130,000 P50,000
c. P20,000 P130,000 P50,000
d. P0 P160,000 P40,000

Problem 47: Under IFRS 15, how shall an entity recognise revenue from contract with customers?
a. An entity shall recognise revenue when (or as ) the entity satisfies the performance obligatio n
by transferring promised good or service( i.e. an asset) to a customer.
b. An entity shall recognise revenue when it i probable that future economic benefits will flow to
the entity and it can be measured reliably.
c. An entity shall recognise revenue at time of collection of cash.
d. An entity shall recognise revenue at time of signing of contract.

Problem 48: Under IFRS 15, how shall an entity recognise revenue from contract with customers?
a. An entity shall recognise revenue when (or as ) the entity satisfies the performance obligatio n
by transferring promised good or service( i.e. an asset) to a customer.
b. An entity shall recognise revenue when it i probable that future economic benefits will flow to
the entity and it can be measured reliably.
c. An entity shall recognise revenue at time of collection of cash.
d. An entity shall recognise revenue at time of signing of contract.

Problem 49: Wendy Company is constructing a skyscraper in BGC under a fixed price constructio n
contract for P25 million. Wendy incurred the following during the first year of construction:

Materials used in construction P5,000,000

Site labor costs 2,000,000
Allocated overhead 2,000,000
General administrative costs 500,000
Depreciation of idle equipment 500,000

At the end of first year, it has estimated cost to complete the contract of P11 million.

How much is the gross profit to be recognized by Wendy for the first year of construction?
a. P1,904,762
b. P2,304,878

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

c. P1,150,000
d. P2,250,000

Use the following information for the next three items.

Problem 50: On January 1, 20X1, Max Inc. entered into a contract to build an office building for
a customer for a total contract price of P5,000,000. The construction contract provides the
customer with a right to conduct final inspection to ensure compliance with the contract terms
prior to accepting the completed project. It has been the accounting policy of Max Inc. to use
percentage-of-completion method to account for its construction contracts with customers. The
following data were provided by the accountant of Max Inc. for the years ended December 31,
20X1, 20X2 and 20X3:

20X1 20X2 20X3

Cost incurred each year P1,450,000 P2,600,000 P 600,000
Estimated cost to complete at year-end 3,150,000 400,000 -
Progress billings each year 400,000 2,000,000 2,600,000
Progress payments received each year 275,000 2,100,000 2,625,000

The above costs incurred for each year are inclusive of actual marketing expense and general
administrative costs which are not reimbursable under the construction contracts and provided by
the accountant as follows:
20X1 20X2 20X3
Marketing expense P 70,000 P200,000 P120,000
General administrative costs 30,000 150,000 80,000

The applicable tax rate of Max is 25%.

How much is the net income to be reported by Max in 20X1?
a. P50,000
b. P37,500
c. P26,087
d. P19,565

Problem 51: How much is the net income to be reported by Max in 20X2?
a. P24,475
b. P18,356
c. P300,000
d. P400,000

Problem 52: How much is the net income to be reported by Max in 20X3?
a. (P350,562)
b. (P262,921)
c. (P100,000)
d. (P75,000)

Problem 53: Evaluate the following statements:

I. Franchise fees should be recognized when performance obligations are satisfied.
II. Franchise revenue is recognized over time if the franchisor is providing access to the right
rather than transferring control.
a. Both statements are true
b. Both statements are false
c. Only statement 1 is true
d. Only statement 2 is true

Problem 54: On January 1, 2035, AAA, BBB, and CCC Inc. entered into a franchise agreement
with QQQ Company to market their products. The agreement provides for an initial fee of
P25,000,000 payable as follows: P7,000,000 to be paid upon signing of the contract and the
balance in five equal annual payments every end of the year starting December 31, 2035. AAA,
BBB, and CCC Inc. signs a non-interest bearing note for the balance. His credit rating indicates
that he can borrow at 15% interest for this type of loan. The present value of an annuity of P1 at
15% for 5 periods is 3.352. The agreement further provided that the franchisee must pay a
continuing franchise fee equal to 3% of the monthly gross sales. On August 31, AAA, BBB, and

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

CCC Inc. had completed the initial services required in the contract at a cost of P8,580,240 and
incurred an indirect cost of P350,000. QQQ commenced business operations on November 30,
2035. The gross sales reported to AAA, BBB, and CCC Inc. were P3,600,000 for December,
2035. The first installment payment was made on the due date.

Assume that the collectibility of the note is reasonably certain, how much is the net income for the
year ended, December 31, 2035?
a. 18,877,760
b. 18,769,760
c. 12,055,040
d. 12,289,072

Problem 55: MMM Monitor Muffler sells franchise arrangements throughout Luzon and Visayas.
Under a franchise agreement, MMM receives ₱1,200,000 in exchange for satisfying the following
separate performance obligations:

● franchisees have a five-year right to operate as a MMM Monitor Muffler retail

establishment in an exclusive sales territory
● franchisees receive initial training and certification as a MMM Monitor Mechanic
● franchisees receive a MMM Monitor Muffler building and necessary equipment.

The stand-alone selling price of the initial training and certification is ₱30,000, and ₱900,000 for
the building and equipment. MMM estimates the stand-alone selling price of the five-year right to
operate as a MMM Monitor establishment using the residual approach. MMM Monitor received
₱150,000 on July 1, 2025, from Pericles and accepted a note receivable for the rest of the franchise
price. MMM Monitor will construct and equip Pericles ' building and train and certify Pericles by
September 1, and Pericles’ five-year right to operate as a MMM Monitor establishment will
commence on September 1 as well.
What amount would MMM calculate as the stand-alone selling price of the five year right to
operate as a MMM Monitor retail establishment?
a. ₱270,000
b. ₱300,000
c. ₱1,750,000
d. ₱1,200,000

Use the following information for the next two questions

Problem 56: MARIE is an artist who sells his work under consignment. Marie transferred his
sculptures on consignment to a local curator.

Marie most likely should recognize revenue when:

a. Marie paints the painting, because the painting is produced while he works;
b. When he transfers the painting to the curator;
c. When the curator sells the sculptures;
d. When the curator’s right of return expires.

Problem 57: After Marie has transferred a sculpture to the curator, the sculpture
a. Should be counted in Marie’s inventory until the curator sells it
b. Should be counted in the curator’s inventory as the curator now possesses it
c. Should be counted in either Marie’s or the curator’s inventory, depending on which incurred
the cost of preparing the sculpture for display.
d. There is insufficient information to know who should carry the sculpture in inventory

Problem 58: Doctor F Co. consigned 10 eye classes to trading and paid 10,000 Php for the freight
out. The consignee is allowed a commission of 5% on sales. RRR trading submitted account sales
on its transactions for the month of December 2021, as follows:
Sales (6 units, including 12.5% gross profit) 360,000
Less: advances to consignor 50,000
Selling expenses 4,000
Installation and delivery 6,000
Commission 36,000 (96,000)
Net remittance 264,000

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

How much was the net profit or loss of Doctor F Co. on the consignment?
a. 264,000 Profit
b. 39,000 Loss
c 11,000 Profit
d. 7,000 Loss

Problem 59: If the joint arrangement is structured through a separate vehicle, the joint arrangement
is classified as a: either
a. Joint operation
b. Joint venture
c. Associate
d. Cannot be determined based on the given facts

Problem 60: An SME must account for its investment in jointly controlled entities after initia l
recognition using:
a. either the cost model, the equity method, or the fair value model
b. either the cost model or the fair value model
c. either the cost model or the equity method
d. either the fair value model or the equity method

Problem 61: R Inc., C Co., and F Inc. sign an agreement to collectively purchase an oil pipeline
and to hire a company to manage and operate the pipeline on their behalf. The costs involved in
running the pipeline and the revenue earned from the pipeline are shared by the three parties based
on their ownership percentage, all major operating and financing decisions related to the pipeline
must be agreed to by the three companies. The cost of purchasing the pipeline was P70,000,000.
The pipeline has an estimated 20-year useful life with no residual value. The management fee for
operating the pipeline for 2024 was P14,000,000. Revenue earned from the pipeline in 2024 was
P23,100,000. R invested P21,000,000 for a 30% interest.

Compute the share of R Inc. in the revenue of the joint operation for 2024:
a. P1,680,000
b. P6,930,000
c. P14,000,000
d. P21,000,000
Compute the shear of R Inc. in the expenses of the joint operation for 20x4:
a. P1,050,000
b. P4,200,000
c. P5,250,000
d. P6,930,000

Problem 62: Compute the share of R inc. in the net income of the joint operation for 2024:
a. P1,680,000
b. P6,930,000
c. P14,000,000
d. P21,000,000

Problem 63: On January 1, 2024, Glenda Company obtained 20% interest in a joint venture for
P6,000,000 and agreed to share control with other parties in a joint arrangement. During 2024, the
joint venture reported net income of P7,000,000 and paid cash dividends of P4,000,000. How
much is the carrying value of the investment in the joint venture as of December 31, 2024?
a. P6,000,000
b. P9,000,000
c. P6,600,000
d. P7,400,000

Problem 64: On January 1, 2024, Rodiel Company acquired 20% of the outstanding share capital
of an entity for P8,000,000 and agreed to share joint control over the entity with Crisostomo
Company. The book value of the acquired shares was only P6,000,000 and the excess was
attributable to an undervalued depreciable asset which had a remaining useful life of ten years. For

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

the year ended 2024, the entity reported net income of P1,800,000 and cash dividends of P400,000.
During the year, the entity also declared a stock dividend of 5%.

How much is the carrying value of the investment in the joint venture in the books of Rodiel as of
December 31, 2024?
a. P7,676,000
b. P8,360,000
c. P8,280,000
d. P8,080,000

14 | P a g e RFERRER/ RL A C O/ A T A NG/ P DEJ ES US