ADVANCED FINANCIAL ACCOUNTING AND REPORTING

DECEMBER 18, 2021 – 1:00PM – 4:00PM

Compiled By: 11 Supernova

DISCLAIMER: Not of all these questions are the exact questions itself on the said
CPALE but the concept behind those questions, exists HERE. The importance of the
concept/rationale is important. Padayon, future CPA’s!

P.S. Wag maniniwala sa chismis. Always believe in your preparation and your efforts
will never betray you. ^^

1. The functional currency is

A. The currency in which the entity reports earnings.
B. The currency in which the entity primarily conducts banking activities.
C. The currency in which the entity primarily operates.
D. The currency in which the entity presents the financial statement. Presentation Currency

2. Which of the following should be considered nonmonetary?

A. Trade receivables
B. Deferred tax liabilities
C. Accrued expense
D. Taxes payable

3. Which of the following is not one of the steps in accounting for an acquisition?
A. Prepare proforma financial statements prior to acquisition.
B. Determine the acquisition date.
C. Identify the acquirer.
D. Expense the costs and general expenses of the acquisition in the period of
acquisition.

4. Which is a characteristic of a joint arrangement?

A. The parties are bound by a contractual agreement.
B. The contractual arrangement gives two or more parties joint control over the
arrangement.
C. The parties are bound by a contractual arrangement which gives two or more
parties absolute control over the arrangement.
D. The parties are bound by a contractual arrangement which gives two or more
parties joint control over the arrangement.

5. Two entities established a joint arrangement in an incorporated entity. The

assets and liabilities of the entity will be in the name of the incorporate entity.
The activities of the arrangement will be decided by its own board of directors.
The rights of the two parties are limited only to the net assets of incorporated
entity. How should the two parties account for their investment?
A. Proportionate consolidation
B. Joint venture
C. Joint operation
D. Investment in trading securities

6. Franchise fee revenue shall be recognized when all material services or

conditions have been substantially performed or satisfied by the franchisor.
Substantial performance means
A. Franchisor has no remaining obligation or intent to refund money or forgive
unpaid debt.
B. Substantially all initial services have been performed.
C. No other material conditions or obligations exist.
D. All of these define substantial performance by the franchisor.
7. Contract revenue in construction contract comprises
A. The initial amount of revenue agreed in the contract.
B. Variation in contract work, claim and incentive payment.
C. The initial amount of revenue agreed in the contract, variation in contract
work, claim and incentive payment.
D. The initial amount of revenue agreed in the contract and progress billings.

8. In a job order cost system, the use of indirect materials previously purchased
is recorded usually as an increase in
A. Stores control
B. Work in process control
C. Factory overhead control
D. Factory overhead applied

9. In job order system, conversion costs do not consider

A. Direct labor
B. Indirect labor
C. Direct materials
D. Factory overhead

10. At the time of corporate liquidation, which of the following unsecured claims
with priority shall be settled first?
A. Liability for taxes
B. Liability for corporate crime
C. Liability for employee benefits
D. Liability for corporate torn

11. The partnership of Jess, Tulfo, and Raffy was dissolved on June 30, 2021 and
account balances after non-cash assets were converted into cash on September 1,
2021 are:

Assets Liabilities and Equity

Cash 50,000 Accounts payable 120,000
Jess, capital (30%) 90,000
Tulfo, capital (30%) (60,000)
Raffy, capital (40%) (100,000)

Personal assets and liabilities of the partners at September 1, 2021 are:

Personal Assets Personal Liabilities

Jess 80,000 90,000
Tulfo 100,000 61,000
Raffy 192,000 80,000

If Raffy contributes 70,000 to the partnership to provide cash to pay the creditors,
what amount of Jess’s 90,000 partnership equity would appear to be recoverable?
A. P90,000
B. P81,000
C. P79,000
D. P60,000

12. The Jaja Sales Company began the appliances business on January 1, 2019 reports
gross profit on the installment basis. The following information relative to the
installment sales are available:
 2019 2020 2021
Installment sales 360,000 375,000 450,000
Cost of installment sales 270,000 271,875 324,000
Gross profit 90,000 103,125 126,000

Collections:
2019 installment contracts 67,500 112,500 108,750
2020 installment contracts 71,250 120,000
2021 installment contracts 93,750

Defaults:

Unpaid balance of 2019

installment contracts 18,750 22,500
Value assigned to repossessed
merchandise 9,750 9,000
Unpaid balance of 2020
Installment contracts 24,000
Value assigned to repossessed
Merchandise 13,500

The realized gross profit on installment sales before repossession during 2021
A. P86,437.50
B. P90,300
C. P86,687.50
D. P120,000

13. Happy Inc. opens a sales agency in Davao City, and a working fund for P20,000
is established on the imprest basis. The first payment from the fund is P3,000 for
rent. This transaction should be recorded by the home office as follows:
A. No entry
B. Rent 3,000
Cash 3,000
C. Davao Agency 3,000
Cash 3,000
D. Davao Agency 3,000
Working Fund 3,000

14. Zero Na Corporation has been undergoing liquidation since January 1. As of

March 31, its condensed statement of realization and liquidation is presented below:

Assets:
Assets to be realized 550,000
Assets acquired 350,000
Assets realized 325,000
Assets not realized 125,000

Liabilities:
Liabilities liquidated 278,000
Liabilities not liquidated 310,000
Liabilities to be liquidated 463,000
Liabilities assumed 115,000

Revenues and Expenses

Supplementary charges 229,900
Supplementary credits 617,900
The net gain(loss) for the three-month period ending March 31 is:
A. P72,000 loss
B. P72,000 gain
C. P848,000 loss
D. P848,000 gain

15. Kamayan Inc. charges an initial franchise fee of P500,000 for the right to
operate as a franchise of Kamayan. Of this amount, P100,000 is payable when the
agreement was signed and the balance is payable in a noninterest bearing note in
five annual payments of P80,000 each. In return for the initial franchise fee, the
franchisor will help locate the site, negotiate the lease or purchase of the site,
supervise the construction activity, and provide the bookkeeping services. The
credit rating of the franchisee indicates that money can be borrowed at 8%. The
present value of an ordinary annuity of five annual receipts of P80,000 each
discounted at 8%. The present value of an ordinary annuity of five annual receipts
of P80,000 each discounted at 8% is P319,416.80. The discount represents the
interest revenue to be accrued by the franchisor over the payment period.

If the probability of refunding the initial franchise fee is extremely low, the
amount of future services to be provided to the franchisee is minimal,
collectibility of the note is reasonably assured and substantial performance has
occurred. The unearned franchise fees would be
A. P500,000
B. P419,416.80
C. P0
D. P319,416.80

16. The following condensed balance sheet is presented for the partnership of Smith
and Jones, who share profits or losses in the ratio of 60:40, respectively:

Other assets P450,000

Smith, loan 20,000
P470,000

Accounts payable P120,000

Smith, Capital 195,000
Jones, Capital 155,000
P470,000

The partners decided to liquidate the partnership. If the other assets are sold for
P385,000, what amount of the available cash should be distributed to Smith?
A. P136,000
B. P156,000
C. P159,000
D. P195,000

17. It is the contractually agreed sharing control of an arrangement, which exists

only when decisions about the relevant activities require the unanimous consent of
the parties sharing control.
A. Joint control
B. Joint undertaking
C. Joint operation
D. Joint venture

18. IFRS 11, Joint Arrangement, provides that the classification of the arrangements
will require entities to apply judgment when assessing their rights and obligations
arising from the arrangement by considering the following, except:
A. The terms agreed by the parties in the contractual agreements.
B. The structure and legal form of the arrangement.
C. When relevant, other facts and circumstances.
D. When structured in a legal entity, the choice between proportionate consolidation
and the equity method.

19. According to IAS 27 as amended in 2014, in the separate financial statements

of a parent entity, investments in subsidiaries that are not classified as held for
sale should be accounted for
A. Cost value
B. Book value
C. Market value
D. Net realizable value

20. Which of the following would be most likely to be used by the partnership in
distributing the profits of the company among partners who are active in managing
the affairs of the business?
A. Bonus as a percentage of profit
B. Bonus as a percentage of sales in excess of the targeted amount
C. Interest based on weighted average capital
D. Salaries provided to the partners

21. The partner’s maximum loss absorbable is determined:

A. By adding the remaining non-cash assets and cash withheld for possible loss.
B. By adding cash withheld for possible loss and remaining unpaid liabilities.
C. By dividing capital interest balance by his profit or loss ratio
D. By dividing total interest balance by his profit and loss ratio

22. P Corp. acquired 90% interest of S Corp. in 20x5. On this date, the book values
and fair values were equal to one another. On January 1, 20x6, P Corp. sold an
equipment with P900,000 book value to S Corp. for P1,800,000. S Corp. is depreciating
the equipment for 10 years using the straight line method. P Corp. uses equity
method to record its investment in S Corp. The separate income of P Corp. and S
Corp. were as follows:
P S
Sales 36,000,000 21,000,000
Cost of goods sold (15,000,000) (5,700,000)
Gross profit 21,000,000 15,300,000
Depreciation expense (9,000,000) (2,700,000)
Other expenses (3,600,000) (9,000,000)
Gain on sale of equipment 900,000
Separate income 9,300,000 3,600,000

The total investment income of P Corp.

A. P3,240,000
B. P3,690,000
C. P2,430,000
D. P2,790,000

23. Taken Company adds a markup of 20% of cost on all merchandise shipped to the
branch. It is then sold by the branch at 25% above billed price. However, on
February 24, 2021, typhoon Jolina destroyed the warehouse of the branch as well as
all the inventory items on hand. The company did not have any insurance policies
on both the warehouse and the inventory items. Inspection of the books maintained
by the branch revealed the following information:
Merchandise Inventory, January 1 P24,000
Shipments from Home Office 18,000
Sales 18,750
Sales Return 2,250

How much is the true cost of the inventory destroyed by the fire?
A. P24,000
B. P22,500
C. P27,000
D. P28,000

24. ABC transferred merchandise inventory from its home office to its branch and
the average gross margin on the transfer is 40%. At the beginning of the year, the
branch held merchandise purchased from the home office in the 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 of P40,000.

What entry should the home office record on the realized intercompany profit during
the year?
A. Allowance for overvaluation of inventory 41,600
Branch income summary 41,600
B. Allowance for overvaluation of inventory 39,714
Branch income summary 39,714
C. Allowance for overvaluation of inventory 71,600
Branch income summary 71,600
D. Allowance for overvaluation of inventory 55,600
Branch income summary 55,600

25. Rap Manufacturing Corporation uses a standard cost system to collect costs
related to the production of its ski lift chairs. Rap uses machine hours as an
overhead base. The variable overhead standards for each chair are 1.2 machine hours
at a standard cost of P18 per hour. During the month of September, Rap incurred
34,000 machine hours in the production of 32,000 ski lift chairs. The total variable
overhead cost was P649,400. What is Rap’s variable overhead spending variance for
the month of September?
A. P37,400 unfavorable
B. P41,800 favorable
C. P79,200 unfavorable
D. P84,040 favorable

26. The National Co. acquired 80% of the Local Co. for a consideration transferred
of P100 million. The consideration was estimated to include a control premium of
P24 million. Local’s net assets were P85 million at the acquisition date. Are the
following statements TRUE of FALSE, according to IFRS 3, Business Combination?

Statement 1 – Goodwill should be measured at P32 million if the non-controlling

interest is measured at is share of Local’s net assets.
Statement 2 – Goodwill should be measured at P34 million if the non-controlling
interest is measured at fair value.

A. False; False
B. False; True
C. True; False
D. True; True
27. It is the entity that has the controlling financial interest
A. Investor
B. Parent
C. Associate
D. Affiliate

28. On January 1, 2020, Owen Corporation purchased all of Sharp Corporation’s common
stock for P1,200,000. On that date, the fair values of Sharp’s assets and liabilities
equaled their carrying amounts of P1,320,000 and P320,000, respectively. During
2020, Sharp paid cash dividends of P20,000. Selected information for the separate
balance sheets and income statements of Owen and Sharp as of December 31, 2020 and
for the year then ended follows:

Owen Sharp
Balance sheet accounts:
Investment in subsidiary P1,300,000
Retained earnings 1,240,000 560,000
Total stockholder’s equity P2,620,000 P1,120,000

Income statement accounts:

Operating income P420,000 P200,000
Equity in earnings of Sharp 120,000
Net income 400,000 140,000

In Owen’s December 31, 2020 consolidated balance sheet, what amount should be
reported as total retained earnings?
A. 1,240,000
B. 1,360,000
C. 1,380,000
D. 1,800,000

29. In a job order system, the application of factory overhead is usually reflected
in the general ledger as an increase in
A. Factory overhead control
B. Finished goods control
C. Work in process control
D. Cost of goods sold

30. At the end of the last fiscal year, Baehr Co. had the following account balances:

Overapplied overhead P. 6,000

Cost of goods sold 980,000
Work in process 38,000
Finished goods 82,000

If the most common treatment of assigning overapplied overhead was used, the final
balance in cost of goods sold would have been
A. P985,340
B. P974,660
C. P974,000
D. P986,000

31. AAA Inc. granted BBB a franchise on January 2, 2030. The agreement provided an
initial franchise fee of P2,000,000 payable as follows: P400,000 down payment and
the balance payable in four annual installments starting December 31, 2030. The
prevailing interest rate for a similar note is 20% and the present value of an
annuity of 1 for 4 periods is P2.5887. The agreement also provides for a continuing
franchise fee of 5% of gross sales of the franchise payable 10 days the following
month. The collectability of the note is reasonably assured. The franchisee
commenced operation on July 1,2030 and reported gross sales of P4,000,000 from July
to December 2030.

What is the total revenue from franchise fees to be reported by BBB for the year
ended December 31, 2030?
A. P2,200,000
B. P2,000,000
C. P1,635,480
D. P600,000

32. On January 1, 2030, an entity granted a franchise to a franchisee. The franchise

agreement required the franchisee to pay a nonrefundable upfront fee in the amount
of P400,000 and on-going payment of royalties equivalent to 5% of the sales of the
franchisee. The franchisee paid the nonrefundable upfront fee on January 1, 2030.
In relation to the nonrefundable upfront fee, the franchise agreement required the
entity to render the following performance obligations:

To construct the franchisee’s stall with stand-alone selling price of P200,000.

To deliver 10,000 units of raw materials to the franchisee with stand-alone

selling price of P250,000.

To allow the franchisee to use the entity trade name for a period of 10 years
starting January 1, 2030 with stand-alone selling price of P50,000.

On June 30, 2030, the entity completed the construction of the franchisee’s stall.
On December 31, 2030, the entity was able to deliver 3,000 units of raw materials
to the franchisee. For the year ended December 31, 2030, the franchisee reported
sales revenue amounting to P100,000.

The entity had determined that the performance obligations are separate and distinct
from one another.

What is the amount of nonrefundable upfront fee to be allocated to the

construction of the franchisee’s stall?
A. 200,000
B. 160,000
C. 250,000
D. 120,000

33. An entity is employing backflush costing in connection with just-in-time

production process. The production data for the year is provided below:
• The entity acquired direct materials during the year at a cost of P100,000.
• The entity reported direct labor cost of P200,000.
• The actual factory overhead incurred during the year amounted to P170,000.
• The standard factory overhead application rate is 75% of direct labor cost.
• The ending finished goods inventory is reported at P120,000.

What is the cost of goods sold to be reported by the entity under backflush costing?
A. P470,000
B. P350,000
C. P330,000
D. P300,000
34. On January 1, 2021, an entity accepted a long-term construction project for an
initial contract price of P1,000,000 to be completed on June 30, 2023. On January
1, 2022, the contract price was increased to P1,500,000 by reason of change in the
design of the project. The project was completed on December 31, 2023 which resulted
to penalty amounting to P200,000. The outcome of the construction contract can be
estimated reliably.

The entity provided the following data concerning the direct costs related to the
said project:

2021 2022 2023

Costs during the year P440,000 P680,000 P130,000
Remaining estimated costs to
complete at the end of the year 660,000 280,000 -

What is the revenue to be recognized by the entity for the year ended December 31,
2021?
A. P340,000
B. P400,000
C. P440,000
D. P360,000

35. It is the currency in which the financial statements are presented

A. Foreign currency
B. Presentation currency
C. Functional currency
D. Legal tender

36. Items of assets and liabilities at functional currency shall be translated into
presentation currency at
A. Historical rate
B. Closing rate
C. Average rate
D. Opening rate

37. What is the initial measurement of foreign currency transaction?

A. Historical rate for monetary items and closing rate for nonmonetary items.
B. Historical rate for nonmonetary items and closing rate for monetary items.
C. Historical rate for both monetary items and nonmonetary items.
D. Closing rate for both monetary items and nonmonetary items.

38. Items of income and expenses at functional currency shall be translated into
presentation currency ay
A. Historical rate
B. Closing rate
C. Average rate
D. Opening rate

39. Unrealized holding gain or loss arising from changes in fair value of derivatives
shall be recognized in current earnings pertaining to effective portion

Fair value hedge Cash flow hedge

A. Yes No
B. Yes Yes
C. No Yes
D. No No
40. On January 1, 2020, a NPO received P5,000,000 cash donation from a donor who
stipulated that the amount should be invested indefinitely in revenue producing
investment. The deed of donation also provides that the dividend income shall be
used for the acquisition of computers of the NPO. On December 31, 2020, the NPO
received. P500,000 cash as dividend income from the investment of the fund. On
January 1, 2021, the NPO acquired a computer at a cost of P250,000 with a useful
life of 5 years without residual value.

How shall the cash flows be reported in NPO’s Statement of Cash Flows for the year
ended December 31, 2020?
A. Cash receipts from operating activities by P500,000
B. Cash receipts from financing activities by P5,500,000
C. Cash disbursements for investing activities by P250,000
D. Cash disbursements for investing activities by P500,000

41. Which of the following statements concerning the different types of hedging
transactions is incorrect?
A. In hedging transaction designated as cash flow hedge, unrealized holding gain
or loss on hedged item will be recognized in other comprehensive income with
reclassifications adjustment to profit or loss if realized.
B. In hedging transaction designated as fair value hedge, unrealized holding gain
or loss on hedged item will be recognized in profit or loss.
C. In hedging transaction which is undesignated, unrealized holding gain or loss
on hedging instrument will be recognized in profit or loss.
D. In hedging transaction designated as hedge of net investment in foreign
operation, unrealized holding gains or losses on hedging instrument which is
considered effective portion will be recognized in other comprehensive income with
reclassification adjustment to profit or loss if realized.

42. What is the effect of admission of a new partner to an existing partnership

through the purchase of interest of an existing partner?
A. It will result to partnership gain or loss.
B. It will increase the partnership total assets by the cash paid to the existing
partner.
C. It will not change the total capital of the partnership.
D. It will decrease the capital of the partnership by the capital to be transferred
to the new partner.

43. In statement of affairs, assets pledged for partially secured creditors are
A. Included with assets pledged for fully secured creditors
B. Offset against partially secured liabilities
C. Included with free assets
D. Disregarded

44. 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

45. Shey, Apple, and Tan are partners with capital balances of P112,500, P46,875,
and P140,625 respectively, sharing profits and losses in the ratio of 3:2:1. Paz
is admitted as a new partner bringing with him expertise and is to invest cash for
a 25% interest in the partnership which includes a P25,000 credit for goodwill upon
his admission. How much cash should Paz contribute?
A. P100,000
B. P225,000
C. P75,000
D. P125,000

46. Xatu and Yen have capital balances of P150,000 and P180,000 respectively. Zet
is to invest P60,000 for 15% in the partnership interest and is also in the profit
or loss. There is an undistributed income in the amount of P80,000. Partners X and
Y share profit and loss of 65:35. How much is the capital credit of Zet upon his
admission?
A. P60,000
B. P61,500
C. P72,000
D. P70,500

47. Which is true about a silent partner?

A. He involves in the day to day activities of the partnership.
B. He is considered a general partner.
C. None of the above
D. He is an adviser to the partnership.

48. Which of the following statements is correct?

Statement 1: The acquirer shall recognize the acquiree’s contigent liabilities if
certain conditions are met.
Statement 2: The acquirer shall recognize the acquiree’s contingent assets if
certain conditions are met.
A. I only
B. II only
C. Both I and II
D. Neither I or II

49. Miggy Company has the following information for July:

Units started 100,000 units

Beginning work in process (35% complete) 20,000 units
Normal spoilage (discrete) 3,500 units
Abnormal spoilage 5,000 units
Ending work in process (70% complete) 14,500 units
Transferred out 97,000 units

All materials are added at the start of the production process. Miggy Company
inspects goods at 75 percent completion as to conversion.

What are the equivalent units production for conversion costs, assuming FIFO?
A. 108,900
B. 103,900
C. 101,650
D. 106,525

50. Artic Company manufactures three products in a joint process which costs
P25,000. Each product can be sold at split-off or processed further and then sold.
10,000 units of each product are manufactured. The following information is
available for the three products:

Product Sales value at Seperable processing Sales value at

split-off costs after split - off completion
X P12 P9 P21
Y P10 P4 P17
 Z P15 P6 P19

To maximize profits, which products should Artic process further?

A. Product Y only
B. Product X and Z
C. Product X only
D. Product X, Y, and Z

51. Propaganda Corporation manufactures joint products X and Y and by-product A.

The joint costs are assigned to the joint products using the net realizable sales
value method, which considers further processing costs in succeeding operations.
The joint costs are allocated to by-product using the reversal cost method. The
total manufacturing costs for 10,000 units were P172,000 during the quarter.
Production and cost data follow:

X Y A
Units produced 5,000 4,000 1,000
Sales value per unit P50 P40 P5
Further processing costs per unit P10 P5 -
Disposal cost per unit P2
Desired profit per unit P1

The gross profit of product X

A. P120,000
B. P100,000
C. P70,000
D. P80,000

52. Zobel decides to contribute P5,000,000 to his alma mater. De La Salle University
agrees to pay Jacob fixed amount every month for the next years in exchange for the
donation. Zobel’s donation would be accounted for in the
A. Endowment fund
B. Restricted current fund
C. Annuity fund
D. Agency fund

53. Under Section 4, Article IX-D of the 1987 Philippine Constitution states that
this agency shall submit to the President and the Congress, within the time fixed
by law, an annual report covering the financial condition and operation of the
Government, its subdivisions, agencies, and instrumentalities, including
government-owned or controlled corporations, and non-governmental entities subject
to its audit, and recommend measures necessary to improve their effectiveness and
efficiency. It shall submit such other reports as may be required by law
A. Department of Finance
B. Bureau of Treasury
C. Department of Budget and Management
D. Commission on Audit

54. On January 1, 2021, the DPWH received a P10,000,000 appropriation from the
national government for the acquisition of machinery. On February 1, 2021, DPWH
received the allotment from the DBM. On March 1, 2021, DPWH entered into a contract
with CAT Inc. for the acquisition of the machinery with a price of P8,000,000. On
April 1, 2021, DPWH received the Notice of Cash Allocation from DBM net of 1%
withholding tax for income tax of supplier and 5% withholding of final tax on VAT
of supplier. On May 1, 2021, CAT Inc. delivered the machinery to DPWH. On June 1,
2021, DPWH paid the obligation to CAT Inc. On July 1, 2021, DPWH remitted the
withheld income tax and final VAT to BIR.
What is the journal entry on April 1, 2021?
A. Debit Cash – MDS Regular P7,520,000 and Credit Subsidy Income from National
Government P7,520,000.
B. Debit Machinery P8,000,000 and Credit Accounts Payable P8,000,000.
C. Debit Accounts Payable P8,000,000 and Credit Due to BIR P480,000 and Cash – MDS
Regular, P7,520,000.
D. Debit Due to BIR P480,000 and Credit Subsidy Income from National Government
P480,000.

55. ABC Corporation retails merchandise through its home office store and through
a branch store in a distant city. Separate ledgers are maintained by the home office
and the branch. The branch store purchase merchandise from the home office (at 120%
of home office cost), as well as from outside suppliers. Selected information from
the December 31, 2021 trial balances of the home office and branch is as follows:

Home Office Branch

Sales 240,000 120,000
Shipments to branch 32,000 -
Purchases 140,000 22,000
Inventory, January 1, 2021 80,000 60,000
Shipments from home office - 38,400
Expenses 56,000 24,000
Branch inventory allowance 14,400 -

Additional information:
• The entire difference between the shipment account is due to the practice of
billing and the branch at cost plus 20%.
• The December 31, 2015 inventories are 80,000 and 40,000 for the home office and
the branch respectively. (The branch purchased 16% of its ending inventory from
outside suppliers).
• Branch beginning and ending inventories include merchandise acquired from the
home office as well as from outside suppliers. Merchandise acquired from home
office is inventoried at 120% of home office cost.

Compute for the adjusted balance of branch inventory allowance and adjusted branch
net income
A. P8,800; P100,400
B. P5,600; P24,400
C. P14,400; P30,000
D. P8,800; P21,200

56. Under IFRS 10, what financial statements are required to be prepared and
presented by a parent corporation?
A. Consolidated financial statements and combined financial statements
B. Consolidated financial statements, combined financial statements, and
Separate financial statements
C. Combined financial statements, and separate financial statements
D. Only consolidated financial statements

57. The Snipe Co. owns 65% of the Genesis Co. On the last day of the accounting
year, Genesis sold to Snipe a non-current asset for P200,000. The asset originally
cost P500,000 and at the end of the reporting period its carrying amount in Genesis’
books was P160,000. The group’s consolidated financial statement of financial
position has been drafted without any adjustments in relation to this non-current
asset. Under IFRS 10, what adjustments should be made to the consolidated statement
of financial position figures for non-current assets and retained earnings?
 Non-current assets Retained Earnings
A. Increase by P300,000 Increase by P195,000
B. Reduce by P40,000 Reduce by P26,000
C. Reduce by P40,000 Reduce by P40,000
D. Increase by P300,000 Increase by P300,000

58. What links between power and right of variable returns in consolidated financial
statements?
A. Voting
B. Influence
C. Control
D. Exposure

59. Which of the following has a separate recognition criteria under IFRS 3?
A. Equity
B. Accounts receivable
C. Goodwill
D. Contingent consideration

60. Under IFRS 10, an investment entity is required to measure an investment in a

subsidiary at
A. Cost
B. Fair value through profit or loss
C. Fair value through other comprehensive income
D. Net realizable value

61. Which of the following statements is true/false about IFRS 4 Insurance

Contracts?
Statement I – IFRS 4 shall be applied by an entity to financial instruments that
it issues with a discretionary participation feature
Statement II – An insurer is allowed to re-measure designated insurance liabilities
consistently in each period to reflect current market interest rates.
Statement III – Insurance contracts shall apply to pre-need contracts

A. Statement I and III true, Statement II false

B. Statement I true, Statement II and III false
C. Statement I and II true, Statement III false
D. Statement III true, Statement I and II false

62. When shall an entity present all insurance finance income or expense?
A. Profit or loss
B. Other comprehensive income
C. Either A or B
D. Neither A or B

Insurance contracts, choices BCD are deferred (defective question)

63. On November 30, 2021, Juan Company authorized Miguel Corporation to operate as
a franchise for an initial franchise fee of P1,950,000. Of 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, 2022. The franchise agreement
shows that Juan Company has three performance obligations with their corresponding
standalone selling prices – Install computer equipment, P500,000; Supply initial
inventory, P200,000; Provide employee trainings, P300,000.
As of end of 2021, only the installation of computer equipment has been performed.
The two other obligations are yet to be performed. PV of 1 at 12% for 4 periods is
0.6355. The PV of an ordinary annuity of 1 at 12% for 4 periods is 3.0374. How much
is the earned franchise revenue for the year ended December 31, 2021?
A. P1,661,220
B. P830,610
C. P911,220
D. P0

64. Ola Company produces two products from a joint process – Dora and Boots. Joint
processing costs for production cycle are P8,000. The number of units to be produced
per product are – Dora, 1,500; Boots, 2,200. Sales price at split-off – Dora, P6.00;
Boots, P9.000. Using a physical measure, what amount of joint processing cost is
allocated to Dora?
A. P4,000
B. P4,757
C. P5,500
D. P3,243

65. Which is false statement regarding franchise accounting (IAS 18) answer is if
reasonably assured, use installment sales method
A. The initial franchise fee should not be recognized as revenue until the franchisor
has substantially performed the services required to be performed.
B. To recognize initial franchise fee as revenue, the franchisor is not obliged in
any way to refund cash already received or forgive debt.
C. If the collection of the related note receivable is reasonably assured,
installment method will apply.
D. The entire initial franchise fee shall be recognized as revenue if the franchise
has no other material conditions or obligations exist.

66. Selected information from the separate and consolidated income statements of
People Corporation and its subsidiary, Society Company for the year ended December
31, 2025 are as follows:

People Corp. Society Co. Consolidated

Sales P 600,000 P 420,000 P 924,000

Cost of Goods Sold 450,000 330,000 693,000
Gross Profit P 150,000 P 90,000 P 231,000

During 2025, People Corporation sold goods to Society Company at the same mark-up
on cost that People uses for all sales. At December 31, 2025, Society had not paid
all of these goods and still held 37.5% of them in inventory.

What is the original cost of goods in Society’s inventory acquired from People
Corp.?
A. P36,000
B. P27,000
C. P9,000
D. P18,000

67. Which is the best reason why the net income reported by the branch is less than
the net income computed by the home office concerning the branch operation?
A. Overstatement of goods in the beginning inventory of the branch for the goods
coming from the home office.
B. Understatement of goods in the beginning inventory of the branch for the goods
coming from the outside supplier.
C. Understatement of cost of goods sold reported by the branch for the goods coming
from the outside supplier.
D. Overstatement of cost of goods sold reported by the branch for the goods coming
from the home office.

68. When shall an entity recognize revenue from contracts with customers?
A. When it is probable that future economic benefits will flow to the entity and
the revenue can be measured reliably.
B. When or as the entity satisfies the performance obligation.
C. When the entity collected the cash from the customers.
D. When the entity and the customers sign the contracts.

69. Two entities established a business. The contractual agreement provided that
the relevant activities of the business will require unanimous consent of the two
parties. The business is not incorporated before SEC. The two parties equally own
interest in the said business. How should the two parties account for their
investment?
A. Proportionate consolidation
B. Joint operation
C. Joint venture
D. Business combination

70. In a job order system, indirect labor costs incurred would usually be included
in
A. Factory overhead control
B. Factory overhead applied
C. Work in process control
D. Accrued payroll

“For I, the Lord your God, hold your right hand; it is I who say to you, Fear
not, I am the one who helps you.”
Isaiah 41:13