Problem 1: Paul Corporation has the following information for the current month:

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
Beginning Work in Process Costs:
Material P15,000
Conversion 10,000

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

1. Refer to Paul Corporation. What are equivalent units of production for material, assuming FIFO?

2. Refer to Paul Corporation. What are equivalent units of production for conversion costs, assuming
FIFO?

3. Refer to Paul Corporation. What are equivalent units of production for material assuming weighted
average is used?

4. Refer to Paul Corporation. What are equivalent units of production for conversion costs assuming
weighted average is used?

Problem 2: The Steadler Corp. has a branch in Batangas. During 2022, shipmets to the branch costs
P100,000, billed at 130% of cost. Purchases from outsiders was P125,000 where sixty-four percent of
which remained unsold by year-end. P405,000 branch sales was reported. Expense allocated to the branch
totalled P115,000. On June 20, the home office purchased an equipment for the use of the branch
amounting to P200,000. The home office will maintain the records for the said fixed asset. Useful life is 5
years. The separate income of the home office is P170,000.

How much is the combined net income to be presented in the financial statements?

Problem 3: Psalm is currently preparing its combined financial statements. On December 31, 2013, the
home office account show a balance of P452,300. The branch sent a check for P12,000 on December 31
,2013. The home office did not receive the check until January 4, 2014. Furthermore, Psalm shipped
merchandise costing P20,000 to the branch on December 28, 2013 at a transfer price of P25,000. The
merchandise was not received by the branch until January 8, 2014. Lastly, advertising expenses of P8,500
were allocated by Psalm to the branch. This was recorded as P5,800 by the branch.
How much is the adjusted balance of the reciprocal accounts?

Problem 4: The following data were taken from the statement of realization and liquidation of
Intercontinental Corporation for the quarter ended June 30, 2023
Assets to be realized P515,625
Supplementary credits 796,875
Liabilities to be liquidated 843,750
Supplementary charges 731,250
Liabilities liquidated 562,500
Assets acquired 562,500
Assets realized 656,250
Liabilities assumed 281,250
Assets not realized 234,375

The ending capital balances of capital stock and retained earnings are P648,750 and P178,500,
respectively. A net loss of P226,500 for the period.

How much is the ending balance of cash?

Problem 5: On July 1, 2016, the company contracted to build an office building for a total contract price
of P975,000. The company opted to use the zero-profit method. Data relating to the project from 2016 to
2018 are as follows:

2016 2017 2018

Construction cost incurred to date 75,000 600,000 1,050,000
Estimated costs at completion 675,000 1,000,000 ?
Debits to accounts receivable 150,000 550,000 ?

1. What is the balance of the Construction-in-progress net of progress billings at December 31,
2017?

2. Assuming the company uses the percentage of completion method, what is the gross profit / (loss)
to be recognized for the year 2017?

Problem 6:
ABC Company acquires 80% of the outstanding ordinary shares of XYZ Company for P4,000,000 on January
1, 2021. The stockholders’ equity of XYZ Company as of date of acquisition were as follows:
15% preference shares, P100 par, cumulative, liquidation value of P120 P1,000,000
Ordinary shares, P10 par 2,000,000
Share premium 500,000
Retained earnings 1,500,000
Total shareholders’ equity P5,000,000

Preference shareholders were paid dividends in 2018. XYZ’s depreciable assets were undervalued by
P250,000 on date of acquisition. XYZ Company’s assets at date of acquisition also included goodwill
amounting to P50,000. The fair value of XYZ’s ordinary and preference shares were quoted at P20 per
share and P220 per share, respectively in an active market.

Required:
How much is the goodwill arising from the business combination?

Problem 7:
ABC Company produces two products jointly, products A and B. In the process of producing B, by-product
C is produced. Costs before split-off point are allocated to the joint products using the net realizable value
method. The by-product is recognized as inventory.
Costs before split-off point P45,000
Costs after split-off point
A 75,000
B 40,150
C 100
Production for April, in pounds
A 50,000
B 30,000
C 1,000
Sales for April
A 32,000 pounds @ P2.50 per lb.
B 18,000 pounds @ P1.75 per lb.
C 200 pounds @ P0.25 per lb.

Required:
How much is the gross profit to be recognized for the month of April?
Problem 8:
ABC Co.’s standard production cost per unit for direct materials and conversion costs amounted to P20
and P50, respectively. There is no beginning inventory for the period. The following transactions occurred
during the period:
a. Purchase of direct materials for P320,000
b. Incurred salaries of production personnel of P350,000
c. Depreciation of production equipment was estimated at P150,000
d. Other overhead costs amounted to P125,000
e. 15,000 units were completed
f. 14,500 units were sold for P120 per unit

Required:
1. How much is the ending Raw and In Process Inventory?
2. How much is the ending Finished Goods Inventory?
3. How much is the Cost of Goods Sold for the period?

Problem 9:
On January 1, 2021, ABC Co. entered into a contract with franchisee for a period of ten years commencing
at the start of operations of the franchisee. The franchise agreement provides for the following:
• P1,000,000 paid upon signing of the contract
• P250,000 payment every December 31 for three years, as evidenced by a 5% note
• Royalty payments of 2.5% of monthly gross sales of the franchisee

The effective rate for a similar note provided by the franchisee is 6%.

The franchise agreement provides for the following separate performance obligations (together with
their respective stand-alone prices):
1. Rights to trade name – P600,000
2. Site location, feasibility studies, employee training and other initial services – P400,000

The franchisor does not transfer control of the rights to the trade name. The franchisor completed all
initial services required under the franchise agreement during 2021. The franchisee was able to start
operations on October 1, 2021 and generated sales of P500,000 for the year 2021 and P1,200,000 for
2022.

Required:
1. How much is the total revenue for 2021?
2. How much is the total revenue for 2022?

Problem 10. BBB will issue 50,000 of its P5 par value common shares for the net assets of CCC. CCC’s
trial balance at the date of acquisition shows the following:

DR CR
Current assets P420,000
PPE 980,000
Liabilities P500,000
Ordinary share, P5 par 180,000
Share premium 320,000
Retained Earnings 400,000

CCC’s current assets are appraised at P550,000 and the PPE was also appraised at P1,800,000. Its liabilities
are fairly valued. Accordingly, BBB issued common shares with total market value equal to CCC’s net assets
including goodwill of P200,000.

What is the market value per share of BBB‘s common shares at the date of business combination?
A. P37
B. P22
C. P41
D. P51
Problem 11. On June 30, 2032, PPP, Inc. purchased 70 percent of the ordinary shares of SSS Company
for P700,000. At that date, SSS had P650,000 of ordinary shares outstanding and retained earnings of
P250,000. All of the purchase difference was related to a building with a book value of P175,000 and a
remaining life of 10 years. PPP’s retained earnings balance at December 31, 2032 was P755,000. The
income and dividend figures for both PPP and SSS for 2032 are as follows:

Income Dividends
PPP (own operations) 275,000 70,000

SSS: Jan 1 to June 30 80,000 30,000

July 1 to Dec 31 100,000 0

On December 31, 2032, the consolidated retained earnings is:

A. 821,500 B. 856,500 C. 1,026,500 D. 1,021,500

Problem 12. AAA Corporation acquired an 80% interest in RRR Company on January 1, 2034 for
P1,225,000. On this date the capital stock and retained earnings of the two companies were as follows:
AAA RRR
Capital stock P3,150,000 P875,000
Retained earnings 1,400,000 175,000

The assets and liabilities of RRR were stated at their fair values when AAA acquired its 80% interest and
the proportionate share in net identifiable assets was used to initially measure the non-controlling
interest. AAA uses the cost method to account for its investment in RRR

Net income and dividends for 2034 for the affiliated companies were:

AAA RRR
Net income P525,000 P157,500
Dividends declared 315,000 87,500
Dividends payable December 31, 2034 157,500 43,750

The consolidated dividends payable at December 31, 2034:

a. P201,250 b. P166,250 c. P157,500 d. P0

Problem 13. PP Corp owns 80% of SS Inc.’s ordinary shares. During 2033, PP sold SS P250,000 of inventory
on the same terms as sales made to third parties. SS sold all of the inventory purchased from PP in 2033.
The following information pertains to SS and PP’s sales for 2033:
PP SS
Sales……………………………….. P1,000,000 P700,000
Cost of Sales………………… 400,000 350,000
P 600,000 P350,000

What amount should PP report as Cost of Sales in its 2033 consolidated income statement?
a. P750,000 b. 680,000 c. 500,000 d. 430,000

Problem 14. On January 1, 2033, LLL, BBB and DDD (the joint operators) jointly buy a helicopter for P30
million cash. The joint arrangement includes the following terms:
a. The parties are the joint owners of the helicopter
b. The helicopter is at the disposal of each party for 70 days each year
c. The parties may decide to use the helicopter or lease it to a third party
d. The maintenance and disposal of the helicopter require the unanimous consent of the parties
e. The contractual arrangement is for the expected life (20 years) of the helicopter and can be
change only if all parties agree. The residual value of the helicopter is nil.
f. Revenues and expenses are to be shared equally among the joint operators.

In 2033, the parties paid P300,000 to meet the costs of maintaining the helicopter. In 2033, each party
also incurred costs of running the helicopter when they made use of the helicopter (e.g. LLL incurred
 costs of P200,000 on pilot fees, aviation fuel and landing costs). In 2033, the parties earned rental
income of P2.5 million by renting the helicopter to others.

What is the book value of the helicopter in the books of LLL on December 31, 2033?

A. P28.5M B. P19M C. P21M D. P9.5M

Problem 15. CC, PP and AA, accountants, agree to form a partnership and to share profits in the ratio of
5:3:2. They also agreed that AA is to be allowed a salary of P 14,000 and that PP is to be guaranteed P
10,500 as his share of the profits. During the first year of operation, income from frees are P 90,000,
while expenses total P 48,000. What amount of net income should be credited to CC’s capital account?
A. P12,500
B. P14,000
C. P15,050
D. P12,688

Problem 16. The partnership of OOO, MMM, and NNN has the following account balances:
Cash P 36,000
Noncash assets 100,000
Liabilities P17,000
OOO, Capital 69,000
MMM, Capital (8,000)
NNN, Capital 58,000

This partnership is in the process of being liquidated. OOO and MMM are each entitled to 40% of all
profits and losses with the remaining 20% to NNN.

What is the maximum amount that MMM has to contribute to this partnership because of the deficit
capital balance?
a. 48,000
b. 19,000
c. 84,000

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