AFAR05 - Preweek Handout

No. 125 Brgy.
San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com
AFAR PREWEEK HANDOUT
1. On January 1, 2020, Tony, Irene and Julius entered into articles of co-partnership for the
operation of SIB computer shop. Toni contributed investment property with assessed value of
P1,700,000 subject to mortgage payable of P500,000 to be assumed by the partnership. Irene
contributed computer equipment with cost of P600,000 with accumulated depreciation of
P200,000. The fair market value of the computer equipment is P300,000. On January 2,
2020, the partnership was able to sell the investment property for P2,000,000. How much
cash shall be contributed by Julius if the articles of co-partnership provide that Toni will have
60% interest in the partnership?
a. P500,000
b. P700,000
c. P800,000
d. P600,000
2. At the date of partnership formation of ABC partnership, the amount credited to A’s capital
is less than the fair market value of the property he contributed. Which of the following is the
most valid reason?
a. The property contributed by A is impaired.
b. The property contributed by A has been subjected to positive asset revaluation.
c. Bonus has been given by partner A to the other partners.
d. Goodwill arising from partnership formation has been recognized.
3. On January 1, 2030, John, Earl and Chico organized a partnership wherein John contributed
P1M for 20% interest in the partnership. Earl contributed P3M for a capital credit of P2.5M.
After closing the accounting book, Earl and Chico made drawings of P300,000 and
P100,000, respectively. Their profit/loss agreement are presented below:
 Quarterly salary of P20,000, P5,000 and P60,000 respectively

 The remainder will be divided in the ratio of 1:5:4
On December 31, 2030, the capital balance of Chico is P1,600,000. What is the net income
of the partnership for the year ended December 31, 2030?
a. P340,000
b. P300,000
c. P240,00
d. P440,000
4. How shall the net profit or net loss of the partnership be divided among the partners, whether
capitalist or industrial?
a. In accordance with their capital contribution ratio.
b. In accordance with just and equitable sharing taking into account the circumstances of the
partnership.
c. Equally
d. In accordance with the partnership agreement.
5. On December 31, 2020, the capital balance of partners Marie, Shey and Irene of MSI
Partnership are P2M, P5M and P3M, respectively with profit or loss agreement ratio of 1:3:6,
respectively. On January 1, 2021, Tony is admitted to the partnership by acquiring 40% of
Irene capital interest and profit interest at a price of P1,500,000. MSIT partnership reported
P1M net income for year 2021. What is the capital balance of Sally on December 31, 2021?
a. P1,740,000
b. P1,900,000
c. P1,440,000
1|P a g e RFERRER/ATAN G/PDEJESUS

No. 125 Brgy. San Sebastian
Mobile : 0927 283 8234
Telephone : (043) 723 8412
d. P1,600,000
6. Using the same data in the preceding number, what is the capital balance of Marie on
December 31, 2021?
a. P2,100,000
b. P2,130,000
c. P2,040,000
d. P2,070,000
7. The balance sheet of the Shai, Irish, and John partnership on January 1, 2019 ( date of
partnership dissolution) was as follow:
Cash P4,000 Liabilities P8,000

Other asset 26,000 Loan from Shai 1,000
Loan to John 2,000 Shai, Capital (20%) 2,000
Irish, Capital (40%) 9,000
John, Capital (40%) 12,000
Total Assets P32,000 Total liab//equity P32,000
In January, other assets with book value of P16,000 were sold for P10,000 in cash. Using a
safe payments schedule, how much will each partner receive as cash distribution after the
liabilities had been paid?
a. Shai – P1,200; Irish – P1,800; John – P3,000
b. Shai – P0; Irish – P2,500; John – P3,500
c. Shai – P1,800; Irish – P1,800 ; John – P2,400
d. Shai – P0; Irish – P2,000 ; John – P4,000
8. In partnership liquidations, what are safe payments?

a. The amounts of distributions that can be made to the partners during the liquidation based
on the partner's contributed capital return.
b. The amounts of distributions that can be made to the partners, after all creditors have
been paid in full.
c. The amounts of distributions that can be made to the partners with assurance that such
amounts will not have to be returned to the partnership.
d. The amounts of distributions that can be made to the partners, after all non-cash assets
have been adjusted to fair market value.
9. On June 30, 2019, the Mike, Chris, and Alaine partnership h. the following fiscal year-end
balance sheet:
Cash P8,000 Accounts Payable P14,000

Accounts receivable 12,000 Loan from Alaine 10,000
Inventory 28,000 Mike, Capital ( 20%) 28,000
Plant asset – net 24,000 Chris, Capital (20%) 20,000
Loan to Able 12,000 Alaine, Capital 12,000
(60%)
Total Asset P84,000 Total Liab./equity P84,000
The percentages shown are the residual profit and loss sharing ratios. The partners dissolved
the partnership on July 1, 2019 and began the liquidation process. During July the following
events occurred:
 Receivables of P6,000 were collected.

 All inventory was sold for P8,000. :

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 All available cash was distributed on: July 31, except for P4,000 that was set aside for
contingent; expenses.
The book value of the partnership equity (i.e., total equity of the partners) on June 30, 2019 is
a. P 84,000
b. P120,000
c. P 60,000
d. P58,000
10. The cash available for distribution to the partners on July 31, 2019 is
a. P22,000
b. P14,000
c. P 4,000
d. P 8,000
11. How much cash would Chris receive from the cash that is available for distribution on Kuly
31? (Assume a safe payments schedule is used).
a. P0
b. P2,400
c. P4,000
d. 800
12. How much cash would Mike receive from the cash that is available for distribution on July
31? (Assume a safe payments schedule is used.)
a. P4,000
b. P0
c. P2,400
d. P800
13. Manila Manufacturing Co. Uses a job order cost system. Its cost sheet for the month of April
2019 were as follows:
Job 410 Job 411 Job 412 Job 413 Job 414 Job 415
Work in progress April 1
2019
Direct Materials 1,200 750
Direct Labor 1,800 1,440
Applied factory overhead 1,170 936
Finished goods April 1, 2019

Direct material s 9,000 3,360
Direct Labor 12,000 4,200
Applied overhead 7,800 2,730
Cost utilized in April

Direct material s 5,460 6,600 18,000 2,400
Direct Labor 7,200 8,400 21,000 3,600
Applied overhead 4,680 5,460 13,650
The company completed three jobs (Job Nos. 412,413 and 414) during April 2019. The
applied factory overhead rate is 65% of direct labor cost, is the same for each job. Thus,
overhead was added to the cost sheets of said jobs on the aforementioned rate. Actual factory
overhead as at April1, 2019 amounted to P18,000. Actual overhead for the month of April
totalled P 9,000

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Telephone : (043) 723 8412
The cost of goods manufactured for the month of April 2019 is

a. P97,746
b. P97,647
c. P97,476
d. P97,674
14. The cost of goods manufactured for Jobs 412 is

a. P 52,650
b. P 21,510
c. P 23,586
d. P 51,650
15. The cost of goods manufactured for Job 413 is

a. P 23,566
b. P 23,586
c. P 21,150
d. P 21,510.
16. The cost of goods manufactured for Jobs 414 and total manufacturing cost for Job 415,
respectively, are
a. P 4,170 and P 3,126
b. P 28, 800 and P 10,290
c. P 17,340 and P 20,460
d. P 52,650 and P 8,340
17. If the under or over applied factory overhead is significant, it shall be closed to
a. Cost of goods sold only
b. Finished goods and cost of goods sold proportionately
c. Work in process, finished goods and cost of goods proportionately
d. Raw materials, work in process, finished goods, and cost of goods sold proportionately
18. When will the average process costing method produce the same cost of goods manufactured
as the first in first out process costing method?
a. When materials are added 100% at the end of the process.
b. When materials are added 100% at the beginning of the process.
c. When the beginning work in process inventory and ending work in process inventory are
equal.
d. When there is no beginning work in process inventory.
19. Julius Inc. employs process costing for its inventory. Conversion costs are added uniformly
at the end of the period while direct materials are added 100% at the start of the production
process. The following data are provided:
Beginning WIP Inventory 20,000 units (20% completed as to conversion)

Units started 80,000 units
Ending WIP Inventory 10,000 (60% incomplete as to conversion)
 There is no spoilage during the period.

 The cost of beginning inventory is P500,000 consisting of P200,000 direct materials and
P300,000 conversion costs.
 The total manufacturing cost is P2.2M consisting of P400,000 direct materials and
P1,800,000 conversion costs.

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Telephone : (043) 723 8412
What is the cost per unit for direct materials under FIFO process costing?
a. P5
b. P4
c. P6
d. P7.5
20. Using the same data in number 19, what is the conversion cost per unit for Average process
costing?
a. P20
b. P30
c. P22.34
d. P19.15
21. Tristan Inc. employs process costing for its inventory. Conversion costs are added uniformly
at the end of the period while direct materials are added 100% at the end of the production
process. The following data are provided:
Beginning WIP Inventory 10,000 units (10% incomplete as to conversion)
Units started 50,000 units
Units completed 40,000 units
Ending WIP inventory 12,000 units (80% completed as to conversion cost)
 Normal loss is 10% of units started during the period.

 Inspection point occurs when the production is 90% completed as to conversion.
What is the equivalent unit of production of direct materials under average process costing?
a. 40,000
b. 30,000
c. 52,000
d. 60,000
22. Using the same data in number 21, what is the equivalent unit of production of conversion
cost under FIFO process costing?
a. 47,800
b. 40,600
c. 55,800
d. 41,400
23. Which costing system is ideal for backflush costing and just in time inventory system?
a. Actual costing system
b. Normal costing system
c. Standard costing system
d. Budgeted costing system
24. ABC Company has a cycle of 3 days, uses a Raw and In Process Account and charges all
conversion costs to cost of goods sold. At the end of each month, all inventories are counted,
their conversion costs components are estimated, and inventory account balances are
adjusted. Raw material cost is backflushed from RIP to finished goods. The following
information is provided for the month of June.
Beg. Bal. of RIP account, including P1,000 conversion cost P5,000

Beg. Bal. of finished goods accounting including P6,000 conversion cost 10,000
Raw materials received on credit 400,000
Direct labor cost P300,000; Factory overhead applied P500,000 800,000
Ending RIP inventory per physical count, including P7,000 conversion cost 20,000
Ending finished goods inventory per physical count, including P4,000 conversion cost 6,000

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Telephone : (043) 723 8412
What is the amount of conversion cost in units sold in June?

a. P802,000
b. P796,000
c. P794,000
d. P800,000
25. Using the same data in number 25, what is the amount of direct materials backflushed from
RIP to finished goods?
a. P391,000
b. P404,000
c. P387,000
d. P395,000
26. 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
27. Which of the following factors would guide you in classifying a product as a main product or
by-product?
a. Weight or volume of outputs per period
b. Number of units per processing period
c. Joint costs incurred up to the split-off point
d. Percentage of total sales value
28. Which of the following statements is TRUE of joint costing?

a. The costs of a production process that yields multiple products simultaneously are called
joint costs.
b. Joint costing is less useful for companies which manufacture multiple products
simultaneously from the same production process.
c. Distribution costs incurred beyond the split-off point that are assignable to each of the
specific products identified at the split-off point are considered as joint costs.
d. The primary purpose of joint costing is to allocate the separable costs to the individual
products that are eventually sold.

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29. The unadjusted balance in the Allowance, for Overvaluation account at year-end represents
a. The mark-up on the merchandise available for sale by the branch for the year.
b. The mark-up on the merchandise shipped to the branch during the year.
c. The mark-un on merchandise shipped to the branch during the year less the mark-up on
the merchandise returned by the branch during the year.
d. The mark-up on the cost of goods sold by the branch for the year.
30. 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.
31. Neither the Palmer Branch nor the home office of Rupert Company had completed any
intracompany transactions during the last half of May, the credit balance of the branch’s
Home Office ledger account on May was larger than the debit balance of the home office's
Investment in Palmer Branch account. The most likely reason for this discrepancy is:
a. The home office reported a net loss for the month of May.
b. The branch reported a net income for the month of May.
c. The branch reported a net loss for the month of May.
d. The branch returned merchandise to the home office.
32. On January 1, 2019, Star 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.
 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. P41,000
b. P62,000 d. P45,000
33. Sol Company decided to open a branch in Manila. Shipments of merchandise to the branch
totaled P108,000 which included a 20% mark-up on cost. All accounting records are kept at
the home office. The branch submitted the following report summarizing the operations for
the year ended December 31, 2018:
Sales on account 148,000

Sales on cash basis 44,000

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Collections of accounts receivable 120,000

Expenses paid 76,000
Expenses unpaid 24,000
Purchase of merchandise for cash 52,000
Inventory on hand, December 31; 80% from home 60,000
office
Remittance to home office 110,000
What is the branch inventory on December 31, 2018 at cost?

a. 50,000
b. 40,000
c. 52,000
d. 20,000
34. What is the true branch net income for the current year?
a. 2,000
b. 8,000
c. 1,600
d. 1,000
35. 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.
36. Which of the following cash in bank accounts is used by national government agencies for
cash remittances to Bureau of Treasury?
a. Cash Treasury/Agency Deposit Regular
b. Cash – Modified Disbursement System – Regular
c. Cash in Bank Land Bank of the Philippines
d. Cash in Bank Bangko Sentral ng Pilipinas
37. In the statement of activities, expenses of non-profit organization shall be recorded only as
reduction from
a. Temporarily restricted net assets
b. Unrestricted net assets
c. Permanently restricted net assets
d. Current liability
38. Last year, a non-profit organization received a contribution with a donor restriction for
educational scholarship of its members. In the current year, the non-profit organization fully
spent the said contribution for the intended purpose. What is the effect of this expenditure to
current year’s change in net assets?
a. It will increase the temporarily restricted net assets.
b. It will not affect the unrestricted net assets.
c. It will not affect the total net assets.
d. It will decrease the permanently restricted net assets.
39. On January 1, 2020, Red Cross Inc., a non-profit organization, received P10M cash donation
from Richy Rich 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, Red Cross Inc.
received P200,000 cash as dividend income from the investment of the fund. On January 1,

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2021, Red Cross Inc. acquired a personal computer at a cost of P50,000 with a useful life of
5 years without residual value. How shall the transactions be reported in NPO’s Statement of
Activities for the year ended December 31, 2020?
a. There shall be increase in unrestricted net asset by P50,000.
b. There shall be decrease in temporary restricted net asset by P200,000.
c. There shall be increase in permanently restricted net asset by P10M and increase in
temporary restricted net asset by P200,000.
d. There shall be increase in unrestricted net asset by P10,200,000.
40. In the accounting statement of affairs, the gains or losses upon liquidation would equal:
a. Net book value of assets minus book value of liabilities
b. Book value of assets minus their realizable value
c. Total estimated realizable value of assets minus the amount assigned to secured
creditors
d. Total estimated realizable value of assets minus the amount remaining for Class 7
unsecured creditors
41. Evaluate the following statements:
I. In the accounting statement of affairs, the emphasis is on the asset net realizable
value, not on historical costs
II. The accounting statement of affairs is based on estimated values; actual realized
values may be different
a. Both statements are true
b. Both statements are false
c. Only statement 1 is true
d. Only statement 2 is true
42. Companies recognize revenue only when

a. A contract is reasonably likely to exist
b. A performance obligation is likely to exist
c. A written contract is in place and payment is variable
d. Control over goods or services has been transferred from the seller to the customer
43. Under PFRS 15, if the Construction in Progress is higher than Progress Billings there
should be recognition of?
a. Inventory
b. Accounts Receivable
c. Contract Receivable
d. Contract Liability

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44. Franchise revenue are recognized overtime if

a. Franchise rights are transferred at a point in time
b. The franchisor is providing access to the right rather than transferring control
c. Performance obligations regarding franchise rights are completed when franchise
opens
d. The franchisee fee is payable upon signing contract
45. Revenue is recognized upon completion of substantial performance and used when
realization of revenue is reasonably assured
a. Cost recovery method

b. Accrual method
c. Installment method
d. Deposit method
46. The direction of intercompany sales (upstream or downstream) does not affect
consolidation workpaper procedures when the intercompany sales between affiliates are
made:
A. At fair value
B. Above market value
C. At book value
D. To a 100 percent-owned subsidiary
47. The material sale of inventory items by a parent company to an affiliated company
A. Enters the consolidated revenue computation only if the transfer was the result
of arm's length bargaining.
B. Affects consolidated net income under a periodic inventory system but not
under a perpetual inventory system.
C. Does not result in consolidated income until the merchandise is sold to outside
parties
D. Does not require a working paper adjustment if the merchandise was
transferred at cost
The following transactions were ascertained during bankruptcy of SNOW Co.:

A mortgage payable of P385,000 is secured by building valued at P30,000 less that its
carrying amount of P460,000. Note payable of P195,0000 is secured by furniture and
equipment with a carrying amount of P240,000 that is estimated to be 70% unrealizable.
Assets not mentioned above have an estimated value of P125,000, an amount that is P30,000
below its carrying amount. Total liabilities not mentioned above total P192,000, including
claims with priority of P37,000, interest on the mortgage of 5,000 and interest on the note of
1,600.
48. What is the estimated recovery percentage of the partially secured creditors?
a. 66.34%
b. 69.53%
c. 68.23%
d. 67.21%
10 | P a g e RFERRER/ATANG/PDEJESUS
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49. What is the estimated loss on realization of assets?

a. 132,000
b. 228,000
c. 120,000
d. 198,000
50. What is the estimated payment to creditors without priority?

a. 128,000
b. 69,584
c. 71,748
d. 130,250
51. The following data were taken from the statement of affairs for AAA Company:
Assets pledged for fully secured liabilities (Fair value, 180,000

150,000)
Assets pledged for partially secured liabilities (Fair value, 148,000

104,000)
Free Assets (fair value, 80,000) 140,000
Unsecured liabilities with priority 14,000
Fully secured liabilities 60,000
Partially secured liabilities 120,000
Unsecured liabilities with priority 224,000
Compute the estimated recovery per peso of unsecured claims:

a. 0.65
b. 0.98
c. 1.00
d. 0.70
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52. The following data relating to a construction job started by Psalm co. During 2036:
Total contract price P200,000

Actual cost during 2036 40,000
Estimated remaining cost 80,000
Billed to customer during 2036 60,000
Received from customer during 2036 20,000
How much gross profit would Psalm co. recognized for 2036 under the zero profit method and
the percentage of completion method?
A. 0 and 26,667
B. 0 and 53,333
C. 8,000 and 26,667
D. 24,000 and 66,6667
53. Shadow construction company Inc., entered into a firm fixed price contract with Sky
Association in July 1, 2034 to construct a 4-story office building. At that time, Shadow
estimated that it would take between 2 and 3 years to complete the project. The total contract
price for construction of the building is P8,000,000. Shadow appropriately accounts for this
contract under the zero-profit method in its financial statements and for income tax reporting.
The building was deemed substantially completed on December 31, 2036. Estimated
percentage of completion, accumulated contract costs incurred, estimated cost to complete the
contract and accumulated billings to Sky under the contract were as follows;
12/31/2034 12/31/2035 12/31/2036

% of Completion 10% 60% 100%
Contract cost incurred P700,000 P5,000,000 P8,500,000
Estimated cost to complete the contract P6,300,000 P3,400,000
Billings to Sky P1,440,000 P4,320,000 P7,200,000
The amount to be shown as excess of cost over billings or (billings in excess of cost) in
December 31, 2036
A. (800,000)
B. 520,000
C. 800,000
D. (520,000)
54. Cudia constructor's inc. has the following data for large jobs in its Jobs in Progress account
Project No. Actual Cost Estimated Total Cost Contract Percent

Price Complete
101 P17,512 P345,600 P384,000 5
102 22,914 29,750 35,000 75
103 107,730 122,500 175,000 80
104 45,600 79,520 99,400 55
105 89,000 244,620 302,000 35
P282,756 P821,990 P995,400
The company accounts for its large jobs under the percentage of completion method. Billings are
done as follows:
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A. 20% down payment upon contract signing

B. Balance is billed according to percentage of completion less application of the down payment
which is also according to percentage of completion.
The total billings made for large jobs is

A. 406,572
B. 199,080
C. 208,492
D. 387,572
55. On January 2, 2036, EYE, Inc , authorized Pillar to operate as a franchisee for an initial
franchise fee of P1,500,000. Of this amount, P600,000 was received as down payment upon
signing the agreement, and the balance represented by 12% note due in the 3 annual
payments, beginning December 31, 2036. EYE rendered the required initial services at a cost
of P150,000 and QQQ was able to operate on April 27, 2036.
Assuming the collection of the note is not reasonably assured, the realized revenue from the
initial franchise fee on December 31, 2036 is:
A. 720,000
B. 1,300,000
C. 600,000
D. 900,000
56. Using the data above, but assuming the collection is of the note is reasonably assured, the net
income to be presented in its statement of comprehensive income on December 31, 2036 is:
A. 1,308,000
B. 1,800,000
C. 1,300,000
D. 1,500,000
57. On August 31, 2036, Q9 Inc., entered into franchise agreements with 2 franchisees. The
agreements required an initial franchise fee of P1,400,000 plus 4 payments of P600,000 due
every 4 months, the first payment is due on December 31, 2036. The market interest rate is
12%. The initial deposit is refundable until substantial performance has been completed. The
following data describes the agreement:
Franchise Probability of full Services performed by Total cost incurred to

collection franchisor 12/31/2036 12/31/2036
Baras Likely Substantially P1,400,000
Antipolo Doubtful 25% N/A
The present and future value tables at 4% for 4 periods were as follows:
Present value of P1 0.8548
Present value of an annuity of P1 3.6299
Future value of P1 1.1699
Future value of an ordinary annuity of P1 4.2465
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What amount of net income is to be reported by Q9 in 2036, assuming P2,000,0000 was received
from each franchisee during the year
Baras. Antipolo
A. 2,177,890. 0
B. 3,577,490. 0
C. 2,265,058. 0
D. 2,265,058. 87,118
58. Makati corporation and Saigon company agreed to combine their business with Makati
corporation as the surviving company. Makati will issue 48,000 shares of its capital stock,
with a par value of P200 per share and a fair market value of P350 per share. Makati
incurred the following additional acquisition - related costs.
Professional fees P240,000

Broker's fee 160,000
Costs to register and issue stock 100,000
Before combination, their respective statement of financial position showed stockholders'

equity Accounts as follows:
Makati Saigon
Capital Stock 14,400,000 7,200,000
Share Capital 6,240,000 720,000
Retained Earnings 12,000,000 4,080,000
The total stockholders' equity of Makati Corporation after the combination is:
A. 49,440,000
B. 48,940,000
C. 49,340,000
D. 49,780,000
59. PTV Corporation issued 120,000 of P20 par ordinary shares with a fair value if P5,100,000
for all outstanding stock of HTV company. In addition, PTV incurred of the following costs
Professional fees to arrange the business combination. P 54,000

Cost of SEC Registration 24,000
Cost of printing and issuing stock certificates 6,000
Immediately before the business combination in which HTV company was dissolved, HTV's
asset and equities were as follows:
Book value Fair value
Current assets P2,000,000 P2,200,000
Plant assets 3,000,000 4,400,000
Liabilities 600,000 600,000
Ordinary shares 4,000,000
Retained Earnings 400,000
Mobile : 0927 283 8234
Telephone : (043) 723 8412
What is the amount of goodwill (gain on acquisition)?

A. 900,000
B. (1,100,000)
C. (900,000)
D. 1,000,000
60. Using the data on the previous number, how much share premium is recorded by PTV?
A. 2,700,000
B. 2,670,000
C. 2,730,000
D. 2,660,000
61. TINA corporation holds 80% of the stock of SHE company. During 2036 TINA purchased
merchandise for P80,000 and resold P60,000 to SHE for P96,000. SHE company reported
sales of P134,000 in 2036 and had inventory of P32,000 on December 31, 2036. The
companies had no beginning inventory and had no other transactions in 2036.
What amount of cost of goods sold and consolidated comprehensive income will be
reported in the 2036 consolidated statement of comprehensive income?
Cost of goods sold Consolidated net income

A. 40,000 106,000
B. 60,000 80,000
C. 104,000 94,000
D. 40,000 94,000
62. Several years ago ABC company acquired 70% of XYZ Company at book value. Relevant
data for 2025 are as follows:
ABC XYZ
CI from own operations P800,000 P500,000
Dividends declared and paid in 2025 540,000 220,000
Merchandise from intercompany sales in
ABC inventory:
January 01, 2025 80,000
December 31, 2025 140,000
Gross profit rate on sales:
2024 70% 40%
2025 75% 30%
Consolidation CI for 2025 is:

A. P900,000
B. P1,290,000
C. P1,190,000
D. P1,890,000
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Use the following data in answering the next two questions

On January 1, 2036, QQQ company purchased 80% interest in BBB inc., for P2,000,000. The
equity balances of BBB at the time of the purchase were as follows:
Ordinary Share P 200,000

Share Premium 800,000
Retained earnings 1,000,000
Any excess of cost over book value is attributable to goodwill.

No dividends were paid by either company during 2036. The following income statement data
were prepared for QQQ Company and its subsidiary, BBB Inc., on December 31, 2036
QQQ BBB
Sales P1,200,000 P 600,000
Other income 80,000 30,000
Cost of goods sold 640,000 360,000
Operating expenses 300,000 64,000
On January 1, 2036, BBB sold a machine to QQQ company for P80,000. The machine cost BBB
P100,000, and P50,000 of accumulated depreciation had been recorded as of the sale date. The
machine had a 5 year remaining useful life and no salvage value. QQQ company is issuing
straight line depreciation.
Since the purchase date, QQQ has sold merchandise for resale to BBB Inc., at a mark up on cost
of 25%. Sales during 2036 were P300,000. The inventory of these goods held by BBB was
P30,000 on January 1, 2036, and P36,000 on December 31, 2036.
63. What is the amount of goodwill to be reported on the January 1, 2031 consolidated
statement of financial position, assuming goodwill is measured at fair value?
A. 500,000
B. 400,000
C. 300,000
D. 600,000
64. What is the consolidated net income attributable to controlling interest to be reported in the
consolidated statement of comprehensive income on December 31, 2036?
A. 484,400
B. 484,000
C. 726,000
D. 520,800
-end

AFAR05 - Preweek Handout

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AFAR05 - Preweek Handout

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No. 125 Brgy.

AFAR PREWEEK HANDOUT

 Quarterly salary of P20,000, P5,000 and P60,000 respectively

1|P a g e RFERRER/ATAN G/PDEJESUS

Cash P4,000 Liabilities P8,000

8. In partnership liquidations, what are safe payments?

Cash P8,000 Accounts Payable P14,000

 Receivables of P6,000 were collected.

2|P a g e RFERRER/ATAN G/PDEJESUS

Finished goods April 1, 2019

Cost utilized in April

3|P a g e RFERRER/ATAN G/PDEJESUS

The cost of goods manufactured for the month of April 2019 is

14. The cost of goods manufactured for Jobs 412 is

15. The cost of goods manufactured for Job 413 is

Beginning WIP Inventory 20,000 units (20% completed as to conversion)

 There is no spoilage during the period.

4|P a g e RFERRER/ATAN G/PDEJESUS

 Normal loss is 10% of units started during the period.

Beg. Bal. of RIP account, including P1,000 conversion cost P5,000

5|P a g e RFERRER/ATAN G/PDEJESUS

What is the amount of conversion cost in units sold in June?

28. Which of the following statements is TRUE of joint costing?

6|P a g e RFERRER/ATAN G/PDEJESUS

Sales on account 148,000

7|P a g e RFERRER/ATAN G/PDEJESUS

Collections of accounts receivable 120,000

What is the branch inventory on December 31, 2018 at cost?

8|P a g e RFERRER/ATAN G/PDEJESUS

a. Net book value of assets minus book value of liabilities

b. Book value of assets minus their realizable value

41. Evaluate the following statements:

a. Both statements are true

b. Both statements are false

c. Only statement 1 is true

d. Only statement 2 is true

42. Companies recognize revenue only when

9|P a g e RFERRER/ATAN G/PDEJESUS

44. Franchise revenue are recognized overtime if

a. Cost recovery method

The following transactions were ascertained during bankruptcy of SNOW Co.:

49. What is the estimated loss on realization of assets?

50. What is the estimated payment to creditors without priority?

Assets pledged for fully secured liabilities (Fair value, 180,000

Assets pledged for partially secured liabilities (Fair value, 148,000

Free Assets (fair value, 80,000) 140,000

Unsecured liabilities with priority 14,000

Fully secured liabilities 60,000

Partially secured liabilities 120,000

Unsecured liabilities with priority 224,000

Compute the estimated recovery per peso of unsecured claims:

Total contract price P200,000

12/31/2034 12/31/2035 12/31/2036

Project No. Actual Cost Estimated Total Cost Contract Percent

A. 20% down payment upon contract signing

The total billings made for large jobs is

Franchise Probability of full Services performed by Total cost incurred to

Professional fees P240,000

Before combination, their respective statement of financial position showed stockholders'

Professional fees to arrange the business combination. P 54,000

What is the amount of goodwill (gain on acquisition)?

Cost of goods sold Consolidated net income

Consolidation CI for 2025 is:

Use the following data in answering the next two questions