Excel Professional Services Inc.
Management Firm of Professional Review and Training Center (PRTC)
Online • Manila • Cavite • Laguna • Cebu • Cagayan De Oro • Davao
Advanced Financial Accounting
and Reporting (AFAR) CPA Review
FIRST PRE-BOARD EXAMINATION
Multiple Choice. Select the letter that corresponds to the
best answer. This examination consists of 70 items and the
exam is good for three (3) hours. Good luck!
1. Salaries to partners typically should be
a. A device for sharing net income
b. An operating expense of the partnership
c. Drawings by the partners
d. Reduction for the partners’ capital account balances
2. Initially, a partner’s interest in a partnership is generally
equal to
a. The sum of the fair values of the assets contributed
to the firm, increased by the liabilities of the
partners assumed by the partnership
b. Total fair market value of assets contributed less
liabilities, at book value, to be assumed by the
partnership
c. Total fair market value of assets contributed
d. Net assets contributed at fair market value
3. Partnership net income is defined as
a. the interest allocation to the partners, based on
weighted average invested capital
b. partnership income after deducting partner salaries
and interest.
c. partnership income after deducting partner
salaries.
d. partnership income before deducting salaries and
interest.
4. If the total debits in the statement of realization and
liquidation exceeds the total credits, there is
a. Net loss for the period c. Either A or B
b. Net gain for the period d. None of these
5. It is the initial report prepared at the start of the
liquidating process.
a. Cooling-off statement
b. Statement of break up
c. Statement of love affairs
d. Statement of affairs
6. Which of the following is not true about revenue
recognition with respect to long-term construction
contracts?
a. Long-term construction contract s often are viewed
as having a single performance obligation, because
goods and services fail the "separately identifiable
" criterion.
b. Long-term construction contracts often satisfy the
criteria for recognizing revenue over time.
c. Long-term construction contracts require
accounting for construction in progress as well as
billings to customers.
d. Long-term construction contracts typically include
multiple performance obligations because of all the
different types of goods and services included for
each project
7. Cost estimates on a long-term contract may indicate
that a loss will result on completion of the entire
contract. In this case, the entire expected loss should
be
a. recognized in the current period. regardless of
whether the percentage-of completion {over time)
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February 19, 20 & 21, 2023
or cost-recovery (point in time/time of completion)
method is employed.
b. recognized in the current period under the
percentage-of-completion (over time) method. but
the cost-recovery (point In time/time of
completion) method defers recognition of the loss
to the time when the contract is completed.
c. recognized in the current period under the cost-
recovery (point in time/time of completion)
method. but the percentage-of-completion (over
time) method defers the loss until the contract Is
completed.
d. deferred and recognized when the contract is
completed, regardless of whether the percentage-
of-completion (over time) or cost-recovery (point
in time/time of completion) method is employed
8. State the correct sequence of the following steps of
revenue recognition under PFRS 15.
I. Determine the transaction price
II. Recognize revenue when (or as) the entity
satisfies a performance obligation
III. Identify the performance obligations in the
contract
IV. Allocate the transaction price to the
performance obligations in the contract
V. Identify the contract with the customer
a. V, IV, II, I, III c. V, III, I, IV, II
b. V, I, IV, III, II d. V, I, III, IV, II
9. Which of the following correctly relates to ‘Step 2’ in the
recognition of revenue under PFRS 15?
a. The entity shall assess the customer’s ability and
intention to pay the consideration in the contract
when they become due.
b. The entity shall determine the transaction price and
shall consider whether the transaction price
includes, among other things, a variable
consideration or significant financing.
c. The entity shall treat each promise to transfer a
distinct good or service as a performance
obligation.
d. The entity shall recognize revenue when (or as) a
performance obligation is satisfied.
10. A promise to grant a license is most likely to be distinct
if
a. the license is integral to the functionality of a
tangible good.
b. the customer can benefit from the license only in
conjunction with a related service.
c. the performance obligation is satisfied over time.
d. the customer can benefit from the license on its own
and the license is separately identifiable.
11. If the promise to transfer a license is distinct,
a. the entity shall treat all the promises in the contract
as a single performance obligation.
b. the entity shall determine whether the
performance .obligation is satisfied over time or at
a point in time using the general principles' of
PFRS 15.
c. the entity shall determine the nature of the grant
of license as either "right to access" or "right to
use."
d. B and C
AFA.1stPB5.23
TEAM PRTC

12. An entity enters into a contract with a customer to
license (for a period of three years) intellectual property
related to the design and production processes for a
good. The contract also specifies that the customer will
obtain any updates to that intellectual property for new
designs or production processes that may be developed
by the entity. The updates are essential to the
customer's ability to use the license because the
customer operates in an industry in which technologies
change rapidly. The entity does not sell the updates
separately and the customer does not have the option
to purchase the license without the updates. Which of
the following statements is incorrect?
a. The promises to grant the license and to provide the
updates are two separate performance obligations.
b. The license and the updates are accounted for
together as a single performance obligation.
c. The general principles are applied to determine how
the performance obligation is satisfied.
d. The single performance obligation is satisfied over
time.
13. Which of the following would most likely not be
considered as a separate performance obligation in
relation to a franchise agreement?
a. grant of license to use the franchisor's trade name
b. transfer of equipment to be used in the franchisee's
business
c. franchisor's promise to undertake activities to
support the franchise
d. all of the these are separate performance
obligations
14. Which of the following would most likely not be
considered as a separate performance obligation in
relation to a franchise agreement?
a. grant of license to use the franchisor's trade name
b. transfer of equipment to be used in the franchisee's
business
c. franchisor's promise to undertake activities to
support the franchise
d. all of the these are separate performance
obligations
15. Statement 1 (S1): The balance of the Allowance for
Overvaluation of Inventories: Branch ledger account is
deducted from the balance of the Investment in Branch
account in the separate balance sheet of the home
office.
Statement 2 (S2]: If the home office bills shipments of
merchandise to the branch ai 25% above home office
cost and the adjusted balance of the Allowance for
Overvaluation of Inventories: Branch ledger account is
P20,400, the amount of branch inventories at billed
prices is P81,600.
a. S1 - True; S2 – True c. S1 - False: S2 - True
b. S1 - True; S2 – False d. S1 - False: S2 - False
17. Under PFRS3 Business Combination, goodwill is
computed as:
a. Cost of investments less subsidiary's fair value at
the beginning of the year.
b. Cost of investments less subsidiary's book value at
the acquisition date.
c. Cost of investments less subsidiary's fair value at
acquisition date.
d. Cost of investment less subsidiary's book value of at
the beginning of the year
18. Which of the following Is not a true statement with
regard to a statutory merger?
a. One entity continues to exist
b. One entity ceases to exist
c. The name of the new entity is not the same as either
of the entities
d. All of the above are true statements with regard to
a statutory merger
19. Consolidated Net Income attributable to the owners of
the parent is computed as
a. Net income of the group less non-controlling
interest net income
b. Parent net income from its own operation plus share
of parent in the subsidiaries net income
c. Consolidated net Income attributable to owners of
the parent plus net income attributable to NCI
d. Parent separate net income plus NCI net income
20. Goodwill is attributed to both the owners of the parent
and non-controlling interests (NCI) if
a. the NCI is measured at 'proportionate share.
b. the NCI is measured at 'fair value'.
c. in both a and b
d. the goodwill is big
The balance sheet of Piedmont Enterprises and Skelton
Company at December 31, 2021 are summarized as follows:
Piedmont Skelton
Assets P5,000,000 P 2,000,000
Liabilities P1,500,000 P 500,000
Capital stock , P40 par 2,500,000
Capital stock, P25 par 1,000,000
Retained earnings 1,000,000 500,000
At the date of acquisition, Skelton’s assets are understated
while its liabilities are fairly valued.
On January 1, 2022, Piedmont purchased 80% of Skelton
Company’s outstanding shares for P2,000,000 when the fair
value of Skelton’s net assets was P2,200,000. Piedmont
issued 10,000 unissued shares in consideration of the
acquisition. Piedmont is to assign an amount to the non-
controlling interests at the date of acquisition based on the
total fair value of Skelton’s outstanding shares.

16. Statement 1 (S1): A home office records shipments to 21. How much is the consolidated assets at the date of
its branch at billing prices and adjusts the loading acquisition?
account (deferred profit) at year-end. When this a. P9,000,000 c. P8,000,000
approach is used, the loading account during the period b. P9,700,000 d. P 8,700,000
will always be zero.
Statement 2 (S2): If a "loading" account is used, the 22. How much is the consolidated liability at the date of
"shipments to branch" account on the home office acquisition?
books is created for the actual cost of shipments made a. P2,000,000 c. P1,800,000
to the branch whereas the "shipments from the home b. P1,500,000 d. P 500,000
office" on the branch's books includes any initial
unrealized profit 23. How much is the stockholders’ equity in the
a. S1 - True; S2 – True c. S1 - False: S2 - True consolidated balance at January 1, 2022?
b. S1 - True; S2 – False d. S1 - False: S2 - False a. P7,000,000 c. P6,000,000
b. P5,500,000 d. P6,700,000

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TEAM PRTC

28. Assuming DLSU is not an SME, determine the amount

24. Assume the amount assigned to the non-controlling of goodwill / ( income from acquisition) that will result
interest at the date of acquisition is based on the total from the combination.
fair value of identifiable net assets at that date, calculate a. P 20,000 c. P 40,000
the amount of goodwill recognized at January 1, 2022. b. (P 40,000) d. P 95,000
a. P300,000 c. P 20,000
b. P280,000 d. P240,000 29. Assuming DLSU’s Retained earnings at January 1, 2018
was P500,000, at what amount will the Retained
The Carl Company will issue P10 par value common stock Earnings be shown on the balance at this date?
for the net assets of PBA Company. The fair market value DLSU is not an SME DLSU is an SME
per share of Carl’s common stock is P40. The following is
a. P 445,000 P 485,000
the list of accounts of PBA Company on the date of the
acquisition. b. P 365,000 P 445,000
c. P 485,000 P 405,000
Book Value Fair Market Value d. P 405,000 P 485,000
Current assets P280,000 P 320,000
Plant assets (net) 680,000 1,280,000 BAHAY-PARE CORPORATION purchases all the outstanding
Liabilities 320,000 shares of SINAG-TALA COMPANY on January 2, 2022 for
Common stock 64,000 P385,000 cash. On this date the stockholders equity of
Additional paid-in capital 256,000 SINAG-TALA is as follows:
Retained earnings 320,000
Share capital, P10 par P175,000
25. To have an income from acquisition of P120,000, the Paid-in capital in excess of par 87,500
number of shares to be issued by Carl Company should Retained earnings 175,000
be
a. 30,000 shares c. 29,000 shares Any excess of the fair value of net assets over the fair value
b. 30,400 shares d. 35,000 shares of the investment is attributable to SINAG-TALA’s building
which is currently overstated in its books. All other net asset
26. Same data as in previous number, to have a goodwill of items of the acquired company are fairly valued at the
P 120,000, the number of shares to be issued by Carl acquisition date. The building has an estimated life of 10
Company should be years from January 2, 2022 without salvage value.
a. 30,000 shares c. 29,000 shares
b. 30,400 shares d. 35,000 shares The condensed trial balances of the affiliated companies on
December 31, 2022 appear as follows:

The following balance sheet was prepared for ACADEME BAHAY-PARE SINAG-
COMPANY just before DLSU CORPORATION acquired its TALA
entire net assets on January 1, 2018. Current assets P 420,000 P 302,750
Land 210,000 210,000
Particulars Book Value Fair Value Building (net) 1,050,000 283,500
Cash P 10,000 P 10,000 Investment in SINAG- 385,000 -
Accounts receivable 40,000 40,000 TALA
Inventory 100,000 145,000 Current liabilities (708,750) (367,500)
Plant assets 300,000 350,000 Ordinary shares, P3 par (525,000) -
Goodwill 50,000 - Share capital, P10 par - (175,000)
P500,000 P545,000 Paid-in capital in (315,000) ( 87,500)
Accounts payable P140,000 P140,000 excess of par
Bonds payable 60,000 65,000 Retained earnings, Jan. (446,250) (175,000)
Ordinary shares 200,000 2, 2022
Share premium 20,000 Sales (367,500) ( 70,000)
Retained earnings 80,000 Cost of goods sold 210,000 61,250
P500,000 Operating expenses 78,750 17,500
Dividends declared 8,750 -
Totals -- --
DLSU issued 10,000 shares of stocks with a par value per
share of P5 and a fair value of P30. Additional cash
30. Compute the consolidated net income for 2022.
payments made by DLSU in completing the acquisition
a. P75,520 c. P72,550
were:
b. P70,525 d. P75,250
Broker’s fee paid to firm that located P10,000
31. Compute the consolidated Retained Earnings at
ACADEME COMPANY
December 31, 2022.
Cost to issue and register the shares 40,000
a. P517,250 c. P515,270
Professional fees paid to accountants 30,000
b. P525,170 d. P512,750
Professional fees paid to lawyers 25,000
Professional fees paid to official valuers 15,000 The following information was taken from the books of
Indirect acquisition costs 15,000 MAYON COMPANY and its Naga City branch on December
31, 2022, before adjusting entries were recorded.
27. Assuming DLSU is an SME, calculate the goodwill /
(income from acquisition) that will result from the Branch books
combination. Sales P300,000
a. P 20,000 c. P 40,000 Inventory, January 1 19,000
b. (P 40,000) d. P 95,000 Purchases 20,000
Shipment from Home Office 180,000

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TEAM PRTC

Expenses 80,000 activities. An assessment of their participation shows they

Home Office books have rights over assets and obligations over liabilities. They
Sales P400,000 have equal shares in interest.
Inventory, January 1 40,000
Purchases 210,000 On July 1, 2022, Amer sells machinery to the joint
Shipment to Branch 150,000 undertaking for P102,400. The cost to Amer of the
Expenses 210,000 machinery transferred is P40,960. The machinery had an
Allowance for overvaluation of branch 31,500 estimated remaining useful life of 5 years at that date.
inventory, December 31
There are no merchandise shipments in transit as at the 38. At what amount will Amer show the machinery, net at
year-end. The ending inventories are: its balance sheet at July 1, 2022?
a. P13,653 c. P17,067
Home Office (all from outside suppliers) P50,000
b. P34,133 d. P17,076
Branch office (40% from outside suppliers, 40,000
the rest from home office)
39. At what amount will Amer show the machinery, net at
its balance sheet at December 31, 2022?
32. How much is the overstatement of the branch’s 2022
cost of sales per home office cost?
a. P27,306 c. P34,133
a. P 12,500 c. P 27,000 b. P10,922 d. P12,288
b. P 13,500 d. P 27,500
40. At what amount will Brad show the machinery in its
33. Calculate the company’s 2022 net income. balance sheet at December 31, 2022?
a. P 140,000 c. P 181,000 a. P27,320 c. P37,200
b. (160,000) d. P 208,500 b. P30,720 d. P32,700

On January 1, 2020, SME Voltex 5 Company has a 30%

The Dasmarinas Corporation operates a branch in Calamba equity of Takuza 4 Enterprises for P92,800. The latter
City. The home office ships merchandise to the branch at company is a joint venture undertaking. Transaction costs
more than cost. Selected information Selected information of 3% of the purchase price of the shares were incurred by
from the December 31, 2022 trial balances are as follows: SME Voltex 5 Company.

Home Branch On December 31, 2010, Takuza 4 declared and paid

Office Office dividends of P24,000 and reported a profit of P67,200
Books Books Published price quotations do not exist for Takuza shares
Sales P600,000 P300,000 but appropriate valuation techniques determined the fair
Shipment to Branch 200,000 value of the investment at P104,000. Costs to sell are
Purchases 350,000 - estimated at P5,200.
Shipment from Home office 230,000
Inventory, January 1 100,000 40,000 41. What is the amount of the Investment in JV to be
Allowance for overvaluation of 58,000 recognized by Voltex 5 in its 2020 balance sheet using
branch inventory the fair value method?
Expenses 120,000 50,000 a. P 94,640 c. P 65,520
Inventory at December 31, 2022 b. P104,000 d. P 92,800
Home office P30,000
Branch office P40,000 42. What is the amount of Investment in JV to be recognized
by Voltex 5 in its 2020 balance sheet under the equity
Merchandise shipment in transit at December 31, 2022 is method.
P20,000 at billed price. a. P 108,544 c. P98,800
b. P 180,445 d. P89,800
34. The net income reported by the home office for its
2022 operation is: On March 31, 2022, Emng, Bobby, and Ramil formed the
a. P260,000 c. P 20,000 POGI Partnership to operate a CPA review center. The
b. P 38,000 d. P200,060 following is a list of their contributions at that date:

In ‘000 Emong Bobby Ramil

35. The net income reported by the branch for its 2022
operation is Book Fair Book Fair Book Fair
Value value Value value Value Value
a. P20,000 c. P260,000
Cash P132 P132 P100 P100 P120 P120
b. P200,060 d. P 38,000
Inventor 80 75
y
36. How much is the overstatement of the cost of sale in Land 150 188
the branch 2022 income statement resulting from the Equipme
home office billing policy? nt, net ____ ____ _____ _____ 90 90
a. P46,000 c. P20,000
Totals P282 P320 P180 P175 P210 P210
b. P38,000 d. P 0
Bobby has an accounts payable of P50,000 on the inventory
37. How much net income was reported in the company’s
and Ramil has a mortgage payable of P60,000 on the
2022 income statement?
equipment. The partners have agreed to assume only the
a. P362,000 c. P236,000 mortgage payable but not the accounts payable. They
b. P263,000 d. P326,000 further agreed for the capital ratio to be 50%, 20%, and
30% to Emong, Bobby, and Ramil, respectively.:
Amer Company, Brad Company, and Cris Enterprises are
participants in a joint undertaking bound by a contractual
agreement for the sharing of control over its relevant

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TEAM PRTC

The partnership starts operation on April 1, 2022 and on value through the non-cash assets prior to Clara’s
December 31, 2022 reported a net income of P305,400. admission.

The following is the profit and loss agreement among the 47. How much will be the capital balances of Alma and
partners Bella after the admission of Clara?
• 10% interest to each partner’s beginning capital a. P 150,000 and P150,000
• Salaries of P30,000 per quarter will be given to Emong b. P 210,000 and P190,000
and Ramil c. P210,000 and P210,000
• Bonus of 10% of net income after interest, salaries, and d. P190,000 and P19,000
bonus will be given to Emong.
• Residual profit/(loss) will be divided equally. 48. The entry to record the admission of Clara will not
include
43. How much is the net asset contribution of Ramil? a. A debit to Cash of P400,000
a. P210,000 c. P175,000 b. A debit to Alma, capital of P210,000
b. P150,000 d. P125,000 c. A debit to Bella, capital of P190,000
d. A credit to Clara, capital of P400,000
44. What is the beginning capital of Partner Bobby?
a. P352,500 c. P129,000 The balance sheet of Abby, Blanche, and Celia partnership
b. P211,500 d. P141,000 on January 1, 2019, the date of partnership dissolution, was
as follows:
On December 31, 2019, the balance sheet for the XYZ
Partnership follows: Cash P 4,000 Liabilities P 8,000
Other 26,000 Abby, loan 1,000
Cash P 10,000 Accounts payable P 17,500 assets
Accounts 15,000 Loan from Zoilo 12,500 Celia, loan 2,000 Abby, capital (20 2,000
receivable % P/L)
Inventory 35,000 Xander, capital 35,000 Blanche, capital(40 9,000
(20%) % P/L)
Plant 30,000 Ysabel, capital 25,000 ________ Celia, capital (40 12,000
assets, net (20%) % P/L)
Loan to 15,000 Zoilo, 15,000 P 32,000 P 32,000
Xander capital(60%)
Total P105,000 Total P105,000 In January, other assets with a book value of P16,000 were
assets liability/equity sold for P10,000.

The percentages shown are for the residual profit and loss 49. How much will each partner receive from the cash
sharing ratios. The partners dissolved the partnership on distribution after the liabilities had been paid.
January 1, 2020 and began the liquidation process. During a. Abby, P1,200; Blanche, P1,800; and Celia, P3,000
January the following events occurred: b. Abby, P 0; Blanche, P2,500; and Celia P3,500
c. Abby P1,800; Blanche , P1,800; and Celia, P2,400
• Receivables of P7,500 were collected. d. Abby, P 0; Blanche, P2,000; and Celia, P 4,000
• All inventory was sold for P10,000.
• All available cash was distributed on January 31, 2020, 50. If the partners have retained available cash of P400 for
except for P5,000 that was set aside for contingent future liquidation expenses, after the liabilities have
expenses. been paid, how much will Blanche receive from the
cash distribution?
45. How much cash would Ysabel receive from the cash a. P1,800 c. P2,500
that is available for distribution on January 31 b. P2,000 d. P2,300
a. P0 c. P 5,000
b. P3,000 d. P 1,000 The following data were taken from the Statement of Affairs
of Greenfield Corporation.
46. How much cash would Xavier receive from the cash
that is available for distribution on January 31 Pledged Assets : BCV ERV
a. P 5,000 c. P 3,000 Plant, property, and equipment P72,000 P60,000
b. P0 d. P1,000 (PPE)
Merchandise inventory 59,200 41,600
Alma and Bella formed a partnership in the Philippines,
Free assets 56,000 32,000
which uses PFRS based on IASB accounting principles. The
two partners agree on a profit and loss ratio of 60% and Total assets P187200 P133,600
40% to Alma and Bella, respectively. At a later date, the Secured liabilities
partners agree to admit Clara into the partnership for a Bonds payable (secured by P24,000
50%interestin capital and in earnings. PPE)
Notes payable (secured by 48,000
Capital accounts of the partners immediately before the merchandise inventory)
admission of Clara are: Alma, P300,000 and Bella,
Unsecured liabilities:
P300,000.
Clara invested P400,000 for the partnership interest and Taxes P 3,000
that this is a fair price for the share of partnership interest Salaries and wages 2,600 5,600
to be acquired. Clara paid the money directly to Alma and Accounts payable 89,600
Bella for 50% each of their existing interests. The partners
have decided to revalue partnership interest to current fair

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TEAM PRTC

51. What is the estimated amount the holders of the notes

payable will receive in the event of liquidation? Best Ever Constructions uses the cost-to-cost method in
a. P52,700 c. P56,200 measuring the progress of satisfying performance
b. P45,760 d. P57,000 obligation in contracts with customers. During 2022, a single
long-tem contract was begun for a contracted price of
52. What is the estimated amount the unsecured creditors P2,135,000. Information on the project follows:
with priority will receive in the event of liquidation?
a. P5,600 c. P7,500 2022 2023
b. P6,000 d. P6,200 Revenue earned to date P 427,000 P1,281,000
Progress billings to date 350,000 1,470,000
53. What is the estimated amount holders of the accounts Cost incurred to dat 367,500 1,039,500
payable will receive upon liquidation? Collections to date 320,000 1,050,000
a. P58,240 c. P52,480
b. P54,840 d. P89,600 58. What is the gross profit recognized from this long-
term contract in
54. Using the data provided EXCEPT that the accounts 2022 2023 2022 2023
payable is P49,600 (instead of P89,600), compute the a. P77,000 P798.000 c. P59,500 P 175,000
estimated amount the stockholders will receive upon b. P77,000 P350,000 d. P59,500 P 182,000
liquidation.
a. P10,400 c. P14,000 CCC Construction Company started work on three job sites
b. P 0 d. P 6,400 with different customers during 2020. Data relating to the
three jobs are given below (In ‘000):
Amounts related to the statement of affairs of Distressed
Company as of April 30, 2019 follow: Site Contract Costs Costs to Progress Collections
Price Incurred Complete Billings
Abra P500 P375 P0 P500 P400
Assets pledged for fully secured P 80,000
liabilities Bohol 700 100 400 100 80
Assets pledged for partially secured 50,000 Cebu 250 100 100 130 120
liabilities
Free assets 272,000 59. What amount of gross profit should be recorded for the
Fully secured liabilities 60,000 current year if the cost recovery method is used for all
Partially secured liabilities 80,000 contracts?
Unsecured liabilities with priority 40,000 a. P100,000 c. P240,000
Unsecured liabilities without priority 330,000 b. P125,000 d. P375,000

55. Calculate the expected amount recoverable by partially 60. What amount of gross profit would be reported for the
secured creditors in the event of liquidation. current year if the percentage of completion method is
a. P71,000 c. P69,500 used for all contracts?
b. P50,000 d. P80,000 a. P 65,000 c. P215,000
b. P190,000 d. P240,000
Home office bills its branch for merchandise shipments at
30% above cost. 61. Aside from uncollected contract receivable, at what
The following are some of the account balances on the books amounts should (1) Bohol and (2) Cebu be shown in
of home office and its branch as of December 31, 20X0: the balance sheet at the year-end, respectively, under
the % of completion method?
Home Office Branch a. (1) P40,000 Contract asset and (2) P5,000
Books Books contract liability
Inventory, January 1 35,000 101,500 b. (1) P20,000 Contract asset and (2) P10,000
Shipments from Home Office 263,900 Contract Asset
Purchases 1,575,000 350,000 c. (1) P40,000 contract liability and (2) P10,000
Shipments to Branch 253,750 contract asset
Branch Inventory Allowance 91,875 d. (1) P40,000 contract liability and (2) P5,000
Sales 2,100,000 1,260,000 contract asset
Operating Expenses 507,500 192,500

Per physical count, the ending inventory of the branch is

P73,500 including goods from outside purchases of
P48,475; the ending inventory of the home office is
P210,000.

56. What is the total ending inventory to be shown on the

combined financial statements?
a. P118,475
b. P277,725
c. P328,475
d. P280,000
.
57. What is the combined net income for the year?
a. P957,950
b. P871,850
c. P891,975
d. P942,725

Page 6 of 7 www.teamprtc.com.ph AFAR.1stPB5.23

TEAM PRTC

BRIGADIER CONSTRUCTIONS, INC. had been working on a. a debit to consignment-Out of P7,935

three different projects during 2023, which had been started b. a credit to Consignment profit of P8,255
in different years. The following data pertain to the jobs at c. a credit to Consignment-Out of P9,375
the end of 2023. The company uses the percentage of d. a debit to Consignment-In of P P37,500
completion method in accounting for long-term projects.
Joey Muffler sells franchise arrangements throughout Luzon
Job Const Contract Costs To- and Visayas. Under a franchise agreement, Joey receives
Period price date P600,000 in exchange for satisfying the following
performance obligations:
1 2023 520,000 330,000
• franchisees have a five-year right to Operate as a Joe
Muffler retail establishment in an exclusive sales
2 2022 5,529,600 1,843,200 territory.
• franchisees receive initial training and certification as a
2023 3,446,784 Muffler Mechanic, and
• franchisees receive a Joey Muffler. building and
necessary equipment.
3 2021 8,000,000 1,024,000

2022 3,993,600 The stand-alone selling price of the initial training and
certification is P15,000, and P450,000 for the building and
2023 6,473,600 equipment. Joey received P75,000 on July 1, 20x6, from
Althea and accepted a note receivable for the rest of the
franchise price. Joey will construct and equip Altheas'
Job Estimated Billings To- Collections
building and train and certify Althea by September 1, and
Costs To Date To-Date
Altheas' five-year right to operate as a Joey Muffler
Complete
establishment will commence on September 1 as well.
1 --- 520,000 440,000
Franchisee has the right to access on the franchise
agreement.
2 P3,072,000 1,935,360 1,843,200
2,297,856 3,686,400 3,512,080 68. What amount would Joey assign as the stand-alone
selling price of the five year right to operate as a Joey
3 4,096,000 1,500,000 1,310,000 Muffler retail establishment?
a. P135,000 c. P585,000
2,246,400 5,250,000 5,000,000
b. P150,000 d. P600,000
--- 8,000,000 7,800,000
69. How much revenue would Joey recognize in the year
62. The gross profit recognized in 2021 was ended December 31, 20x6, with respect to its franchise
a. P675,000 c. P756,000 arrangement with Althea? (Ignore any interest on the
b. P657,000 d. P576,000 note receivable.)
a. P9,000 c. P465,000
63. The total gross profit for all the projects to be b. P450,000 d. P474,000
recognized in 2023 will be
a. P144,650 c. P146,450 70. Ronella Ocampo sells hairstyling franchises. Ronella
b. P144,560 d. P145,460 Ocampo receives P50,000 from a new franchisee for
providing equipment and furnishings that have a stand-
Under a consignment arrangement, CONSIGNOR COMPANY alone selling price of P50,000. Ronella Ocampo also
ships 24 units of special electronic gadgets called Tsamba receives P30,000 per year for use of, the Ronella
Bebe to CONSIGNEE ENTERPRISES. The cost per unit to Ocampo name and for ongoing consulting services
Consignor, Inc. is P1,500 and the goods will be sold at (starting on the date franchise is purchased). Carlos
P2,400 each for a 10% commissions on gross sales. Freight became a Ronella Ocampo franchisee on July 1, 20x6
charges paid by the consignor on the shipments was P1,500. had completed training and was open for business. How
At the end of 30 days, the consignee rendered an Account much revenue in 20x6 will Ronella Ocampo recognize
Sales for 18 units sold and reimbursable charges for: for its arrangements with Carlos?
Delivery expenses, P1,000 and Advertising, P1,500, among a. Zero c. P65,000
others. The consignor uses the Consignment-Out account in b. P10,000 d. P70,000
accounting for the consignments. On the other hand, the
Consignee uses the Consignment-In account. Thank you for participating in Team PRTC
Nationwide Online Open First Pre-Board
64. How much is the net remittance by the consignee? Examination.
a. P36,380 c. P33,680
b. P36,830 d. P30,638

65. How much is the net profit of the consignor?

a. P 8,705 c. P 8,255
b. P 5,555 d. P 2,513

66. How much is the adjusted balance of the Consignment

Out account after recognition of the net profit?
a. P7,935 c. P 5,973
b. P9,375 d. P 3,957

67. The reclassification entry to be recorded by the

consignor to recognize the deferred cost in its balance
sheet will include

Page 7 of 7 www.teamprtc.com.ph AFAR.1stPB5.23