ABC Branch submitted the following data to its home office in DEF for 2022, its first year of

operation:

Shipments to the branch are billed at cost. The December 31 inventory of the branch was
P255,500.

What is the balance of the shipment to branch account on January 1, 2022 in the home
office books?

P480,000

The following must exist to have a bonus to retiring partner.

The retiring must be paid more than the book value of his capital

The partnership contract of A and B Company provided for salaries of P45,000 to A and
P35,000 B, with any remaining income or loss divided equally. During 2020, pre-salaries
income of the business was P100,000, and both partners withdrew cash from the
partnership equal to 80% of their salary allowances. During 2020, A’s equity in the
partnership:

Increase more than B’s equity

Which of the following accounts is credited when abnormal spoilage is written off in an
actual cost system?

Work in process
A partially owned subsidiary sells depreciable assets to its parent company at a gain, the
NCINIS is computed by multiplying the NCI percentage by the subsidiary net income

Minus the net amount of unrealized gain on the intercompany sale

Filipino entity is operating in the USA where the functional currency is the US dollar. The
presentation currency of Filipino entity is Philippine peso because all its owners are
Filipinos. On January 1, 2021, the Filipino entity acquired an investment property at a cost
of $1,000 with useful life of 10 years without residual value. Filipino entity elected cost
model in the accounting of its investment property. On December 31, 2021, the fair value of
investment property is determined to be $1,200. The direct foreign currency exchange rates
are $1=P50 on January 1, 2021 and $1=P40 on December 31, 2021.

What is the carrying amount of Investment Property to be presented in the Statement of

Financial Position of Filipino Entity?

P36,000

A government agency set up a payable to officers and employees:

The journal entry to record the remittances of taxes to BIR

Answer:

This is a requirement for a partnership to be in writing and be attached to the public

instrument.

If contributed capital exceeds P3,000

On January 1, 2022, ABC Corp acquired 95% of the outstanding ordinary shares of DEF
Corp. Non-controlling interest is measured at fair value.
How much is the total consolidated assets on January 1, 2022?

P965,000

On January 1, 2022, ABC Corp acquired 60% of the outstanding ordinary share of DEF
Corp at a cost of P10,000,000. On the date of acquisition, the stockholder’s equity of DEF
Corp was P12,000,000. On the date of acquisition, all the identifiable assets and liabilities of
DEF Corp were recorded at fair value except for an equipment with a fair value of
P3,000,000 greater than the carrying amount. The remaining useful life of the equipment is
5 years.

On December 31, 2022, ABC Corp had inventory costing P4,000,000 on hand which have
been purchased from DEF Corp. at a gross profit of 30% based on sale. For the year ended
December 31, 2022, DEF Corp reported net income of P8,000,000 and paid dividend of
P3,000,000. It is the company policy of ABC to account its Investment in Subsidiary using
equity method

Determine the goodwill (gain on acquisition) to be reported on January 1, 2022?

1,000,000
ABC Company acquired DEF Company’s net assets by issuing its own P14 par value
ordinary shares totaling 50,000 shares at market price of P 14.50. ABC Company had the
following expenditures incurred:

The total amount debited to expense should be

P 197,500

ABC Inc. filed a petition for insolvency. The trustee provided the following information about
the company’s statement of affairs:

What is the estimated recovery percentage of unsecured secured creditors?

40%

ABC Factory manufactures small tables in its Processing Department. Direct materials are
added at the initiation of the production cycle and must be bundled in single kits for each
unit. Conversion costs are incurred evenly throughout the process. Inspection occurs at the
end of the process. Spoiled units generally constitute 5% of the good units.
Round off unit costs to two decimal places.

The total cost of units transferred out is

P 253,440

ABC Company is employing backflush costing in connection with just-in-time production

process. The entity provided the following production data for the year:

• The entity acquired direct materials during the year at a cost of P200,000

• The entity reported direct labor cost of P400,000

• The actual factory overhead incurred during the year amounted to P340,000

• The standard factory overhead application rate is 75% of direct labor cost

• The ending finished goods inventory is reported at P240,000

What is the cost of goods sold under backflush costing?

P660,000

On November 1, 2022, Entity A entered into a firm commitment for the exportation of goods
at a price of $2,000. Delivery will happen on January 31, 2023. In order to hedge this
foreign currency denominated firm commitment, Entity A entered into a forward contract
with a bank to sell $2,000. Entity A is operating in Philippine economy where the functional
currency is Philippine peso. Entity A elects to use fair value hedge to account this hedge of
firm commitment. The following direct exchange rates are given:

What is the carrying amount of firm commitment asset or liability on December 31, 2022?

P10,000 asset

ABC Company acquired DEF Company’s net assets by issuing its own P14 par value
ordinary shares totaling 50,000 shares at market price of P 14.50. ABC Company had the
following expenditures incurred:

The total amount debited to share premium should be

P 69,500

Property was purchased on December 31, 2020 for 20 million won. The general price index
in the country was 60.1 on that date. On December 31, 2022, the general price index had
risen to 240.4. If the entity operates in a hyperinflationary economy. What would be the
carrying amount in the financial statements of property after restatement?
80 million won

X grants a franchise license to Y, which provides the right to use the X tradename and sells
its products for a period of five years. During the license period, X will undertake activities
that will affect the franchise license, including analyzing customer preference, implementing
product improvements and undertaking marketing activities. X shall recognize revenue:

over time

Under BOT arrangement, if the operator receives cash or other financial assets. The asset
shall be subsequently accounted for, after the construction servies are complete under:

PFRS 9
On January 15, 2020, partners A, B, and C had the following loan and capital account
balances (after closing entries for January)

The partnership’s income sharing ratio was 5:2:3, respectively to A, B, and C. On January
15, 2020, D was admitted to the partnership for a 20% interest in total capital of the
partnership in exchange for an investment of P40,000 cash. Prior to D’s admission, the
existing partners agreed to increase the carrying amount of the partnership equipment to
current fair value by P60,000 increase. Which of the following statement is correct?

D will be credited additional P12,000 for his share of the equipment revaluation

On June 30, 2022, the balance sheet for the partnership A, B, and C and their profit and
loss ratio were as follows:
A decided to retire from the partnership and by mutual agreement, the assets were adjusted
to their current fair value of P720,000 the partnership paid P204,000 cash for A’s equity in
the partnership, exclusive of the loan which were repaid in full. The capital balances of B
and C, respectively, after A’s retirement from the partnership were:

164,000; 402,000

On January 1, 2022, ABC Corp acquired 60% of the outstanding ordinary share of DEF
Corp at a cost of P10,000,000. On the date of acquisition, the stockholder’s equity of DEF
Corp was P12,000,000. On the date of acquisition, all the identifiable assets and liabilities of
DEF Corp were recorded at fair value except for an equipment with a fair value of
P3,000,000 greater than the carrying amount. The remaining useful life of the equipment is
5 years.

On December 31, 2022, ABC Corp had inventory costing P4,000,000 on hand which have
been purchased from DEF Corp. at a gross profit of 30% based on sale. For the year ended
December 31, 2022, DEF Corp reported net income of P8,000,000 and paid dividend of
P3,000,000. It is the company policy of ABC to account its Investment in Subsidiary using
equity method.

How much is the investment income on December 31, 2022?

1,680,000

Under PAS 27, how shall the parent account for its investment in subsidiary in the parent’s
separate financial statements?

Any of the above

A government agency set up a payable to officers and employees:

The journal entry to record the constructive receipt of tax remittance advice is

ANSWER:

The following data relate to a construction job by ABC Inc. during 2022:

Any costs incurred are expected to be recoverable. Under the zero profit method, what
amount should ABC recognize as gross profit?

a.

P0

ABC Factory manufactures small tables in its Processing Department. Direct materials are
added at the initiation of the production cycle and must be bundled in single kits for each
unit. Conversion costs are incurred evenly throughout the process. Inspection occurs at the
end of the process. Spoiled units generally constitute 5% of the good units.
Round off unit costs to two decimal places.

The cost allocated to abnormal spoilage using weighted average method is

P 11,088

Which of the following business combination transactions will affect the goodwill or gain on
bargain purchase arising from business combination?

Incurring costs related to the issuance of ordinary shares given as consideration for
acquisition of the 51-100% of ordinary shares of subsidiary corporation.

Banks A and B agreed to combine their corporate, investment banking, asset management
and service activities by establishing a separate vehicle, Bank C. Both parties expect the
arrangement to benefit them in different ways.

The assets and liabilities held in Bank C are the assets and liabilities of Bank C and not the
assets and liabilities of the parties. Bank A and B each invested P5,000,000 to have a 40
percent ownership interest in Bank C, with the remaining 20 percent being listed and widely
held. The stockholders’ agreement between Bank A and Bank B established joint control
over the activities of Bank C.

Transactions of Bank C for the year 2021 and 2022 as follows:

What is the dividend income from Bank C reported under Bank A’s primary financial
statements for the year ended December 31, 2022?

P1,600,000 using cost or fair value method

On January 1, 2022, ABC Corp acquired 60% of the outstanding ordinary share of DEF
Corp at a cost of P10,000,000. On the date of acquisition, the stockholder’s equity of DEF
Corp was P12,000,000. On the date of acquisition, all the identifiable assets and liabilities of
DEF Corp were recorded at fair value except for an equipment with a fair value of
P3,000,000 greater than the carrying amount. The remaining useful life of the equipment is
5 years.

On December 31, 2022, ABC Corp had inventory costing P4,000,000 on hand which have
been purchased from DEF Corp. at a gross profit of 30% based on sale. For the year ended
December 31, 2022, DEF Corp reported net income of P8,000,000 and paid dividend of
P3,000,000. It is the company policy of ABC to account its Investment in Subsidiary using
equity method.

How much is the total Investment in DEF on December 31, 2022?

9,880,000

Under PAS 21, what is the accounting treatment of exchange differences arising from
translating financial statement in entity’s functional currency into entity’s presentation
currency?

It shall be presented and recognized in other comprehensive income with reclassification

adjustment to profit or loss
When will the equivalent unit of production computed for direct materials under FIFO
Process be always the same with the equivalent unit of production computed for direct
materials under Average Process in case Work in Process Inventory beginning is present?

When all direct materials are added at the end of the production process

A CPA donates his services to prepare the annual financial report for a voluntary health and
welfare organization. The services should be recorded as:

Accounting expenses

A, B, and C formed a partnership on January 1, 2021. The average capital and the ending
capital of the partners before closing the nominal accounts for the year 2021 are shown
below:

The profit for 2021 is P284,625 before charging partners’ salary allowances and before
payment of 4% interest on average capital balances. The annual salary allocation are
P34,375 to A, P24,062.50 to B and P17,187.50 to C. the balance of the profits is to share
on a 6:1:3 ratio to A, B, and C, respectively.

It is intended to distribute cash to partners so that, after the credits and allocations have
been made as indicated in the preceding paragraph, the balances in the partners’ account
will be proportionate to their residual profit-sharing ratios. None of the partners is to invest
additional cash, but they wish to distribute the lowest possible amount of cash.

How much are the capital balances of A, B, and C, respectively?

144,163; 24,027; 72,081

Which of the following reconciling transactions will require credit to home office current in
Branch A’s book for the adjustment?

Collection by Branch A of Branch B’s accounts receivable

What is the objective of PFRS 11 about entities that have interest in joint arrangements?

To established principles for financial reporting

Which of the following is correct? If significant in amount, material purchase price variance
is closed to:

I. Raw material inventory

II. Work in process inventory

III. Cost of goods sold

IV. Finished goods inventory

a.

II, III and IV only

A contribution made by Mr. X in 2022 to ABC, a voluntary health and welfare organization
which is restricted to usage to celebrate the millennium in the year 2023, is recorded as a
credit to:

Revenue-temporarily restricted

The statement of financial position of partnership showed the following:

How much is the total cash paid to partners during the first installment if noncash assets
with carrying amount of P40,000 are sold for P18,000, additional liquidation expenses of
P2,500 are incurred and paid, cash withheld is P5,400, and all of the outside creditors are
paid?

P5,100

What would Blue Sky initially do when accounting for transactions in a foreign currency if its
inventory is carried at fair value (and if the fair value is determined in the foreign currency)?

a.

Translate the inventory into the functional currency at the rate ruling at the time of the
valuation

The statement of financial position of partnership showed the following:

How much is the cash withheld if during the first installment noncash assets with carrying
amount of P56,000 are sold for P38,000, additional liquidation expenses of P12,000 are
incurred and paid, all of the outside creditors are paid and A received P11,000 during the
first installment?
a.

P10,000

Consigned goods are recognized as revenue

a.

By the consignor when it received payment from consignee for goods sold

ABC Inc. filed a petition for insolvency. The trustee provided the following information about
the company’s statement of affairs:

How much is the estimated deficiency?

840,000

ABC Branch submitted the following data to its home office in DEF for 2022, its first year of
operation:
Shipments to the branch are billed at cost. The December 31 inventory of the branch was
P255,500.

What is the balance of the Investment in branch (Branch Current) account on December 31,
2022 on the home office books?

P950,500

Which of the following statement is correct?

Statement 1: When a transaction has significant benefit of financing, the fair value os
determined either by measuring the consideration receive or by discounting the payment
using imputed interest rate.

Statement 2: A company recognizes revenue from performance obligation over time by

measuring the progress towards completion of the contract

Both statements are correct

Banks A and B agreed to combine their corporate, investment banking, asset management
and service activities by establishing a separate vehicle, Bank C. Both parties expect the
arrangement to benefit them in different ways.
The assets and liabilities held in Bank C are the assets and liabilities of Bank C and not the
assets and liabilities of the parties. Bank A and B each invested P5,000,000 to have a 40
percent ownership interest in Bank C, with the remaining 20 percent being listed and widely
held. The stockholders’ agreement between Bank A and Bank B established joint control
over the activities of Bank C.

Transactions of Bank C for the year 2021 and 2022 as follows:

What is the interest of Bank B on the joint arrangement at December 31, 2022?

P7,000,000

Which of the following transactions will result to credit to home office account in the book of
the branch?

Payment by the home office of the payable of the branch

On January 1, 2022, ABC Corp acquired 95% of the outstanding ordinary shares of DEF
Corp. Non-controlling interest is measured at fair value.
How much is the consolidated shareholder’s equity?

a.

695,000

On January 1, 2022 an entity purchased a tract of vacant land that is situated overseas for
Baht 90,000. The entity classified the land as investment property. The fair value of the land
at December 31, 2022 is Baht 100,000. The entity’s functional currency is Php (Peso).

What is the carrying amount of the investment property at December 31, 2022 and what
amount would be presented in profit or loss for the year ended December 31, 2022?

a.

Carrying amount of investment property = P210,000. Profit for the year includes P30,000
increase in the fair value of the investment property.

ABC Inc. filed a petition for insolvency. The trustee provided the following information about
the company’s statement of affairs:
How much is the estimated loss on realization?

600,000

If a partner’s capital balance is credited for an amount greater than or less than the fair
value of his/her net contribution, the excess or deficiency is called

Bonus to/ from

A and B each operating a separate business agreed to form a partnership on July 1, 2022.
The assets and liabilities of the two sole proprietorships on the date of formation is as
follows:

The partners agreed on the following adjustments: A’s accounts receivable are to be taken
over a book value less 15% and B’s account receivable at book value less 10%. A’s
equipment is new and considered adequate for the new business. B’s equipment is
disposed at 90% of its book value. It is agreed that A bears one fourth of the loss resulting
from the sale.

Assuming B pay sufficient cash to give him one half interest in the partnership after
charging too A’s capital account his share of the loss on the sale by B of the equipment,
how much cash must B invest?

P20,400
The following were taken from the salvaged files:

Compute the percentage of completion in 2021:

a.

20%

BIGBANG operates and franchises restaurants around the world. As part of its franchise
agreement, BIGBANG requires a franchisee to pay a non-refundable upfront franchise fee
of P9,000,000 upon opening a restaurant and ongoing payments of royalties, based on
percentage of sales. As part of the franchise agreement, BIGBANG provides pre-opening
services, including supply and installation of cooking equipment and cash register, valued at
P2,500,000 (i.e., the stand-alone selling price of the pre-operating services). In addition, the
franchise agreement includes a license of intellectual property (i.e., BIGBANG’s trademark
and trade name) to the franchisee. Assume that BIGBANG has determined that the license
provides a right to access the intellectual property. BIGBANG has determined the
stand-alone selling price of the license is P7,500,000. The franchise agreement has a term
of 15 years. BIGBANG evaluates the arrangement and determines it meets the criteria to be
accounted for as a contract with a customer. BIGBANG determines its pre-opening services
and license of intellectual property (IP) are each distinct and, therefore, need to be
accounted for as separate performance obligations (PO).
How should BIGBANG recognize revenue from the supply and installation of cooking
equipment and cash register?

P2.5M - Point in time