CPA REVIEW SCHOOL OF THE PHILIPPINES

MANILA

ADVANCED FINANCIAL ACCOUNTING AND REPORTING Sunday, May 5, 2024

Final Preboard Examination 1:00 p.m to 4:00 p.m.

Number 1
Soon-to-be partners, A and B will contribute the following: A will contribute cash, P1,500,000, and B
will contribute a Building with a carrying amount of P1,000,000 and an agreed value of P1,200,000.
The building has a mortgage in the amount of P100,000, but it will be paid personally by B. One of the
provisions, of their agreement is upon formation the capital balances of the partners will be equal.
What is the contributed capital of B?
A. 1,000,000
B. 1,100,000
C. 1,200,000
D. 1,350,000

Number 2
Partners A and B formed a partnership on January 1, 2025, with original capital contributions of
P2,000,000 and P1,500,000 respectively. They agreed to distribute profits and losses with the following
provisions:
a) 10% on their original capital contributions
b) Monthly salaries of P15,000 and P20,000 respectively for A and B
c) The remainder shall be shared at 60:40
At the end of the year, due to unfavorable circumstances, the partnership generated a net loss of
P300,000.
What is the share of A in the net loss?
A. 98,000
B. 262,000
C. 38,000
D. 202,000

Number 3
Partners A and B have capital balances of P500,000 and P300,000 respectively before admitting
incoming Partner C. The new partner will invest P200,000 for 25% capital interest and 20% in the
profits and losses.
What is the capital credit of C upon his admission?
A. 250,000
B. 200,000
C. 160,000
D. 300,000

Number 4
Which of the following items will affect both consolidated net income attributable to parent’s
shareholders and noncontrolling interest in net income?
A. Dividend income from subsidiary
B. Realized gain on the downstream transaction
C. Realized loss on the upstream transaction
D. Gain on bargain purchase
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Number 5
Partners A, B, and C have capital balances of P300,000, P200,000, and P100,000 respectively. The
following were also loan balances present in the partnership books: a loan to A in the amount of
P50,000 and a loan from C in the amount of P30,000. Partner B decided to retire from the partnership
and they agreed to pay P170,000 for his interest. They share profits and losses 30:30:40 respectively.
Assuming there was an asset that needed to be revalued, what is the capital balance of Partner C
after retirement?
A. 100,000
B. 140,000
C. 117,143
D. 60,000

Number 6
Partners A, B, and C have capital balances of P600,000, P400,000, and P200,000 respectively. The
total liabilities of the partnership were P300,000 and the cash balance was P500,000. They agreed to
liquidate the partnership. Non-cash assets were sold at a gain of P250,000 and liquidation expenses
were paid in the amount of P80,000. They share profits and losses 40:40:20.
What is the amount of cash that Partner B received after liquidation?
A. 400,000
B. 468,000
C. 332,000
D. 368,000

Number 7
Partners A, B, and C have capital balances of P600,000, P400,000, and P200,000 respectively. The
total liabilities of the partnership were P300,000 and the cash balance was P500,000. They agreed to
liquidate the partnership. Only P300,000 of the non-cash assets were sold for P100,000 and liquidation
expenses were paid in the amount of P80,000. Cash withheld for future liquidation expenses was
P20,000. They share profits and losses 40:40:20.
What is the amount of cash that Partner C received after the 1st installment liquidation?
A. 144,000
B. 200,000
C. 56,000
D. 0

Number 8
Book value Estimated realizable value
Cash 100,000 100,000
Inventory 80,000 70,000
Building 500,000 750,000
The inventory was pledged to accounts payable in the amount of P50,000. The building was pledged to
a mortgage payable including its interest in the amount of P800,000. Salaries and taxes had a total
amount of P200,000. Other liabilities not mentioned were P150,000.
What was the amount paid to the holder of the mortgage payable?
A. 800,000
B. 500,000
C. 750,000
D. 0
 Page 3
Number 9
Under IAS 21, foreign exchange differences arising from translating financial statements in functional
currency to presentation currency shall be recognized in
A. Profit or loss
B. Other comprehensive income with reclassification adjustment
C. Retained earnings
D. Other comprehensive income without reclassification adjustment

Number 10
Under IAS 21, when translating foreign currency-denominated transactions to functional currency,
which of the following items shall be measured in the financial statement at the exchange rate
prevailing at the end of the reporting period?
A. Sales
B. Interest payable
C. Common stocks
D. Prepaid asset

Number 11
The following were ascertained for the given period in the statement of realization and liquidation:
Assets to be realized 100,000
Assets realized 80,000
Assets not realized 20,000
Increase in asset 50,000
Liabilities liquidated 35,000
Liabilities not liquidated 40,000
Liabilities assumed 25,000
Liabilities to be liquidated 50,000
Supplementary credits 170,000
Supplementary debits 80,000
What is the gain or loss for the period?
A. 40,000 gain
B. 40,000 loss
C. 100,000 gain
D. 100,000 loss

Number 12
Unrealized holding gain or loss on derivatives designated as fair value hedge shall be recognized in
A. Profit or loss
B. Other comprehensive income with reclassification adjustment
C. Retained earnings
D. Other comprehensive income without reclassification adjustment

Number 13
Unrealized holding gain or loss on time value (ineffective portion) of derivatives designated as cash
flow hedge shall be recognized in
A. Profit or loss
B. Other comprehensive income with reclassification adjustment
C. Retained earnings
D. Other comprehensive income without reclassification adjustment
 Page 4

Numbers 14 and 15

At the beginning of 2024, the company enters into a contract to build an establishment for a client. The
contract price (CP) for the said establishment is P8,000,000. The client has given the company until the
end of 2026 to finish the establishment. The following data were ascertained:

2024 2025 2026

Costs incurred to date P2,500,000 P4,500,000 P6,000,000
Estimated costs to complete P3,750,000 P1,125,000 -

14. Under IFRS 15, what is the realized gross profit/(loss) for the year ended December 31,
2024?
A. 1,750,000
B. 1,700,000
C. 700,000
D. 2,200,000

15. Under IFRS 15, what is the construction-in-progress as of December 31, 2025?
A. 9,600,000
B. 6,400,000
C. 7,100,000
D. 8,900,000

Number 16
On January 1, 2024, a franchisor entered into a franchise agreement with a franchisee which requires
the latter to pay a non-refundable upfront fee of P800,000 at the signing of the contract and ongoing
payment of royalty equal to 5% of the sales of the franchisee. On the date of the signing of the contract,
the franchisee paid the non-refundable upfront fee. As part of the franchise agreement, the franchisor
shall render the following performance obligations which are considered separate and distinct from one
another:
a) Training ten personnel of the franchisee with stand stand-alone selling price of P100,000.
b) Construction of the franchisee's building and landscape with stand stand-alone selling price of
P400,000.
c) Delivery of 1,000 units of raw materials to franchisee with stand stand-alone selling price of
P300,000.
d) Allowing the franchisee to access the franchisor's trademark and tradename for a term of 10 years
starting from January 1, 2024, with stand-alone. selling price of P200,000.

As of the end of December 31, 2024, the accounting department of the franchisor obtained the
following information:
a) The franchisor was able to train seven out of ten personnel of the franchisee.
b) The percentage of completion of construction of the franchisee's building and landscape was
estimated by the engineer and architect at 90% although the building was fully completed because
the landscape was not yet started.
c) 600 units of raw materials were already delivered to the franchisee.
d) For the year ended December 31, 2024, the franchisor reported sales revenue amounting to
P100,000 because it already started operation upon the construction of the building on October 1,
2024.
What is the revenue from franchise fees from continuing services?
A. 509,000
B. 504,000
C. 800,000
D. 5,000
 Page 5

Number 17
Entity A consigned his goods costing P50,000 to Entity B. Entity A paid freight of P3,000 to ship the
goods to Entity B. At the end of the period, only 40% of the consigned goods remained in the shop of
Entity B. Total cash sale received by Entity B from the customer was P50,000. Entity B incurred and
paid a total of P1,500 freight to deliver the goods to the customer. Also the terms of their contract were
10% commission based on sales and any payment made by Entity B was to be reimbursed by Entity A.
What is the net income of Entity A at the end of the period?
A. 22,300
B. 27,300
C. 16,700
D. 11,700

Number 18
The Home Office in Manila established a branch in Bacolod. At the end of the year the reciprocal
account in the books of Manila was P350,000, however, the following transactions were not recorded
by the receiving party:
a) A debit memo in the amount of P10,000 was sent by Bacolod
b) A credit memo in the amount of P20,000 was sent by Manila
c) A credit memo in the amount of P30,000 was sent by Bacolod
What is the adjusted balance of the reciprocal account at the end of the year?
A. 350,000
B. 370,000
C. 330,000
D. 390,000

Number 19
The home office sends merchandise to the branch at a billed price of 150%. In the separate books of the
home office, the allowance for overvaluation account had a balance of P120,000. In the combined
statement, the ending inventory of the branch was P80,000 of which P20,000 came from outsiders.
What is the overstatement of the cost of goods sold of the branch from the home office
merchandise?
A. 40,000
B. 100,000
C. 90,000
D. 10,000

Number 20
Unrealized holding gain or loss for the effective portion of derivatives designated as a hedge of a net
investment in a foreign entity shall be recognized in
A. Profit or loss
B. Other comprehensive income with reclassification adjustment
C. Retained earnings
D. Other comprehensive income without reclassification adjustment
 Page 6

Number 21
Under IFRS for SMEs, the income of the SME-venturer for its investment in a joint venture under the
fair value model consists of
A. Share in net income of joint venture
B. Dividend income
C. Gain on changes in fair value of investment
D. Dividend income and gain on changes in a fair value of investment

Numbers 22 and 23
A certain company manufactures a certain product and uses a job order costing system. There is always
spoilage during production. The following are the costs related to the current production:
Total cost exclusive of allowance for spoilage P100,000
Allowance for spoilage P20,000
Units produced 5,000
At the end of the production, 100 units are spoiled and the total cost is P8,000. The spoiled units can be
sold for P6,000.

22. Assuming the spoilage is due to internal failure, what is the cost transferred to the Finished
Goods Inventory account?
A. 92,000
B. 114,000
C. 112,000
D. 115,000

23. Assuming the spoilage is due to exacting specifications, what is the cost per good unit?
A. 23.46
B. 19.18
C. 23.27
D. 18.78

Number 24
Ravenol Manufacturing Company makes three products: A and B were considered main products and
C was a by-product. The joint cost was P138,300. It was the company’s policy to allocate the joint cost
using the net realizable value method and the by-product was accounted during the point of sale. The
following data were given:
Product Production (lbs) Sales price per lbs Separable Costs
A 220,000 P3.00 P160,000
B 180,000 P1.50 P95,000
C 50,000 P0.45 P3,450
What is the joint cost allocated to Product A?
A. 96,895
B. 88,333
C. 98,148
D. 102,444
 Page 7

Number 25
BPI bank has the following traceable costs and cost drivers:
Activities Traceable costs Budgeted cost driver
New accounts P500,000 1,000 accounts
Deposits P360,000 400,000 deposits
Loans P270,000 900 applications
The activities were being used by the Ayala branch and Ortigas branch:
Activities Ayala Ortigas
New accounts 200 accounts 400 accounts
Deposits 40,000 deposits 20,000 deposits
Loans 100 applications 160 applications
What amount of Deposits will be assigned to the Ortigas branch?
A. 120,000
B. 18,000
C. 240,000
D. 36,000

Numbers 26 and 27
Andi Manufacturing Corp. uses a process costing system to account for its production and the policy is
to use the Weighted Average method. The following data are ascertained for the period:
Units
Beginning inventory (45% complete) 15,000
Started 50,000
Ending inventory (60% to complete) 8,000
Completed 52,000
The normal spoilage is 10% of the units started. All of the materials were added at the start of
production.

26. What is the EUP for Direct materials?

A. 65,000
B. 60,000
C. 50,000
D. 52,000

27. What is the EUP for Conversion?

A. 55,200
B. 56,800
C. 60,200
D. 61,800

Number 28
Under IFRS for SMEs, the income of the SME-venturer for its investment in a joint venture under the
cost method consists of
A. Share in net income of joint venture
B. Dividend income
C. Gain on changes in fair value of investment
D. Both B and C
 Page 8

Number 29

It refers to the newest system adopted by the Commission on Audit for analyzing, classifying,
summarizing, and communicating all transactions that are involved in the receipt and disbursement of
all government funds and properties, and interpreting the results thereof.
A. New government accounting system
B. Government accounting manual
C. Fund accounting
D. Public fund accounting

Number 30

Which of the following cash in bank accounts is used by national government agencies for
disbursement?
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

Number 31

The receipt of notice of cash allocation by a national government agency shall be credited by the said
agency to
A. Cash – Modified Disbursement System – Regular
B. Cash Treasury/Agency Deposit Regular
C. Subsidy income from national government
D. Advances from national government

Number 32

This phase in the national government budgetary process involves the enactment of the General
Appropriations Act by the Congress of the Philippines based on the proposed national budget submitted
by the President of the Republic of the Philippines.
A. Budget Preparation
B. Budget Legislation
C. Budget Execution
D. Budget Accountability

Number 33

In the statement of activities, expenses of nonprofit organizations shall be recorded only as reductions
from
A. Temporarily restricted net assets
B. Unrestricted net assets
C. Permanently restricted net assets
D. Current Liability
 Page 9
Number 34
Last year, a nonprofit organization received a contribution with a donor restriction for research
purposes. In the current year, the nonprofit organization fully spent the said contribution for the
intended purpose. What is the effect of this expenditure on the current year’s change in net assets?
A. Increase the temporarily restricted net assets.
B. No effect on the unrestricted net assets.
C. No effect on the total net assets.
D. Decrease the permanently restricted net assets.

Number 35
Resources of a non-profit organization that have been set aside for a specific purpose by the Board of
Trustees of the organization are accounted for in
A. Term endowment fund
B. Unrestricted fund
C. Restricted current fund
D. Annuity fund

Number 36
Statement (1) The unrealized profit on ending inventory decreases consolidated net income.

Statement (2) The realized profit on beginning inventory increases consolidated merchandise
inventory.
A. Only the first statement is true
B. Only the second statement is true
C. Both statements are true
D. Both statements are false

Number 37

Statement (1) The amortization of the fair value differentials affects the non-controlling interest in net
assets.

Statement (2) The intercompany dividend revenue affects the non-contolling interest in net income.
A. Only the first statement is true
B. Only the second statement is true
C. Both statements are true
D. Both statements are false

Number 38

Statement (1) The gain on bargain purchase resulting from the acquisition of shares affects the total
consolidated net income attributable to controlling interest.

Statement (2) The impairment of goodwill resulting from the acquisition of shares affects the
consolidated operating expenses.
A. Only the first statement is true
B. Only the second statement is true
C. Both statements are true
D. Both statements are false
 Page 10

Number 39
Statement (1) In acquisition of net assets, the resulting goodwill or gain on bargain purchase is recorded
in the books of the surviving company.

Statement (2) In a merger, the stockholders’ equity of the acquired company is eliminated in its
separate books.
A. Only the first statement is true
B. Only the second statement is true
C. Both statements are true
D. Both statements are false

Number 40
Statement (1) Control premium is included in the computation of the assumed fair value of the
previously held securities based on the price paid involving the new acquisition in a step acquisition.
Statement (2) The contingent consideration is recognized to the extent probable on the date of
acquisition.
A. Only the first statement is true
B. Only the second statement is true
C. Both statements are true
D. Both statements are false

Number 41
The SB Company owns 90% of the DP Company. On their separate financial statements, SB Company
has liabilities of P27,300,000, including P672,000 due to DP. DP Company has liabilities of
P9,184,000, including P924,000 advances from YG.
Compute the total liabilities in SB’s consolidated statement of financial position
A. 36,484,000
B. 35,812,000
C. 34,888,000
D. 0

Number 42
GV Company acquired 75% of EZ Company’s outstanding shares for P510,000 cash. At that date, EZ
reports identifiable assets with a book value of P1,040,000 and a fair value of P1,280,000, and it has
liabilities with a book value and fair value of P716,000.
Compute the goodwill or (gain on bargain purchase) arising on consolidation if non-controlling
interest is measured at fair value and that control premium of P30,000 is included in the
purchase price
A. 106,000
B. 116,000
C. (87,000)
D. 57,000
 Page 11

Number 43

KR Corporation paid P4,500,000 for a 90% interest in CK Corporation on January 1, 2024. The
excess of the aggregate amount over the book value of the identifiable net assets of the acquired
company amount to P240,000. The excess was allocated as follows: P160,000 to an undervalued
equipment with a five-year remaining useful life and the balance to goodwill. Non-controlling interest
is measured at fair market value. Net income of KR in 2024 is P2,000,000 ; Net income of CK in
2024 is P500,000. Dividends declared by CK to KR amount to P48,000.
Compute the consolidated net income in 2024
A. 2,420,000
B. 2,468,000
C. 2,340,000
D. 2,383,200

Number 44
MB owns 70% of DW Company’s outstanding ordinary shares. DW Company, in turn, owns 20%
investment in RC Corporation. During 2024, MB earned a net income of P8,015,000 from its own
operations while DW suffered a loss of P1,500,000 excluding its share in the earnings of associates, if
any. RC reported a net income of P1,087,500. DW declared dividends of P625,000 from its
accumulated profits in previous years.
The consolidated net income for the year 2024 is
A. 7,117,250
B. 6,527,500
C. 6,679,750
D. 6,732,500

Number 45
DV Corp. owns 70% of PF Corp’s ordinary shares. On August 1, 2024, DV Corp. acquired an
equipment from PF Corp. for P20,300,000. The carrying amount of the equipment is P11,900,000 and
has a remaining life of 8 years.
Due to this intercompany transaction, compute the net adjustment (increase/decrease) in the
consolidated net income attributable to controlling interest for 2024
A. 5,573,750 decrease
B. 7,350,000 increase
C. 7,962,500 decrease
D. 5,145,000 increase

Number 46
VG Corp. owns 80% of FC Corp’s ordinary shares. On June 1, 2024, FC Corp. sold equipment to VG
Corp. for P10,500,000. The carrying amount of the equipment is P11,400,000 and has a remaining life
of 5 years.
Due to this intercompany transaction, compute the net adjustment (increase/decrease) in the non-
controlling interest in net income 2024
A. 795,000 decrease
B. 636,000 increase
C. 144,000 decrease
D. 159,000 increase
 Page 12

Number 47

VP Company acquired a 75% interest in JS Company in 2022. For years ended December 31, 2023
and 2024, JS reported net income of P5,740,000 and P6,500,000, respectively. During 2023, JS sold
merchandise to VP for P1,520,000 at a cost of P1,040,000. Two-fifths of the merchandise was later
resold by VP to outsiders for P700,000 during 2024. In 2024, VP purchased merchandise from JS for
P1,760,000 at a profit of P640,000. One-fourth of the merchandise was resold by VP to outsiders for
P540,000 during 2024.
Compute the non-controlling interest in net income in 2024
A. 1,553,000
B. 1,657,000
C. 1,577,000
D. 1,673,000

Number 48
XY Co. had the following transactions with two subsidiaries, D1 and D2, during 2024: Sales of
P5,880,000 to D1, Inc., resulting in a P1,764,000 gross profit. D1 had P1,470,000 of this inventory on
hand at year-end. Purchases of raw materials totaling P23,520,000 from D2 Corp., a wholly-owned
subsidiary. D2’s gross profit on the sale was P4,704,000. XY had P5,488,000 of this inventory
remaining on December 31, 2024. Before working paper entries, XY had combined current assets of
P29,400,000.
Compute the amount XY should report in its December 31, 2024, consolidated financial position
for current assets
A. 22,442,000
B. 29,400,000
C. 27,861,400
D. 30,938,600

Number 49

On December 1, 2024, ABC Company paid cash to purchase a 90–day “at the money” call option for
75,000 Singapore Dollars. The option’s purpose is to protect an exposed liability of 75,000 SGD
relating to an inventory purchased, received on December 1, 2024 and to be paid on March 1, 2025.

12/1/24 12/31/24 3/1/25

Spot rate 41.22 41.56 41.48
Fair value of call option P14,600 P31,200 ?

Compute the gain or loss on option contract due to change in the time value on December 31, 2024
A. 8,900 loss
B. 25,500 gain
C. 16,600 gain
D. 5,700 loss
 Page 13

Numbers 50 and 51
Condensed statements of the financial position of HP Corp. and JB Corp. as of December 31, 2023,
were as follows:
HP JB
Current assets P 175,000 P 65,000
Noncurrent assets 725,000 425,000

Liabilities P 85,000 P 35,000

Ordinary shares, P20 par 550,000 300,000
Share premium 5,000 25,000
Retained earnings 260,000 130,000

On January 1, 2024, HP Corp. issued 35,000 shares with a market value of P22/share for the
identifiable assets and liabilities of JB Corp. The book value reflects the fair value of the assets and
liabilities, except that the noncurrent assets of JB have a fair value of P630,000, and P30,000 overstates
the noncurrent assets of HP. Contingent consideration to the extent probable on the date of acquisition
amounts to P15,000. HP also paid for the share issue costs worth P84,000 and other acquisition costs
of P59,000.

50. Compute the total assets in the books of the surviving company immediately after the merger
A. 1,562,000
B. 1,577,000
C. 1,705,000
D. 1,547,000

51. Compute the retained earnings in the books of the surviving company immediately after the
merger
A. 251,000
B. 201,000
C. 192,000
D. 187,000

Number 52
On October 1, 2024, JKL Company paid a premium to purchase a 120-day “at the money” put option
for 128,000 Malaysian Ringgits. The option’s purpose is to protect an exposed asset of 128,000 MYR
relating to a merchandise sold, delivered on October 1, 2024 and to be collected on January 31, 2025.

10/1/24 12/31/24 1/31/25

Spot rate 11.86 11.77 11.73
Fair value of put option P28,400 P36,500 ?

Compute the gain or loss on option contract due to change in the effective portion on 2025
A. 19,860 loss
B. 5,120 gain
C. 16,640 gain
D. 24,980 loss
 Page 14

Number 53
On January 1, 2024, ABC Inc. paid a premium to acquire a put option from a writer. This is in relation
to a forecasted sale of merchandise worth $78,000. (option price = P4.965)
1/1/24 3/31/24 6/30/24
Spot rate P4.934 P4.908 P4.75
Fair value of option P11,760 P13,680 P16,770
Compute the gain/loss affecting earnings on the first quarter of 2024
A. 2,028
B. (2,028)
C. 1,920
D. (108)

Numbers 54 and 55
The Statement of Financial Position of BK Company as of December 31, 2023 were as follows:
Book Value
Cash P2,000,000
Accounts Receivable 2,500,000
Inventories 4,200,000
Plant & Equipment, net 5,000,000
Goodwill 500,000
Liabilities 7,000,000
Share Capital, P200 par 5,200,000
Retained Earnings 2,000,000
On January 2, 2024, LZ Company acquired all the identifiable net assets of BK Company for
P9,000,000 cash. A contingent consideration of P500,000 is to be paid to the stockholders of the
dissolved company, depending on the outcome of the specific target. Only 60% of the consideration to
be transferred is probable on the date of acquisition. The fair value of the inventories of BK is
undervalued by 300,000, and P500,000 undervalues its plant & equipment. Out-of-pocket costs of the
business combination were paid in the amount of P200,000.
On the date of acquisition, the goodwill in the acquirer's books amounted to P400,000. On August 1,
2024, the amount of contingent consideration was increased by P150,000 due to an improved
information regarding relevant facts and circumstances on January 2, 2024. On October 31, 2024, the
amount of contingent consideration was decreased by P80,000 due to the massive destruction brought
about by the calamities that recently hit the country.

54. Compute the amount of goodwill shown on the statement of financial position of LZ
Company as of August 31, 2024.
A. 1,800,000
B. 2,350,000
C. 1,450,000
D. 1,950,000

55. Compute the amount of goodwill shown on the statement of financial position of LZ
Company as of December 31, 2024.
A. 2,270,000
B. 1,950,000
C. 2,350,000
D. 1,450,000
 Page 15

Numbers 56, 57, 58 and 59

Refer to the following direct selling rates against PHP:

JPY (P0.10 spread) 10/31/24 11/30/24 12/31/24 1/31/25 2/28/25

Selling Spot rate 0.55 0.50 0.45 0.44 0.40
30 days forward 0.60 0.55 0.46 0.42 0.35
60 days forward 0.70 0.47 0.59 0.46 0.26
90 days forward 0.85 0.84 0.60 0.38 0.36
120 days forward 0.90 0.77 0.44 0.48 0.50

56. On November 30, 2024, the Philippine Company entered into a forward contract to speculate on a
purchase of 271,500 Japanese Yen, to be delivered on January 31, 2025.
How much PHP should the Philippine Company pay on January 31, 2025?
A. 100,455
B. 135,750
C. 127,605
D. 119,460

57. On October 31, 2024, the Philippine Company entered into a purchase commitment with a
Japanese Company for 5 million Japanese Yen, deliverable on February 28, 2025. On the same
day, the Philippine Company entered into a forward contract to hedge against unfavorable
fluctuations in the foreign exchange rates.
How much is the debit or credit to “firm commitment” account on December 31, 2024?
A. 500,000 credit
B. 500,000 debit
C. 1,550,000 debit
D. 1,550,000 credit

58. On October 31, 2024, the Philippine Company exported goods to a Japanese Company for
JPY2,000,000, payable on January 31, 2025.
How much sales revenue should the Philippine Company recognize for the year ended
December 31, 2024?
A. 1,100,000
B. 900,000
C. 1,400,000
D. 880,000

59. On November 30, 2024, the Philippine Company borrowed JPY450,000, evidenced by a 60-day
5% interest bearing promissory note.
For the December 31, 2025 income statement, how much should be included foreign exchange
gain or loss?
A. 22,500.00
B. 4,500.00
C. 4,537.50
D. 4,518.75
 Page 16

Number 60
On December 31, 2024 a foreign subsidiary in Hong Kong submitted the following accounts stated in
its local currency which is the functional currency of the foreign operation. The subsidiary in Hong
Kong acquired in 2024 is not integrated with the operations of the parent in the Philippines. Moreover,
its cash flows do not directly affect the parent company. The foreign operation is self-sufficient and is
not dependent on the parent company for financing.

Total Assets HK$ 1,470,000

Total liabilities 294,000
Ordinary Shares 735,000
Retained Earnings 441,000
The exchange rates were: Current rate, P8.75 ; Historical rate, P8.10 ; Weighted average rate, P8.50.
Compute the cumulative translation adjustment (Dr)/Cr on December 31, 2024
A. (1,501,500)
B. 764,400
C. 588,000
D. 1,501,500

Numbers 61 and 62
On January 6, 2024, the Department of Education received a P3,800,000 appropriation from the
national government for the development of learning modules. On January 28, 2024, the said
Department received the obligation authority which is 75% of the expenditure authority from the
Department of Budget and Management. On February 4, 2024, the Department of Education entered
into a commitment with Basic Knowledge Developers for the creation of various learning materials
with an agreed contract price of 90% of the amount authorized . On February 20, 2024, the Department
received the disbursement authority from the Department of Budget and Management in the amount
equal to the agreed contract price. During the month of March there were contract adjustments and
modifications resulting in total disbursements equivalent to only 80% of the original contract price.

61. Compute the amount being monitored in both RAPAL and RAOD
A. 3,800,000
B. 2,850,000
C. 2,565,000
D. 3,420,000

62. Compute the amount credited to the Revenue Account

A. 2,850,000
B. 2,565,000
C. 3,800,000
D. 3,420,000
 Page 17

Numbers 63 and 64

The CHILDFUND Center, a recognized organization for the welfare and development of homeless
children in Quezon City, had the following receipts and expenses for the year ended December 31,
2024:

Receipts:
General Contributions P 2,500,000
Internally-imposed gifts and bequests 900,000
Board Designated Grants and Contracts 1,800,000
Special gifts restricted by sponsors for children 450,000
Non-expendable gift to be retained 480,000
Expenses:
Nutrition P 1,150,000
Membership Relations 600,000
Management, Financing & Administrative 300,000
Basic Education 2,000,000
Fund raising activities 240,000

63. In CHILDFUND’s Statement of Activities, for the year ended December 31, 2024, what
amount should be reported as change in unrestricted net assets?
A. 1,360,000
B. 1,840,000
C. 910,000
D. 2,050,000

64. In CHILDFUND’s Statement of Activities, for the year ended December 31, 2024, what
amount should be reported under the classification of program services?
A. 2,000,000
B. 3,390,000
C. 1,150,000
D. 3,150,000

Number 65

On September 1, 2024, SME A and SME B acquired 30% (each) of the ordinary shares that carry
voting rights at a general meeting of shareholders of Entity Z for P570,000 and transaction cost of
P7,500. SME A and SME B immediately agreed to share control over Entity Z. For the year ended
December 31, 2024, Entity Z recognized a profit of P720,000. On December 30, 2024, Entity Z paid
a dividend of P63,000 declared in the prior year. On December 31, 2024, the fair value of each
venturers’ investment in Entity Z was P639,000 and cost to sell amounted to P10,800. The amount of
value in use is P622,800. There is a published price quotation for Entity Z.
The effect in profit or loss to be reported by SME A in 2024 using the equity model
A. 69,600
B. 61,500
C. 80,400
D. 50,700
 Page 18

Numbers 66, 67 and 68

The VMSHA, a homeowners association in a private subdivision in Quezon City, had the following
cash receipts and disbursements for the year ended December 31, 2024:

Receipts:
Membership fees P 1,300,000
Car sticker 160,000
Contribution to the establishment of term endowment 200,000
Donor-restricted fund 170,000
Board-designated fund 80,000
Donation of a pure endowment fund 100,000
Interest received from the regular endowment fund 15,000
Proceeds from the sale of furniture 30,000
Interest received from the term endowment fund 18,000
Disbursements:
Maintenance and security 250,000
Utilities and supplies 120,000
Long-term debt 60,000
Administrative and filing 130,000
Closed-circuit television 10,000

The interest received from the regular endowment is restricted by the donor for the acquisition of
emergency kits.
Compute the net cash provided by/ (used in):

66. Operating activities

A. 1,058,000
B. 1,073,000
C. 880,000
D. 800,000

67. Investing activities

A. 30,000
B. (10,000)
C. 20,000
D. 0

68. Financing activities

A. 345,000
B. 443,000
C. 425,000
D. 363,000
 Page 19

Number 69

On March 1, 2024, SME X and SME Y acquired 25% (each) of the ordinary shares that carry voting
rights at a general meeting of shareholders of Entity C for P68,000. Transaction cost is 6% of the
transaction price. SME X and SME Y immediately agreed to share control over Entity C. For the year
ended December 31, 2024, Entity C recognized a profit of P75,000. On December 30, 2024, Entity C
declared and paid a dividend of P32,000 for the year 2024. On December 31, 2024, the fair value of
each venturers’ investment in Entity C was P84,000. Cost to sell is 4% of the fair value. Value in use
amounts to 80,000. However, there is no published price quotation for Entity C.
Compute the balance of Investment in Entity C on Dec. 31, 2024 using the cost model
A. 80,640
B. 84,000
C. 72,080
D. 80,000

Number 70
Banks J and K (the parties) agreed to combine their corporate, investment banking, asset management
and service activities by establishing a separate vehicle (Bank Q). Both parties expect the arrangement
to benefit them in different ways.
The assets and liabilities held in Bank Q are the assets and liabilities of Bank Q and not the assets and
liabilities of the parties. Banks J and K each have a 40% ownership interest in Bank Q, with the
remaining 20% being listed and widely held. The stockholders’ agreement between Bank J and Bank
K establishes a joint control of the activities of Bank Q.
Transactions for year 2024:
Investments: Bank J P6,250,000
Bank K P6,250,000

Revenues P1,250,000
Cost and Expenses P 750,000
Dividends paid – Bank Q P 180,000

What is the interest of Bank J in the joint arrangement at December 31, 2024?
A. 6,250,000
B. 6,050,000
C. 6,450,000
D. 6,378,000

END