CPA REVIEW SCHOOL OF THE PHILIPPINES

MANILA

ADVANCED FINANCIAL ACCOUNTING AND REPORTING Sunday, September 17, 2023

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

Number 1

A and B are partners in a business known as AB Company. The partners are considering a number of
options regarding the partnership including the admission of a new partner and a potential sale of the
partnership. The following information has been prepared as a basis for evaluating various alternatives:
Item Book value Fair value Tax basis

Cash and cash equivalents 80,000 80,000 80,000

Accounts receivable 340,000 288,000 368,000
Inventory 268,000 120,000 200,000
Prepaid and other current assets 72,000 60,000 72,000
Property , plant and equipment (net) 1,368,000 1,200,000 1,280,000
Total Assets 2,128,000 1,748,000 2,000,000
Accounts payable 216,000 216,000 216,000
Other current liabilities 152,000 140,000 116,000
Notes/loans payable 960,000 960,000 960,000
A, capital 480,000
B, capital 320,000
Total liabilities and capital 2,128,000
The partners currently share profits and losses 60% and 40%, respectively, for A and B.
If B were to sell one-half of his interest in capital to someone outside the partnership based on
fair value, what would be the amount of that capital?
A. 86,400
B. 91,200
C. 141,600
D. 160,000

Number 2

Partners A and B share profits and losses equally for the remainder and have the provision for annual
salary allowances of P750,000 and P600,000, respectively.
Under this agreement, what is the total net income of the partnership in order for B to receive
P850,000 as his share?
A. 1,350,000
B. 1,600,000
C. 1,850,000
D. 850,000

Number 3

Which of the following statements is true in relation to consolidated financial statements?

A. Non-controlling interest is presented in the consolidated statement of financial position by means
of a note to consolidated financial statements.
B. The intercompany profit in inventory transfer between affiliates is computed by multiplying the
inventory held by the buying affiliate by the gross profit rate based on sales of the buying affiliate.
C. The income and expenses of a subsidiary are included in the consolidated financial statements
from the acquisition date.
D. Recognition of the realized profit in beginning inventory requires a working paper debit to cost of
goods sold.
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Numbers 4 and 5
63. A
A and B are partners having capital balances of P3,750,000 and P4,500,000, respectively, and profits
and losses equally. They admit C to a 1/3 interest in partnership capital and profits for an investment of
64. C
P4,875,000.
4. If the asset revaluation method is used in recording the admission of C to the partnership (8,400 + 2,100 + 5,460 + 3,500 + .10x + 914,200 = x) 933,660/.90x
x = 1,037,400/ 13.30 = 78,000 units sold
A. C capital will be P4,375,000
B. Total capital will be P13,125,000
Sales 1,037,400
C. B capital will be P5,250,000
CGS ( 554,190) (700,000 + 7,000 + 3,500 = 710,500 * 78/100)
D. Asset revaluation will be recorded at P1,125,000
GP 483,210
5. If the asset revaluation method is used in recording the admission of C, what is the under or AE (8,400)
overvaluation of the asset upon admission of C? DE (2,100)
Ins (5,460)
A. 1,500,000 undervaluation CE (103,740)
B. 1,500,000 overvaluation 363,510
C. 750,000 undervaluation
D. 750,000 overvaluation Inventory 710,500 * 22/100 = 156,310
65. C
Number 6
66. B
A, B, C and D are partners, sharing earnings in the ratio of 3:4:6:8. The balance of their capital
accounts on December 21, 2024 are as follows: A – P 12,500; B- P312,500; C – P312,500 and D
– P112,500. The partners decided to liquidate, and they accordingly converted the non-cash assets into Access 400,000 300,000/5 60,000
P290,000 of cash. After paying the liabilities amounting to P37,500, they have P277,500 cash available Construction 1,600,000 1,200,000* 100% 1,200,000
for payment to partners. Delivery 2,000,000 1,500,000*15/20 1,125,000
4,000,000 3,000,000 2,385,000 + 400,000 (4M x 10%)
What is the carrying amount of noncash assets?
A. 762,500 Unearned revenue (raw materials): (1,500,000 - 1,125,000) 375,000
B. 787,500
C. 318,750 67. B
D. 567,500
68. C
Number 7
69. B
Entity A and Entity B agreed to a business combination. Their condensed statement of financial
position before combination show: 70. B
Entity A Entity B
Book Value Fair Value
ASSETS P 7,000,000 P 10,500,000 P9,950,000 END
Liabilities 4,987,500 2,932,000
Ordinary shares, P100 par 2,187,500
2,625,000
Share premium 918,000
Retained (612,500) 4,462,500
earnings/(deficit)
LIABILITIES & SHE P 7,000,000 P 10,500,000
It was agreed that Entity A will be the continuing entity and shall issue 64,980 shares to Entity B.
Market value of A’s share on the date of business combination is P102.
Immediately after the business combination, what is the increase in stockholders' equity?
A. 6,237,920
B. 9,030,500
C. 7,018,000
D. 6,627,960
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Number 8
54. D P Corporation acquired an 80% interest in S Company on January 1, 2024 for P245,000. On this date
the ordinary shares and retained earnings of the two companies were as follows:
AR 228,000 ( P88,000; old + P140,000; new)
P S
PA 384,000 (P480,000 – P96,000)
612,000 Ordinary shares 630,000 175,000
Retained earnings 280,000 35,000
55. D The assets and liabilities of S Company were stated at their fair values when P Corporation acquired its
80% interest and the proportionate share in net identifiable assets was used to initially measure the
56. A non-controlling interest. Net income and dividends for 2024 for the affiliated companies were:
P S
Home Office Current 1,950,000 + 21,600 – 5,400 = 1,966,200 Net income 105,000 31,500
Dividends declared 63,000 17,500
57. D Dividends paid 31,500 8,750
End of year evaluation indicates P2,400 impairment in goodwill.
SFHO 266,400
F-in 24,800 What is the consolidated retained earnings attributable to controlling interest at December 31,
Cash 11,200 2024?
HOC 280,000 A. 408,280
B. 393,800
58. C C. 331,280
D. 330,800
Allowance for Overvaluation, beg (P2,160,000/225% *125%) 1,200,000
Allowance for Overvaluation, during the year (P10,800,000 * 125%) 13,500,000
Allowance for Overvaluation Before Adjustment 14,700,000 Number 9
Less: Allowance for Overvaluation After Adjustment (1,710,000)
12,990,000 On January 1, 2024, P Corporation purchased 80% of S Company’s P10 par ordinary shares for
P487,500. On this date, the carrying value of S’s net assets was P500,000. The fair value of S’s
identifiable assets and liabilities were the same as their book values except for plant assets (10 years
59. C remaining life) which were P50,000 in excess of the carrying amount. For the year ended December
31, 2024, S’s net income was P95,000 and the dividend income received by P Corporation from S
2,600,000/ 130% = * 30% = 600,000; 980,000 – 600,000 = 380,000 mark-up, beg Company was P50,000.
Inventory, beg P1,900,000 + 380,000 + 432,000 + 1,160,000 + 2,600,000 = 6,472,000
In the December 31, 2024 consolidated statement of financial position, what is the amount of
non-controlling interest?
60. C
A. 140,875
B. 18,000
Sales 3,215,625
C. 127,375
Sales Discount ( 53,103.75)
D. 128,375
CGS ( 2,411,718.75)
Expenses
Samples (257,250) P490,000 * 90% * 7/12
Number 10
Paid Vouchers (214,375)
279,177.50
On January 1, 2024, P Corporation purchased 80% of the outstanding shares of S Company at a cost of
61. A
P280,000. On that date, S Company had P120,000 of ordinary shares and P200,000 of retained
earnings. For 2024, P Corporation had net income of P136,000 and paid dividends of P40,000. For
62. D
2024, S Company reported net income of P60,000 and paid dividends of P20,000. All of the assets and
2024 2025
liabilities of S Company had book values approximately equal to their respective market values. On
CP 56M 56M * 80% = 44.8M
April 1, 2024, S Company sold equipment with a book value of P12,000 to P Corporation for P24,000.
TEC (84) (52.5)
The equipment is expected to have a useful life of five years from the date of the sale.
EGP/Loss (28) 3.5
POC 100% 80% How much is the non-controlling interest in net income?
To date (28) 2.8 A. 9,960
PY - 28 B. 10,080
CY (28) 30.8 C. 13,800
D. 10,560
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Number 11
Page 8
On January 2, 2024, PP Company purchased 70% of the stocks of SS Company at book value. On
May 1, 2024, PP Company acquired a used machinery for P337,500 from SS Company that was 47. C
carried in the latter’s books at P270,000. The machinery has a remaining life of 6 years. On October
1, 2025, SS Company purchased an equipment from PP Company for P570,000. The carrying amount Total Assets $980,000 * 7.75 = P7,595,000
of this equipment was P630,000 and had a remaining life of 5 years.
Total Liabilities $196,000 * 7.75 = P1,519,000
Results of operation for the year 2025 were Ordinary shares 490,000 * 7.10 = P3,479,000
PP Company SS Company Retained Earnings 294,000 * 7.50 = P2,205,000
Net income 945,000 165,000 7,203,000
Dividends paid 345,000 - CTA 392,000
7,595,000
In the consolidated income statement in 2025, what is the consolidated net income attributable to
parent’s shareholders equity? 48. D
A. 1,125,375
B. 1,078,125 893,150 x (1.69 - 1.65) 35,726 loss
C. 1,131,375
D. 1,128,375 NOTE: Since the spot rate decreased from 1.69 to 1.65, then the exposed accounts receivable
also decreased resulting to a forex loss.
Numbers 12 and 13 49. B
A Co. acquired 60% of the outstanding ordinary shares of B Co. on January 1, 2024. A Co. acquired it
at book value. 50. D
Income statements of A Co. and B Co. for 2025 are as follows:
51. D
A B
Net sales 218,750 87,500 Trading Securities P1,280,000 – 1,120,000 = 160,000
Cost of sales (131,250) (52,500) Land & Bldg. P1,800,000 – 1,000,000 = 800,000
Gross profit 87,500 35,000 960,000
Operating expenses (26,250) (13,125)
Dividend income 14,000 - 52. A
Net income 75,250 21,875
Trading Securities P1,280,000 – 1,120,000 = 160,000
B Co. made sales to A Co. of P28,000 in 2024 and P42,000 in 2025. A Co. reported inventory on Land & Bldg. P1,800,000 – 1,000,000 = 800,000
December 31, 2024 amounting to P17,500 of which 20% comes from B Co. and inventory on 960,000
December 31, 2025 amounting to P21,000 of which 30% comes from B Co. A Co. uses 30% mark up Inventories 120,000
on cost and B Co. uses 25% mark up on cost for their selling prices. A Co. and B Co. declared and 1,080,000
paid dividends in 2025 amounting to P21,000 and P17,500 respectively. On January 1, 2025, B Co. Less: Unsecured priority claims (30,000)
has ordinary shares of P80,000; share premium of P30,000 and retained earnings of P40,000. 1,050,000
12. In the Consolidated Income Statement for the year ended December 31, 2025, what is the net 53. C
income attributable to parent shareholders’ equity?
A. 77,315 Sales 400,000
B. 77,539 CGS (288,000)
C. 78,211 GP 112,000
D. 78,435 Trustee Expense (24,000)
Depreciation (96,000)
13. In the Consolidated Income Statement for the year ended December 31, 2025, what is the Loss in MS (20,000)
cost of goods sold? (28,000)
A. 141,750
B. 141,190
C. 184,310
D. 142,310
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Numbers 14 and 15
39. C
AA Corp. uses job order costing system to produce its products. Its uses a single factory overhead rate
Supporting expenses: (350,000 + 320,000) = 670,000 that is based on machine hours. Its manager believes that the company would be better if it will use
two overhead rates, one based on material costs and the other one is based machine hours. The
40. C following data is for year 2024:
Budgeted FOH
41. B
Materials related Factory Overhead 3,840,000
42. D Machine related Factory Overhead 10,400,000
Total Budgeted Factory Overhead 14,240,000
1/1/24 3/31/24
FV of put option P19,600 P22,800 Costs of materials used on jobs 12,800,000
Intrinsic value 4,030 7,410 Total Machine hours 1,600,000
*Time value 15,570 15,390 decreased by P180
Data related to three jobs worked on in December follow:
*Difference between FV of option and intrinsic value Job # 1 Job # 2 Job # 3
1/1/24 (in the money)
Option price P4.965 Material Costs 168,000 656,000 312,000
Spot rate 4.934 Direct Labor Costs 128,000 104,000 144,000
.031 x $130,000 = 4,030 Machine Hours used 68,000 36,000 23,200

3/31/24 (in the money) Actual factory overhead related to materials was P318,400 and actual factory overhead related to
Option price P4.965 machine hours was P846,400.
Spot rate 4.908
.057 x $130,000 = 7,410 14. Assuming AA Corp uses predetermine factory overhead based on machine hours. What is
the factory overhead applied to job # 1?
43. A A. 320,400
B. 605,200
3/31/24 6/30/24 C. 442,000
FV of put option P22,800 P27,950 D. 50,400
Intrinsic value 7,410 27,950 increased by P20,540
Time value 15,390 0 15. Assuming AA Corp uses the two overhead rates suggested by the manager to determine
factory overhead rates. What is the total cost of job #3?
Intrinsic value on 6/30/2024 [130,000 x (4.965- 4.75)] 27,950
A. 662,480
44. D B. 901,200
C. 1,190,800
D. 700,400
AUD35,000 x (34.30 - 36.70) 84,000 positive

NOTE: Since the balance of the Forward contract receivable of 1,284,500 (35,000 x 36.70) is
greater than the balance of the Forward contract payable of 1,200,500 (35,000 x 34.30) then the
difference of 84,000 is considered an asset (positive).
45. B
AUD35,000 x (36.70 - 39.50) 98,000 loss
NOTE: Since the forward rate increased from 36.70 to 39.50, then the underlying liability in the
hedge item also increased resulting to a forex loss.
46. A
Number 16
Which of the following statements is true in relation to consolidated financial statements?
A. When a subsidiary has borrowed cash from the parent company, the related receivable and payable
are eliminated in their own set of books in preparing a consolidated statement of financial position.
B. In an acquisition-type business combination, the shareholders’ equity section of a consolidated
statement of financial position for a parent and its partially owned subsidiary consists of the parent
shareholders’ equity accounts only.
C. Parent company owns 75% of Subsidiary company. During 2024, Parent sold goods with a 30%
gross profit to Subsidiary. Subsidiary sold all of these goods in 2024. For 2024 consolidated
financial statements, sales and cost of goods sold should be reduced by 75% of the intercompany
sales.
D. Amortization of excess affects the computation of the non-controlling interest in profit.
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Number 17
Page 6
The company has two main products, Alpha and Beta. Charlie on the other hand was a by-product of
Beta. Alpha and Beta came from the same raw material. Charlie was manufactured from the residue of 24. C
the joint process. The cost before separation was P375,000. The company opted to use the NRV
(approximated) in accounting its joint costs and the NRV of product Charlie was a reduction from the 25. B
cost where it came from. The following data were ascertained during the year:
Alpha Beta Charlie 26. C
Units produced 25,000 14,425 1,200
27. D
Units sold 23,000 12,000 1,200
Cost after separation P16,200 P49,300 P3,500
Initial measurement of investment (100,000 + 1,000) 101,000
Selling price per unit P15 P20 P5
Impairment loss (3,000)
What is the gross profit of product Alpha? Recoverable amount (102,000 - 4,000) / Investment in Entity Z 12/31/2024 98,000
A. 105,300
NOTE: Since the recoverable amount is less than the carrying amount of the investment, then
B. 124,476
there is an impairment loss to be recognized.
C. 61,765
D. 49,560
28. A
Number 18 Dividend income (20,000 x 30%) 6,000
Impairment loss (3,000)
ABC Corporation manufactures a certain product. For October, there were no beginning inventories of
Net profit 3,000
materials. ABC uses a Just in Time system and backflush costing with three trigger points for making
entries to record their manufacturing process. ABC’s October costs per product are direct materials,
P75 and conversion costs, P60. The following data pertains to October operations: 29. D
NOTE: Since there is a quoted price, even if Entity A initially elected to use the cost model,
Materials purchased P412,500
Entity A must use the Fair value model
Conversion costs incurred 330,000
Number of finished units 5,250 units
Number of units sold 5,000 units 30. D
What is the balances of MIP inventory account at the end of October?
31. A
A. 33,750
B. 15,000
32. A
C. 18,750
D. 19,643
33. C
Number 19 34. D
Joint Control is
35. D
A. A contractual arrangement whereby two or more parties undertake an economic activity
B. The contractually agreed sharing of control of an arrangement, which exists only when decisions
36. C
about the relevant activities require the unanimous consent of the parties sharing the control
C. Short term associations of two or more parties to fulfill a specific project
D. The minimum proportion of the voting rights to make decisions about the relevant activities of the 37. C
joint arrangement
Net Cash Operating Activities: [(4,500,000 + 240,000) - (900,000 + 350,000 + 320,000)] =
3,170,000
Number 20
38. D
A joint operator shall recognize in relation to its interest in a joint operation the following, except
A. Its assets and liabilities including its share of any assets held jointly and liabilities incurred jointly Net Cash Financing Activities: [(575,000 + 1,000,000 + 150,000) - (400,000)] = 1,325,000
B. Its revenue from the sale of its share of the output arising from the joint operation
C. Its share of the revenue from the sale of the output by the joint operation and expenses, including
its share of any expenses incurred jointly
D. Its investment and shall account that investment using the equity method
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Numbers 21, 22 and 23
Page 5
The following data were extracted in the first department of a three step process to complete the
Cost per EUP: company's product and opted to use the FIFO method in accounting the process: Beginning inventory
Direct materials (375,000 ÷ 25,000) 15 units were 8,000 (25% to complete). Ending inventory units were 5,000 (15% to complete). Units
Conversion (569,800 ÷ 20,350) 28 started were 20,000. Normal lost units were 2,000 and abnormal lost units were 1,000. Materials were
43 added when the conversion process was 80% complete.
Normal spoilage: Beginning inventory cost: Direct materials P15,000 and Conversion P23,000.
Conversion (1,400 x 28) 39,200 Costs during the year were the following: Direct materials P375,000 and Conversion P569,800.
Units were inspected when the conversion process was 70%.
Allocation base for normal spoilage:
21. What is cost of transferred-out goods to the next department?
CC A. 730,000
Started and completed 12,000 B. 769,200
Ending 4,250 C. 780,124
16,250 D. 758,948

NOTE: Since the percent complete as to conversion of the materials was 75% then it did not 22. What is the ending inventory cost?
reach the policy for the placement of materials of 80% complete, therefore no materials were A. 194,000
added LAST YEAR. All of the materials were added THIS YEAR. No normal spoilage as to B. 204,252
direct materials because no normal lost units was accounted for in the EUP schedule as to direct C. 213,076
materials. Units were inspected first before placement, thus no lost units were accounted. D. 233,200

23. What is the period cost?

Beginning inventory cost 38,000
Beginning inventory cost to complete A. 19,600
B. 34,600
this year: DM (8,000 x 100% x 15) 120,000
C. 43,000
CC (8,000 x 25% x 28) 56,000 D. 30,100
Beginning inventory completed cost 214,000
Started and completed (12,000 x 43) 516,000
Share in normal spoilage: Numbers 24 and 25
CC (39,200 x 12,000/16,250) 28,948
Transferred-out cost 758,948 AA Agency received Notice of Cash Allocation in the amount of P1,000,000 from DBM. AA Agency
made a total cash disbursements in the amount of P800,000.
NOTE: The normal spoilage was allocated only in the units started and in the ending units only
24. What is the journal entry to record the receipt of the NCA?
because those units passed the 70% inspection point. As to the beginning units, it also past the
inspection point, but it happened last year, thus no spoilage was allocated to it. A. Cash Collecting Officer 1,000,000
Subsidy income national government 1,000,000
22. B B. Cash Treasure Agency Deposit Regular 1,000,000
Subsidy income national government 1,000,000
Direct materials (5,000 x 15) 75,000 C. Cash-Modified Disbursement System Regular 1,000,000
Conversion (4,250 x 28) 119,000 Subsidy income national government 1,000,000
Share in normal spoilage: D. Memo entry
CC (39,200 x 4,250/16,250) 10,252
Ending inventory cost 204,252 25. What is the journal entry to record the return of the unused NCA?
A. Subsidy income national government 200,000
23. A Cash Treasure Agency Deposit Regular 200,000
B. Subsidy income national government 200,000
Conversion (700 x 28) 19,600 Cash-Modified Disbursement System Regular 200,000
C. Subsidy income national government 200,000
Cash Collecting Officer 200,000
D. Memo entry
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Number 26 Page 4
This refers to a serially-numbered document prescribed by the DBM that should be used by the NGAs
16. D
in the remittance of withheld taxes on funds coming from DBM.
A. Modified Disbursement System 17. B
B. Modified Disbursement System Check
C. Tax Remittance Advice
D. Official Receipt NRV by-product [(1,200 x 5) – 3,500] 2,500
Allocation base: Alpha: (25,000 x 15) – 16,200 358,800 (60%)
Numbers 27, 28 and 29
Beta: (14,425 x 20) – 49,300 239,200 (40%)
On January 1, 2024 entity A acquired 30 percent of the ordinary shares that carry voting rights of 598,000
entity Z for P100,000. In acquiring those shares entity A incurred transaction costs of P1,000. Entity A
has entered into a contractual arrangement with Entity C that owns 25 per cent of the ordinary shares Joint cost to be allocated (375,000 – 2,500) 372,500
of entity Z, whereby entities A and C jointly control entity Z. Entity A uses the cost model under IFRS
for SMEs to account for its investments in jointly controlled entities. A published price quotation does
not exist for entity Z. In December 31, 2024, entity Z declared and paid a dividend of P20,000. At Share in joint cost (372,500 x 60%) 223,500
December 31, 2024 management assessed the fair values of its investment in entity Z as P102,000 and Separable cost 16,200
the cost to sell are estimated at P4,000. CGM 239,700
÷ 25,000
27. What is the balance of the Investment in Entity Z on December 31, 2024? Cost per unit 9.588
A. 101,000
B. 100,000 Gross profit (15 – 9.588) x 23,000 124,476
C. 102,000
D. 98,000
18. C
28. What is the net effect in profit of loss for the year ended December 31, 2024?
MIP ending inventory (5,250 - 5,000) x 75 18,750
A. 3,000 net profit
B. 17,000 net profit
19. B
C. 4,000 net profit
D. 6,000 net profit
20. D
29. Assume there is a quoted price, what is the balance of the Investment in Entity Z on
December 31, 2024? 21. D
A. 98,000
B. 100,000 EUP Schedule
C. 101,000 Direct materials Conversion
D. 102,000 Beginning 8,000 2,000
Started and completed 12,000 12,000
Number 30 Ending 5,000 4,250
Normal lost units - 1,400
Which of the following will increase the cost of goods sold of a manufacturing concern during the Abnormal lost units - 700
year? EUP 25,000 20,350
A. Adjusting entry for insignificant over-application of factory overhead. Alternative:
B. Decrease in the salary of the factory workers during the year.
Direct materials Conversion
C. Increase in the work in process inventory during the year.
Completed 20,000 20,000
D. Decrease in the finished goods inventory during the year.
Ending 5,000 4,250
Beginning ( - ) (6,000)
Number 31 Normal lost units - 1,400
Abnormal lost units - 700
As a result of the retirement of a partner in an existing partnership, the capital balance of the remaining EUP 25,000 20,350
partners increases. If the assets of the partnership before retirement are properly valued, which of the
following statements is true?
A. The retiring partner receives less than his capital balance before retirement.
B. There is partnership net loss prior to the retirement of the said partner.
C. The remaining partner gives bonus to the retiring partner.
D. There is impairment of existing assets recognized prior to retirement.
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Number 32
11. A
CNI-P Process Inc. employs process costing method to account for its inventory. If this is the first year of
Net income of P per books 945,000 operation and production of the company, which is true as to the cost of goods manufactured during
Net income of S per books (165,000 x 70%) 115,500 the first year if computed under average process costing method or FIFO process costing method?
Upstream RG in 2025 (01/01 to 12/31) [(337,500 - 270,000) ÷ 6] x 70% 7,875 A. The cost of goods manufactured computed under either methods will be the same.
Downstream URL (570,000 - 630,000) 60,000 B. The cost of goods manufactured computed under either method will only be the same if there is no
Downstream RL in 2025 from 10/1 to 12/31 (60,000 ÷ 5 x 3/12) (3,000) work in process ending inventory.
1,125,375 C. The cost of goods manufactured computed under average process costing will be higher when
materials are added at the end of the process.
12. B D. The cost of goods manufactured computed under FIFO process costing will be higher when
CNI-P materials are added at the beginning of the process.
Net income of P per books 75,250
Net income of S per books (21,875 x 60%) 13,125
Intercompany dividends (17,500 x 60%) (10,500) Number 33
Upstream UPEI in 2025 [(21,000 x 30% x 25/125) x 60% (756)
Under IFRS 11, which of the following is the proper accounting treatment by joint venturer in its
Upstream RPBI in 2025 [(17,500 x 20% x 25/125) x 60% 420
interest in joint venture?
77,539
A. The joint venturer shall subsequently measure its investment in joint venture at fair value with
13. D gain or loss on changes in fair value presented in profit or loss.
B. The joint venturer shall recognize as dividend income in its profit or loss the amount of dividend
received from the joint venture.
Cost of goods sold per books (131,250 + 52,500) 183,750 C. The joint venturer shall recognize its share in the net income of the joint venture in its profit or
Intercompany sale of inventory in 2025 (42,000) loss by increasing its investment account.
UPEI in 2025 [(21,000 x 30% x 25/125) 1,260 D. The joint venturer shall proportionately consolidate its interest in the joint venture in its
RPBI in 2025 [(17,500 x 20% x 25/125) (700) consolidated financial statements.
142,310

14. B Number 34

Total budgeted OH 14,240,000 The factory overhead applied is less than the actual factory overhead incurred. If the difference is
considered insignificant by the company, the journal entry to adjust the difference shall include a
Total budgeted machine hrs ÷ 1,600,000
Predetermined rate 8.9 A. Debit to work-in-process inventory, end
B. Credit to cost of goods sold
C. Debit to finish goods inventory, end
Machine hrs used J1 68,000 D. Credit to factory overhead account
x 8.9
OH applied J1 605,200
Number 35
15. D
A new partner is admitted in an existing partnership through investment. If the total contributed capital
of all partners is higher than the total agreed capitalization of new partnership while the agreed
Budgeted OH materials related 3,840,000 capitalization of new partner is lower than his contributed capital, which of the following is correct?
Budgeted cost of materials ÷ 12,800,000
A. The capital balance of old partners will always increase.
Predetermined rate .30 B. Impairment loss shall be recognized and shared by all the partners including the new partner.
C. Revaluation surplus shall be recognized and shared by all the partners including the new partner.
Budgeted OH machine related 10,400,000 D. Impairment loss shall be shared only by old partners with bonus coming from new partner.
Budgeted cost of materials ÷ 1,600,000
Predetermined rate 6.50
Number 36
Direct materials J3 312,000 Which of the following statements regarding Corporate Liquidation is TRUE?
Direct labor J3 144,000 A. The free assets must deal with the secured creditors first.
OH applied J3 244,400 [(312,000 x .30) + (23,200 x 6.50)] B. Liquidation is the only remedy for financially-distressed corporations.
Total cost J3 700,400 C. The estimated payment to unsecured non-priority liabilities may be equal to zero.
D. The Statement of Financial Affairs is prepared when there is an actual realization of assets of an
entity initiated by the appointed Trustee.
 Page 10
Page 2
Numbers 37, 38 and 39
7. C
The Kilusang Manggagawa, a recognized labor union of the non-teaching staff of LMN University,
had the following cash receipts and disbursements for the year ended December 31, 2024: Aggregate (64,980 x 102) 6,627,960
Receipts: FMV Identifiable net asset of B (9,950,000 - 2,932,000) (7,018,000)
Membership dues P 4,500,000 Gain on bargain purchase (390,040)
Sale of organizational supplies 240,000
Contribution for an establishment of term endowment 575,000 Issued shares at FMV (64,980 x 102) 6,627,960
Donation of a pure endowment fund 1,000,000 Gain on bargain purchase 390,040
Interest received from the pure endowment fund 150,000 Increase in stockholders' equity after merger 7,018,000
Disbursements:
Labor negotiations 900,000 8. D
Fund-raising 350,000
Long-term debt 400,000 CNI-P
Administrative and general 320,000 Net income of P per books 105,000
Computer equipment 80,000 Net income of S per books (31,500 x 80%) 25,200
The interest received from permanent endowment is restricted by the donor for acquisition of computer Impairment loss (2,400)
equipment. Intercompany dividends (17,500 x 80%) (14,000)
113,800
37. Compute the net cash provided by operating activities.
Conso RE, beg (RE of Parent) 280,000
A. 3,245,000
CNI-P 113,800
B. 2,930,000
Dividends declared by Parent (63,000)
C. 3,170,000
Conso RE, end 12/31/2024 330,800
D. 3,395,000
38. Compute the net cash provided by financing activities. 9. C
A. 1,725,000
B. 1,100,000 NCI-NI
C. 1,175,000 Net income of S per books (95,000 x 20%) 19,000
D. 1,325,000 Amortization excess of FV over BV of plant assets
(1,000)
(50,000 ÷ 10 x 20%)
18,000
39. Compute the total amount of supporting expenses.
A. 900,000 NCI, beginning (487,500 ÷ 80% x 20%) 121,875
B. 350,000 NCI-NI 18,000
C. 670,000 Share of Subsidiary in his dividends declared (50,000 ÷ 80% x 20%) (12,500)
D. 430,000 NCI, ending 12/31/2024 127,375
NOTE: The initial measurement of the NCI is equal to the assumed amount because the fair
Number 40
value of the assumed amount was greater than the proportionate share of 110,000 (550,000 x
Which of the following statements regarding Corporate Liquidation is FALSE? 20%).
A. Revenues earned and expenses incurred during liquidation are found in the periodic report of the
trustee. 10. A
B. The expected recovery percentage does not apply with fully secured creditors.
C. The current and non-current classifications of the asset and liability accounts may be helpful in the NCI-NI
determination of the estimated deficiency to unsecured creditors. Net income of S per books (60,000 x 20%) 12,000
D. In the planning report of the receiver, assets pledged to partially secured creditors have no free Upstream URG [(24,000 - 12,000) x 20%] (2,400)
portion. Upstream RG from 4/1 to 12/31 (12,000 ÷ 5 x 9/12) x 20% 360
9,960
Number 41
A private not-for-profit entity receives donations and contributions from different individuals. In
which case should no contribution revenue be reported?
A. A restricted fund
B. A donation with condition
C. A board-designated contribution
D. A donation which is to be retained
 Page 11
CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila Numbers 42 and 43
On January 1, 2024, ABC Inc. paid a premium to acquire a put option from a writer. This is in
ADVANCED FINANCIAL ACCOUNTING AND REPORTING
relation to a forecasted sale of merchandise worth $130,000. (option price is P4.965)
Final Preboard Examination
1/1/2024 3/31/2024 6/30/2024
SOLUTIONS Spot rate P4.934 P4.908 P4.75
Fair value of option P19,600 P22,800 P27,950
1. A
42. Compute the gain or (loss) affecting earnings on the first quarter of 2024
A. 3,380
Unadjusted capital of B 320,000
B. (3,380)
Share of B in the excess of BV over FV (overstatement) of total assets
(152,000) C. 3,200
(1,748,000 - 2,128,000) x 40%
D. ( 180)
Share of B in the excess of BV over FV (overstatement) of other
4,800
current liabilities (140,000 - 152,000) x 40%
Adjusted capital of B 172,800 43. Compute the gain or (loss) affecting other comprehensive income for the second quarter
x 50% ended 2024
50% of B's capital interest based on fair value 86,400 A. 20,540
B. 23,920
2. C C. 27,950
D. 8,360
Share of B in the total net income 850,000
Salary of B (600,000) Numbers 44 and 45
B's share in the remainder 250,000
÷ 50% On November 1, 2024, JDS Company entered into a firm commitment to acquire machinery. The said
Total remainder 500,000 fixed asset is customized for the operations of JDS Company. Delivery and passage of title would be
Total salaries (750,000 + 600,000) 1,350,000 on February 28, 2025 at the price of AUD35,000 . On the same date, to hedge against unfavorable
Total net income 1,850,000 changes in the exchange rate, JDS entered into a 120-day forward contract with LMN Bank for
AUD35,000. Exchange rate were as follows:
3. C
Spot Forward
4. C Bid Offer Bid Offer
Nov. 01, 2024 P36.10 P36.25 P34.15 P34.30
Dec. 31, 2024 37.15 37.40 36.50 36.70
5. A Feb. 28, 2025 39.20 39.50 39.20 39.50

Total contributed capital 44. What is the fair value of the derivative instrument on December 31, 2024? Indicate whether
13,125,000
(3,750,000 + 4,500,000 + 4,875,000) positive or negative fair value
Undervaluation of an asset 1,500,000 A. 82,250 positive
Total agreed capital (4,875,000 x 3) 14,625,000 B. 0
C. 82,250 negative
Capital of B before admission 4,500,000 D. 84,000 positive
Share in the undervaluation (1,500,000 x 50%) 750,000
Capital of B after admission 5,250,000 45. What is the gain or loss on the hedged item for the year 2025?

6. A A. 98,000 gain
B. 98,000 loss
C. 94,500 gain
Total interest of partners before liquidation D. 94,500 loss
750,000
(12,500 + 312,500 + 312,500 + 112,500)
Loss on realization (472,500)
Total cash paid to partners 277,500 Number 46

Proceeds from the sale of non-cash assets 290,000 Which of the following statements regarding foreign currency transactions is TRUE?
BV of non-cash asset sold (762,500) A. A decrease in the buying spot rate will result in a foreign exchange loss to an asset exposure.
Loss on realization (472,500) B. An increase in the selling spot rate will result in a foreign exchange gain to a liability exposure.
C. Foreign transactions are affected by the fluctuations of exchange rates.
D. A transaction exposure exists when the importer is required to pay in foreign currency on the date
the purchase was made.
 Page 17
Page 12
Number 47 Number 67
On December 31, 2024, a foreign subsidiary in Hong Kong submitted the following accounts stated in Which of the following statements regarding accounting for home office and branch is FALSE?
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, A. The Allowance for overvaluation account must be debited in the separate books of the home office
its cash flows do not directly affect the parent company. The foreign operation is self-sufficient and is to adjust the results of operations of the branch.
not dependent on the parent company for financing. B. A credit memo received by the branch from the home office may be a notification from the home
office about allocation of expenses incurred by the latter.
Total Assets HK$ 980,000 C. Shipment of merchandise to the branch which is in transit may understate the home office current
Total liabilities 196,000 account.
Ordinary Shares 490,000 D. A home office shall notify the branch through a debit memo for a payment made by the home
Retained Earnings 294,000 office to the suppliers of the branch on account.
No dividends were declared in 2024. The exchange rates were: Closing rate, P7.75; Historical rate,
P7.10 ; Weighted average rate, P7.50.
Number 68
Compute the cumulative translation adjustment (Dr)/Cr on December 31, 2024
A. 392,000 debit Which of the following statements regarding IFRS 15 is FALSE?
B. 509,600 debit A. A key feature of the revenue arrangement is that the signing of the contract by the two parties is
C. 392,000 credit not recorded until one or both of the parties perform under the contract.
D. 509,600 credit B. A performance obligation is a promise in a contract to provide a product or service to a customer.
C. When a company sells a bundle of goods or services, the selling price of the bundle is often more
Number 48 than the sum of the individual standalone prices.
D. A company satisfies its performance obligation when the customer obtains control of the good or
JKL Company sold merchandise for 893,150 pounds from a vendor in Thailand on November 30, service.
2024. Payment in Baht was due on January 30, 2025 a date when the spot rate was P1.65. The
exchange rates for the Thai Baht were as follows:
November 30, 2024 December 31, 2024 Number 69
Spot rate P1.67 P1.69
30-day rate 1.64 1.59 Which of the following statements regarding IFRS 15 is TRUE?
60-day rate 1.63 1.56 A. Total revenue from franchise fees includes interest revenue from the notes receivable.
In its 2025 statement of comprehensive income, what is the amount to be reported by JKL B. Expenses paid by the consignee on behalf of the consignor affects the computation of both the net
Company as foreign exchange difference? remittance to the consignor and net income of the consignor.
C. Construction cost presented in the Statement of Comprehensive Income is always the actual cost
A. 17,863 loss
incurred for the year.
B. 17,863 gain
D. The percentage of completion method recognizes revenues, costs and gross profit as a company
C. 35,726 gain
makes progress toward completion on a long-term contract.
D. 35,726 loss
Number 49 Number 70
The Reverendo family lost its home due to a typhoon. On December 22, 2024, a donor sent money to A private not-for-profit entity receives three cash donations:
the Good Heart Society, a private not-for-profit entity, specifically to purchase a temporary shelter for
the Reverendo family. During the first month of 2025, Good Heart Society purchased the said shelter ▪ One gift of P350,000 is internally-imposed
for the family. How should the not-for-profit entity report the receipt of the donation in the 2024 ▪ One gift of P450,000 is donor restricted for acquisition of fixed assets.
financial statements? ▪ One gift of P600,000 is to be held indefinitely with the income to be used for research activities.
A. As a permanently restricted contribution Which of the following statements is FALSE?
B. As a liability A. Temporarily restricted net assets have increased by P450,000.
C. As an unrestricted contribution B. Permanently restricted net assets have increased by P1,050,000
D. As a temporarily restricted contribution C. When the donated money is spent for fixed assets, temporarily restricted net assets will decrease.
D. Unrestricted net assets have increased by P350,000.
Number 50
Which of the following statements regarding derivatives is TRUE? END
A. The sole purpose for entering into derivative contracts is to manage market risks such as foreign
exchange risk and interest rate risk.
B. A forward contract is presented as an asset in the separate financial statements of the holder.
C. An option contract may have a negative fair value to the holder.
D. An option contract has a fair value at the inception date which is equivalent to the premium paid.
 Page 16 Page 13
Numbers 51 and 52
Numbers 63 and 64
The following selected account balances were taken from the Statement of Financial Position of TUV
QRS Inc. purchased 100,000 units costing P700,000, and paid P7,000 freight for its shipment. After a Corp. as of December 31, 2024, immediately before the takeover of the trustee:
day, the company consigned these goods to TUV Inc. stating that the consignee is entitled to 10% of
Trading Securities P1,200,000
the revenue from all sold units. The shipment from the consignor to the consignee amounted to P3,500
Inventories 440,000
with payment terms Freight collect. With a standard retail price of P13.30, the consignee remitted a
Land 600,000
total of P914,200. Other notable expenses paid by the consignee on the consignor’s behalf were P8,400
Building 1,600,000
advertising expense, P2,100 delivery charges to customers, and P5,460 installation fee on the
customer’s premises. Additional information:
● Trading securities are estimated to be realized in the amount of P1,280,000. These securities
63. Compute the cost of goods still out on consignment have been pledged to secure notes payable of P1,120,000.
A. 156,310 ● The estimated worth of inventories is P280,000. However, inventories with book value of
B. 154,770 P200,000 have been pledged to secure notes payable of P240,000. The realizable value of the
C. 155,540 inventories pledged is estimated to be P160,000.
D. 154,000 ● Land and buildings are estimated to have a total realizable value of P1,800,000. These
properties are pledged to secure the mortgage payable of P1,000,000.
64. Compute the net income from sale of consigned goods ● Unsecured priority claims amounted to P30,000.
A. 365,510 51. Compute the estimated amount available for preferred claims and nonpriority claims out of
B. 360,010 the assets pledged with fully secured creditors
C. 363,510
D. 353,010 A. 0
B. 3,080,000
C. 1,080,000
Numbers 65 and 66 D. 960,000

On January 1, 2024, DEF Company granted a franchise to a franchisee. The franchise agreement 52. Compute the amount of net free assets
required the franchisee to pay a nonrefundable upfront fee in the amount of P3,000,000 and on-going A. 1,050,000
payment of royalties equivalent to 10% of the sales of the franchisee. The franchisee paid the B. 970,000
nonrefundable upfront fee on January 1, 2024. C. 1,080,000
D. 960,000
In relation to the nonrefundable upfront fee, the franchise agreement required the entity to render the
following performance obligations which were separate and distinct from each other:
● To construct the franchisee’s stall with stand-alone selling price of P1,600,000. Numbers 53 and 54

● To deliver 20,000 units of raw materials to the franchisee with stand-alone selling price of A trustee has been appointed for STU Company, which is being liquidated under the Bankruptcy Law.
P2,000,000. The following transactions occurred in the first month of liquidation after the assets were transferred to
the trustee.
● To allow the franchisee to access the entity's tradename for a period of 5 years starting January 1, 1. Credit sales by the trustee were P400,000. Cost of goods sold were P288,000, consisting of all
2024. The stand-alone selling price of the access of the trade name was P400,000. the inventory transferred from STU.
2. The trustee sold all P80,000 worth of marketable securities for P60,000.
On June 30, 2024, the entity completed the construction of the franchisee’s stall. On December 31, 3. Receivables collected by the trustee: P112,000 from the P200,000 existing at the beginning of
2024, the entity was unable to deliver the remaining 5,000 units of raw materials to the franchisee. For the month; and P260,000 from the increase during the period. Remaining receivables are to be
the year ended December 31, 2024, the franchisee reported sales revenue amounting to P4,000,000. realized by next month.
4. Disbursements by the trustee: Old current payables: P124,000 of the P260,000 transferred;
65. Under IFRS 15, compute the amount DEF Company should recognize as revenue from Trustee's expenses: P24,000. Remaining liabilities are to be liquidated next month.
franchise fee on the December 31, 2024 Statement of Comprehensive Income 5. Recorded P96,000 depreciation on the plant assets of P480,000 transferred from STU.
A. 2,385,000
B. 0 53. Compute the net income/net loss for the period
C. 2,785,000 A. 48,000
D. 3,000,000 B. ( 48,000)
C. ( 28,000)
66. Under IFRS 15, compute the amount DEF Company should recognize as unearned revenue D. (124,000)
in relation to the performance obligation on raw materials as of December 31, 2024
A. 1,125,000 54. Compute the total amount of assets not realized at the end of the period
B. 375,000 A. 228,000
C. 1,500,000 B. 708,000
D. 0 C. 472,000
D. 612,000
 Page 14 Page 15
Number 55
Number 59
Which of the following statements regarding accounting for home office and branch is TRUE?
During the year 2024, goods billed at P2,600,000 were shipped to the branch at 130% of cost. The
A. A debit memo sent by the home office to the branch will decrease their reciprocal accounts.
account Loading in Branch Inventory has a balance of P980,000 before adjustment. The beginning
B. The retained earnings of the branch is eliminated through the working paper and not extended in
inventory of the branch from the home office at cost is P1,900,000; the beginning inventory of the
the combined financial statements.
branch from outsiders is P432,000; purchases from outsiders is P1,160,000.
C. The branch may purchase merchandise from the home office or from outside suppliers.
D. The separate statement of comprehensive income of the home office includes the results of Compute the total goods available for sale of the branch
operations of the branch. A. 4,246,668
B. 5,070,000
C. 6,472,000
Number 56 D. 4,880,000
On December 31, 2024, the Home Office Current account in the books of Pasig Branch had a balance
of P1,950,000. In analyzing the activity in each of these accounts for December, you found the
following differences: Number 60
a. A P40,000 branch remittance to the home office initiated on December 21, 2024 was recorded On June 1, 2024, the home office established an agency in Rizal, sending samples costing P490,000
twice by the home office on December 23 and 27. which are useful until the end of May 2025 and have a salvage value of 10% of cost. A working fund
b. The home office incurred P72,000 of advertising expenses and allocated 1/3 of this amount to the of P398,125 is to be maintained using the imprest basis. During 2024, the agency submitted to the
branch on December 22. The branch recorded this transaction on December 23 amounting to home office a sales order amounting to P4,134,375. Sales per invoice were P3,215,625 which were
P2,400. duly approved by the home office. Collections during the year amounted to P1,717,021.25 net of 3%
c. Inventory costing P100,600 was sent to the branch by the home office on December 17. The sales discount. The cost of merchandise sold during the year is equal to 75% of the gross sales.
billing was at cost, but the branch recorded the transaction at P106,000. Vouchers for expenses amounted to P214,375.
The adjusted balance of the reciprocal accounts on December 31, 2024 How much net income would be reported by the Rizal agency on December 31, 2024?
A. 1,966,200 A. 315,927.50
B. 1,977,000 B. 508,865.00
C. 1,923,000 C. 279,177.50
D. 1,933,800 D. ( 95,427.50)
Number 57 Numbers 61 and 62
The home office in Cebu shipped merchandise costing P222,000 to the Iloilo branch and paid the
On January 1, 2024, VST Company accepted a long-term construction project for a fixed contract price
freight amounting to P16,800. The home office transfers merchandise to the branch at a 20% mark-up
of P56,000,000 to be completed on November 30, 2026. The entity provided the following data
based on cost. The Iloilo branch was subsequently instructed to transfer the merchandise to the
concerning the direct costs related to the said project for 2024 and 2025:
Bacolod branch wherein the latter paid P11,200 freight. If the shipment was made directly from Cebu
to Bacolod, the freight cost would have been P24,800. 2024 2025
Compute the amount credited to Home Office Current account in the books of Bacolod branch Costs incurred 16,800,000 25,200,000
Estimated remaining costs to complete at year-end 67,200,000 10,500,000
A. 291,200
B. 246,800
61. Under IFRS 15, compute the amount VST Company should report as realized gross profit or
C. 284,960
(loss) for the year ended December 31, 2025
D. 280,000
A. 30,800,000
B. 3,500,000
Number 58 C. 2,800,000
D. (25,200,000)
A home office ships inventory to its branch at a mark-up of 125% based on cost. The required balance
of the unrealized intercompany account is P1,710,000. During the year, the home office sent 62. Under IFRS 15, compute the amount VST Company should report as construction in
merchandise to the branch costing P10,800,000. At the start of the year, the branch's books showed progress balance on December 31, 2025
P2,160,000 of inventory on hand that was acquired from the home office.
A. 42,000,000
By what amount will the Allowance for Unrealized Gross Margin in Branch Inventory account B. 72,800,000
be debited in the books of the home office at the end of the year? C. 61,600,000
A. 14,700,000 D. 44,800,000
B. 1,422,000
C. 12,990,000
D. 3,132,000