AFAR_Answer-Key.doc

ADVANCED FINANCIAL ACCOUNTING AND REPORTING INSTRUCTIONS: Select the best answer for each of the following questions. ALL questions are compulsory and MUST be attempted. Mark only one answer for each item on the answer sheet provided. Strictly NO ERASURES ALLOWED. Erasures will render your examination answer sheet INVALID. Use PENCIL NO. 2 only. GOODLUCK! 1.

The partnership agreement between Ken and Avery stipulates that Ken is to receive a 20% bonus on profits, with residual profit and loss to be apportioned in the ratio 3:2, respectively. Which partner has a greater advantage when the partnership has a profit and hen it incurred a loss? a. Profit – Ken; Loss – Avery b. Profit – Avery; Loss – Avery c. Profit – Ken; Loss – Ken d. Profit – Avery; Loss – Ken

a. b.

I only II only

c. I or II d. I and II

7.

State the proper order of partnership liquidation. I. Outside creditors II. Owners’ interests III. Inside creditors a. I, II, III c. II, I, III b. III, I, II d. I, III, II

2.

The estimated amount available for free assets in a Statement of Affairs for a business enterprise undergoing bankruptcy liquidation is equal to the assets a. Current fair value less carrying amounts b. Carrying amounts less current fair values c. Carrying amounts plus gain or less loss on realization d. Carrying amounts plus loss or less gain on realization

8.

Under cash priority program, when all of the priorities are paid, any remaining cash distribution is a. allocated to the partners based on their respective profit or loss ratios. b. allocated to the partners based on the balances in their capital accounts after allocation of losses. c. allocated to the partners based on their precomputed priorities. d. allocated to the partners based on the relative values of their capital balances.

3.

As suggested by Article 1787 of the Philippine Civil Code and relevant PFRSs, the net contributions (assets and related liabilities assumed by the partnership) of the partners to the partnership are measured at a. fair value b. cost c. discretionary amount determined by partners d. any of these

9.

4.

On November 1, 2014, Klaus Co. obtained franchise rights from “The Originals” Co. The initial franchise fee included consideration for inventory and equipment to be delivered to Klaus. All of the necessary preparations were completed, and Klaus Co. started operations, on January 31, 2015. The inventory and equipment were delivered to Klaus on December 1, 2014. How would “The originals” Co. recognize revenue for the supply of inventory and equipment? a. recognize in full on November 1, 2014 b. recognize in full on December 1, 2014 c. recognize in full on January 31, 2015 d. deferred and amortize over the franchise term starting January 31, 2015

Under the cost recovery method, a. the initial collections on the sale are treated as recovery of the inventory sold. Thus, no gross profit or interest income is recognized until total collections from the sale equals the cost of inventory sold. b. the initial collections on the sale are treated as recovery of the inventory sold. Thus, no gross profit is recognized until total collections from the sale equals the cost of inventory sold. c. A or B d. None of the above.

5.

An advance cash distribution plan is prepared a. Each time cash is distributed to partners in an installment liquidation b. Each time a partnership asset is sold in an installment liquidation c. To determine the order and amount of cash each partner will receive as it becomes available for distribution d. None of these

6.

The interest of the withdrawing, retiring, or deceased partner shall be adjusted for which of the following? I. His share of any profit or loss up to the date of his withdrawal, retirement or death, if he withdraws, retires or dies during the year II. His share of any revaluation gains or losses as at the date of his withdrawal, retirement, or death

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10. Under PAS 11 – Construction Contracts, the primary issue in accounting for construction contracts is a. the allocation of contract revenue to the accounting periods in which construction work is performed. b. the allocation of contract costs to the accounting periods in which construction work is performed. c. the determination of percentage of completion. d. A and B. e. All of the choices. 11. PAS 11 – Construction Contracts provides that any expected loss on the construction contract is a. recognized as an expense immediately. b. recognized as an expense immediately as an adjustment to the revenue already recognized. c. recognized as an expense immediately adjunct to the costs of construction already recognized. d. deferred and amortized over the remaining construction period. 12. Which of the following appears on the statement of financial position of a contractor who is applying PAS 11 – Construction Contracts? a. Construction in progress as current asset. b. Progress billings as current liability. c. Amount of due from (due to) customers for contract work. d. Any of the choices.

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AFAR

TeamPRTC 13. The realization of income on installment sales transactions involves a. Recognition of the difference between the cash collected on installment sales and the cash expenses incurred b. Deferring the net income related to installment sales and recognizing the income as cash is collected c. Deferring gross profit while recognizing operating or financial expenses in the period incurred d. Deferring gross profit and all additional expenses related to installment sales until cash is collected 14. In selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be a. The terms of payment b. The nature of the contractor’s technical facilities used in construction c. The method commonly used by the contractor for other long-term construction contracts d. The degree to which a reliable estimate of the costs to complete and extent of progress toward completion is practicable

II. initial services required by the franchise agreement are substantially performed. III. no other material conditions or obligations exist. a. b.

I, II and III II and III only

c. I and II only d. I and III only

20. If franchise rights are repossessed and the franchisor refunds the consideration received, I. the original franchise sale is canceled. “Gain or loss” from cancellation may arise after derecognition of account balances associated with the franchise cancelled. II. the transaction shall not be regarded as a sale cancellation. However, impairment loss may arise from forfeiture of collectibles. a. I only c. I or II b. II only d. I and II 21. Which of the following is an inventory account of a manufacturer but not of a merchandiser? a. Cost of goods manufactured b. Merchandise Inventory c. Work in process inventory d. Direct labor

15. SMDC Construction Company’s project extend over a. Cost of goods sold several years and collection of receivables is b. Manufacturing overhead applied reasonably certain. Each project has a contract that c. Direct materials used specifies a price and the rights and obligations of all d. Finished goods inventory parties. Both the contractor and the customer are expected to fulfill their contractual a. Materials inventory obligations on each project. Reliable b. Direct labor estimates can be made of the extent of c. Manufacturing overhead progress and costs to complete each d. Selling expenses project. The method that SMDC must 22. Cost of goods manufactured is used to compute use to account for construction revenue is a. Installment sales method 23. Which of the following is a period cost? b. Percentage- of- completion method c. Completed –contract method 24. Job order costing would be an appropriate system to d. Cost recovery method account for the manufacture of 16. One of the more popular input measures used to determine the progress toward completion in the percentage- of-completion method is a. Revenue-percentage basis b. Cost-percentage basis c. Progress completion basis d. Cost –to- cost basis 17. The theoretical support for using the percentage- ofcompletion method of accounting for long-term construction projects is that it a. Is more conservative than the cost recovery method b. Reports a lower net income figure than the cost recovery method c. More closely conforms to the cost principle d. Produces a realistic matching of expenses with revenues 18. It is the one-off payment made by the franchisee to the franchisor to obtain the franchise right. a. Initial franchise fee b. Continuing franchise fee c. Fixer’s fee d. Any of the choices 19. There is substantial performance when: I. the franchisor has no remaining obligation or intent to refund any cash received or forgive any unpaid notes or receivables.

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a. Aircraft 25. b. Matches A c. Zippers d. Cardboard boxes written order sent to inform the purchasing department of a need for materials is called a a. 26. b. c. d.

Purchase order Purchase requisition Receiving report Materials requisition form

r a periodic inventory system, the purchase materials is recorded in an account entitled

U n d e of

a. Cost of Goods Sold 27. b. Purchases c. Materials inventory d. Work in Process Inventory The total of the materials subsidiary ledger inventory cards must be equal to the amount in the following account a. Cost of Goods Sold 28. b. Purchases c. Materials Inventory d. Work in Process Inventory Which of the following is usually prepared daily by employees for each job worked on? a. b. c. d.

Job time tickets Time card Punch card Cost control card

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AFAR

TeamPRTC 29. Under a perpetual inventory system, the purchase of materials is recorded in an account entitled

a.

a. 30. b.

b.

Cost of Goods Sold Purchases c. Materials inventory d. Work in process inventory Factory worker fringe benefit costs are usually charged to a. Work in process Inventory b. Direct labor c. Administrative expenses d. Factory overhead The following condensed balance sheet is prepared for QUIEL and ROGER, who share profits and losses in the ratio of 60:40, respectively: Other assets P 405,000 Accounts P108,000 payable Quiel, loan 18,000 Quiel, capital 175,500 Roger, capital 139,500 Total P 423,000 Total P 423,000 31. The partners have decided to liquidate the partnership. If the other assets are sold for P346,500, what amount of the available cash should be distributed to QUIEL? a. P136,000 c. P122,400 b. P156,000 d. P195,000 On January 1, 2014, the partners SELYA, TESSA, and URSULA, who share profits and losses in the ratio of 5:3:2, respectively, decided to liquidate their partnership. On this date the partnership condensed balance sheet was as follows: Cash Other assets

P

45,000 225,000

Total

P 270,000

Liabilities Selya, capital Tess, capital Ursula, capital Total

P

54,000 72,000 81,000 63,000 P270,000

c. d.

CLAIRE, P1,045,080; DAISY, P376,200; P221,400 CLAIRE, P1,161,200; DAISY, P418,000; P246,000 CLAIRE, P1,987,500; DAISY, P189,000; P217,500 CLAIRE, P1,095,120; DAISY, P547,560; P182,520

& ELSIE, & ELSIE, & ELSIE, & ELSIE,

On January 1, 2015, FRIDA and GLACE formed a partnership by contributing cash of P405,000 and P270,000, respectively. On February 1 2015, Partner FRIDA contributed an additional P135,000 cash to the partnership and on August 1, 2014 Partner FRIDA made a permanent withdrawal of P67,500. On May 1, 2015, Partner GLACE contributed machinery with a fair market value of P90,000 and a net book value of P75,000 when contributed. On November 1, 2015 Partner GLACE contributed an additional P45,000 cash to the partnership. Both partners withdrew one-fourth of their salary allowances in 2015. The partnership reported a net income of P257,400 in 2014 and the profit and loss agreement are as follows: a. Interest at 6% is allowed on average capital balances; b. Salaries of P2,700 per month to each partner; c. Bonus to FRIDA of 10% of net income after interest, salaries, and bonus; and d. Balance to be divided in the ratio of 6:4 to FRIDA and GLACE, respectively. 34. Determine how the net income will be allocated to the partners: a. FRIDA, P160,000 and GLACE, P126,000 b. FRIDA, P 180,000 and GLACE, P106,000 c. FRIDA, P170,000 and GLACE, P116,000 d. FRIDA, P153,000 and GLACE, P104,400

On January 15, 2014, the first cash sale of other assets with a carrying amount of P135,000 realized P108,000. Safe installment payments were made on the same date. 32. How much cash should be distributed to each partner? SELYA TESSA URSULA a. P15,000 P51,000 P44,000 b. P40,000 P45,000 P35,000 c. P55,000 P33,000 P22,000 d. P13,500 P45,900 P39,600

HAIDEE and ISABEL are partners sharing profits and losses in the ratio of 60% and 40%, respectively. The partnership balance sheet at August 30, 2014 follows:

CLAIRE, DAISY, and ELSIE formed the CDE Partnership on August 1, 2015, with the following assets, measured at fair market values, contributed by each partner: CLAIRE DAISY ELSIE Cash P 324,000 P108,000 P129,600 Accounts receivable 73,080 91,800 Plant, Property, & Equipment (PPE) 1,620,000 340,200 -

At this date, JOSIE was admitted as a partner for a consideration of P43,875 cash for a 40% interest in capital and in profits. 35. Assume JOSIE is admitted by purchase of 40% each of the original partners’ interest, determine how the P43,875 will be apportioned to HAIDEE and ISABEL a. HAIDEE, P32,850 and ISABEL, P15,900 b. HAIDEE, P32,450 and ISABEL, P16,300 c. HAIDEE, P29,565 and ISABEL, P14,310 d. HAIDEE, P32,950 and ISABEL, P15,800

Cash Other assets Isabel, Loan

P

12,150 119,700 9,000

Total

P 140,850

Accounts payable Haidee, Loan Haidee, capital Isabel, capital Total

P 13,500 5,850 81,000 40,500 P140,850

A part of CLAIRE’s cash contribution, P216,000, comes from personal borrowings. Also, the PPE of CLAIRE and DAISY are mortgaged with the bank for P972,000 and P72,000, respectively. The partnership is to assume responsibility for these PPE mortgages. The partners have agreed to share profits and losses on a 5:2:3 ratio, to CLAIRE, DAISY, and ELSIE, respectively. 33. What is the capital balance for each partner at the opening of business on August 1, 2015?

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TeamPRTC PRINCESS COMPANY filed a voluntary bankruptcy petition on August 15, 2013 and the statement of affairs reflect the following amounts: BOOK ESTIMATED CARRYING CURRENT VALUE VALUE Pledged with fully secured creditors Pledged with partially secured creditors Free Assets

Liabilities with priority Fully secured creditors Partially secured creditors Unsecured creditors

P 150,000 90,000 210,000 P 450,000

P 185,000 BEIGE STALKS CORPORATION, which began operations on January 1, 2014, appropriately uses the installment 60,000 method of accounting for revenues. The following 160,000 information is available for the years ended December 31, P 405,000 2014 and 2015:

Liabilities P 35,000 130,000 100,000 270,000 P 535,000

36. How much cash will be available to pay the unsecured non-priority claims? a. P240,000 c. P160,000 b. P180,000 d. P125,000 The following data were taken from the statement of affairs of MARACLARA CORPORATION: Assets pledged for fully secured liabilities (current fair value, P75,000) P 90,000 Assets pledged for partially secured liabilities (current fair value P52,000) 74,000 Free assets (current fair value , P40,000) 70,000 Unsecured liabilities with priority 7,000 Fully secured liabilities 30,000 Partially secured liabilities 60,000 Unsecured liabilities without priority 112,000 37. The amount that will be paid to creditors with priority is: a. P7,000 c. P7,500 b. P6,000 d. P6,200 SILVER PLATTER COMPANY which began operations on January 2, 2014, appropriately uses the installment method of revenue recognition. The following information pertains to the company’s operations for 2014 and 2015 2014 2015 Sales P 307,200 P460,800 Collections from 2014 sales 102,400 51,200 2015 sales 0 153,600 Accounts written off from 2014 sales 25,600 76,800 2015 sales 0 153,600 Gross profit rates 40% 30% 38. What amount should SILVER PLATTER COMPANY report as deferred gross profit in its December 31, 2015 balance sheet? a. P 76,800 c. P 114,688 b. P102,400 d. P 66,560 BROWN DERBY COMPANY began operations on June 1, 2015. The following information are extracted from its records at year-end. Cost of installment sales, P2,991,424; Cost of Regular Sales, P1,680,000. Mark-up on installment sales is 40% of cost while regular sales is 33-1/3% based on sales. At the end of 2015, the balance of Installment accounts receivable is P2,520,000; Accounts receivable is

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P1,176,000. Operating expenses (includes losses on repossession) total to 75% of the realized gross profit. 39. What is the net income for the year ended December 31, 2015? a. P329,142 c. P 543,984 b. P546,000 d. P 279,918

2014 2015 Cost of installment sales P 960,000 P1,920,000 GP realized on sales made in 2014 144,000 86,400 2015 192,000 GPR based on cost 30% 40% 40. What is the ending balance of installments receivable at December 31, 2015? a. P2,265,600 c. P1,632,000 b. P1,704,000 d. P1,176,000 On January 1, 2014, MAXX SERVICES, INC. signed an agreement authorizing LALLA COMPANY to operate as a franchisee over a 20-year period for an initial franchise fee of P137,500 received when the agreement was signed. LALLA commenced operations on July 1, 2014, at which date all of the initial services required of MAXX SERVICES had been performed. The agreement also provides that LALLA must pay annually to MAXX a continuing franchise fee equal to 5% of the revenue from the franchise. LALLA COMPANY’s franchise revenue for 2014 was P1,100,000. 41. For th e year ended December 31, 2014, how much should MAXX SERVICES record as revenue from franchise fees with respect to the LALLA account? a. P192,500 c. P123,750 b. P137,500 d. P 60,500 GREAT DANE, INC., franchisor, entered into a franchise agreement with PITBULL COMPANY, franchisee, on July 1, 2015. The total franchise fees agreed upon is P550,000, of which P50,000 is payable upon signing and the balance is to be covered by a note payable in four equal annual installments. The direct franchise cost incurred was P325,000. Indirect franchise expenses of P31,250 was also paid. The relevant interest rate is 12% and the note is reasonably assured of collection. The agreement also provides for the payment of continuing franchise fees at 4% of the franchisee’s gross sales. The franchise outlet commences its operations on December 1, 2015 and had a gross sales of P250,000 for the month. 42. Assuming the notes are interest-bearing, how much net income will be reported for 2015? a. P198,750 c. P 233,750 b. P 77,550 d. P 73,750

On January 2, 2015, QUICKBUILD ERECTORS entered into contract to construct two projects. The following data relate to the construction activities. Contract price Cost incurred during 2015 Estimated costs to complete Billings to customer

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Project A

Project B

P945,000 540,000 270,000 337,500

P675,000 630,000 157,500 607,500

AFAR

TeamPRTC 43.

What amount of gross profit should QUICKBUILD ERECTORS report in its 2015 income statement under the following methods? a. b. c. d.

Percentage of

Zero Profit

Completion Method P 0 P (112,500) P ( 22,500) P ( 22,500)

Method P (90,000) P (22,500) P 0 P(112,500)

44. BEST - EVER CONSTRUCTION, INC . recognizes construction revenue and costs using the percentage of completion method. During 2014, a single long-term project was begun which continued through 2015. Information on the project follows: 2014 2015 Accounts receivable P350,000 P1,050,000 Incurred costs during year 367,500 672,000 Construction in progress 427,000 1,274,000 Billings on contract 350,000 1,470,000 The construction accounts are at amounts t0-date. What is the gross profit recognized from this long-term contract? 2014 2015 a. P 77,000 P 798,000 b. 77,000 350,000 c. 59,500 448,000 d. 59,500 175,000 CIGNAL ERECTORS began operations on January 2, 2015. During the year, the company entered into a contract with TEAM Company to construct a manufacturing facility. At that time CIGNAL estimated that it would take five years to complete the facility at a cost of P3,937,500. The total contract price for the construction of the facility is P5,468,750. During the year, the company incurred P962,500 in construction costs related to the construction project. The estimated cost to complete the contract is P2,730.000 TEAM was billed and paid 30% of the contract price subject to a 10% retention. 45. Using the percentage of completion method, how much is the excess of Construction in Progress over Contract Billings or Contract Billings over Construction in Progress? a. P273,437 (current liability) b. P273,437 (current asset) c. P437,500 (current asset) d. P437,500 (current liability) Presented below are items taken from the unadjusted trial balances of NCR Company and its Manila Branch on December 31, 2015: Home Office Branch Books Books Shipment to branch P2,250,000 AFOVOBI 749,250 Shipment from HO P2,925,000 Purchases (from OV) 1,084,500 MI, January 1 921,375 MI, December 31 365,625 Sales 4,800,000 Expenses 382,500

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Assuming that the branch ending inventory acquired from other vendors (OV) is P73,125 46. What is the net income (loss) of the branch insofar as the home office is concerned? a. P534,000 c. P315,000 b. P681,750 d. (P147,750) Teardrops Commercial Corp. maintains a branch in Iloilo City. Selected balances taken from the books of Teardrops and its Bacolod City branch as of December 31, 2015 are as follows: Home Office Branch Office Merchandise Inventory, Jan 1 P 12,000 P 8,000 Purchases 150,000 30,000 Shipments from Home Office 93,750 Shipments to Branch 75,000 Branch Inventory Allowance 19,750 Sales 115,000 176,500 Merchandise Inventory, Dec 31 14,000 10,350 P4,350 of the branch's ending inventory came from purchases from suppliers other than the home office. 47. As far as the home office is concerned, the cost of sales of the branch was: a. P 97,120 c. P121,400 b. P102,850 d. P131,850 During the year 2015 the Bacolod Corporation bills its Iloilo branch at 140% of cost. Goods billed at P346,500 were shipped to the branch. The account Allowance for overvaluation has a balance of P122,400 before adjustment. The beginning inventory of the branch from the home office at cost is P93,600; the beginning inventory of the branch from outsiders is P15,200, purchases from outsiders is P130,500. 48. Cost of goods available for sale of the Iloilo Branch in 2015 is a. P486,800 c. P609,200 b. P623,240 d. P463,500 GHI Company bills its Bulacan Branch for merchandise shipments at 125% of cost. As of cut-off date, December 31, 2015, the following data were available: Mdse. Fr Home Mdse. Office(at billed Purchased prices) from Outsiders Total Merchandise, December 1 P300,000 P120,000 P420,000 Additions to stock during December 450,000 360,000 810,000 Merchandise, December 31 420,000 150,000 570,000 The branch returned P15,000 worth of merchandise to the Home Office acquired at billed price. 49. The amount of the allowance for overvaluation account that was realized as income in view of branch sales for the month of December was: a. P63,000 c. P87,500 b. b. P66,000 d. P84,000

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The Batangas Corporation operates a branch in Lipa City. The Home Office ships merchandise to the branch at 125% of its cost. Selected information from the December 31, 2015 trial balance are as follows: Home Office Branch Office Books Books Sales P600,000 P300,000 Shipments to branch 200,000 Purchases 350,000 Shipments from Home Office 250,000 Inventory, January 1 100.000 40,000 Allowance for Overvaluation of branch Inventory 58,000 Expenses 120,000 50,000 Inventory at December 31, 2015: Home Office Branch Office

P30,000 60,000

50. The combined net income of the home office and the branch after adjustment is: a. P326,000 c. P500,000 b. P496,000 d. P280,000 Quad Corporation purchases all of the net assets of Chrome, Inc., for P320,000. Immediately prior to the combination, Chrome’s net assets were carried on the books at P180,000, and Chrome had retained earnings of P24,000. The fair value of Chrome’s net assets at the date of combination is P248,000. Quad Corporation had retained earnings of P40,000 and no goodwill immediately prior to the combination 51. Immediately after the combination, the combined company reports goodwill and retained earnings of: Goodwill Retained Earnings a. P 0 P 40,000 b. P 0 P 64,000 c. P 72,000 P 40,000 d. P 72,000 P 64,000 The Carl Company will issue P10 par value common stock for the net assets of PBA Company. The fair market value per share of Carl’s common stock is P40. The following is the list of accounts of PBA Company on the date of the acquisition. Book Value Fair Market Value Current assets P280,000 P 320,000 Plant assets (net) 680,000 1,280,000 Liabilities 320,000 Common stock 64,000 Additional paid-in capital 256,000 Retained earnings 320,000 52. To have an income from acquisition of P120,000, the number of shares to be issued by Carl Company should be” a. 30,000 shares c. 29,000 shares b. 30,400 shares d. 35,000 shares The Carl Company will issue P10 par value common stock for the net assets of PBA Company. The fair market value per share of Carl’s common stock is P40. The following is the list of accounts of PBA Company on the date of the acquisition. Book Value Fair Market Value

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Current assets P280,000 Plant assets (net) 680,000 Liabilities 320,000 Common stock Additional paid-in capital Retained earnings

P 320,000 1,280,000 64,000 256,000 320,000

53. To have a goodwill of P 120,000, the number of shares to be issued by Carl Company should be a. 30,000 shares c. 29,000 shares b. 30,400 shares d. 35,000 shares On August 1, 2014, Blite Company paid P850,000 for all the net assets of Ong Enterprises in a transaction properly recorded as a purchase. The recorded assets and liabilities of Ong Enterprises on August 1, 2014, follow: Cash P 80,000 Inventory 240,000 Property and equipment, net 480,000 Liabilities (180,000) On August 1, 2014 it was determined that the inventory of Ong had a fair market value of P190,000, and the property and equipment (net) had a fair market value of P560,000. 54. What is the amount of goodwill resulting from the business combination? a. P 0 c. P200,000 b. P 20,000 d. P230,000 55. Stain Corporation is an 80%-owned subsidiary of Paint Corporation. During 2014 Stain sold merchandise that cost P96,000 to Paint for P128,000. Paint's ending inventory at December 31, 2014 contained unrealized profit of P6,400 from the intercompany sales. During 2015 Stain sold merchandise that cost P112,000 to Paint for P152,000. One-half of this remained unsold by Paint at December 31, 2015 For 2015 Paint's separate income was P200,000 and Stain's reported net income was P152,000. The consolidated net income for 2015 will be: a. P302,000 c. P310,720 b. P338,400 d. P274,500 56. P Company acquired a 90% interest in S Company in 2013 at a time when S Company's book values and fair values were equal to one another. On January 1, 2015, S sold a machine with a P24,000 book value to P Company for P48,000. P depreciates the machine over 10 years using the straight line method. Separate incomes for P and S for 2015 are as follows: P Co. S. Co. Sales P960,000 P560,000 Gain on sale of 24,000 machinery Cost of goods sold (400,000) (152,000) Depreciation expense (240, 000) (72,000) Other expenses (96,000) (240,000) Separate incomes P224,000 P120,000 The consolidated net income for 2015 is: a. P344,000 c. P310,400 b. P322,400 d. P312,560 RICH Corporation paid P1,125,000 for an 80% interest in HARD Corporation on January 1, 2015 at a price P37,500 in excess of underlying book value. The excess was allocated P15,000 to undervalued equipment with a ten-

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TeamPRTC year remaining useful life and P22,500 to goodwill which was not impaired during the year. During 2015, HARD Corporation paid dividend of P60,000 to RICH Corporation. The income statements of RICH and HARD for 2015 are given below: RICH HARD Sales Cost of sales Depreciation expense Other expense Net income

P2,500,000 (1,250,000)

P1,000,000 (500,000)

(250,000) (500,000) P500,000

(150,000) (225,000) P125,000

57. Consolidated net income for 2015 is a. P632,125 c. P623,125 b.

P263,125

d.

P632,215

60. In Aleck’s income statement, the amount that should be included as a foreign exchange loss a. P 0 c. P 6,000 b. P21,000 d. P27,000 On April 8, 2013, CALAMBA CORPORATION purchased merchandise from an unaffiliated foreign company for 10,000 units of the foreign company’s local currency. CALAMBA paid the bill in full on March 1, 2015 when the spot rate was P0.45. The spot rate was P0.60 on April 8, 2013 and was P0.55 on December 31, 2014. 61. For the year ended December 31, 2014, CALAMBA should report a transaction gain of a. P1,500 c. P1,000 b. P 500 d. P 0

P Corporation acquired 70% of the voting common stock of S Company at a time when S Company’s book values and fair values were equal. Separate incomes of P Corporation and S Company for 2015 are as follows: P Corporation S Company Sales 633,600 350,400 Cost of Goods Sold 384,000 192,000 Operating expenses 115,200 96,000 Separate income from own operations 134,400 62,400

On December 1, 2014, a Philippine firm purchased a speculative hedge to buy 30,000 foreign currency when the spot rate was P1.10 and a 60 day forward rate was P1.12. The spot rate at December 31 (the company’s yearend was P1.25 and a 30-day forward rate was P1.13. When the speculative hedge was exercised on January 31, 2015 the spot rate was P1.11 and a 30 day forward rate, P1.12. 62. The journal entry to record this hedge would include a debit to Contract Receivable in the amount of a. P33,600 c. P33,000 b. P 600 d. P 0

Intercompany sales from P to S for 2014 and 2015 are summarized as follows: Cost Selling Unsold Price at yearend Intercompany sales – 2014 240,000 374,400 30% Intercompany sales – 2015 168,000 264,000 40%

63. The amount of foreign exchange gain/loss that would appear on the income statements of the Philippine company resulting from this speculative hedge for the years ended 2014 and 2015 are a. 2014 = P300 loss; 2015 = 600 loss b. 2014 = P300 gain; 2015 = 600 gain c. 2014 = P300 loss; 2015 = 600 gain d. 2014 = P300 gain; 2015= 600 loss

58. The 2015 consolidated income statement will show cost of goods sold of a. P 310,080 c. P 384,000 b. P 576,000 d. P 192,000

From the following data, question 16 to 18 should be answered. Opening inventory 4,000 units Percentage of Value Completion Materials 100% P1,992 Labor 50% 1,074 Overhead 50% 846 Put in process 20,000 units Materials value P12,000 Labor 9,984 Overhead is 100% of labor cost Units completed and transferred 21,000 units Units in process at the end 3,000 units Materials 100% Labor and overhead 60% 64. The equivalent production for material is Under Average Under FIFO a. 24,000 20,000

On September 1, 2015 Junjun Company received an order for equipment form a foreign customer for FC 300,000 when the Philippine peso equivalent was P96,000. Junjun shipped the equipment on October 15, 2015, and billed the customer for FC 300,000 when the Phil. Peso equivalent was P100,000. Junjun received the customer’s remittance in full on November 16, 2015, and sold the FC 300,000 for P105,000. 59. In its income statement for the year ended December 31, 2015, Junjun should report a foreign exchange gain of a. P5,000 c. P9,000 b. P4,000 d. No gain no loss Alecks Corporation had the following foreign currency transactions during 2015 a. Merchandise was purchased from foreign supplier on January 20, 2015 for the Peso equivalent of P90,000. The invoice was paid on March 20, 2015 at the Phil. Peso equivalent of P96,000. b. On July 1, 2015, Alecks borrowed the Philippine peso equivalent of P500,000 evidenced by a note that was payable in the lender’s local currency on July 1, 2015. On December 31, 2015, the Phil. Peso equivalent of the principal amount and accrued interest were P520,000 and P26,000 respectively. Interest on the note is 10% per annum.

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b. c. d.

20,000

21,000

20,000

24,000

21,000

20,000

Sangley, Inc. manufactures a product which goes through three consecutive processes, Process 1, Process 2, and Process 3. Data for the month of September, 2006 are as follows: PROCESS1 Work

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PROCESS2

PROCESS3

in

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TeamPRTC Process, beg. Materials added Conversion costs Closing work in process

P8,000 20,000 10,000 6,000

P13,000 4,000 10,000

P2,000 5,000 16,000

9,000

4,000

65. What was the value of the output transferred from Process 3 to the finished goods warehouse for the month of September? a. P63,000 c. P67,000 b. P65,000 d. P69,000 Lego Plastics, Inc. has two joint products, ABBA and ADDA, and uses the net realizable value method of allocating joint costs. The total joint costs for the year 2000 amounted to P300,000. During the year, additional processing costs after split-off were P160,000 for ABBA and P240,000 for ADDA. Lego produced 16,000 units of ABBA and 8,000 units of ADDA during the year. The selling price for ABBA is P20.00 and for ADDA is P50.00. 66. The portion of joint costs allocated to ADDA during the year is a. P175,000 c. P180,000 b. P225,000 d. P150,000 Lee Company produces two products in a single operation, Bex and Rom. Joint production cost for June, 2014 were P30,000. During the month, further processing costs beyond the split-off point needed to convert the products into salable form were P25,000 and P35,000 for 1,600 units of Bex and 800 units of Rom, respectively. Bex sells for P50 per unit and Rom sells for P100 per unit. Lee uses the net realizable method for allocating joint product costs. 67. For June, 2014, the joint cost allocated to product Bex were a. P20,000 c. P13,500 b. P16,500 d. P10,000

a. b.

P1,245,000 P1,290,000

The following information relates to Job No. 2468, which is being carried out by Flexy Co. to meet a customer’s order. Dept. A Dept. B Direct materials used P5,000 P3,000 Direct labor hours 400 200 employed Direct labor rate per hour P4.00 P5.00 Overhead rate per DL hour P4.00 P4.00 Adm. and other overhead 20% of full production cost Profit markup 25% of selling price 69. The selling price to the customer of Job 2468 is: a. P16,250 c. P17,333 b. P20,800 d. P19,500 Rumors Company applied factory overhead as follows: Department Factory Overhead Rate Fabricating P7.75 per Machine hour Spreading 15.10 per Machine hour Gossiping 2.125 per Machine hour Actual machine hours are: 19,000 hours for fabricating; 27,500 hours for spreading and 5,500 hours for gossiping. 70. If the actual factory overhead cost for the period is P574,375, how much is over (under) applied factory overhead? a. (P11,875.00) c. (P 187.50) b. (P23,562.50) d. (P76,125.00)

The accounting records for 2014 of Wagner Music Co. showed the following: Decrease in raw materials inventory P 45,000 Decrease in finished goods inventory 150,000 Raw materials purchased 1,290,000 Direct labor payroll 600,000 Factory overhead 900,000 Freight-out 135,000 68. The cost of raw materials used for the period amounted to

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c. P1,335,000 d. P1,380,000

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