AFAR.doc

NATIONAL FEDERATION OF JUNIOR PHILIPINNE INSTITUTE OF ACCOUNTANTS – NATIONAL CAPITAL REGION ADVANCED FINANCIAL ACCOUNTING & REPORTING (AFAR)

1.

Certain balance sheet accounts of a foreign subsidiary of Rose Company have been stated in Philippine pesos as follows: Stated Current Rates Historical Rates Accounts receivable, current P 200,000 P 220,000 Accounts receivable, long-term 100,000 110,000 Prepaid insurance 50,000 55,000 Goodwill 80,000 85,000 P 430,000 P 470,000 I. The subsidiary’s functional currency is the local currency unit. What amount should Rose’s balance sheet include for the preceding items? a. P430,000 b. P435,000 c. P440,000 d. P450,000 II. The subsidiary’s functional currency is peso. What total amount Rose’s balance sheet include for the preceding items? a. P430,000 b. P435,000 c. P440,000 d. P450,000 A. I – c; II – a C. I – a; II – c B. I – a; II – d D. None of the above

2.

A partnership begins its first year with the following capital balances: Arthur, capital P 60,000 Baxter, capital 80,000 Cartwright, capital 100,000 The articles of partnership stipulate that profits and losses be assigned in the following manner:  Each partner is allocated interest equal to 10 percent of the beginning capital balance.  Baxter is allocated compensation of P20,000 per year.  Any remaining profits and losses are allocated on a 3:3:4 basis, respectively.  Each partner is allowed to withdraw up to P5,000 cash per year. Assuming that the net income is P50,000 and that each partner withdraws the maximum amount allowed, what is the balance in Cartwright’s capital account at the end of that year? A. P105,800 C. P106,900 B. P106,200 D. P107,400

3.

Under PAS 29, one of the following is an indicator of hyperinflation. a. People prefer to keep their wealth in monetary assets b. People prefer to keep their wealth in relatively stable foreign currency c. Interest rates, wages and prices are not linked to a price index d. The cumulative inflation rate over three (3) years exceeds or is approaching 50%

4.

The following are information regarding partnership business: I. A partnership has the following capital balances: Allen, capital P60,000 Burns, capital 30,000 Costello, capital 90,000 Profits and losses are split as follows: Allen (20%), Burns (30%), and Costello (50%). Costello wants to leave the partnership and is paid P100,000 from the business based on provisions in the articles of partnership. If the partnership uses the bonus method, what is the balance of Burns’s capital account after Costello withdraws? a. P24,000 b. P27,000 c. P33,000 d. P36,000 II. At year-end, the Cisco partnership has the following capital balances: Montana, capital P130,000 Rice, capital 110,000 Craig, capital 80,000 Taylor, capital 70,000 Profits and losses are split on a 3:3:2:2 basis, respectively. Craig decides to leave the partnership and is paid P90,000 from the business based on the original contractual agreement. If the goodwill method is to be applied, what is the balance of Montana’s capital account after Craig withdraws? a. P133,000 b. P137,500 c. P140,000 d. P145,000 A. I – a; II – d B. I – b; II – c

C. I – b; II – d D. None of the above

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The following are information regarding a partnership undergoing liquidation: I. A local partnership is liquidating and is currently reporting the following capital balances: Angela, capital (50% share of all profits and losses) P 19,000 Woodrow, capital (30%) 18,000 Cassidy, capital (20%) (12,000) Cassidy has indicated that a forthcoming contribution will cover the P12,000 deficit. However, the two remaining partners have asked to receive the P25,000 in cash that is presently available. How much of this money should each of the partners be given? a. Angela, P13,000; Woodrow, P12,000 b. Angela, P11,500; Woodrow, P13,500 c. Angela, P12,000; Woodrow, P13,000 d. Angela, P12,500; Woodrow, P12,500 II. A partnership has the following balance sheet just before the final liquidation is to begin: Cash P26,000 Liabilities P 50,000 Inventory 31,000 Art, capital (40%) 18,000 Other assets 62,000 Raymond, capital (30%) 25,000 ________ Darby, capital (30%) 26,000 Total P119,000 Total P119,000 Liquidation expenses are estimated to be P12,000. The other assets are sold for P40,000. What distribution can be made to the partners? a. P-0- to Art, P1,500 to Raymond, P2,500 to Darby. b. P1,333 to Art, P1,333 to Raymond, P1,334 to Darby. c. P-0- to Art, P1,200 to Raymond, P2,800 to Darby. d. P600 to Art, P1,200 to Raymond, P2,200 to Darby. A. I – b; II – b B. I – c; II – a

C. I – b; II – a D. None of the above

Under PFRS 11, joint arrangements that are joint ventures (which were ‘jointly controlled entities’ under the PAS 31) are accounted for under

6.

a. b. c. d.

Cost method in accordance with PAS 39 Equity method in accordance with PAS 28 Fair value method in accordance with PFRS 9 Proportionate consolidation method in accordance with PAS 31

Under PFRS 10, when a parent loses control of a subsidiary, it must recognize any investment retained in the former subsidiary at

7.

a. b. c. d.

8.

Carrying amount Fair value, with any gain or loss recognized in profit or loss Fair value, with any gain or loss recognized in other comprehensive income Original acquisition cost, adjusted for any dividend received from the subsidiary

A chemical company manufactures joint products Pep and Vim, and a byproduct. Zest. Costs are assigned to the joint products by the market value method, which considers further processing costs in subsequent operations. For allocating joint costs to the by-product, the market value or reversal cost method is used. The total manufacturing costs for 10,000 units were P172,000 during the quarter. Production and cost data follow: Pep Vim Zest Units produced 5,000 4,000 1,000 Sales price per unit P50 P40 P 5 Further processing cost per unit 10 5 Selling and administrative expense per unit 2 Operating profit per unit 1 I. The value of Zest a. P5,000 II. Compute the gross a. P 0 A. I – c; II – a B. I – d; II – d

to be deducted from the joint costs is: b. P3,000 c. P2,000 d. Zero profit for Pep: b. P70,000 c. P 80,000 d. P100,000 C. I – c; II – d D. None of the above

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The following are information regarding parent and subsidiary: I. Clark Company had the following transactions with affiliated parties during 2008:  Sales of P60,000 to Dean, with P20,000 gross profit. Dean had P15,000 of this inventory on hand at year-end. Clark owns a 15% interest in Dean and does not exert significant influence.  Purchases of raw materials totaling P240,000 from Kent Corporation, a wholly-owned subsidiary. Kent’s gross profit on the sale was P48,000. Clark had P60,000 of this inventory remaining on December 31, 2008. Before eliminating entries, Clark had consolidated current assets of P320,000. What amount should Clark report in its December 31, 2008, consolidated balance sheet for current assets? a. P320,000 b. P317,000 c. P308,000 d. P303,000 II. Par Company owns 60% of Sub Corp.’s outstanding capital stock. On May 1, 2008, Par advanced Sub P70,000 in cash, which was still outstanding at December 31, 2008. What portion of this advance should be eliminated in the preparation of the December 31, 2008 consolidated balance sheet? a. P70,000 b. P42,000 c. P28,000 d. P 0 A. I – c; II – a B. I – d; II – d

C. I – c; II – d D. None of the above

The modified accrual basis in accounting for government transactions means

10.

a.

Income is recognized when received while expenses are recognized when incurred Income is recognized when earned while expenses are recognized when paid Income is recognized when received while expenses are recognized when paid, except for transactions that are required by law to be accounted for under another basis Income is recognized when earned while expenses are recognized when incurred, except for transactions that are required by law to be accounted for under cash or another basis

b. c. d.

To be highly effective, the actual results of the hedge must be within a range of

11.

a. b. c. d.

100% - 150% 100% - 125% 80% - 100% 80% - 125%

Under PFRS 4, it refers to a party that has a right to receive compensation under an insurance contract if an insured event occurs.

12.

a. b. c. d.

13.

Cedant Insurer Reinsurer Policyholder

Hartwell Company distributes the service department overhead costs to producing departments and the following information for the month of January is presented as follows: Maintenance Utilities Overhead costs incurred P18,700 P 9,000 Services provided to: Maintenance department 10% Utilities department 20% Producing department A 40% 30% Producing department B 40% 60% Hartwell Company distributes service reciprocal method, what would be maintenance costs? A. M = P18,700 + .10U C. M B. M = P 9,000 + .20U D. M

14.

department overhead costs based on the the formula to determine the total = P18,700 + .30U +.40A + .40B = P27,700 + .40A + .40B

Financial statement of not-for-profit organization focuses on a. b. c. d.

Basic information for the organization as a whole Standardization of funds nomenclature Inherent differences of not-for-profit organization reporting presentations Distinctions between current fund and noncurrent fund

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that

impact

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15. Pistahan Corporation is a manufacturing company engaged in the production of a single special product known as “Marvel”. Production costs are accumulated with the use of a job-order-cost system. The following information is available as of June 1, 2012: Work-in process.........................................P 10,710 Direct materials inventory.............................. 48,600 In analyzing the job-order cost sheets, the records disclosed that the compositions of the work-in-process inventory on June 1, 2012 were as follows: Direct materials used...................................P 3,960 Direct labor (900 hours)................................ 4,500 Factory overhead applied................................ 2,250 P 10,710 The following manufacturing activity occurred during the month of June 2008: Purchased direct materials costing P 60,000 Direct labor worked 9,900 hours at P 5 per hour Factory overhead of P 2.50 per direct labor hour was applied to production. At the end of June 2012, the following information was gathered in connection with the inventories: Inventory of work-in-process: Direct materials used..........................P 12,960 Direct labor (1,500 hours)..................... 7,500 Factory overhead applied....................... 3,750 P 24,210 Inventory of direct materials........................P 51,000 Compute the cost of goods manufactured: A. P 142,560 C. P 131,850 B. P 118,350 D. P 108,600 16.

X, Y, and Z, a partnership formed on January 1, 2012 had the following initial investment: X……………………………………………………………………………………………………………………………P 100,000 Y…………………………………………………………………………………………………………………………… 150,000 Z…………………………………………………………………………………………………………………………… 225,000 The partnership agreement states that the profits and losses are to be shared equally by the partners after consideration is made for the following: - Salaries allowed to partners: P60,000 for X, P48,000 for Y, and P36,000 for Z. - Average partners’ capital balances during the year shall be allowed 10%. Additional information: - On June 30, 2012, X invested an additional P60,000. - ZZ withdrew P70,000 from the partnership on September 30, 2012. - Share the remaining partnership profit was P5,000 for each partner. Partnership net profit at December 31, 2012 before salaries, interests and partners’ share on the remainder was: A. P199,750 C. P211,625 B. P207,750 D. P222,750

17.

The following statements are based on PFRS 3 (Business Combinations): Statement I: An entity shall account for each business combination by applying the acquisition method. Statement II:The acquirer shall measure the identifiable assets acquired and the liabilities assumed at their acquisition date fair values. Statement III:For each business combination, the acquirer shall measure any non-

controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. a. b. c. d.

18.

All of the statements are true Only statement I is true Only statement II is false Only statement III is false

Kanlaon Corporation started operations on January 1, 2010 selling home appliances and furniture sets both for cash and on installment basis. Data on the installment sales operations of the company gathered for the years ending December 31, 2010 and 2011 were as follows: 2010 2011 Installment sales P400,000 P500,000 Cost of installment basis 240,000 350,000 Cash collected on installment sales:

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Page 5 of 14 2010 installment sales 2011 installment sales

210,000

150,000 300,000

Additional information: On January 5, 2012, an installment sales on 2010 was defaulted and the merchandise with an appraised value of P5,000 was repossessed. Related installment receivable balance on January 5, 2012 was P8,000. The balance of the Deferred Gross Profit controlling account at December 31, 2011 was: A. P 76,000 C. P160,000 B. P130,000 D. P190,000 19.

A Philippine importer that purchases merchandises from a foreign firm’s foreign current unit (FCU) would be exposed to a net exchange gain on the unpaid balance if the a. Peso weakened relative to the FCU and the FCU was the denominated currency b. Peso weakened relative to the FCU and the peso was the denominated currency c. Peso strengthened relative to the FCU and the FCU was the denominated currency d. Peso strengthened relative to the FCU and the peso was the denominated currency Abnormal spoilage in a manufacturing process a. Profit or loss b. Accumulated profit or loss c. Manufacturing overhead applied d. Manufacturing overhead control

20.

21.

should be charged to

What is the correct accounting for Joint Arrangements? a. All joint arrangements are accounted for under PAS 28. b. Joint arrangements classified as joint ventures are accounted for under PFRS 11. c. Joint arrangements classified as joint ventures are accounted for under PAS 28. d. Joint arrangements classified as joint operations are accounted for under PAS 28.

22.

Gains or losses that arise as a result of translating foreign currency denominated operations into the reporting currency are recognized in income: a. only if they are material items b. only when they are settled in cash c. in the reporting period in which they arise d. only when the interest in the foreign operation is sold

Under PAS 11, when it is probable that total contract costs on a fixed price construction contract will exceed total contract revenue, the expected loss should be

23.

a. b. c. d.

Set off against profit of other construction contract where available Recognized as an expense immediately, unless revenue to date exceeds costs to date Apportioned to the years of the contract according to the percentage of completion method Recognized as an expense immediately

24. Lucille Inc. manufactures a product that gives rise to a by-product called "Robon." The only costs associated with Robon are additional processing costs of P1.00 for each unit. Lucille accounts for "Robon" sales first by deducting its separable costs from such sales and then by deducting this net amount from the cost of sales of the major product. For the past year 2,000 units of Robon were produced which were sold for P3.00 each. Sales revenue and cost of goods sold from the main product were P500,000 and P400,000 respectively. Compute the gross margin after considering the byproduct sales and costs. If Lucille changes its method of accounting for Robon sales by showing the net amount as "Other Income," the effect on the gross margin would be: A. P 0 C. P4,000 B. P2,000 D. P6,000

AFAR – NCR Frontliners 2017

NFJPIA-NCR 25.

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A lumber company produces two-by-fours and four-by-eights as joint products and sawdust as a by-product. The packaged sawdust can be sold for P2 per pound. Packaging costs for the sawdust are P.10 per pound and sales commissions are 10% of sales price. The by-product net revenue serves to reduce joint processing costs for joint products. Joint products are assigned joint costs based on board feet. Data follows: Joint processing costs . . . . . . . Two-by-fours produced (board feet) . Four-by-eights produced (board feet) Sawdust produced (pounds). . . . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. P . . . . .

50,000 200,000 100,000 1,000

What is the cost assigned to two-by-fours? A. P32,000 C. P32,200 B. P32,133 D. P33,333 26. The following information summarizes the standard cost for producing one metal tennis racket frame. In addition, the variances for one month's production are given. Assume that all inventory accounts have zero balances at the beginning of the month: Standard Cost Standard Monthly Per Unit Costs _____ Materials P 4.00 P 8,400 Direct labor 2 hrs @P2.60 5.20 10,920 Factory overhead: Variable 1.80 3,780 Fixed 5.00 10,500 Variances: Materials price, P244.75 unfavorable Materials quantity, P500.00 unfavorable Labor rate, P520.00 unfavorable Labor efficiency, P2,080.00 unfavorable What were the actual direct labor hours worked during the month? A. 5,000 C. 4,000 B. 4,800 D. 3,400 27. Using the same information in No. 26, what were the actual quantities of materials used during the month? A. 2,156 C. 2,225 B. 2,100 D. 1,975

Items 28 and 29 are based on the following information: Presented below is the unadjusted Corporation at December 31, 2010:

Cash Installment accounts receivable, 2009 Installment accounts receivable, 2010 Inventory, 12/31/2010 Other assets Accounts payable – trade Unrealized gross profit – 2008 Unrealized gross profit – 2009 Unrealized gross profit – 2010 Capital stock Retained earnings Gain on repossession Operating expenses Total

trial

balance

of

Sterling

Debit P 5,000 40,000 140,000 200,000 497,000

Products

Credit

P

___50,000 P 932,000

50,000 10,000 86,000 100,000 600,000 80,000 6,000 ________ P 932,000

Cost of goods sold had been uniform over the years at 60% of sales. Sterling Products Corporation adopts perpetual inventory procedures. On installment sales, the corporation charges installment accounts receivable and credits inventory gross profit accounts. Repossessions of merchandise have been made during 2010 due to some customers’ failure to pay maturing installments. Analyses of these transactions were summarized as follows: Inventory………………………………………………………………………………………………… 7,500 Unrealized gross profit, 2008…………………………………………… 800 Unrealized gross profit, 2009…………………………………………… 2,400 Installment Accounts Receivable – 2008…… 2,000 Installment Accounts Receivable – 2009…… 6,000 Gain on repossession…………………………………………………… 2,700

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The repossessed merchandise was unsold at December 31, 2010. It was ascertained that they were booked upon repossession at original costs. A fair valuation of these items would be a sale price of the repossessed merchandise at P10,000 after incurring costs of reconditioning of P5,000 and cost to dispose them in the market at P500. 28. Realized gross profit on 2010 sales was: A. P44,000 C. P124,000 B. P56,000 D. P136,000 29. Gain/loss on repossession was: A. P200 loss B. P200 gain

C. P300 loss D. P300 gain

30. The joint venture accounts in the books of the venturers (participants) M, N and O, show the balances below, upon termination of the joint venture and distribution of the profits: BOOKS of M N O Accounts with Dr Cr Dr Cr Dr Cr M 900 900 N 750 750 O 1,650 1,650 Final A. M B. O C. N D. M

settlement of the joint venture will require payments as follows; pays P900 to O and N pays P750 to O pays P900 to M and P750 to N pays P1,650 to M and O pays P900 to N pays P900 to N and N pays P750 to O

The cost per equivalent unit under the weighted average method of process costing considers

31.

a. b. c. d. 32.

Current Current Current Current

cost cost cost cost

only plus cost of ending work in process inventory plus cost of beginning work in process inventory less cost of beginning work in process inventory

The work-in-process account of the Malinta Company which uses a job order cost system follows: Work-in-process April 1 balance Direct materials Direct labor Overhead applied

P25,000 50,000 40,000 30,000

Finished goods

P125,450

Overhead is applied to production at a predetermined rate based on direct labor cost. The work-in-process on April 30 represents the cost of Job No. 456, which has been charged with direct labor cost of P3,000 and Job No. 789 which has been charged with applied overhead of P2,400. The cost of direct materials charged to Job Nos. 456 and 789 amounted to: A. P4,200 C. P7,500 B. P4,500 D. P8,700 33.

The Natural Company acquired 80% of The Loco Company for a consideration transferred of P100 million. The consideration was estimated to include a control premium of P24 million. Loco's net assets were P85 million at the acquisition date. Are the following statements true or false, according to PFRS3 Business combinations? (1) Goodwill should be measured at P32 million if the non-controlling interest is measured at its share of Local's net assets. (2) Goodwill should be measured at P34 million if the non-controlling interest is measured at fair value. Statement (1) Statement (2) Statement (1) Statement (2) A. False False C. True False B. False True D. True True

34.

The Moon Company acquired a 70% interest in The Swan Company for P1,420,000 when the fair value of Swan's identifiable assets and liabilities was P1,200,000. Moon acquired a 65% interest in The Homer Company for P300,000 when the fair value of Homer's identifiable assets and liabilities was P640,000. Moon measures non-controlling interests at the relevant share of the identifiable net assets at the acquisition date. Neither Swan nor Homer had any contingent liabilities at the acquisition date and the above fair values were the same as the carrying amounts in their financial statements. Annual

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Page 8 of 14 have

not

resulted

in

any

impairment

losses

being

Under PFRS 3 Business combinations, what figures in respect of goodwill and of gains on bargain purchases should be included in Moon's consolidated statement of financial position? A. Goodwill: P580,000; Gains on the bargain purchases: P116,000 B. Goodwill: Nil or zero; Gains on the bargain purchases: P116,000 C. Goodwill: Nil or zero; Gains on the bargain purchases: Nil or zero D. Goodwill: P580,000; Gains on the bargain purchases: Nil or zero 35.

A, B, and C are partners in an accounting firm. Their capital account balances at year-end were A, P90,000; B, P110,000 and C, P50,000. They share profits and losses on a 4:4:2, after the following special terms: 1. Partner C is to receive a bonus of 10% of net income after the bonus. 2. Interest of 10% shall be paid on that portion of a partners capital in excess of P100,000. 3. Salaries of P10,000 and P12,000 shall be paid to partners A & C, respectively. Assuming a net income of P44,000 for the year, the total profit share of partner C was: A. P 7,800 C. P19,400 B. P16,800 D. P19,800

Items 36 and 37 are based on the following information: The income statement submitted by the Pampanga Branch to the Home Office for the month of December, 2010 is shown below. After effecting the necessary adjustments the true net income of the Branch was ascertained to be P156,000. Sales …………………………………………………………………………… P 600,000 Cost of sales: Inventory, December 1……………………………… P 80,000 Shipments from Home Office………………… 350,000 Local purchases……………………………………………… 30,000 Total available for sale……………………… P460,000 Inventory, December 31…………………………… 100,000 360,000 Gross margin ………………………………………………………… P240,000 Operating expenses ………………………………………… 180,000 Net income P 60,000 The branch inventories were: 12/01/201 12/31/201 0 0 Merchandise from home office………………… P 70,000 P 84,000 Local purchases…………………………………………………… 10,000 16,000 Total …………………………………………………………………………… P 80,000 P100,000 36. The billing price based on cost imposed by the home office to the branch, and A. 140% C. 40% B. 100% D. 29% 37. The balance of allowance for overvaluation of branch December 31, 2008 after adjustment. A. P10,000 C. P16,000 B. P24,000 D. None of the above 38.

The partners of the M&N Partnership started liquidating their business on July 1, 2010, at which time the partners were sharing profits and losses 40% to M and 60% to N. The balance sheet of the partnership appeared as follows: Assets

Cash Receivable Inventory Equipment P65,200 Accumulated Depreciation 30,800 Total

P

8,800 22,400 39,400

34,400 P105,000

Liabilities & Capital Accounts payable M, capital M, drawing N, capital N, drawing N, loan Total

P 32,400 P31,000 __5,400 P33,200 ___200

25,600 33,000 14,000 P105,000

During the month of July, the partners collected P600 of the receivables with no loss. The partners also sold during the month the entire inventory on which they realized a total of P32,400. A. B.

How much of the cash was paid to M’s capital on July 31, 2010? P25,600 C. P320 P 5,400 D. P 0

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Following data pertain to Matiisin Company which sells appliances on an installment basis: 2008 2009 2010 Installment sales P390,000 P420,000 P480,000 Cost of sales 237,900 243,600 288,000 From Sales Made in: Installment accounts receivable balances: January 1, 2010 December 31, 2010

2008 P 24,000 -

2009 P 300,000 P 60,000

2010 P 320,000

Repossessions on defaulted accounts were made during 2010, as follows:

Account balance Net resale value of repossessed merchandise

From Sales Made in: 2009 2010 P 10,000 P 5,000 4,500

3,500

The total realized gross profit in 2010 on the collections of 2008, 2009, and 2010 sales was: A. P 9,360 C. P 96,600 B. P62,000 D. P167,960 40.

The net gain (loss) on repossession on defaulted sales of 2009 and 2010 was: A. P 500 C. P 800 B. P(800) D. P(1,300)

41.

Pasig Garment Company operates a branch in Cabanatuan City. At the end of the year, the Branch account in the books of the home office at Manila shows a balance of P150,000. The following information are ascertained: 1. The home office has billed the branch the amount of P37,500 for the merchandise, which was in transit on December 31. 2.

A home office accounts receivable for P10,500 was collected by the branch. Said collection was not reported to the home office by the branch.

3.

Supplies of P4,500 was returned by the branch to the home office but the home office has not yet reflected in its records the receipt of the supplies. The branch made profit of P10,100 for the month of December but the home office erroneously recorded it as P11,180. The branch has not received the cash in the amount of P25,000 sent by home office on December 31. This was charged to General Expense account.

4. 5.

All transactions are presumed to have been properly recorded. What is the balance of the Home Office account on the books of the branch as of December 31, before adjustments? A. P121,920 C. P117,420 B. P123,000 D. P106,920 42.

43.

What is the adjusted balance of the reciprocal accounts? A. P 96,420 C. P117,420 B. P106,920 D. P179,920 The Carly Company owns 75% of The Halley Company. The following figures are from their separate financial statements: Carly: Trade receivables P1,040,000, including P30,000 due from Halley. Halley: Trade receivables P215,000, including P40,000 due from Carly. According to PAS 27 Consolidated and separate financial statements, what figure should appear for trade receivables in Carly's consolidated statement of financial position? A. P1,215,000 C. P1,255,000 B. P1,225,000 D. P1,185,000

44.

The White Company acquired an 80% interest in The Pulley Company when Pulley's equity comprised share capital of P100,000 and retained earnings of P500,000. Pulley's current statement of financial position shows share capital of P100,000, a revaluation reserve of P400,000 and retained earnings of P1,400,000. Under PAS 27 Consolidated and separate financial statements, what figure in respect of Pulley's retained earnings should be included in the consolidated statement of financial position?

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Page 10 of 14 C. P1,040,000 D. P1,520,000

The Snipes Company owns 65% of The Genie Company. On the last day of the accounting period Genie sold to Snipes a non-current asset for P200,000. The asset originally cost P500,000 and at the end of the reporting period its carrying amount in Genie's books was P160,000. The group's consolidated statement of financial position has been drafted without any adjustments in relation to this non-current asset. Under PAS27 Consolidated and separate financial statements, what adjustments should be made to the consolidated statement of financial position figures for non-current assets and retained earnings? A. B. C. D.

46.

Non-current assets Increase by P300,000 Reduce by P40,000 Reduce by P40,000 Increase by P300,000

Retained earnings Increase by P195,000 Reduce by P26,000 Reduce by P40,000 Increase by P300,000

Bonifacio contractors had a 3-year construction contract in 2012 for P900,000. The company uses the percentage-of-completion method for financial statement purposes. Income to be recognized each year is based on the ratio of cost incurred to total estimated cost to complete the contract. Data on this contract follows: Accounts receivable – construction contract billings P Construction in progress…………………………………………………………………………P 93,750 Less: Amounts billed…………………………………………………………………………………… 84,375 10% retention………………………………………………………………………………………………………

30,000

Net income recognized in 2012 (before tax)…………………………

15,000

9,375

Bonifacio Contractors maintains a separate bank account for each construction contract. Bank deposits to this contract amounted to P50,000. What was the estimated total income before tax on this contract? A. P45,000 C. P135,000 B. P94,000 D. P144,000 47.

The Lakers Company owns 75% of The Viking Company. On December 31, 2012, the last day of the accounting period, Vikings sold to Lakers a noncurrent asset for P200,000. The asset's original cost was P500,000 and on December 31, 2012 its carrying amount in Viking’s books was P160,000. The group's consolidated statement of financial position has been drafted without any adjustments in relation to this non-current asset. Under PAS 27 Consolidated and separate financial statements, what adjustments should be made to the consolidated statement of financial position figures for retained earnings and non-controlling interest? A. B. C. D.

48.

Retained earnings Increase by P225,000 Increase by P300,000 Reduce by P30,000 Reduce by P40,000

Non-controlling interest Increase by P75,000 No change Reduce by P10,000 No change

The Virgil Company owns 65% of The Migu Company. On December 31, 2012, the last day of the accounting period, Virgil sold to Migu a noncurrent asset for P1,000. The asset's original cost was P2,500 and on December 31, 2012 its carrying amount in Virgil's books was P800. The group's consolidated statement of financial position has been drafted without any adjustments in relation to this non-current asset. Under PAS27 Consolidated and separate financial statements, what adjustments should be made to the consolidated statement of financial position figures for non-current assets and non-controlling interest? A. B. C. D.

Non-current assets Increase by P1,500 Reduce by P200 Reduce by P200 Increase by P1,500

49.

Non-controlling interest Increase by P525 No change Reduce by P70 No change

The Roel Company acquired equipment on January 1, 2009 at a cost of P800,000, depreciating it over 8 years with a nil residual value. On January 1, 2012 The Muldon Company acquired 100% of Roel and estimated the fair value of the equipment at P460,000, with a remaining life of 5 years. This fair

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value was not incorporated into Roel's books and the depreciation expense continued to be calculated by reference to original cost. Under PAS 27 Consolidated and separate financial statements, what adjustments should be made to the depreciation expense for the year and the statement of financial position carrying amount in preparing the consolidated financial statements for the year ended December 31, 2013? Depreciation Increase by Increase by Decrease by Decrease by

A. B. C. D. 50.

expense P8,000 P8,000 P8,000 P8,000

Carrying amount Increase by P24,000 Decrease by P24,000 Increase by P24,000 Decrease by P24,000

Goodwill should be recorded in the accounting records only when a. It is internally generated b. It can be established that a definite benefit or advantage has resulted to a firm from some item such as good name, capable staff, or reputation c. It is acquired through the acquisition of another business d. A firm reports above normal earnings for five or more consecutive years

Items 51 and 52 are based on the following information: Apo Supply Company is engaged in merchandising both at Home Office in Makati, Metro Manila and a branch in Davao. Selected accounts in the trial balances of the Home Office and the branch at December 31, 2010 follow: Debits Inventory, January 1, 2010 Davao Branch Purchases Freight-in from home office Sundry expenses

Home Office P 23,000 58,300 190,000

Branch P 11,550 105,000 5,500 28,000

52,000

Credits Home office Sales Sales to Branch Allowance for branch inventory, January 1, 2010

P155,000 110,000

P 53,300 140,000

1,000

Additional information: 1. Davao branch receives all its merchandise from the home office. The Home Office bills the goods at cost plus 10% mark-up. At December 31, 2010, a shipment with a billing value of P5,000 was in transit to the branch. Freight on this shipment was P250 which is to be treated as part of inventory. 2. December 31, 2010 inventories excluding the shipment in transit , are: Home office, at cost…………………………………………P 30,000 Davao branch, at billed value (excluding freight of P520)……… 10,400 51.

Net income of the Home Office A. P10,000 B. P15,000 52. Net income of Davao branch was: A. P10,470 B. P11,470 53.

54.

was: C. P20,000 D. P25,000 C. P12,470 D. P13,470

A hospital has the following account balances: Revenue from newsstand Amount charged to patients Interest income Salary expense – nurses Bad debts Undesignated gifts Contractual adjustments What is the hospital’s net patient service revenue? A. P880,000 C. P690,000 B. P800,000 D. P680,000

P

50,000 800,000 30,000 100,000 10,000 80,000 110,000

On January 1, 2013, two real estate companies (the parties - Packet Company and Sacket Company) set up a separate vehicle (Harrison Company) for the purpose of acquiring and operating a shopping centre. The contractual

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arrangement between the parties establishes joint control of the activities that are conducted in Harrison Company. The main feature of Harrison’s legal form is that the entity, not the parties, has rights to the assets, and obligations for the liabilities, relating to the arrangement. These activities include the rental of the retail units, managing the car park, maintaining the centre and its equipment, such as lifts, and building the reputation and customer base for the centre as a whole. As a result, Packet Company paid P1.6 million for 50,000 shares of Harrison’s voting common stock, which represents a 40% investment. No allocation to goodwill or other specific account was made. The joint control over Harrison is achieved by this acquisition and so Packet applies the equity method. Harrison distributed a dividend of P2 per share during the year and reported net income of P560,000. What is the balance in the Investment in Harrison account found in Packet’s financial records as of December 31, 2013? a. P1,724,000 c. P1,844,000 b. P1,784,000 d. P1,884,000 55.

Connie Corp. had a realized foreign exchange loss of P15,000 for the year ended December 31, 2011 and must also determine whether the following items will require year-end adjustment: • Connie had an P8,000 loss resulting from the translation of the accounts of its wholly owned foreign subsidiary for the year ended December 31, 2011. • Connie had an account payable to an unrelated foreign supplier payable in the supplier’s local currency. The Philippine peso equivalent of the payable was P64,000 on the October 31, 2011 invoice date, and it was P60,000 on December 31, 2011. The invoice is payable on January 30, 2012. In Connie’s 2011 consolidated income statement, what amount should be included as foreign exchange loss? A. P 11,000 C. P 19,000 B. P 15,000 D. P 23,000

56.

Noting that there was a P5,780,000 translation adjustment gain, Dora Inc. (the parent company) secured a foreign bank loan denominated in the functional currency when the spot rate was 1 Taiwan Nt dollar = P1,022. The bank loan has a principal amount of 200,000,000 Nt dollars. Interest calculations are ignored. The bank loan is designated as a hedge of net investment and is considered to have satisfied all necessary criteria.

Selected exchange rates between the functional currency (Nt dollar) and the peso are as follows: Date January 1, 2011 . October 1, 2012 . December 31, 2012 2012 average. . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . .

. . . . . .

Rate P 0.98 1.00 1.05 1.03

The December 31, 2012 Loans payable account balance obtained to hedge the net investment amounted to A. P196,000,000 C. P206,000,000 B. P200,000,000 D. P210,000,000 57.

Kuchen Manufacturing uses backflush costing to account for an electronic meter it makes. During August 2011, the firm produced 16,000 meters of which it sold 15,800. The standard cost for each meter is: Direct material P 20 Conversion costs 44 Total P 64 Assume that the company had no inventory on August 1. The following event took place in August: 1. Purchased P320,000 of direct materials. 2. Incurred P708,000 of conversion costs. 3. Applied P704,000 of conversion costs to Raw and In Process Inventory. 4. Finished 16,000 meters. 5. Sold 15,800 meters for P100 each. Compute the Finished Goods, ending and the amount of Cost of Goods Sold after the adjustment of over-under applied conversion cost: Finished Goods, ending Cost of Goods Sold as adjusted A. P -0P 1,015,200 B. 12,800 1,011,200 C. -01,024,000 D. 12,800 1,015,200

Use the following information for questions 58 to 59:

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On January 1, JJ acquired 80 percent of the outstanding voting stock of SZ for P260,000 cash consideration. The remaining 20 percent of SZ had an acquisitiondate fair value of P65,000. On January 1, SZ possessed equipment (5-year life) that was undervalued on its books by P25,000. SZ also had developed several secret formulas that JJ assessed at P50,000. These formulas, although not recorded on SZ’s financial records, were estimated to have a 20-year future life.

As of December 31, the financial statements appeared as follows: JJ Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P (300,000) Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . 140,000 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P(140,000) Retained earnings. 1/1 . . . . . . . . . . . . . . . . . . . . P(300,000) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (140,000) Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0Retained earnings, 12/31 . . . . . . . . . . . . . . . . . . P(440,000) Cash and receivables . . . . . . . . . . . . . . . . . . . . . . P210,000 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 Investment in JJ . . . . . . . . . . . . . . . . . . . . . . . . . . 260,000 Equipment (net) . . . . . . . . . . . . . . . . . . . . . . . . . . 440,000 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P1,060,000 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P(420,000) Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . (200,000) Retained earnings, 12/31 . . . . . . . . . . . . . . . . . . (440,000) Total liabilities and equities . . . . . . . . . . . . . . . . . P(1,060,000)

SZ P(200,000) 80,000 10,000 P(110,000) P(150,000) (110,000) -0P(260,000) P90,000 110,000 -0300,000 P500,000 P(140,000) (100,000) (260,000) P(500,000)

During the year, JJ bought inventory for P80,000 and sold it to SZ for P100,000. SZ had paid for only half of this purchase by the end of the year. Of these goods, SZ still owns60 percent on December 31. 58. a. b.

What is the total of consolidated revenues? P500,000 c. P420,000 P460,000 d. P400,000

a. b.

What is the total consolidated cost of goods sold? P140,000 c. P130,000 P152,000 d. P132,000

59.

60.

For which type of hedge are changes in fair value deferred and amortized as an equity adjustment? a. Cash flow hedge b. Operating hedge c. Fair value hedge d. Notional value hedge

61.

Which models are allowed to be used by the private operator for buildoperate-transfer (BOT) schemes under IFRIC 12? I – Financial Asset model II – Intangible Asset model a. b. c. d.

62.

III – Property, Plant & Equipment model

I and II I and III II and III I, II and III

If shares are issued as part of the consideration paid, transactions costs such as brokerage fees may be incurred. According to PFRS 3 Business Combinations the appropriate accounting treatment for such costs in the records of the acquirer is a debit to: a. Cash b. Investments c. Share capital d. Acquisition expenses

Use the following information for questions 63 to 65: On 1/3/x6, Pylux sold equipment costing P100,000 to its 100%-owned subsidiary, Sylux, for P80,000. At the time of the sale, the equipment had been 50% depreciated (using the straight-line method and an assigned life of 10 years). Sylux continued depreciating the equipment by using the straight-line method over a remaining life of 5 years. 63. What are the cost and accumulated depreciation, respectively, of this equipment in the 12/31/x6 consolidated balance sheet? a. P80,000 and P16,000. d. P100,000 and P16,000. b. P80,000 and P56,000. e. P100,000 and P60,000. c. P80,000 and P60,000.

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What is the amount of the intercompany profit or loss that must be deferred at 12/31/x6?

64.

a. b. c.

P6,000 P14,000 P16,000

d. e.

P24,000 P30,000

65. What is the amount of the adjustment to Depreciation Expense in preparing the

consolidation worksheet at 12/31/x6? a. b. c.

P–0– P3,000 P4,000

d. e.

P5,000 P6,000

Use the following information for questions 66 and 67. CC Corporation subsidiary buys marketable equity securities and inventory on April 1, 20x4, for 100,000 foreign currencies each. It pays for both items on June 1, 20x4, and they are still on hand at year- end. Inventory is carried at cost under the lower-of-cost-or-market rule. Currency exchange rates for 1 peso follow: January 1, 20x4 . . . . . . .P0.15=1 FC April 1, 20x4 . . . . . . . . 0.16=1 June 1, 20x4 . . . . . . . 0.17=1 December 31, 20x4 . . . . . . 0.19=1 66. Assume that the FC (foreign currency) is the subsidiary’s functional currency. What balances does a consolidated balance sheet report as of December 31,20x4? a. Marketable equity securities = P16,000 and Inventory = P16,000. b. Marketable equity securities = P17,000 and Inventory = P17,000. c. Marketable equity securities P19,000 and Inventory = P16,000. d. Marketable equity securities P19,000 and Inventory P19,000. 67. Assume that the peso is the subsidiary’s functional currency. What balances does a consolidated balance sheet report as of December 31, 20x4? a. Marketable equity securities = P16,000 and Inventory = P16,000. b. Marketable equity securities = P17,000 and Inventory = P17,000. c. Marketable equity securities P19,000 and Inventory = P16,000. d. Marketable equity securities P19,000 and Inventory P19,000. 68. Under PFRS 10, which is NOT one of the three (3) elements of control? a. power over the investee b. holding majority voting rights c. exposure, or rights, to variable returns from involvement with the investee d. the ability to use power over the investee to affect the amount of the investor’s returns 69.

The test indicating that an intra-group business realized is: a. the generation of profit from the transaction b. c. d.

70.

transaction

has

been

the involvement of an external party in the transaction the presence of only within the group as parties to the transaction whether or not an operating profit or loss occurred as a result of the transaction

Under NGAS, it is an authorization issued by the DBM to government agencies to withdraw cash from the National Treasury through the issuance of Modified Disbursement System checks. a. b. c. d.

Allotment Obligation Appropriation Notice of Cash Allocation

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