P2 Materials

C

C

A statement of realization and liquidation has been prepared. Totals there from are as follows: Assets to be realized P80,000 Assets acquired 40,000 Assets realized 30,000 Assets not realized 90,000 Liabilities to be liquidated 80,000 Liabilities assumed 50,000 Liabilities liquidated 100,000 Liabilities not liquidated 30,000 Supplementary credits 110,000 Supplementary charges 98,000 The ending balances of capital stock and retained earnings are P100,000 and P18,000 respectively. How much was the ending balance of cash? a. P35,000 b. P45,000 c. P58,000 d. P59,000 The following data were presented in the statement of affairs for Burnout Company: Unsecured Liabilities with priority P160,000 Unsecured Liabilities without priority 1,440,000 Capital Stock 1,000,000 Retained Earnings (Deficit) (424,000) Loss on Realization of Assets 720,000 Estimated Liquidation/ Administrative expenses 72,000 The percentage of claims unsecured without priority creditors expect to receive on the liquidation of Burnout Company: a. 100% b. 95% c. 85% d. 90%

A.

Zamboanga Company has been operating a branch in Ozamis. Shipments are billed to the branch at cost. The branch carries its own account receivables, makes its own collections and pays its own expenses. The transactions for the year are given effect in the account balances below: Cash P 8,500 Account Receivable P25,000 Home office current 35,000 Sales 147,000 Shipment from Home Office 135,000 Expenses 13,500 The branch inventory on December 31, 2005 is P18,500 C1. On January 1, 2006, the branch current account on the books of the home office should have a balance of a. P25,000 b. P18,000 c. P52,000 d. P27,000 B2. On January 1, 2006, the shipment to branch account on the home office books should have an opening balance of a. P135,000 b. P0 c. P16,500 d. P35,000

The following were taken from the books of Misamis Company and its branch. The balances are at December 31, 2005: Home Office Branch Sales P600,000 Expenses 200,000 Shipments from Home office 360,000 Allowance for overvaluation P72,500 The branch acquires of its merchandise from the home office. The inventories of the branch at billed price are as follows: January 1, P75,000, December 31, P84,000. a1. The percentage of profit on cost that the home office uses to bill merchandise shipped to branch is a. 20% b. 25% c. P120% d. 25% a2. The adjusted profit of the branch is a. P107,500 b. P49,000

c. P58,500

d. P102,000

C

A partner’s withdrawal of assets from a partnership that is considered a permanent reduction in the partner’s equity is debited to the partner’s; a. Drawing account c. Capital account b. Retained earnings account d. Loan receivable account

C

The admission of a new partner under the bonus method will result in

a. bonus to the old partners only but not both b. bonus to the new partner only

c. bonus either the new partner or the old partners, d. none of the above

D

Which of the following results in the dissolution of a partnership? a. The contribution of additional assets to the partnership by an existing partner. b. The receipt of share in profit by an existing partner. c. The withdrawal of a partner from a partnership d. The winding up of the partnership and the distribution of remaining assets to the partners.

C

Total partners’ equity will not change when a withdrawing partner a. withdraws assets equal to his capital balance. b. sells his interest to a new or remaining partner. c. withdraws assets amounting to less than his capital balance. d. withdraws assets amounting to greater than his capital balance.

C

The following is the priority sequence in which liquidation proceeds will be distributed for a partnership: a. Partnership drawings, partnership liabilities, partnership loans and partnership capital balances. b. Partnership liabilities, partnership loans, partnership drawings and partnership capital balances. c. Partnership liabilities, partnership loans, and partnership capital balances. d. Partnership liabilities, partnership capital balances and partnership loans.

C

If a partner is insolvent, his personal properties shall first be distributed a. to partnership creditors b. to the partners by way of additional contributions when the assets of the partnership were insufficient to settle all obligations. c. to separate creditors d. to partnership and separate creditors in the ration of their loan exposures.

b Mini is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus a bonus of 10% of net income after salaries & bonus as a means of allocating profit among the partners. Salaries traceable to the other partners are estimated to be P100,000. What amount of income would be necessary so that Mini would consider the chances to be equal? a. P165,000 c. P265,000 b. P290,000 d. P305,000 c Pete and Rico share profits after the provision of annual salary allowances of P14,400 and P13,200 respectively in the ratio of 3:2. However, if partnership’s net income is insufficient to provide for said allowances in full amount, the net income shall be divided equally between the partners. In 2005, the following errors were discovered: Depreciation for 2005 is understated by P2,100, and the inventory on December 31, 2005 is overstated by P11,400. The partnership net income for 2005 was reported to be P19,500. The capital accounts of the partners should be increased (decreased) by: a. Pete, P6,540; Rico, P(6,960) b. Pete, P(6,540); Rico, P6,960 c. Pete, P(6,750); Rico, P(6,750) d. Pete, P(6,960); Rico, P6,540

In a business combination, an acquirer's interest in the fair value of the net assets acquired exceed the consideration transferred in the combination. Under IFRS 3 Business combination, the acquirer should (select one answer)

a. recognize the excess immediately in profit or loss b. recognize the excess immediately in other comprehensive income c. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize any excess immediately in profit or loss d. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize any excess immediately in other comprehensive income The following costs should be included in the consideration transferred in a business combination, according to IFRS 3 Business Combinations (1) Costs of maintaining an acquisitions department (2) Fees paid to accountants to effect the combination Costs (1) Costs (2) Costs (1) Costs (2) a. No No c. Yes Yes b. No Yes d. Yes Yes The following statements about an acquisition are true or false, according to IFRS 3 Business Combinations (1) The acquirer should recognize the acquiree's contingent liabilities if certain conditions are met. (2) The acquirer should recognize the acquiree's contingent assets if certain conditions are met. (1) (2) (1) (2) a. False False c. True False b. False True d. True True

Which of the following is NOT included in the cost of an acquired company? a. Finder's fee for arranging the combination b. Contingent consideration determinable at the consummation date of the combination c. Costs of registering and issuing debt securities tot he shareholders of the combined entities. d. None of the above. Which of the following accounts would be subject to impairment when recorded in a combination? a. Inventories b. Goodwill c. Patents d. Equipment Negative goodwill in a combination should be a. Offset against goodwill of the acquiring company. b. Credited to the acquiring company's Additional Paid-In Capital account. c. Credited to the acquiring company's Profit or Loss account. d. Credited to a Deferred Credit account. A merger is a business combination in which I an established company acquires all the voting ordinary share capital of one or more established companies, which are then liquidated. II a new company acquires all the voting ordinary share capital of two or more established companies, which are then liquidated. Which of the following is correct? a. I only b. II only c. I and II d. neither I and II

S Company was acquired by P International on July 1, 2009. P exchanged 40,000 shares of its P5 par stock, with a market value of P20 per share, for the net assets of S Company and S Company is dissolved. P incurred the following costs as a result of this transaction: Direct acquisition costs P25,000 Indirect acquisition costs 30,000 Stock registration and issuance costs 10,000 The balance sheet of S Co. together with fair values on the day of the acquisition was as follows: Carrying value Fair value Cash P 100,000 P100,000 Inventory 300,000 250,000 Equipment under capital lease (net) 200,000 220,000 Property, plant, and equipment: Land 200,000 180,000

Buildings (net) 300,000 Current liabilities Liability under capital lease Bonds payable Stockholders’ equity: Common stock Paid-in capital in excess of par Retained earnings

250,000 P1,050,000 P 80,000 150,000 400,000

80,000 140,000 270,000

200,000 100,000 120,000 P1,050,000

Based on the above data: 1.1 The cost of combination __________800,000______________ 1.2 The goodwill/gain arising from the business combination ______240,000

P pays 800 to purchase 80% of the shares of S. Fair value of 100% of S’s identifiable net assets is 600. 1 If P elects to measure non-controlling interests as their proportionate interest in the net assets of S 120, the consolidated financial statements show goodwill of ___120_____________. 2 If P elects to measure non-controlling interests at fair value and determines that fair value to be 185, then goodwill of consolidated financial statements is ____385____________. 3 If P elects to measure non-controlling interests at fair value and determines that fair value to be 110, then goodwill of consolidated financial statements is ____400____________.

On January 1, 2006, Parent company sold to its 80%-owned subsidiary, S Company, a machine for P60,000. At that time, the machine had a net book value of P45,000. S Company estimated the remaining useful life of the machine to be six years. Assume that in 2006, P Company and S Company reported net income of P40,000 and P50,000 respectively, from their own operation. 1.1 Non-Contolling interest in the subsidiary net income in 2006 ________________ P10,000 1.2 The consolidated net income (parent company’s approach) _____________P67,500 1.3 The book value of the machinery on December 31, 2006 for consolidation purposes ____________P37,500 Parent company acquired 80% of the capital stock of S Company on January 1, 2005. On January 5, 2007, equipment with a cost of P150,000 and accumulated depreciation (based upon a five year life) of P90,000 was sold by the Parent to S Company for P100,000. The 2007 net income from own operation of the Parent and S Company were P75,000 and P62,000, respectively . C 2.1 Non-controlling interest in the subsidiary net income in 2006 a. P4,400 b. P8,400 c. P12,400 d. P4,800 D 2.2 The consolidated net income for 2007 a. P97,000 b. P108,600 c. P124,600 d. P104,600

A 2.3 For consolidation purposes, the equipment will have a book value on December 31, 2007 of a. P30,000 b. P50,000 c. P60,000 d. P40,000 On January 1, 2003, ABC Co. purchase a computer with an expected life of five years. On January 1, 2005, ABC Co. sold the computer to DEF Corp. and recorded the following entry:

Cash 39,000 Accumulated depreciation 16,000 Computer Equipment Gain on sale of equipment

40,000 15,000

DEF Corp. holds 60% of the voting shares of ABC Co. ABC Co.and DEF Corp. reported income from its own operations of P 45,000 and P 85,000, respectively. There is no change in the estimated life of the equipment as a result of intercompany sale. What is the consolidated net income? ______________P86,000

AA Corp. is 80% owned by BB Inc. On January 1, 1999, AA Corp. paid P 100,000 for a truck with an expected life of ten years and no residual value. AA Corp sold the truck to BB, Inc. on January 1, 2005. During the preparation of consolidated working paper for 2005, the following working paper entry was made to eliminate the effects of the intercompany truck sale: Truck 48,000 Gain on sale of truck 12,000 Depreciation Expense Accumulated Depreciation What amount of _______________P13,000

depreciation

expense

3,000 57,000 was

recorded

by BB

Inc.

during

2005?

Baxter Corporation’ master budget calls for the production of 5,000 units of product monthly. The master budget includes indirect labor of P144,000 annually; Baxter considers indirect labor to be a variable cost. During the month of April, 4,500 units of product were produced, and indirect labor costs of P10,100 were incurred. A performance report utilizing flexible budgeting would report a budget (controllable variance for indirect labor: a. P1,900 unfavorable c. P1,900 favorable b. 700 favorable d. 1,000 unfavorable

Espiritu Construction Co. has used the cost-to-cost percentage of completion method of recognizing revenue. Tony Espiritu assumed leadership of the business after the recent death of his father, Howard. In reviewing the records, Espiritu finds the following information regarding a recently completed building project for which the total contract was P2,000,000. Gross profit (loss) Cost incurred

2005 P75,000 360,000

2006 P140,000 ?

2007 P (20,000) 820,000

Espiritu wants to know how effectively the company operated during the last year 3 years on this project and, because the information is no complete, has asked for answers to the following questions. What was the total estimated gross profit on the project by the end of 2006? a. P215,000 b. P358,333 c. P 195,000 d. Incomplete data The Mindanao Sales Company employs the perpetual inventory basis in the accounting for new cars. On August 15, 2007, a new car costing P247,500 and with a price of P330,000 was sold to Carla. The company granted Carla an allowance of P127,500 on the trade-in of her old car, the current value of which was estimated to be P122,550; the balance of P202,500 was payable as follows: P52,500 cash at the time of purchase and twenty monthly payments of P7,500 starting September 1, 2007. (use two decimal places for percentage) The amount of realized gross profit on December 31, 2007 is: a. P19,684.73 b. P41,766.93 c. P48,924.93

d. P56,082.93

EFG Inc., franchiser, entered into franchise agreement with HIJ Inc., franchise on July 1, 2007. The total franchisee fees agreed upon is P550,000, of which P50,000 is payable upon signing and the balance to be covered by a non-interest bearing note payable in four equal annual installments. It was agreed that the down payment is not refundable, notwithstanding lack of substantial performance of services by franchiser. The direct franchise cost incurred was P325,000. Indirect franchise expense of P31,250 was also incurred. The management of HIJ has estimated that they can borrow loan at the rate of 12%. The franchisee commenced its operations on July 31, 2007. When EFG prepares its financial statements on July 31, 2007, how much is the net income to be reported? (Use two decimal places for the present value factor). a. P73,750 b. P119,350 c. P77,550 d. P108,800



On   November   15,   2009,   Manila   Company,   a   Philippine   company   ordered merchandise from a US company for 20,000 US dollars. The merchandise was shipped and invoiced on December 10, 2009. Manila Company paid the invoice on January 10, 2010. The spot rare for US dollars on the respective dates were: November 15, 2009 P49.55 December 10, 2009   48.75 December 31, 2009   46.75 January 10, 2010   44.75

In Manila's December 31, 2009, income statement, what is the foreign exchange gain(loss)? a. P9,600 c. P8,000 b. P4,000 d. P1,600 

Bulacan Corporation had the following foreign currency transactions during 2009. First, it purchased merchandise from a foreign supplier on January 20, 2009, for the Philippine peso equivalent of P90,000. The invoice was paid on March 20, 2009,   at   the   peso   equivalent   of   P96,000.   Second,   on   July   1,   2009   Bulacan borrowed the peso equivalent of P500,000 evidenced by a note that was payable in the lender's local currency on July 1, 2011. On December 31, 2009, the peso equivalents   of   the   principal   amount   and   accrued   interest   were   P520,000   and P26,000, respectively. Interest on the note is 10% per annum. In Bulacan's 2009 income statement, what amount should be included as a foreign exchange loss? a. P ­0­ c. P6,000 b. P21,000 d. P27,000



On September 1, 2009, Cebu Corporation received an order for furniture froma foreign customer for 300,000 local currency units (LCU) when the Philippine peso equivalent was P96,000. Cebu shipped the furniture on October 15, 2009, and billed the customer for 300,000 LCU when the Philippine peso equivalent was P100,000.   Cebu   received   the   customer's   remittances   in   full   on   November   16, 2009, and sold the 300,000 LCU for P105,000. In its statement for the year ended December 31, 2009, Cebu should report a foreign exchange gain of? a. P ­0­ c. P5,000 b. P4,000 d. P9,000



The following data applies to Davao Company's sale of 10,000 foreign currency units under a forward contract dated November 1, 2009, for delivery on January 21, 2010. 11/1/09 12/31/09 Spot rates P80 P83 30 day forward rate   79   82

90 day forward rate

  78

  81

Davao entered into the forward contract to speculate in the foreign currenc. In its income statement for the year ended December 31, 2009, what amount of loss should Davao report from this forward contract? a. P400 c. P200 b. P300 d. P ­0­

1. On November 1, S company entered into a firm commitment to acquire a machinery. Delivery and passage of title would be on February 28, 2009 at the price of HK$2,000. On the same date, to hedge against unfavourable changes in the exchange rate, S entered into a 120 day forward contract with China bank for HK$2,000. Exchange rate were as follows:

Spot Rate Forward Rate Nov. 01, 2008 P 26 P 24 Dec. 31, 2008 28 26 Feb. 28, 2009 29 29 How much is the forex gain or loss recognized by the S Company on the firm commitment? a. P6,000 gain b. P10,000 loss c. P6,000 loss d. P10,000 gain 2. On October 1, 2011, Sweet Philippines took delivery from US firm of inventory costing 285,000 dollars. Payment is due on January 30, 2012. Concurrently, Sweet Philippines paid P3,925 cash to acquire an at-the-money call option for 285,000 US Dollars. Strike price is P4.40

Market price Fair value of call option

12/31/2011 P4.423 P7,050

1/30/2012 P4.427 ?

The foreign exchange gain(loss) on hedging instrument due to the change in the effective portion on December 31, 2012. If changes in the time value will be excluded from the assessment of hedge effectiveness should be: a. P1,140 b. P(1,140) c. P(3,430) d. P645 1. On November 19, 2011, RST Company, a Philippine company ordered merchandise from Sweden Company for 31,800 Sweden kronor. The merchandise was delivered on December 18, 2011. The voice was dated December 2, 2011, the shipping date (FOB shipping point). RST Company paid the invoice on January 28, 2012. The spot rates for Sweden kronor on the respective dates were: November December December December

19, 2011 2, 2011 18, 2011 31, 2011

P76.90 76.15 75.75 72.35

January 28, 2012

73.15

What is the reportable foreign exchange gain/ loss amount in RST’s 2011 income statement? a. P108, 120 gain b. P144, 690 gain c. P120, 840 gain d. P25, 440 loss 2. On October 5, 2011, DEF Company sold goods on account to Malaysia Corporation for 50,320 Ringgits. The date of invoice is October 29, 2011 and payment is due on January 30, 2012. Exchange rates were as follows: BID rate OFFER rate Oct. 05, 2011 P67.50 P69.20 Oct.29, 2011 68.70 66.80 Dec. 31, 2011 64.10 63.40 Jan. 30, 2012 62.40 65.50 What is the reportable foreign exchange gain/ loss amount in DEF’s 2012 income statement? a. P85, 544 loss b. P231, 472 loss c. P105, 672 gain d. P171, 088 loss 3. On December 1, 2009, A Corp. Received an order for equipment FOB shipping point from S Co. the order is billed for $86,000, payable on January 31, 2010. The equipment was shipped and invoiced to S Co. on December 12, 2009. Buying Selling Dec. 1 51.45 51.60 Dec. 12 51.58 51.84 Dec. 31 51.72 51.96 Jan. 31, 2010 51.68 51.89 On the December 31, 2009 income statement of A Corp., how much is the FOREX gain/(loss) to be reported on this transaction? a. 12,040 b. 14,280 c. (10,320) d. (14,280)