P2_Answe

Use the following information for the first three items 1. The partnership of Maring and Habagat began business on January 1, 2013. The following assets were contributed by each partner (the non-cash assets are stated at their fair values on January 1, 2013): 2. Cash Inventories Land Equipment

P

Maring 30,000 50,000 100,000

Habagat P 20,000 200,000 -

3.

4. The land was subject to a P65,000 mortgage, which the partnership assumed on January 1, 2013. The equipment was subject to an installment note payable that had an unpaid principal amount of P35,000 on January 1, 2013. The partnership also assumed this note payable. According to the partnership agreement, each partner was to have a 50% capital interest on January 1, 2013, with total partnership capital being P300,000. Maring and Habagat agreed to share partnership income and losses in the following manner:

Interest on beginning capital Salaries Remainder

P

Maring 4% 15,000 60%

 Inventory was acquired at a cost of P30,000. At December 31, 2013, the partnership owed P6,000 to its suppliers. The partnership inventory at December 31, 2013 was P20,000.  Principal of P10,000 was paid on the mortgage. Interest expense incurred on the mortgage was P4,000, all of which was paid by December 31, 2013.  Principal of P7,500 was paid on the installment note. Interest expense incurred on the installment note was P2,500, all of which was paid by December 31, 2013.  Sales on account amounted to P115,000. At December 31, 2013, customers owed the partnership P10,000.  Selling and general expenses, excluding depreciation, amounted to P21,000. At December 31, 2013, the partnership owed P3,000 of accrued expenses. Depreciation expense was P5,000.  Each partner withdrew P225 each week in anticipation of partnership profits.  The partners allocated the net income for 2013 and closed the accounts. Additional information: On January 1, 2014, the partnership decided to admit Nando to the partnership. On that date, Nando invested P100,900 of cash into the partnership for a 20% capital interest.

D. P1,000

The capital balance of Maring at the end of 2013: A. P138,000 B. P139,800

C. P148,800

D. P150,600

The capital balance of Habagat after Nando’s admission must be: A. P150,140 B. P151,100 C. P155,900

D. P156,860

Janine and Nicole formed a general professional partnership (practicing law) in the Philippines on January 1, 2014. Their capital contributions were credited to their respective capital accounts as follows: Janine, Capital – P600,000 Nicole, Capital – P1,000,000. During the year, the partnership earned profit before tax of P4,000,000. The income tax rate was 30%.

Habagat 4% P 10,000 40%

During 2013, the following events occurred:

The share of Habagat on the net income of 2013 must be: A. P10,200 B. P9,000 C. P3,000

How much is the share of Nicole in the partnership profit? a. P1,750,000 b. P2,500,000 c. P1,500,000

5.

d. P2,000,000

Manolo, Jane, Joshua and Loisa own a publishing company that they operate as a partnership. Their agreement includes the following: a. b. c. d. e.

Manolo will receive a salary of P20,000 and a bonus of 3% of income after all the bonuses Jane will receive a salary of P10,000 and a bonus of 2% of income after all the bonuses All partners are to receive the following: Manolo – P5,000; Jane – P4,500; Joshua – P2,000; and Loisa – P4,700, representing 10% interest on their average capital balances. Any remaining profits are to be divided equally among partners Partnership reports a profit of P40,000.

How much is Jane’s share in the profit if the profit is distributed in the following order of priority: interest on invested capital, then bonuses, then salary, and then according to profit and loss percentage? A. P12,443 B. P12,560 C. P12,830.75 D. P13,235.75 Use the following information for the next two items On June 1, 2012, L and M formed a partnership with cash investments of P330,000 and P420,000, respectively. Upon formation, the partners agreed to bring their capital ratio in proportion with their profit or loss ratio which is L-30% and M-70% and M is the partner who has to invest or withdraw

sufficient amount of cash to conform with the agreement. Profit allocation were as follows: monthly salaries, L-P36,000 and M-P30,000. The partners will be allowed with interest of 12% on their capital balances at the end of the year before closing the income summary account and any distribution against net income. M receives a bonus of 20% of net income after deducting the bonus and his salary.

In 2012, the partnership reported net income of P450,000 before any deductions and each partner has drawings of P150,000 distributed at year-end against share in net income.

10. Rushnell, Adrianne and Christine were partners with capital balances on January 2, 2014 of P350,000, P525,000 and P700,000. Their profit ratio is 5:3:2 while the original interest ratio is 4:4:2. On July 1, 2014, Jensie was admitted by the partnership for 20% interest in capital and 25% in profits by contributing P87,500 cash. The partnership had a net income of P210,000 before admission of Jensie. Prior to the admission of Jensie, the partners agree to revalue its overvalued equipment by P35,000. The capital balance of Rushnell after admission of Jensie is: A. P297,500 B. P354,200 C. P470,400 D. P588,000

On January 1, 2013, N was admitted as a partner by purchasing 1/3 interest of M, paying the selling partner the amount of P276,000. N also invested P230,000 cash for a total interest of 20% in capital of the partnership.

11. Partners A, B, C and D, who share profits 5:3:1:1 respectively, decide to dissolve. Capital balances at this time are P60,000, P40,000, P30,000 and P10,000 respectively. Before selling the firm’s assets, the partners agree to the following:

On August 1, 2012, L invested additional P80,000 and withdrew P30,000 on October 1, 2012. On September 1, 2012, M invested additional P48,000 cash and withdrew P18,000 on December 1,2012.

6.

7.

8.

9.

admission of Max, the partners agree to revalue its overvalued equipment by P35,000. Capital balance of Adrian increased by P10,500 as a result of the admission of Max while the capital balance of Nicole at the start of the year is P700,000. The capital balance of Monica at the start of the year is: A. P350,000 B. P354,000 C. P441,000 D. P577,500

Determine the capital balances of L, after admission of N. A. P498,294 B. P541,340 C. P512,290

D. P529,798

Determine the capital balances of M, after admission of N. A. P718,202 B. P724,306 C. P702,220

D. P698,440

D, E and F attorneys, decide to form a partnership and agree to distribute profits in the ratio of 5:3:2. It is agreed, however, that D and E shall guarantee fees from their own clients of P60,000 and P50,000 respectively, that any deficiency is to be charged directly against the account of the partner with fees exceeding the guarantee. Fees earned during 2009 are classified as follows: From clients of D P100,000 From clients of E 40,000 From clients of F 10,000 Operating expenses for 2009 are P20,000. From the above data, compute the net effect on partners’ capital increase or (decrease) by: D E F A. P100,000 P26,000 P24,000 B. P 40,000 P(20,000) --C. P 90,000 P(20,000) P20,000 D. P 50,000 P 30,000 P20,000 Monica, Adrian and Nicole were partners in The Legal Wife Partnership. Their profit ratio is 5:3:2 while the original interest ratio is 4:4:2. On July 1, 2014, Max was admitted by the partnership for 20% interest in capital and 25% in profits by contributing P87,500 cash, and the old partners agree to bring their interest to their original capital ratio. Max is the recipient of the transfer of capital of P280,000 from the existing partners. The partnership had a net income of P210,000 before admission of Max. Prior to the

1. Partnership furniture and fixtures, with the book value of P12,000, is to be taken over by partner A at a price of P15,000. 2. Partnership claims of P20,000 are to be paid off and the balance of cash on hand, P30,000, is to be divided in a manner that will avoid the need for any possible of cash from a partner. How much the P30,000 cash be distributed to the partners? A A. B. C. D.

P0 P(2,500) P0 P0

B P 0 P 11,500 P 20,000 P 20,000

C P 30,000 P 20,500 P 10,000 P 20,000

D P 0 P 500 P 0 P 0

12. The following selected accounts appeared in the trial balance of Aiza Corp as of December 31, 2013: Installment receivable-2012 sales Installment receivable-2013 sales Inventory, December 31, 2012 Purchases

P 6,000 80,000 28,000 222,000

Repossessions Installment sales Regular sales Deferred gross profit – 2012 Operating Expenses

P 1,200 170,000 154,000 21,600 46,000

Additional information: Installment receivable – 2012 sales, December 31, 2012 P 57,100 Inventory of new and repossessed merchandise as of December 31, 2013 38,000 Gross Profit percentage on installment sales in 2012 is 10% higher than the gross profit percentage on regular sales in 2013

Repossession was made during the year and was recorded correctly. It was a 2012 sales and the corresponding uncollected account at the time of repossession was P3,100. Net Income for 2013 is A. P 54,180

B. P 6,740

C. P 52,940

D. P 53,600

13. Siwag Company uses the installment method of reporting for accounting purposes. The following data were obtained. 2011 2012 2013 Installment sales P600,000 P810,000 P990,000 Cost of installment sales 420,000 486,000 643,500 Gross profit P180,000 P324,000 P346,500 Installment contract receivables, December 31: 2011 2012 2013 2011 sales P 360,000 P 270,000 P 120,000 2012 sales 600,000 390,000 2013 sales 780,000 In 2013, one of the customers defaulted in his payment and the company repossessed the merchandise with an estimated market value of P30,000. The sales was in 2011 and the unpaid balance on the date of repossession was P 45,000.

Costs of contracted research and development activities Depreciation of idle equipment that is not used on a particular contract Selling costs 45,000 General & administration costs expenses specifically included under the terms of the contract 30,000 Borrowing cost incurred during the construction period Costs of labor for site supervision

105,000 60,000

Advances made to subcontractors * expensed in prior year although the contract was obtained in 2013

100,000

50,000

Using cost-to-cost method in determining the stage of completion, what is the realized gross profit for the period 2013? (Round-off stage of completion to 2 decimal percentage) a. P 111,055 b. P 125,195 c. P 134,610 d. P 141,330 15. ABC Construction Corporation contracted with the province of Pampanga to construct a bridge at a contract price of P16,000,000. ABC Corporation expects to earn P1,520,000 on the contract. The percentage of completion method is to used and the completion stage is to be determined by estimates made by the engineer. The following schedule summarizes the activities of the contract for years 20112013.

Compute for 2013 (1) the gain (loss) on repossession; (2) total realized gross profit, and (3) the deferred gross profit. (1) A. B. C. D.

P (1,500) 750 (1,500) 1,500

(2) P 189,000 129,000 189,000 73,500

Year 2011 2012 2013

(3) P 451,500 465,000 465,000 273,000

Cost Incurred P4,600,000 4,500,000 5,250,000

Estimate Cost to Complete P 9,640,000 5,100,000 -0-

Engineer’s Estimate of Completion 31% 58% 100%

Billings On Contract P 5,000,000 6,000,000 5,000,000

Collection On Billings P4,500,000* 5,400,000* 6,100,000

*A 10% retainer accounts for the difference between billings and collections.

14. On July 1, 2013, BINAY Construction Corp. contracted to build an parking office building for JOJO Inc. for a total contract price of P2,950,000. Estimated total contract costs is P2,600,000. Costs incurred to date are as follows related to the project were as follows: Cost of direct materials used Cost direct labor (includes labor cost of site supervision) Cost of indirect materials used Cost incurred in securing the contract* Annual depreciation of plant and equipment used on the contract Payroll of design and technical department allocated to the contract Insurance costs (2/3 for other contracts)

130,000

P200,000 150,000 55,000 70,000 240,000 80,000 180,000

Under the percentage of completion method, using the engineer’s estimate as the to be applied to revenue and costs, how much is the gross profit earned each year? 2011 2012 2013 2011 A. P545,600; P 498,400; P 606,000 C. P1,760,000; B. P545,600; P1,044,000; P 1,044,000 D. P1,760,000;

measure of completion 2012 P6,400,000; P1,800,000;

2013 P1,650 P1,650

16. Daryl Company has started construction work on a project with a fixed contract price of P4,500,000. Daryl expects to incur total costs of P3,375,000 on this project. During the first year of the project, the following transactions occurred:  Incurred cost of materials, labor and overhead used in the work, P2,700,000.

 Paid costs of materials purchased but set aside for use in a future date for this project, P225,000. These materials do not have any alternative use and cannot be sold to other parties.  Paid and incurred rectification work not expected to be recovered, P292,500.  Incurred general and administrative costs that are not reimbursable, P112,500.  Incurred selling costs, P67,500.  Incidental income from the sale of certain materials, P45,000. These specific materials were sold since it was considered surplus from the early phase of the construction.  The engineers determined that the original estimate of costs did not include any expected warranty costs of P225,000.

19. How much is the gross profit recognize by Lyca on its 2014 Financial Statements? a. P2,000,000 b. P600,000 c. P1,500,000

Applying principles of PAS 11 – Construction Contracts, determine the profit for the first year. a. P 170,000 b. P 220,000 c. P 247,500 d. P 720,000

20. Using information in #19 alone, calculate the value of current asset in Lyca’s 2014 Financial Statements. a. P3,400,000 b. P5,600,000 c. P 1,400,000 d. P4,400,000

Use the following information for the next two items

21. On June 1, 2013, FNBC Corporation, franchisor, receives P200,000 from PP Fad representing down payment on the franchise agreement signed that PP Fad gave FNBC a 12% interest bearing note for the balance of P1,000,000, payable in four semi-annual installments. Franchise services was substantially completed by FNBC on November 15 at a cost of P900,000. On December 31, 2013, the first semiannual installment became due was accordingly paid by PP Fad. FNBC appropriately uses the accrual method of recording franchise revenues. In its December 31, 2013 financial statements, how much will FNBC report as realized franchise income for the year? A. P 112,500 B. P 300,000 C. P 250,000 D. P 187,000

On July 1, 2012, Kim Corp. obtained a contract to construct a building. The building was estimated to be built at a total of P5,250,000 and is scheduled for completion on October 2014. The contract contains a penalty clause to the effect that the other party was to deduct P17,500 from the contract price each week of delay. Completion was delayed for three weeks. Below are the data pertaining to the construction period. In 2013, there was an increase in the contract price in the amount of P200,000 per cost escalation clause. Kim Corp. uses percentage of completion method. 2012 2013 2014 Costs incurred P 525,000 P 1,932,000 P 325,500 Estimated costs to complete 2,100,000 273,000 Billings to customers 420,000 4,567,500 1,260,000 17. How much is the excess of construction in progress over progress billings or progress billings over construction in progress in 2012? (current asset or current liability) a. P 840,000 current asset c. P 800,000 current asset b. P 840,000 current liability

d. P 630,000 current asset

18. How much is the excess of construction in progress over progress billings or progress billings over construction in progress in 2013? (current asset or current liability) a. P 682,500 current asset c. P 262,500 current liability b. P 635,250 current asset d. P 635,250 current liability Use the following information for the next two items On January 1, 2014, Lyca Company, a real estate company entered into a contract to construct a building

on a piece of land it has acquired and, when construction is complete, to deliver the property to the customer. The following information pertains to the contract: Total cost of land – P2M; estimated total cost of construction – P10M; estimated total cost of contract – P12M; agreed purchase price is P15M. In 2014, the total of construction cost incurred and fair value of land is P6M. By that time, the company estimates a reasonable profit of P1M in the sale of its land. Records also disclose a Progress Billing in the amount of P2.2M. The contract is considered a multiple element contract.

d. 900,000

22. On January 1, 2012, Mr. DJ entered into a franchise agreement with GB to market their products. The agreement provides for an initial fee of P12.5m payable as follows: P3,500,000 to be paid upon signing of the contract and the balance in five equal annual payments every end of the year starting December 31, 2012. Mr. DJ signs a non-interest-bearing note for the balance. His credit rating indicates that he can borrow money at 15% interest for a loan of this type. The present value of an annuity of P1 at 15% for 5 periods is 3.352. The agreement further provides that the franchisee must pay a continuing franchise fee equal to 3% of the monthly gross sales. On August 31, the franchisor completed the initial services required in the contract at a cost of P4,290,120 and incurred indirect costs of P175,000. The franchise outlet commenced business operations on November 30, 2012. The gross sales reported to the franchisor were P1,800,000 for December, 2012. The first installment payment was made in due date, but further collection of the balance was not reasonably assured. Calculate the net income for 2012 that the franchisor will report in its income statement. a. P 3,201,268 b. P 2,417,268 c. P 3,072,268 d. P 3,126,268 23. Each of Jury Co.’s 21 new franchisees contracted to pay an initial franchise fee of P30,000. By December 31, 2013, each franchisee had paid a non-refundable P10,000 fee and signed a note to pay P10,000 principal plus the market rate of interest on December 31, 2014, and December 31, 2015. Experience indicates that one franchisee will default on the additional payments. Services for the initial fee will be performed in 2014. What amount of net unearned franchise fees would Jury report at December 31, 2013?

(under US GAAP) a. P400,000

b. P600,000

c. P610,000

d. P630,000

24. On December 31, 2013, Julrecha Inc. signed an agreement authorizing Ruel Company to operate as a franchisee for an initial franchisee fee of P 50,000. Of this amount, P 20,000 was received upon signing of the agreement and the balance is due in three annual payments of P 10,000 each beginning December 2014. The agreement provides that the down payment (representing a fair measure of the services already performed) is not refundable and substantial services are required of Julrecha. Ruel Company’s credit rating is such that collection of the note is reasonably assured. The present value at December 31, 2013 of the three annual payments discounted at 14% (the implicit rate for a loan of this type) is P 23,220. On December 31, 2013, Ruel Company should record unearned franchise fees of: A. P 50,000 B. P 30,000 C. P 43,220 D. P 23,220

Net income of the agency for the two months ended November 30, 2013 is a. P 17,431 b. P 28,366 c. P 29,875 27.

A home office ships inventory to its branch at a mark-up of 125% above cost. The required balance of the allowance for overvaluation account is P 1,425,000. During the year, the home office sent merchandise to the branch costing P 9,000,000. At the start of the year, the branch’s Statement of Financial Position shows P1,800,000 of inventory on hand that was acquired from the home office. By what amount will the Allowance for Unrealized Gross Margin in Branch Inventory account be debited at the end of the year? a. P10,825,000 b. P2,610,000 c. P1,185,000 d. P12,250,000

28.

Partial list of accounts from the trial balances of the John Rey Corporation, Branch A and Branch B at December 31, 2013 are as follows:

25. On January 1, 2014, Hope Company granted franchise right to Love, Inc. The franchise agreement contains the following:  The initial franchise fee is P400,000 payable as follows: 30% cash down payment upon signing of the contract and the balance is payable as follows: 30% at the end of year 1; 25% each at the end of year 2 and 3 and 20% at the end of year 4.  In addition to the initial franchise fee, a separate fee of P100,000 shall be provided for the supply of equipment. The separate fee is payable upon delivery of equipment. Love, Inc. commenced operations on April 1, 2014. The prevailing rate of interest is 11%. Equipment with the cost of P100,000 and fair value of P120,000 was delivered on June 1, 2014. For the year ended December 31, 2014, Hope Company will report unearned franchise fee in the amount of a. P20,000 b. P340,562 c. P120,000 d. P-026. On October 1, 2013, the Greenbelt Main Office established a sales agency in Ortigas.  The main office sent samples of its merchandise amounting to P8,400 and working fund amounting to P72,000 to be maintained on the imprest basis. The samples sent were intended to last until June 1, 2014.  During the first two months of operations, the agency transmitted to the home office sale of goods costing P291,600, but the home office were not able to fill-up 25% of the said transmitted sales order.  Collections from customers amounted to P73,941, net of 2% sales discount.  Payments made by the agency during October and November were as follows: annual rent of P57,600, advertising expense worth P5,600 and utilities amounting to P7,200.  It purchased an equipment worth P9,000 which will be depreciated at 20% per annum.  The gross profit on sales agency order is 20% of sales

d. P 26,866

Inventory, Jan 2013 Branch A Branch B Purchases Expenses Shipments from home office Home office Sales Shipments to Branch A Shipments to Branch B Loadings in Branch Inventory – Jan 1

Home Office 34,000 100,000 81,000 500,000 120,000 500,000 73,700 46,200 1,300

Branch A 5,500 35,000 68,200 94,000 150,000

Branch B 8,800 38,000 41,800 75,000 120,000

Additional information: Shipments to the branches are made at billed prices. Inventory on hand on December 31, 2013 – Home office – P 31,000; Branch A – P 7,260; Branch B – P 8,250. The merchandise inventory on the combined balance sheet as of December 31, 2013. A. P 68,400 B. P 65,000 C. P 46,500 D. P 45,100 Use the following information for the next two items The income statement submitted by the Sweet November Branch to the Home Office for the month of December 2014 follows:

Sales Less: Cost of Sales Inventory, December 1, 2014 Shipments from Home Office Purchases locally by branch Cost of Goods Available for Sale Inventory, December 31, 2014 Gross Margin Operating Expenses Net Income for the Month The branch inventories consisted of: Merchandise from home office Local purchases Total

P600,000 P 80,000 350,000 30,000 P460,000 100,000

12/01/14 P 70,000 10,000 P 80,000

32.

Marko Clothing Co. operates branch in BGC. At the close of the business on December 31, 2013, the capital account in the books of BGC Branch showed a normal balance of P2,784,300. The inter-office accounts were in agreement at the beginning of the year. For purposes of reconciling the inter-office accounts, the following facts were ascertained: a.

360,000 P240,000 180,000 P 60,000

12/31/14 P 84,000 16,000 P100,000

b.

c. d.

After affecting necessary adjustments, the home office ascertained the true net income of the branch to be P156,000. e. 29. What percentage mark up on cost did the home office use to bill the branch for merchandise shipped to it? a. 40% b. 26 2/3% c. 36% d. 20%

f. g.

30. What is the balance of the Unrealized Profit in Branch Inventory account at December 31, 2014? a. P24,000 b. P33,600 c. P20,000 d. P14,000

h.

31. Judel Co. has a branch in Iloilo. The branch acquires its merchandise from outside sources and from the home office (for which it is billed at 120% of cost). Below are excerpts from the records of the home office and the branch: Home Office: Allowance for overvaluation of branch merchandise P 370,000 Shipments to branch 850,000 Iloilo Branch: Beginning inventory P1,440,000 Shipments from home office 1,020,000 Purchases 410,000 Month- end Branch Inventory: From home office, at billed price P1,170,000 From outside sources, at cost 290,000 The amount of overvaluation that was not realized as a result of branch sales during the month was: c. P175,000 b. P370,000 c. P200,000 d. P195,000

i. j.

On December 27, 2013, the BGC branch released a check for P13,500 to Fabric Warehouse Trading. The branch inadvertently recorded the transaction as a remittance to Marko Clothing Co and sent a copy of the memo notifying the home office. Marko recorded this upon receiving the said memo on January 2, 2014. Marko Clothing Co allocated promotions and advertising expense totaling P18,000 to BGC branch. The home office erroneously charged the said expenses to Eastwood branch. BGC branch was not yet informed of the said allocation as of year-end. A memo from Marko Clothing Co for P20,700 regarding transfer of funds was recorded twice by the BGC branch by debiting its inter-office account. Coat and Ties, a BGC customer remitted P15,000 to Marko Clothing Co. The home office recorded this as cash collection form own receivable on December 28, 2013. Upon notification the following day, the branch debited the amount to Receivable from Home Office and credited its reciprocal account. A P105,000 shipment, charged by home office to BGC branch, was actually sent to and retained by Rockwell branch. The home office failed to take up a P12,000 credit memo from the branch. BGC branch store insurance premium of P9,600 were paid by Marko. The home office debited insurance expense and credited cash on its books. The branch recorded the amount of P96,000 as a liability Merchandise costing P39,000 was sent to the BGC branch by Marko on December 12, 2013. The branch recognized a liability by crediting accounts payable upon receipt of the inventory. Freight charge of P12,600 on merchandise shipped to BGC branch was paid by Marko and was recorded in the branch books as P1,260. Elite Designs, a BGC customer remitted P63,000 to Marko. The home office recorded this cash collection on December 24, 2013. Upon receiving a notification, the BGC branch recorded the transaction twice on December 28, 2013.

The unadjusted balance of Investment in Branch account as of December 31, 2013 is a. P3,075,240 b. P3,051,240 c. P2,970,840 d. P2,962,140 Use the following information for the next two items Janjoy Corp in bankruptcy and is being liquidated by a court-appointed trustee. The financial report that follows was prepared by the trustee just before the final cash distribution:

Cash

purchases J’s net assets for P 3,068,000, and incurred direct cost in combining the two companies of P 350,000. How much goodwill is to be recognized on the books of the surviving company as a result of the business combination? A. P 338,000 B. P 350,000 C. P 312,000 D. P 0

P1,000,000

Claims: Mortgage payable secured by property that was sold for P500,000 Unsecured accounts payable 500,000 Administrative expenses payable Salaries payable Interest payable related to mortgage payable 33.What was the total Free Assets? a. P1,000,000 b. P500,000

c. P400,000

34.What was the percentage of recovery for unsecured creditors? a. 100% b. 44.44% c. 57.14%

P800,000 38. 80,000 20,000 100,000

d. P100,000

d. 66.67%

The consideration transferred in the business combination was P55,000. Transaction costs amount ot P1,000. The fair value of the acquiree’s net assets at the acquisition date was P63,000. The acquirer has not yet decided whether to measure the 20% NCI in the acquire at the NCI’s proportionate share of the fair value of the acquiree’s net assets, which is P12,600, or at the NCI’s fair value, which is P13,000. Does the choice between the options for NCI impact the goodwill at the acquisition date? a. No. the choice for NCI does not impact goodwill at the acquisition date. b. Yes, it does. If the acquirer values the NCI at its proportionate share of the fair value of the acquired business, the goodwill amounts to P4,600; while if NCI is valued at fair value, the goodwill is P5,000. c. Yes, it does. If the acquirer values the NCI at its proportionate share of the fair value of the acquired business, the goodwill amounts to P5,600; while if NCI is valued at fair value, the goodwill is P6,000. d. None of the above.

Use the following information for the next two items Minor Corporation reports net assets of P300,000 at book value. These assets have an estimated market value of P350,000. If Major Corporation buys 80 percent ownership of Minor for P275,000, 35. Goodwill will be reported in the consolidated balance sheet in the amount of: a. P0 b. P25,000 c. P35,000 36. The non-controlling interest will be reported in the amount of: a. P55,000 b. P60,000 c. P70,000 37.

39. Binfathi Group acquired an 80% interest in Entity B. The consideration for the 80% interest in Entity B was 36,000 in shares in Binfathi and 12,000 cash. To issue the shares, Binfathi incurred a cost of 2,000 and incurred costs of 1,400 associated with legal fees and the valuation of Entity B. the fair value of net assets of Entity B amounted to 64,000. How should Binfathi account for this acquisition?

d. P40,000 d. P71,250

J Inc. was merged with S Inc. in a combination properly accounted for as purchase of interests. Their condensed balance sheets before the combination show: S Inc. J Inc. Current assets P 2,288,000 P 1,627,600 Plant and equipment, net 4,654,000 1,040,000 Patents 260,000 Total assets P 6,942,000 P 2,927,600 Liabilities P 2,704,000 P 171,600 Capital stock (par P100) 2,600,000 1,300,000 Additional paid-in capital 390,000 390,000 Retained earnings 1,248,000 1,066,000 Total equities P 6,942,000 P 2,927,600 Per independent appraiser’s report, J’s assets have fair market value of P 1,653,600 for current assets, P 1,248,000 for plant and equipment and P 338,000 for patents. J’s liabilities are properly valued. S

A. Binfathi shall book a gain (negative goodwill) through profit or loss of 3,200 related to the acquisition, recognize expenses of 1,400 and deduct from equity 2,000 relative to cost of issuing the shares. B. Bithfathi shall book goodwill as an asset of 200. C. Binfathi shall book gain (negative goodwill through profit or loss of 1,200 and recognize the costs of legal fees of 1,400 as expenses in profit or loss. D. Binfathi shall book a gain(negative goodwill) through a profit or loss of 3,200 and recognize expenses of 3,400 relative to the costs of issuing shares, paying legal fees and performing the valuation of the Entity B, in profit or loss. 40. Entity A is a first-time adopter with the transition date 1 January 2011. Entity A acquired Entity C in 2007. Entity A applies the business recognition exception to the acquisition of Entity C. Entity C owns a registered internally generated trademark. The technical expertise to manufacture the trademarked product is documented but unpatented. Therefore, Entity C has not recognized the trademark in the consolidated financial statements of Entity A immediately after the acquisition. What does Entity need to do with respect to thetrademark at transition of IFRSs?

A. As the internally-generated trademark meets the recognition criteria to qualify as an intangible asset if Entity C had already applied IFRS in its separate financial statement, the trademark will be capitalized at the date of transition to IFRS. B. Even if the internally-generated trademark meets the recognition criteria to qualidy as an intangible asset if entity C had already applied IFRS in its separate fianancial statements, the trademark will remain subsumed in goodwill. C. As the internally-generated trademark does not meet the recognition criteria to qualify as an intangible asset if Entity C had already applied IFRS in its separate financial statement, an amount corresponding to the original fair value of the trademark in 2007 shall be reclassified from goodwill to retained earnings. D. As the internally-generated trademark does not meet the recognition criteria to qualify as an intangible asset if Entity C had already applied IFRS in its separate financial statement, the trademark will remain subsumed in goodwill.

for using the equity method. The aggregate carrying amount of assets and liabilities of the joint venture is 500 million; the impairment test made at the transition date valued its investment at 450 million. How should the entity account for its investment in the joint venture as at the date of transition? A. The entity should recognize its investment at 450 million and recognize an impairment loss of 50 million in other comprehensive income. B. The entity should account its investment at the net carrying amount of the assets under previous GAAP (that is 500 million) without recognizing any impairment loss. C. The entity should recognize its investment at 450 million and recognize an impairment loss of 50 million in profit or loss. D. The entity should account for its investment at 450 and recognize an impairment of 50 million in retained earnings. 44. A taxpayer from the city of Las Pinas has the following information relating with his real property: FMV of Land, P500,000; FMV of Res. House, P1,500,000. The one percent (1%) real property tax and 1% special education tax are both based on the assessed value of the real property. The assessed value is 20% of the fair market value. Garbage fees amounted to P500. How much is the total amount collected from the taxpayer?

41. Green Group holds a 60% interest in Blue Group at 31 December 20x1. The inventory held by Green Group was purchased from Blue Group for 50,000. It was purchased at cost plus 25%. The Green Group’s consolidated statement of financial position has been drafted without any adjustment in relation to the inventory. What figure, in respect of inventory, should be included in the Green Group’s consolidated financial statements? a. A. 50,000 B. 44,000 C. 40,000 D. None of the above 42. Redgrapes has a 70% ownership interest in EHC, giving it control. On January 1, 2013 Redgrapes acquired additional 15% interest. At that date, equity of EHC is as follows: share capital- 1,000; other comprehensive income-500; accumulated profits-800. On January 1, 2014, the non-controlling interest in EHC had a value of 610. Redgrapes paid 400 for additional 15% interest in EHC. Which of the following statements is correct? A. Redgrapes recognizes a decrease in non-controlling interest of 400 and an increase in the parent’s equity attributable to EHC of 400. B. Redgrapes recognizes a decrease in non-controlling interest of 305 and an increase in the parent’s equity attributable to EHC of 305. The remaining 95 is recognized as a reduction of equity. C. Redgrapes recognizes a decrease in non-controlling interest of 305 and an increase in the parent’s equity attributable to EHC of 305. The remaining 95 is recognized as a goodwill. D. Redgrapes recognizes a decrease in non-controlling interest of 305 and an increase in the parent’s equity attributable to EHC of 305. The remaining 95 is recognized as a reduction of parent’s equity. 43. Entity A is a first-time adopter. Under previous GAAP, Entity A accounted for its interest in a joint venture using proportionate consolidation. In accordance with IFRS, joint venture shall be accounted

P 40,500

b. P 8,500

c.

P 400,500

d. P 4,500

45. A private, not-for-profit geographic society received cash contributions which were restricted by the donors for the acquisition of fixed assets. In which section of the statement of cash flows would these cash contributions be reported? A. Financing activities B. Investing activities C. Operating activities D. Capital and related financing activities 46. The governing board of Samaritan Hospital, which is operated by a religious organization designated P 500,000 of cash for future expansion of the hospital. On the hospital's balance sheet, the cash designated for future plant expansion would be disclosed in which of the following classes of net assets? A. Temporarily restricted net assets B. Unrestricted net assets C. Plant replacement and expansion. D. Board designated net assets

 47. The following expenditures were among those incurred by Cheviot Public University during 2014: Administrative data processing P 50,000 Scholarships and fellowships 100,000 Operation and maintenance of physical plant 200,000 The amount to be included in the functional classification “Institutional Support” expenditures account is a. P150,000 b. P50,000 c. P350,000 d. P300,000 48. A government agency ordered an office equipment for P1,000,000 on August 20, 2013. The equipment was delivered to the government agency on September 11, 2013. The asset has an estimated useful life of 10 years. The book value of the equipment on December 31, 2014 is: a. P 787,500 b. P 977,500 c. P 887,500 d. P 857,500 49. A municipality of the province of Cavite received the following operating and service income for the month of January 2014: Garbage fees P 300,000 Markets 200,000 Hospitals 100,000 Cemeteries 50,000 Slaughterhouse 50,000 All receipts and collections of operating and service income were deposited. The entry to record the deposit of collections from operating and service income includes a: a. debit to Cash in Vault, P700,000 b. debit to Cash in Bank, Local Currency – Current Account, P700,000 c. Credit to Cash in Vault, P700,000 d. Both b and c

    

50. Arizona Company has produced two joint products A and B from a single input. Further processing cost of product A results in a by-product X. A summary of production for 2012 follows: Arizona Company input 600,000 tons of raw material into the Processing Department. Total joint processing cost was P520,000. During the processing, 90,000 tons of material were lost. After joint processing, 60% of the joint process output was transferred to Division 1 to produce product A and 40% was transferred to Division 2 to produce product B. Further processing in Division 1 resulted in 70% of the input in becoming product A and 30% of the input in becoming the by-product X. The separate processing cost for product A in Division 1 P648,884,000. Total packaging cost for product A was P321,300,000. After Division 1 processing and packaging cost, product A is salable at P6,000 per ton. Each ton of by-product X can be sold for P120 after selling cost of P 5,000,000. Arizona Company accounts for the by-product using the net realizable method and showing the NRV as deduction in the cost of goods sold of the main product.



In Division 2, product B was further processed at a separate cost of P 408,000,000. A completed ton of product B sells for P3,700. Selling cost for both product A and B is P 200 per ton.

The share of product A in the joint cost is a. P 207,495 b. P 244,790

c.

P 244,400

d. P 269,390