SUCCEED Review Center: Practical

Accounting II Preweek

October 6,
2015

SUCCEED REVIEW CENTER

Balanga, Bataan
Preweek
PRACTICAL ACCOUNTING II
Cost Accounting
1. Justine Company budgeted total variable overhead costs at 180,000 for the current period. In
addition, they budgeted costs for factory rent at 215,000, costs for depreciation on office equipment
at 12,000, costs for office rent at 92,000, and costs for depreciation of factory equipment at
38,000. All these costs were based on the estimated machine hours of 80,000. Actual factory
overhead for the period amounted to 387,875 and machine hours used totaled 74,000 hours. What
was the over or underapplied factory overhead for the period?
a. P12,650 overapplied
c. 108,850 overapplied
b. 12,650 underapplied
d. 108,850 underapplied
The next two questions are based on the following data:
Papasa Sana Ako Companys Job 75 for the manufacture of 2,200 units was completed during
September at the unit costs presented as follows:
Direct Materials
20
Direct Labor
18
Factory overhead (includes an allowance of 1 spoiled rework)
18
Final inspection of Job 75 disclosed 200 spoiled units, which were sold for 6,000.
2.

What would be the unit cost of good units if the spoilage loss is charged to all production during
September?
a. 56.00
b. 57.50
c. 57.00
d. 58.60

3.

What would be the unit cost of good units if the spoilage is attributable to exacting specifications of
Job 75?
a. 55.00
b. 56.00
c. 57.57
d. 57.50

1. Bluebird Enterprises has two production departments (P1 and P2) and two service departments (S1
and S2). A breakdown of current period costs and service usage for each department is as follows:
Costs
S1 services
S2 services

P1
300,000
50%
40%

P2
400,000
30%
40%

S1
240,000
-020%

S2
200,0
00 20
%
-0-

If Bluebird uses the reciprocal method for allocating service costs, what are the total service costs
allocated to the two production departments (P1 and P2) (rounding all numbers to the nearest
dollar)?
a. 25,000 to P1 and 19,000 to P2
c. 24,667 to P1 and 19,333 to P2
b. 24,400 to P1 and 20,600 to P2
d. 24,917 to P1 and 19,083 to P2
4.

Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the
mining industry. The following information pertains to operations for the month of May:
Units
Beginning work-in-process inventory, May 1
16,000
Started in production during May
100,000
Completed production during May
92,000
Ending work-in-process inventory, May 31
24,000
The beginning inventory was 60% complete for materials and 20% complete for conversion costs.
The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs
pertaining to the month of May are as follows:

Beginning inventory costs are materials, 54,560; direct labor, 20,320; and factory overhead,
15,240.

Costs incurred during May are materials used, 468,000; direct labor, 182,880; and factory
overhead, 391,160.
Using the first-in, first-out (FIFO) method, the equivalent units of production (EUP) for materials
are a. 97,600 units.
c. 104,000 units.
b. 107,200 units.
d. 108,000 units.

5.

Using the FIFO method, the equivalent units of production for conversion costs are
a. 85,600 units.
c. 88,800 units.
b. 95,200 units.
d. 98,400 units.

6.

Using the FIFO method, the equivalent unit cost of materials for May is

Page 1 of
12

Preweek Lecture by Mark Alyson B.

Ngina, CMA, CPA

SUCCEED Review Center: Practical

a. 4.12 II Preweek b. 4.50
Accounting
7.
8.

c. 4.60

Using the FIFO method, the equivalent unit conversion cost for May is
a. 5.65
b. 5.83
c. 6.00

October 6,

d. 4.802015
d. 6.20

Using the FIFO method, the total cost of units in the ending work-in-process inventory at May 31 is
a. 153,168
b. 154,800
c. 155,328
d. 156,960

Page 2 of
12

Preweek Lecture by Mark Alyson B.

Ngina, CMA, CPA

9.

Using the weighted-average method, the equivalent unit cost of materials for May is
a. 4.12
b. 4.50
c. 4.60
d. 5.02

10. Using the weighted-average method, the equivalent unit conversion cost for May is
a. 5.65
b. 5.83
c. 6.00
d. 6.20
11. Using the weighted-average method, the total cost of the units in the ending work-in-process
inventory at May 31 is
a. 99,360
b. 153,168
c. 154,800
d. 156,960
12. A manufacturing firm has a normal spoilage rate of 4% of the units inspected; anything over this rate
is considered abnormal spoilage. Final inspection occurs at the end of the manufacturing process. The
firm employs the first-in, first-out (FIFO) method of inventory flow. The processing for the current
month was as follows:
Beginning work-in-process inventory
Units entered into production
Units completed and passing inspection
Units failing final inspection
Ending work-in-process inventory

24,600 units
470,400 units
(460,800) units
(22,600) units
11,600 units

The equivalent units assigned to normal and abnormal spoilage for the current month would be
Normal Spoilage
Abnormal
Spoilage
a.
904 units
21,696 units
b.
18,432 units
4,168 units
c.
18,816 units
3,784 units
d.
19,336 units
3,264 units
13. New-Rage Cosmetics has used a traditional cost accounting system to apply quality control costs
uniformly to all products at a rate of 14.5 percent of direct labor cost. Monthly direct labor cost for
Satin Sheen makeup is 27,500. In an attempt to more equitably distribute quality control costs,
New-Rage is considering activity-based costing. The monthly data shown in the chart below have
been gathered for Satin Sheen makeup.
Activity
Incoming material inspection
In-process inspection
Product certification

e.

Cost Driver

Cost Rates

Quantity for Satin

Sheen

Type of material
Number of units
Per order

11.50 per type

0.14 per unit
77 per order

12 types
17,500 units
25 orders

The monthly quality control cost assigned to Satin Sheen makeup using activity-based costing is
c. 8,500.50.
d. 525.50 higher than the cost using the traditional system.
525.50 lower than the cost using the traditional system. f.
3,987.50.

14. Information on Divines direct material costs for May is as follows:

Actual quantity of direct materials purchased and used 30,000 lbs. Actual
cost of direct materials
Unfavorable direct materials usage variance
Standard quantity of direct materials allowed for May production

84,000
3,000
29,000 lbs

For the month of May, Divines direct materials price variance was:
a. 2,800 favorable
c. 6,000 unfavorable
b. 2,800 unfavorable
d. 6,000 favorable
15. The following direct labor information pertains to the manufacture of Part BAE:
Number of hours required to make a part
2.5 DLH
Number of Direct workers
75
Number of total productive hours per week
3,000
Weekly wages per worker
1,000
Laborers fringe benefits treated as direct labor costs 25% of wages
What is the standard direct labor cost per unit of Part BAE?
a. 62.500
b. 41.670
c. 78.125

d. 84.125

16. Burma, Inc. analyzes manufacturing overhead in the production of its only one product, Odds. The
following set of information applies to the month of April, 2015:
Budgeted
Actual
Units produced
40,000
38,0
Variable manufacturing overhead
4/DLH
00
16,4
00

Fixed manufacturing overhead

Direct labor hours

20/DLH
6 minutes/unit

88,0
00
4,200
hours
What are the fixed overhead spending and volume variances for the month of April?
a.
b.
c.
d.
Spending
4,000 F
8,000 U
4,000 F
8,000
U8,000
Volume
4,000 F
4,000 U
8,000 F

17. Using the information in the previous number, what are the variable overhead spending and efficiency
variances for the month of April?
a.
b.
c.
d.
Spending
400F
400U
1,200F
1,20
0U
Efficiency
1,600U
1,600U
800U

800F
18. The Batista Manufacturing Company uses Materials and in Process Inventory (MIP) account. At the
end of each month all inventories are counted, their conversion costs components are estimated, and
inventory account balances are adjusted accordingly. Direct materials used are backflushed from MIP
account to Finished Goods account. The following data pertains to September operations:
Beginning balance of MIP account

116,100
Actual conversion costs incurred
14,400
Materials purchased
2,040,0
00
Conversion costs allocated
15,900
Ending balance of MIP Account
125,7
00
What is the amount of direct materials and conversion costs to be backflushed to finished
goods? a. 2,030,400 and 15,900, respectively.
b. 2,040,000 and 14,400, respectively.
c. 2,030,400 and 14,400, respectively.
d. 2,040,000 and 15,900, respectively.
19. Versatile Company produces four solvents from the same process: C, D, E, and G. Joint product costs
are 900,000. (Round all answers to the nearest hundreds.)

C
D
E
G

Barrels
7,500
10,000
14,000
20,000

Sales price
per barrel
at split-off
10.00
8.00
11.00
15.00

Dispo
sal
percos
barrel
at split-off
6.50
4.00
7.00
9.50

Fi
na
price
l
per barrel
13.50
10.00
15.50
19.50

Further
processing
costs
2.00
2.50
4.00
4.50

If Versatile sells the products after further processing, the following disposal costs will be incurred: C,
2.50; D, 1.00; E, 3.50; G, 6.00.
Using a physical measurement method, what amount of joint processing cost is allocated to Product
D?
a. 174,800
b. 244,700
c. 131,100
d. 349,500
20. Refer to Versatile Company. Using sales value at split-off, what amount of joint processing cost is
allocated to Product C?
a. 443,300
b. 227,600
c. 110,800
d. 118,200
21. Refer to Versatile Company. Using net realizable value at split-off, what amount of joint processing
cost is allocated to Product E?
a. 101,700
b. 155,000
c. 217,000
d. 426,300
Partnership
22. On March 1, 2015, Jose and Kiko decide to combine their business to form a partnership. Their
balance sheets prior to any formation showed the following figures:
Cash
Accounts Receivable
Inventories
Furniture and Fixtures, net
Office Equipment, net
Prepaid Expenses
Total
Accounts Payable
Capital
Total

Jos
e

18,00
37,00
0
60,00
0
60,00
0
23,00
0
210,750
91,50
0

Kik
o
7,50
27,00
0
39,00
0
18,00
05,50
0

103,000
36,00
0

They agreed with the following terms and conditions:

Two percent uncollectibility charges.

Revaluation of furniture and fixtures: Jose, value set at 62,000 and Kiko, correction of
depreciation at 500.

Acceptance of 2,000 as rent expense for Jose and claims voucher for salary amounting to
1,600 for Kiko.

Value the inventories at market price for Jose of 59,000 and Kiko of 42,000.
The net (debit) credit adjustment to partners capital accounts are:

a.
b.
c.
d.

Jose
(5,740)
3,740
1,740
(1,740)

Ki
ko
(5,64
0)5,6
40
(36
0)3
60

23. Total liabilities after formation

a. 129,100
b. 127,500

c. 131,100

d. 127,900

24. Total assets after formation

a. 315,970
b. 313,750

c. 321,530

d. 305,970

25. Mr. PP and Ms. KK are partners in a construction business located in Tabuk City. The profit and loss
agreement contains the following provisions:
1) Salaries of 35,000 and 40,000 for PP and KK, respectively.
2) A bonus to PP equal to 10% of net income after the bonus.
3) Interest on weighted average capital at the rate of 8%. Annual drawings in excess of 20,000 are
considered to be a reduction of capital for purposes of this calculation.
4) Profit and loss percentage of 40% and 60% for PP and KK, respectively.
Capital and drawing activity of the partners for the year 2014 are as follows:
PP Capital
120,000
20,000

Beginning balance
April 1
June 1
September 1
November 1
Ending balance

30,000
170,000

PP Drawing
0

KK Capital
60,000

15,000
15,000
30,000

40,000
100,000

KK Drawing

0
20,00
0

20,00
0
Assuming net income for 2015 of 132,000 before any allocations, how much profit should be
allocated to Mr. PP?
a. 69,660
b. 69,747
c. 72,774
d. 69,774
26. The statement of financial position as of September 30, 2015, for the partnership of D, E and F shows
the following information:
Assets

360,000

D, loan
D, capital
E, capital
F, capital
Total

P20,0
83,0
00
00
77,0
00
.
180,00
0
Total
360,000
P360,00
It was agreed among the partners that D retires from the partnership, and it was also further agreed
that the assets should be adjusted to their fair value of 345,000 as of September 30, 2015. Net loss
prior to the retirement of D amount to 70,000. The partnership is to pay D 62,000 cash for Ds
partnership interest, which would include the payment of his loan. No goodwill is to be recorded. D, E
and F share profit 40%, 15% and 45% respectively. After Ds retirement, how much would Fs capital
balance be?
a. 66,000
b. 147,000
c. 136,500
d. 185,250
27. On June 30, 2015, the Dwayne, Wade, and Mark partnership had the following fiscal year-end
statement of financial position:
Cash
Accounts receivable
Inventory
Plant assets-net
Loan to Dwayne
Total assets

40,000
60,000
140,000
120,000
60,000
420,000

Accounts payable
Loan from Wade
Dwayne, capital(20%)
Wade, capital(30%)
Mark, capital(50%)
Total liab./equity

70,0
50,0
00
00
140,0
00
100,0
00

60,000
The percentages shown are the residual profit and loss sharing ratios.
The partners dissolved the
partnership on July 1, 2015, and began the liquidation process. During July the following events
occurred:

Receivables of 30,000 were collected.

The inventory was sold for 40,000.

All available cash was distributed on July 31, except for 20,000 that was set aside for contingent
expenses.
The book value of the partnership equity (i.e., total equity of the partners) on June 30, 2015 is
a. 600,000.
b. 290,000.
c. 300,000.
d. 420,000.
28. The cash available for distribution to the partners on July 31, 2014 is
a. 20,000.
b. 40,000.
c. 70,000.

d. 110,000.

29. How much cash would Wade receive from the cash that is available for distribution on July 31?
a. 0.
b. 6,000.
c. 10,000.
d. 20,000.
Decentralized Operation: Home Office, Branch and Agency
30. Gang Company had an agency in La Trinidad City which was established in July 2015. Upon
establishment, the home office sent samples costing 15,000 and 5,000 working fund to be
maintained on an imprest basis. For that month, the sales agency forwarded sales orders to the home
office (all of which were filed by the home office) with a billed price of 100,000. 70,000 of the sales

was already collected. Also during that month the agency paid expenses of 8,000 but only 5,000
was reimbursed by the home office.
On July 31, 2015, the samples were already valued at 8,000. Gross profit of the company is
estimated at 20% based on sales.

What is the net income of the sales agency for the month ended July 31, 2015?
a. 12,000
b. 5,000
c. 8,000
d. 6,000
The following two questions are based on the following information:
31. The following information were taken from the books of Clark Company and its branch. The balances
at December 31, 2015 follow:
Home Office
Sales
Expenses
Shipment to branch
Allowance for overvaluation

Branch
400,000
100,000

200,000
57,500

The branch acquired all of its merchandise from the home office. The home office ships the
merchandise at 125% of cost. The ending inventory of the branch is 40,000 at billed price.
The beginning inventory of the branch at billed price is
a. 30,000
b. 37,500
c. 22,500
32. The true net income of the branch is
a. 54,625
b. 102,000

c. 112,000

d. 32,500
d. not given

The following two questions are based on the following information:

33. The following were found in your examination of the inter-branch accounts between the Home Office
and Bakun Branch:
a. Transfer of fixed assets from home office in the amount of 53,960 was not recorded by the
Bakun Branch.
b. 10,000 covering marketing expenses of the Buguias Branch was charged by the Home Office to
the Bakun Branch
c. Bakun Branch recorded a debit note on inventory transfers from Home Office of 75,000 twice.
d. Home Office recorded a cash transfer of 65,700 from the Bakun Branch as coming from the
Davao Branch.
e. Bakun Branch reversed a previous debit memo from Atok Branch amounting to 10,500, which
the home office decided that it is appropriately Buguias Branchs cost.
f. Bakun Branch recorded a debit memo from Home Office of 4,650 as 4,560.
Before the above discrepancies were given effect, the balance in the Home Office books of the Bakun
Branch Current Account was 165,920. The unadjusted balance in Bakun Branchs books of its Home
Office Current Account must be
a. 92,336
b. 104,500
c. 98,230
d. 111,170
34. The adjusted balance of the reciprocal account is
a. 84,807
b. 90,220

c. 99,200

d. 109,120

Installment Sales Accounting

The following two questions are based on the following information:
35. Vhong Corp. reported the following accounts for the year just ended:
Collection from installment sales of 2015
Collections from installment sales of 2014
Deferred gross profit, 2014
Deferred gross profit, 2015
Regular sales
Cost of regular sales

210,00
560,00
0
0
350,00
0
840,00
1,400,000
1,050,000

The gross profit rate on installment sales was 10% higher than regular sales. For 2015, the gross
profit on installment sales was 3% lower than in 2014.
In computing the realized gross profit from collections of 2014 installment sales, the applicable gross
profit rate was
a. 28%
b. 38%
c. 35%
d. 32%
36. The total realized gross profit in 2015 is
a. 252,700
b. 286,300

c. 602,700

d. 636,300

The following two questions are based on the following information:

37. Sansu Company sold computer equipment by giving a trade discount of 10% to all its customers. On
May 1, 2015, five units of computer with a total list price of 100,000 and total cost of 59,800 were
sold to Mr. Wadwadan, Sansu Company accepted used computer as trade in and granted an
allowance of 10,000, the current market value of the computer is 12,000. The balance was payable
as follows: 20% of the balance paid at the time of sale; the rest is payable in 10 months starting in

June 1, 2015. After 6 months of paying, Mr. Wadwadan defaulted in the payment of December 1,
2015. The five units of computer equipment were repossessed and it would require 2,000
reconditioning cost for each computer before it could be resold for 6,000 each. A 15% gross profit
rate was normal from the sale of used equipment. Operating expenses amounted to 5,380.
What is the realized gross profit for 2015?
a. 23,240
b. 23,340
38. What is the net income for 2015?
a. 16,720
b. 18,720

c. 19,040

d. 19,540

c. 17,860

d. 26,720

39. On October 1, 2014, Mario Corporation, a real estate developer, sold land to Diego Company for
5,000,000. Diego paid cash of 600,000 and signed a ten-year 4,400,000 note bearing interest at
12%. The carrying amount of the land was 4,000,000 on the date of sale. The note was payable in
forty quarterly principal installments of 110,000 beginning January 2, 2015. Mario appropriately
accounts for the sale under the cost recovery method. On January 2, 2015, Diego paid the first
principal installment of 110,000 and interest of 132,000.
For the year ended December 31, 2015, what total amount of income should Mario recognize from
the land sale and the financing?
a. 309,640
b. 508,200
c. 208,000
d. Nil
Long-Term Construction Contract
40. A construction contractor builds a home under a contract with a fixed price of 1,000,000. The
contractor incurred contract costs of 10,000, 890,000 and 200,000 in 2013, 2014 and 2015
respectively. At the end of 2013 the outcome of the transaction cannot be estimated reliably however
it is probable that the costs incurred in 2013 will be recoverable. At the end of 2014 the contractor
can estimate the outcome of the contract reliably and estimates costs to complete the contract at
200,000. The contract was completed in 2015.
The contractor determines the stage of completion of the construction contract by reference to the
proportion that costs incurred for work performed to date bear to the estimated total costs. In 2014
the contractor must:
a. Recognize contract revenue of 818,182 and contract costs of 900,000.
b. Recognize contract revenue of 808,182 and contract costs of 890,000.
c. Recognize contract revenue of 808,182 and contract costs of 908,182.
d. Recognize contract revenue of 808,182 and contract costs of 900,000.
41. A construction contractor builds a home under a contract with a fixed price of 1,000,000. The
contractor incurred contract costs of 200,000, 400,000 and 100,000 in 2013, 2014 and 2015
respectively. At the end of 2013 the contractor estimated (with sufficient reliability) the future costs
to complete the contract as 400,000. At the end of 2014 the contractor estimated (with sufficient
reliability) the future costs to complete the contract as 150,000. The contract was completed in
2015.
The contractor determines the stage of completion of the construction contract by reference to the
proportion that costs incurred for work performed to date bear to the estimated total costs.
The contractor must recognize contract revenue at:
a. 333,333 in 2013, 466,667 in 2014 and 200,000 in 2015.
b. 1,000,000 in 2013, 0 in both 2014 and 2015.
c. 0 in both 2013 and 2014 and 1,000,000 in 2015.
d. 333,333 in 2013, 333,333 in 2014 and 333,333 in 2015.
42. Using the data in the previous question and assume that contract costs incurred at the end of 2014
included 50,000 prepaid wages. The contractor must recognize contract revenue at:
a. 333,333 in 2013, 466,667 in 2014 and 200,000 in 2015.
b. 333,333 in 2013, 400,000 in 2014 and 266,667 in 2015.
c. 0 in 2013 and 2014 and 1,000,000 in 2015.
d. 333,333 in 2013, 333,333 in 2014 and 333,333 in 2015.
The following three questions are based on the following information:
On July 1, 2014, Pastillas Construction, Inc. contracted to build an office building for Yemma Inc. for
a total contract price of 2,437,500. Data for the construction period are:
2014
2015
201
6
Cost incurred to date
187,500
1,500,000
2,625,00
Estimated costs to complete the project
1,687,500
1,000,000
0
Contract billings to Yemma
375,000
1,375,000
687,50
43. Using the Percentage of Completion method, what is the balance of the Construction in0Progress
account net of billings on December 31, 2015?
a. 287,500 due from
c. 312,500, current asset
b. 287,500 due to
d. 312,500, current liability
44. Using the Zero Profit method, what is the balance of the Construction in Progress account net of
billings on December 31, 2014?
a. 62,500 due from
c. 187,500, current asset
b. 62,500 due to
d. 187,500, current liability
45. Using the percentage of completion method, what is the realized gross profit (loss) in 2016?
a. 125,000
b. 187,500
c. (125,000)
d. (187,500)

201
Contract price

Cost incurred to date

187,50
2,437,500
0
Estimated cost to complete
1,687,500
Estimated gross profit
562,50
Multiply: % of completion
Gross profit to date
56,25
0
Less: Gross profit recognized in previous year
Gross profit this year

1
The whole amount of the loss is recognized immediately, regardless of the

201
201

1,500,00
2,625,00
2,437,500
2,437,500
0
0
1,000,000
(62,500
(187,50
100%
1
(62,500
(187,50
)
0)

(118,750) of completion.
(125,000)
percentage

Franchise Accounting
46. On April 1, 2015, Rhady Rems Enterprises entered into a franchise agreement with San Jose
Manufacturing Company to sell their products. The agreement provides for an initial franchise fee of
4,375,000, payable as follows: Upon signing the contract, 1,225,000 and balance in five equal
payments every December 31, starting December 31, 2015. Rhady Rems signs a 10% interest
bearing note for the balance. The agreement further provides that the franchisee must pay a
continuing franchise fee equal to 5% of its monthly gross sales. On September 30, the franchisor
completed the initial services required in the contract at a cost of 2,756,250 and incurred indirect
costs of 180,000. The business started on October 2, 2015. The gross sales reported by Rhady
Rems are October, 370,000; November, 423,500 and December, 516,500. The first installment
was made on due date. Assuming collection is not reasonably assured, the reported net income will
be:
a. 808,100
b. 886,850
c. 988,100
d. 686,350
The following two questions are based on the following information:
47. On January 1, 2015, DENIECE Co. granted franchise right to CEDRIC, Inc. for a non-refundable initial
franchise fee of 400,000, of which 20% was collected upon signing of the contract and the
remaining 80% is represented by a note receivable in 4 equal annual installments starting December
31, 2015. The prevailing rate of interest on January 1, 2015 is 12%.
All of the initial services and conditions required under the franchise agreement were substantially
performed and satisfied on March 1, 2015.
On July 1, 2015, CEDRIC, Inc. decided not to pursue the franchise business. Accordingly, DENIECE
Co. repossessed the franchise and refunded 50% of collections received. The remaining balance of
the note is forfeited. How much franchise revenue is recognized in 2015?
a. 322,988
b. 162,988
c. 80,000
d. Nil
48. On July 1, 2015, CEDRIC, Inc. decided not to pursue the franchise business. Accordingly, DENIECE
Co. repossessed the franchise. No refund was made of the collections received. The remaining
balance of the note is forfeited. How much franchise revenue is recognized in 2015?
a. 322,988
b. 162,988
c. 80,000
d. Nil
Corporate Liquidation
49. Van Kraft Company recently petitioned for bankruptcy and is now in the process of preparing a
statement of affairs. The carrying values and estimated fair values of the assets of Van Kraft
Company are as follows:
Cash
Accounts Receivable
Inventory
Land
Building (net)
Equipment (net)

Carrying Value

200,000
450,000
600,000
750,000
1,800,000
1,700,000

Debts of Van Kraft are as follows:

Accounts payable
Wages Payable (all have priority)
Taxes Payable
Notes Payable (secured by receivables and inventory)
Interest on Notes Payable
Bonds Payable (secured by land and building)
Interest on Bonds Payable

Fair Value
200,00
300,00
0
350,00
0
700,00
0
1,000,00
0 800,00
0

600,00
0
100,00
0
100,00
0
1,200,00
0 60,00
0
1,500,00
0 70,00
0
Based on the preceding information, what is the total amount of unsecured claims?
a. 1,130,000
b. 1,260,000
c. 930,000
d. 1,210,000

50. Based on the preceding information, what estimated amount will be available for general unsecured
creditors upon liquidation?
a. 280,000
b. 930,000
c. 1,130,000
d. 1,210,000
51. Based on the preceding information, what is the estimated dividend percentage?
a. 23 percent
b. 93 percent
c. 77 percent
d. 68 percent
Joint Arrangements and Investment in Associate
52. The Blooming Company and The Crush Ko Tuloy Company own 60% and 40% respectively of the
equity of The Mabait Company. Blooming and Crush Ko Tuloy have signed an agreement whereby all
the strategic decisions in respect of Mabait are to be taken with the agreement of them both. Are the
following statements true or false, according to PAS27 Separate financial statements, PFRS 10
Consolidated financial statements, PFRS 11 Joint arrangements, PAS28 Investments in associates and
joint ventures?
(1) Blooming should classify its investment in Mabait as an investment in a subsidiary.

(2) Crush Ko Tuloy should classify its investment in Mabait as an investment in an associate.
Statement
Statement
(1) False
(2) False
a
.
b
False
True
.
c
True
False
.
d
True
True
.

53. The requirement to have unanimous consent ensures that in a joint arrangement, no single party
controls the arrangement. A party with joint control of an arrangement can prevent any of the other
parties, or a group of the parties, from controlling the arrangement. In some cases, a contractual
arrangement may require a minimum proportion of the voting rights to make decisions. Consider the
following information:
75% vote to direct
relevant activities
Party A
50%
Party B
25%
Party C
25%
Using the above information, which of the following statements is correct?
a. There is no joint control since the parties have no equal votes.
b. There is a joint control between A, B and C.
c. There is a joint control by A and B since their combined votes meets the requirement.
d. There is no joint control by A B, and C since there multiple combinations of parties could
collectively control the arrangement
Minimum voting requirement

54. A, B and C enter into a joint arrangement to conduct an activity in entity Z. The contractual
agreement between A and B states that they must agree to direct all of the activities of Z. The
agreement of C is not required, except that C has the right to veto the issuance of debt or equity
instruments by Z. The ability to veto the issuance of equity and debt instruments is deemed a
protective right because the right is designed to protect C's interest without giving C the ability to
direct the activities that most significantly affect Z's returns.
Based on PFRS 11 Joint Arrangements, which of the following is correct?
a. Entity A, B and C has a joint control over entity Z.
b. Entity A and B has joint control over entity Z but Entity C has a control to entity A and B.
c. Entity A and B has joint control over entity Z.
d. There is no joint control in this arrangement.
Use PFRS for SME to answer the next two questions:
55. On December 31, 2013 Entity A acquired 30 per cent of the ordinary shares that carry voting rights of
entity B for 100,000. Entity A incurred transaction costs of 1,000 in acquiring these shares.
Entity A has significant influence over entity B. Entity A uses the cost model to account for its
investments in associates.
In January 2014 Entity B declared and paid a dividend of 20,000 out of profits earned in 2013. No
further dividends were paid in 2014, 2015 or 2016.
A published price quotation does not exist for entity B. At December 31, 2013, 2014 and 2015, in
accordance with Section 27 Impairment of Assets, management assessed the fair values of its
investment in entity B as 102,000, 110,000 and 90,000 respectively. Costs to sell are estimated
at 4,000 throughout. Entity A measures its investment in entity B on December 31, 2013, 2014 and
2015 respectively at:
a. 100,000, 100,000, 100,000.
c. 95,000, 95,000, 86,000.
b. 98,000, 106,000, 86,000.
d. 98,000, 101,000, 86,000.
56. The facts are the same as in the previous number. However, , a published price quotation exists for
entity B. Entity A measures its investment in entity B on December 31, 2013, 2014 and 2015
respectively at:
a. 100,000, 100,000, 100,000.
c. 98,000, 106,000, 86,000.
b. 98,000, 101,000, 86,000.
d. 102,000, 110,000, 90,000.
Business Combination & Consolidation of FS
57. A condensed statement of financial position at July 1, 2015 and the related current fair value data for
Dyosko Company are presented below:
Carrying value
Fair
Current assets
736,000
value
Property and equipment
1,185,000
1,380,00
0 96,00
Patent
117,000
0
Total assets
2,038,000
112,00
0
Current liabilities
215,000

Non-current liabilities
560,000
595,00
215,000
0
Share capital, 20 par value
420,000
Accumulated profits
843,000
Total liabilities and shareholders equity
2,038,000
On August 1, 2015, Omaygad Corporation issued 17,800 shares of its 29 par value ordinary shares
(fair value, 45 per share) and 502,000 cash for the net assets of Dyosko Company. Of the
465,000 acquisition related costs paid by Omaygad Corporation on August 1, 2015, 80,000 were

share issuance cost.

Assuming that Dyosko and Omaygad is a SME, how much is the goodwill (gain on acquisition) to be
recorded by Omaygad Corporation?
a. 213,000
b. (213,000)
c. (172,000)
d. 172,000

Use the following data to answer the next two questions:

58. Entity A owns a 60 per cent voting interest in Entity B. Entity B owns a 70 per cent voting interest in
Entity C. How should Entity A account for its investment in Entity C in its consolidated financial
statements?
a. Consolidate Entity C.
b. Account for its investment in Entity C using the equity method.
c. Account for its investment in Entity C using the policy it has adopted to account for associates.
d. Account for its investment in Entity C using fair value.
59. Determine the appropriate percentage for the attribution of post-acquisition increases in Entity Cs
equity to Entity A.
a. 70 per cent.
b. 60 per cent.
c. 42 per cent.
d. 130 per cent.
60. Entity A owns a 60 per cent voting interest in Entity B and a 10 per cent voting interest in Entity C.
Entity B owns a 50 per cent voting interest in Entity C. How should Entity A account for its investment
in Entity C in its consolidated financial statements?
a. As a subsidiary, because Entity A controls Entity C.
b. As an associate.
c. As an associate, if significant influence can be ascertained.
d. As a joint venture.
61. The following amounts of profit after tax relate to the Alpha group of entities:
Alpha Inc.

1,500,0
00400,0
Beta Inc.
00
Charlie Inc.
250,0
00
Delta Inc.
600,0
00
Echo Inc.
800,0
00
Alpha Inc. owns 75 percent of the voting power in Beta Inc. and 30 percent of the voting power in
Charlie Inc.
Beta Inc. also owns 30 percent of the voting power in Charlie Inc. and 25 percent of the voting power
in Echo Inc.
Charlie Inc. owns 40 percent of the voting power in Delta
Inc. Which of the following is correct?
a. Beta Inc. and Charlie Inc. are both subsidiaries of Alpha Inc
b. Beta Inc. is the only subsidiary of Alpha Inc.
c. Charlie Inc. and Echo Inc. are deemed to be associates of Beta Inc.
d. Delta Inc. is deemed to be an associate of Charlie Inc.
62. Duterte owns 100 per cent voting interest in ordinary shares that carry voting rights at a general
meeting of shareholders of Duderte. Duderte sold inventory to Duterte (at a markup of 25 per cent
on cost) for 125,000. Duterte is still holding the inventory at the end of its accounting period. At
what amount should the cost of the inventory be measured in the groups consolidated financial
statements?
a. 125,000
b. 100,000
c. 75,000
d. 150,000
63. The Man Company owns 65% of The Manny Company. On the last day of the accounting period
Manny sold to Man a non-current asset for 200,000. The asset originally cost 500,000 and at the
end of the reporting period its carrying amount in Manny's books was 160,000. The group's
consolidated statement of financial position has been drafted without any adjustments in relation to
this non-current asset. Under PFRS 10 Consolidated financial statements, what adjustments should
be made to the consolidated statement of financial position figures for non-current assets and
retained earnings?
Non-current assets
Retained earnings
Non-controlling interest
a
Increase by 300,000
Increase by 195,000
Reduce by
.b

40,000by
Reduce by 40,000
Reduce by 26,000
Reduce
.
14,000by
c
Reduce by 40,000
Reduce by 40,000
Reduce
.
14,000by
d
Increase by 300,000
Increase by 300,000
Reduce
.
26,000
Foreign Exchange Accounting and Hyperinflation
64. Vinz Corp. sold handicrafts goods to US firm for $100,000 in 2015. Pertinent information on exchange
rate follows:
Buying
Selling
Sept. 4,
45.80
46.00
Receipt of
2015
order Date of
47.00
48.00
Dec.
13,
Date of balance sheet
47.20
48.50
Oct. 15,
20156, 2016
Jan.
Date of settlement
46.00
47.00
The sale would be appropriately recorded at:
a. 4,700,000
b. 4,600,000

c. 4,580,000

d. 4,800,000

65. On December 31, 2015, a branch in Singapore submitted the following financial statement stated in
the foreign currency:
Statement of Financial Position
Monetary assets
$1,080,000
Non-monetary assets
810,000
Monetary Liabilities
972,000
Common stock
648,000
Retained earnings, end
270,000
The exchange rates are as follows:
Current rate 50
Historical rate 46
Average rate 59

Income Statement and Retained Earnings

Sales
$1,458,00
Expense
1,350,000
Net income
$108,00
0
Retained earnings, beginning
Retained earnings, end
$
270,000

Assuming the current rate method was used and that the retained earnings on January 1, 2015 of the
Singaporean Branch in Philippine Pesos is 1,790,000.
Translation gain or (loss) on December 31, 2015
a. 5,630,000
b. (5,630,000)

c. 7,930,000

d. (7,930,000)

66. On January 1, 2015 an entity purchased a tract of vacant land that is situated overseas for
FCU90,000. The entity classified the land as an investment property. The fair value of the land at
December 31, 2015 is FCU100,000. The entitys functional currency is the Philippine peso (). Spot
currency exchange rates:

January 1, 2015: FCU1 = 2

Weighted average exchange rate in 2015: FCU1 = 2.04

December 31, 2015: FCU1 = 2.1.

What is the carrying amount of the investment property at December 31, 2015 and what amount/s
would be presented in profit or loss for the year ended December 31, 2015?
a. Carrying amount of investment property = 210,000. Profit for the year includes 30,000
increase in the fair value of investment property.
b. Carrying amount of investment property = 210,000. Profit for the year includes 20,400
increase in the fair value of investment property and 9,600 foreign exchange gain.
c. Carrying amount of investment property = 180,000. Profit for the year includes no amount in
respect of the investment property.
d. Carrying amount of investment property = 189,000. Profit for the year includes 9,000 foreign
exchange gain.
67. If the functional currency of an entity is that of a hyperinflationary economy, which of the following
items are restated for the effects of general inflation (ie using a general price index)?
a. Assets and liabilities linked by agreement to changes in prices.
b. Assets and liabilities carried at fair value (fair value is determined at the end of the reporting
period).
c. Non-monetary assets and non-monetary liabilities carried at cost (or cost less depreciation) and
all equity items.
d. Monetary assets and monetary liabilities.
Use the following data to answer the next three questions:
68. An entity was incorporated on December 31, 2014. It immediately issued equity instruments in
exchange for 1,000,000 cash. The entity did not enter into any other transactions in 2014 and 2015.
The functional currency of the entity is the currency of a hyperinflationary economy. Inflation during
2015 is 40 per cent. In its financial statements at December 31, 2015 the entity must present cash
at:
a. 1,000,000 at December 31, 2015 and 1,000,000 at December 31, 2014.
b. 1,000,000 at December 31, 2015 and 1,400,000 at December 31, 2014.
c. 1,400,000 at December 31, 2015 and 1,000,000 at December 31, 2014.
d. 1,400,000 at December 31, 2015 and 1,400,000 at December 31, 2014.
69. The gain or loss on the net monetary position for the year ended December 31, 2015 is:
a. 400,000 loss.
b. 400,000 gain.
c. Zero.
d. It is impossible to measure the amount of the gain or loss with the information provided.
70. Assume instead the entity received land (instead of cash) in exchange for the equity instruments
issued. The entity classifies the land as property, plant and equipment. The gain or loss on the net
monetary position for the year ended December 31, 2015 is:
a. 400,000 loss.
b. 400,000 gain.
c. Zero.
d. It is impossible to measure the amount of the gain or loss with the information provided.

Derivatives and Hedge Accounting

71. On December 12, 2015, Ilocos Company entered two forward exchange contracts, each to purchase
1,000 euros in 90 days. The relevant exchange rates are as follows:
Forward Rate for
Date
Spot Rate
March 12, 2016
December 12, 2015
88
90
December 31, 2015
98
93
Ilocos entered into the first forward contract to manage the foreign currency risk from a purchase of
inventory in November 2015, payable in March 2016. At December 31, 2015, what amount of foreign
exchange gain should Ilocos include in income from this forward contract?
a. Nil
b. 3,000
c. 5,000
d. 10,000
72. Ako Pow Company entered into a forward contract for speculation. On December 7, 2015, Ako Pow
Company entered into a forward contract to purchase 48,000 FC (foreign currency) in 90 days. The
relevant exchange rates are as follows:
Spot rate
Forward rate
December 7, 2015
52.59
52.65
December 31, 2015
52.63
52.69
March 7, 2016
52.70
At December 31, 2015, what amount of foreign exchange (forex) gain (loss) should Ako Pow
Company include in the income statement from this forward contract?
a. (1,920)
b. 1,920
c. 960
d. (960)
73. The Murrie Company has hedged the cash flows relating to its interest rate risk by purchasing an
interest rate cap. Interest rates have risen and the hedge has proved to be 90% effective based on
the amount hedged. Additional interest charges up to the end of the financial year amount to
240,000. In accordance with PFRS9 Financial instruments, what amount relating to the additional
interest costs should be recognized in profit or loss?
a. Nil
b. 24,000
c. 216,000
d. 240,000
Government Accounting
74. Which government body is responsible for the design, preparation and approval of accounting
systems of government agencies?
a. Bureau of Treasury
c. Department of Budget and Management
b. Commission on Audit
d. Government Agencies
75. Once a government agency receives Notice of Cash Allocation (NCA), it shall debit Cash National
Treasury and credit
a. Subsidy income Local Government
c. Subsidy income National Government
b. NCA Local Government
d. NCA National Government
76. A government agency issued a purchase order for the purchase of long-term office equipments. This
should be taken up as
a A memo entry in the
.b RAOCO
A memo entry in the
.
RAOMO
c
Purchases
xx
.
Accounts payable
x
x
d Office Equipment
xx
.
Accounts payable
x
x
77. Which of the following would include in an entry to record the remittance of income taxes to the
Bureau of Treasury (BTR) collected by the Bureau of Internal Revenue (BIR)? The BIR has no
authority to use the collections.
a. Debit to Cash Collecting officer
c. Debit to Cash NT MDS
b. Credit to Cash Collecting officer
d. Credit to Cash NT MDS
78. Sept. Star issued purchase order for the acquisition of office equipment costing 300,000. The
equipment was received with the charge invoice and was paid by check after withholding taxes of
10%. Sept. Star remitted a tax withheld to BIR thru a government depository bank.
What is the entry of Sept. Star to record the payment?
a Accounts payable
270,000
.
Cash National Treasury
MDS
b Office Equipment
300,000
.
Cash National Treasury
MDS
c Office
300,000
.
Equipment
Cash
National Treasury
Due to
MDS
d Accounts
300,000
.
payable
Cash
BIR
National Treasury
Due to
MDS

270,0
00
300,0
00
30,00
270,0
0
00
30,00
270,0
0
00

Not-for-Profit Organizations
79. For Guiding Light, a nongovernment nonprofit religious organization, net assets that can be expended
in accordance with the wishes of the governing board of the organization shall be reported as
a. Unrestricted
c. Temporarily restricted
b. Permanently restricted
d. Either unrestricted or temporarily restricted

80. On November 30, 2014, an alumnus of a private nonprofit high school contributed a certain amount
to the school with the stipulation that the donation be used for faculty travel expenses in 2015.
During 2015, the school spent the entire donation in accordance with the wishes of the donor. For the
year ended December 31, 2015, what was the effect of the donation on unrestricted and temporarily
restricted net assets?
a. Increase in unrestricted net assets and decrease in temporarily restricted net assets
b. No effect on unrestricted net assets and decrease in temporarily restricted net assets
c. Increase in unrestricted net assets and no effect on temporarily restricted net assets
d. No effect on both unrestricted and temporarily restricted net assets
81. In April 2015, Delta Hospital purchased medicines from Field Pharmaceutical Co. at a cost of 50,000.
However, Field notified Delta that the invoice was being canceled and that the medicines were being
donated to Delta. Delta should record this donation of medicines as:
a. A memorandum entry only.
b. A 50,000 credit to nonoperating expenses.
c. A 50,000 credit to operating expenses.
d. Other operating revenue of 50,000.
82. Ellens Hospital, a Not for Profit hospital affiliated with a religious group, reported the following
information for the year ended December 31, 2015:
Gross patient service revenue
Bad debts expense
Contractual adjustments with third party payors
Charity care
Allowance for discounts to hospital employees

2,400,000
50,000
200,000
150,000
90,000

Net patient service revenues for Ellen hospital for the year ended December 31, 2015 is
a. 2,250,000
b. 2,110,000
c. 1,960,000
d. 1,910,000
83. Johnny College, a private not-for-profit college, received the following contributions during 2015:
I. 1,250,000 from alumni for construction of a new wing on the science building to be constructed
in 2016.
II. 250,000 from a donor who stipulated that the contribution be invested indefinitely and that the
earnings be used for scholarships. As of December 31, 2015, earnings from investment amounted
to 12,500.
For the year ended December 31, 2015, what amount of these contributions should be reported as
temporarily restricted revenues on the statement of activities?
a. 12,5000
b. 1,262,500
c. 1,250,000
d. 1,512,500
84. Birdlovers, a community foundation, incurred 50,000 in management and general expenses during
2015. In Birdlovers' statement of activities for the year ended December 31, 2015, the 50,000
should be reported as:
a. Part of program services.
c. A contra account offsetting revenue and support.
b. Part of supporting services.
d. A direct reduction of fund balance.
PFRS 4 Insurance Contracts
85. Which of the following types of insurance contracts would probably not be covered by PFRS 4?
a. Motor insurance.
c. Life insurance.
b. Medical insurance.
d. Pension plan.
86. An
a.
b.
c.
d.

entity should apply PFRS4 Insurance contracts to which of the following?

Contingent consideration receivable in a business combination
Product warranties issued by an entity which is a manufacturer
Employers' assets and liabilities under employment benefit plans
Reinsurance contracts issued by the entity

87. An insurance contract can contain both deposit and insurance elements. An example might be a
reinsurance contract where the cedent receives a repayment of the premiums at a future time if there
are no claims under the contract. Effectively this constitutes a loan by the cedent that will be repaid
in the future. PFRS 4 requires that
a. Each payment by the cedent is accounted for as a loan advance and as a payment for insurance
cover.
b. The insurance premium is accounted for as a revenue item in the income statement.
c. The premium is accounted for under PAS 18.
d. The premium paid is treated purely as a loan, and it is accounted for under PAS 39.
88. Entity A writes a single policy for 100,000 premium and expects claims to be made of 60,000 in
2017. At the time of writing the policy, there are commission costs of 20,000. Assume a discount
rate of 3% risk-free. The entity says that is a provision for risk and uncertainty were to be made, it
would amount to 25,000 and that the risk would expire evenly over years 2015, 2016 and 2017.
Under the existing policies, the entity would spread the premiums, the claims expense and the
commissioning costs over the first two years of the policy. Investment returns in years 2014 and

2015 are 2,000 and 4,000, respectively. What is the profit in year 2014 and 2015, using the
matching and deferral approach in years 2014 and 2015?
a. 12,000; 14,000
c. 10,000; 10,000
b. 26,000; 0
d. 0; 26,000
I can do all things through Christ who strengthens me. (Philippians 4:13)
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