University of Nueva Caceres

College of Business and Accountancy

BS Accountancy
Qualifying Examination
ACCOUNTING FOR SPECIAL TRANSACTIONS
General Instructions: Choose the correct answer.
Theory (18 points)
1. According to the definition of revenue provided by IFRS 15, which of the following is true?
(Easy)
a. Revenue includes cash received from shares issued.
b. Revenue includes cash received from borrowings.
c. Revenue may arise from either ordinary activities or extraordinary activities.
d. Revenue arises from ordinary activities only.
2. Which of the following are the exceptions for application of IFRS 15? (Easy)
a. Financial audit and lease contracts
b. Lease contracts and insurance contracts
c. Insurance contracts and pharmaceutical contracts
d. Pharmaceutical contracts and financial audit contracts
3. The revenue model framework provides for Step 1: Identify the contract with the customer.
All of the following are criteria of a contract within IFRS 15, except? (Easy)
a. The right of each party in relation to the goods or services to be transferred can be
identified.
b. The terms and conditions of payment for the goods or services to be transferred can
be identified.
c. The contract has commercial substance.
d. The contract must be in writing only and approved by the parties to the contract.
4. If dividend of 80% is allocable to Class 7 unsecured creditors based on an accounting
statement of affairs, it correctly be concluded that (Average)
a. All unsecured claims will receive the same percentage of return.
b. All unsecured claims will be paid in full.
c. Class 1 through 6 unsecured claims will be paid in full.
d. Stockholders will receive 20% of their equity
5. In liquidation proceeding, if the proceeds on the realization of an asset exceed the lien against
that asset, the excess is assigned to (Easy)
a. The holder of the lien.
b. Other lien holders whose assets will not realize sufficient amounts to cover their liens.
c. Meet the claims of the unsecured creditors.
d. The stockholders of the corporation.
6. A venturer that recognizes in its financial statements the assets that it controls, the liabilities it
incurs, the expenses that it incurs and its share of the income that it earns from the sale of
goods or services by the joint venture is prescribed by IFRS 11 for which type of joint
venture? (Average)
a. Jointly controlled entities
b. Jointly controlled assets
c. Joint operations
d. Jointly controlled assets and jointly controlled operations
7. Where a joint venture is a partnership? (Average)
 a. It should be accounted for by the venturer using the equity method.
b. It should be accounted for using full consolidation accounting.
c. It should be accounted for by the venturer as a partnership and line item added into
the group's financial statements.
d. It should be accounted for by the venturer using partnership accounting separately to
the financial accounts of the venture and any profit on sale of the output from the
venture reported in the income statement of the individual venturers.
8. Which of the following is not an applicable method for strategic investment? (Easy)
a. Equity method
b. Fair value method
c. Net realizable value measurement
d. Choices b and c
9. A joint arrangement that is not structured through a separate vehicle is called? (Average)
a. A joint venture
b. A joint operation
c. A joint venture or a joint operation
d. A partnership
10. Which of the following costs are not capitalized as contract assets according to PFRS 15?
(Average)
a. Claims of third parties
b. Depreciation of plant and equipment used in the contract
c. Cost of design and technical assistance
d. Costs that is related to a satisfied performance obligations
11. On January 1, Joey entered into a contract with Althea for the sale of an excavator with
unique specifications. Joey and Althea develop the specifications and Joey contracts with a
construction equipment manufacturer to produce the equipment. The manufacturer will
deliver the equipment to Althea when it is completed Joey agrees to pay the manufacturer
P42,000,000 upon delivery of the excavator to Althea. Anderson and Althea agree to a selling
price of P46,200,000 that will be paid by Althea to Joey. Joey’s profit is P4,200,000 Joey’s
contract with Althea requires Althea to seek remedies for defects from the manufacturer, but
Joey is responsible for any corrections due to errors in specifications. The role of Joey is a:
(Average)
a. Customer
b. Principal
c. Agent
d. No agreement at all
12. In preparing the financial statements of the home office and its various branches: (Average)
a. Nonreciprocal accounts are eliminated but reciprocal accounts are combined
b. Both reciprocal and nonreciprocal accounts are eliminated
c. Both reciprocal and nonreciprocal accounts are combined
d. Reciprocal accounts are eliminated and nonreciprocal accounts are combined
13. How are anticipated administrative expenses reported on a statement of financial affairs?
(Average)
a. As a footnote until actually incurred.
b. As a liability with priority
c. As a partially secured liability.
d. As an unsecured liability
 14. The Statement of Realization and Liquidation differs from the Statement of Affairs because
(Average)
a. The Statement of Realization and Affairs reports estimated realizable values rather
than actual liquidation results
b. The Statement of Realization and Affairs is a summary of secured debt activity only
c. The Statement of Realization and Affairs is prepared only at final completion of the
liquidation process
d. The Statement of Realization and Affairs reports actual liquidation results rather than
estimated realizable values
15. If the percentage-of-completion (overtime) method is used, what is the basis for determining
the gross profit to be recognized in the second year of a three-year contract? (Average)
a. Cumulative actual costs incurred only.
b. Incremental cost for the second year only.
c. Cumulative actual costs and estimated costs to complete.
d. No gross profit would be recognized in year 2.
16. On March 1, 2022, Giordano Company entered into a contract to transfer a product to Hotter
on July 31, 2022. The contract is structured such that Warmer is required to pay the full
contract price of P57,000 on August 31, 2022. The cost of the goods transferred is P34,200.
Giordano delivers the product to Hotter on July 31, 2022. The contract exists on: (Average)
a. March 1, 2022
b. July 31, 2022
c. August 31, 2022
d. Incomplete data
17. Maybelle Paulino Computers manufactures and sells computers that include a warranty to
make good on any defect in its computers for 150 days (often referred to as an assurance
warranty). In addition, it sells separately an extended warranty, which provides protection
from defects for three years beyond the 150 days (often referred to as a service warranty).
How many performance obligations are in the contract? (Easy)
a. 0
b. 1
c. 2
d. 3
18. The main difference between the net income reported in the separate income statement of the
branch and the net income reported by the home office for the branch’s operation is the
(Average)
a. Overstatement of beginning and ending inventory reported by the branch
b. Overstatement of total goods available for sale reported by the branch
c. Overstatement of costs of goods sold reported by the branch
d. Overstatement of shipment from home office reported by the branch
Practical (12 points)
In items 19-20: Branigan Constructions had assessed its contract it recently signed on June 30, 2018,
it found out that the revenue will be recognized under zero profit method. Information during 2019 are
provided below:
● The contract provides for a fixed price of P4,500,000.
● Branigan billed the customer at an aggregate of 30% a year, the remaining bill will be made at
the completion of the project.
● Branigan collects 50% of the bill every end of the year.
● Construction in progress, January 1, 2019, P1,340,000.
 ● Accumulated cost of construction during the year, P1,120,000.
● Budgeted additional cost, December 31, 2019, P1,340,000.
Nothing follows.
19. What is the balance of contract liability or asset on December 31, 2018? (Average)
a. 10,000 contract asset
b. 665,000 contract asset
c. 10,000 contract liability
d. 665,000 contract liability
20. What is the balance of contract liability or asset on December 31, 2019? (Average)
a. 230,000 contract liability
b. 1,110,000 contract asset
c. 435,000 contract asset
d. 240,000 contract liability
21. At the end of the year the Investment in Bacolod account of the home office is P300,500.
However, there are transactions discovered to have errors.
● Bacolod branch bought equipment on June 1, 2020 costing P63,800 for the home
office’s use and the policy is to record the asset in Bacolod’s books. During that time
the home office recorded the equipment and credited its reciprocal account of its
Bacolod branch
● The policy of the company regarding the equipment’s depreciation is that it has a life
of 8 years with no salvage value and the straight-line method should be used. No
entry has been made by the home office and branch
● The home office ships merchandise to Bacolod amounting to P96,700. Bacolod
recorded the transaction as P97,600
● Bacolod pays the home office’s creditors in the amount of P32,400 and sends a debit
memo to the home office. Upon receipt of the debit memo, the home office debited its
reciprocal account in the amount of P23,400 twice
What is the unadjusted balance of the home office current account in the books of Bacolod at
the end of the year? (Difficult)
a. 379,600
b. 252,000
c. 286,000
d. 315,800
In items 22-23: James Construction has been engaged with constructing high rise buildings since
2001. On January 1, 2019, it signed a construction contract with Daisy Hotels Inc. The following
contract during 2020 is shown below.
Cost information:
● Materials inventory, January 1, 2020, P12,460,000
● Crain and other trucks, January 1, 2020, P5,000,0000
● Accumulated depreciation, P1,000,000
● Machineries, January 1, 2020, P13,000,000
● Accumulated depreciation, P3,000,000
● Idle equipment, January 1, 2020, P3,000,000
● Material purchased during the year, P20,500,000
● Materials inventory, December 31, 2020, P8,400,000
● Budgeted purchase of material, December 31, 2020, P28,650,000
Crain and trucks have original and remaining life of 20 and 16 years as of December 31, 2019.
Machineries have original and remaining life of 13 and 10 years as of January 1, 2020. Idle equipment
was sold during the year at a price of P2,000,000. Materials worth P2,000,000 were returned during
the year. At contract inception, the terms of the contract provide a contract price of P145,000,000 and
the building is to be constructed in 5 years. Last year PoC was 15% and estimated additional cost of
P34,000,000.
22. How much revenue was recognized last year? (Average)
a. 105,000,000
b. 15,750,000
c. 21,750,000
d. 123,250,000
23. What is the PoC during 2020? (Average)
a. 44.34%
b. 36.85%
c. 24.32%
d. 39.07%
24. Since there is no reasonable basis for estimating the collectibility, the Pius Appliance
Company uses the installment method of recognizing revenue for the following sales:
20x4 20x5

Sales P225,000 P337,500

Collections from:

20x4 sales 75,000 37,500

20x5 sales 0 112,500

Defaults

20x4 sales 7,500 15,000

20x5 sales 0 30,000

Account written off

20x4 sales 18,750 56,250

20x5 sales 0 18,750

Gross profit percentage 30% 40%

What amount should Pius Appliance Co. report as deferred gross profit, ending balance in its
December 31, 20x5 balance sheet? (Average)
a. 123,750
b. 93,750
c. 75,000
d. 70,500
25. Lea is a construction firm that uses the PoC of recognizing income. On August 2, 2019, a
contract to build an office condominium was obtained at a price of P8,700,000. Below are the
data pertaining to this contract:
2019 2020
 Estimated cost at completion P6,525,000 P6,960,000

Cumulative income recognized 435,000 1,044,000

PoC 15% 65%

What is the amount of cost of contract incurred during the year ended December 31,2020?
(Average)
a. 3,741,000
b. 4,611,000
c. 4,176,000
d. 3,545,250
26. Hot Pizza granted a franchise to Shake King. Shake King was to pay a franchise fee of
P100,000 payable in five equal annual installments starting with the payment upon signing of
the agreement. The franchisee was to pay monthly 1% of gross sales of the preceding month.
Should the operation of the outlet prove to be unprofitable, the franchise may be canceled
with whatever obligation owing Hot Pizza, in connection with the P100,000 franchise fee,
waived. The first year of operations generated a gross sales of P500,000. For the first year,
Hot Pizza earned franchise fee of? (Average)
a. 5,000
b. 20,000
c. 25,000
d. 105,000
27. The Philippine government and SLEX Co. entered into a concession arrangement for the
construction and operation of Skyway 5 connecting Metro Manila and Batangas Pier. On
December 31, 2010, the concession operator constructed the Skyway 5 at a cost of
P100,000,000. SLEX Co. has a right or license to charge users over the term of the
arrangement of 50 years. The amounts to be received by the concession operator are
contingent on the extent that the public uses the Skyway 5. What is the book value of
infrastructure assets on December 31, 2012? (Average)
a. 100,000,000
b. 98,000,000
c. 96,000,000
d. 94,000,000
28. On December 31, 2020, Carlyn Inc. became bankrupt. The balance sheet of the company as of
December 31, 2020 is provided below:
Cash 100,000 Accounts payable 100,000

Inventory 400,000 Salaries payable 60,000

Land 500,000 Income tax payable 30,000

Note payable 50,000

Loan payable 300,000

Mortgage payable 200,000

Share capital 420,000

 Retained earnings (150,000)
The inventory which has NRV of P200,000 secures the loan payable while the land which has
fair value of P310,000 secures the mortgage payable. The court-appointed liquidator incurred
and paid liquidation expenses amounting to P20,000.
What is the amount received by the mortgagee from the liquidation of Carlyn Inc.? (Average)
a. 200,000
b. 310,000
c. 100,000
d. 80,000
In items 29-30: On January 1, 2021, Takeuchi Construction started to work on a P10,000,000 fixed
contract price. The term of the contract provides for a duration of 4 years.
Information on construction in 2022:
● Cost incurred during the year, P2,500,000.
● Budgeted contract cost, December 31, 2022, P3,000,000.
● Gross profit recognized last year, P500,000.
● Contract asset, January 1, 2022, P2,500,000.
Information on construction in 2023:
● Cost incurred during the year, P4,000,000.
● Budgeted contract cost, December 31, 2023, P2,125,000.
Information on construction in 2024:
● Cost incurred during the year, P500,000.
Takeuchi had assessed at contract inception that the performance obligation will be satisfied over
time. Billings will not be made until completion.
29. How much is the cost incurred to date as of December 31, 2022? (Difficult)
a. 7,450,000
b. 6,000,000
c. 4,500,000
d. 7,950,000
30. How much is the loss on an onerous contract in 2023? (Difficult)
a. 625,000
b. 125,000
c. 500,000
d. 0
Nothing follows~~

Prepared by: James B. Cantorne

The questions are based on the following authors and reviewers, these are modified by the preparer:
1. Antonio Dayag
2. Angelito Punzalan
The questions are formed in parallel competency with the current preboard of the various review
centers and is answerable within 1 hour. The following are coverage of this test:
1. PFRS 15
2. Corporate liquidation
3. Joint Arrangement
4. Home Office and Branch Accounting
5. Build-Operate-Transfer
The following is not covered by the same:
1. Partnership Accounting