ReSA B46 AFAR Final PB Exam Questions Answers Solutions

ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Batch 46  Oct 2023 CPALE  17 Sept 2023  03:00 PM – 06:00 PM
ADVANCED FINANCIAL ACCOUNTING and REPORTING FINAL PRE-BOARD EXAMINATION
INSTRUCTIONS: Select the correct answer for each of the questions. Mark only one answer
for each item by shading the box corresponding to the letter of your choice on the
answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use pencil no. 2 only.
Use the following information for questions 1 to 3:

On December 12, 2022, DD Company entered into three forward exchange contracts, each
to purchase 100,000 Foreign Currency Units (FCUs) in 90 days. The relevant exchange
rates:
Forward Rate for
Spot Rate March 12, 2023
December 12, 2022 P .88 P .90
December 31, 2022 .98 .93
1. DD entered into the first forward contract to manage the foreign currency risk
from a purchase of inventory in November 2022, payable in March 2023. The forward
contract is not designated as a hedge. At December 31, 2022, what amount of foreign
currency transaction gain should DD include in income from this forward contract?
a. P -0- c. P 5,000
b. P3,000 d. P10,000
2. DD entered into the second forward contract to hedge a commitment to purchase

equipment being manufactured to DD’s specifications. At December 31, 2022, what
amount of foreign currency transaction gain should DD include in income from this
forward contract?
a. P -0- c. P 5,000
b. P3,000 d. P10,000
3. DD entered into the third forward contract for speculation. At December 31, 2022,
what amount of foreign currency transaction gain should DD include in income from
this forward contract?
a. P -0- c. P 5,000
b. P3,000 d. P10,000
4. Property was purchased on December 31, 2019 for 20 million baht. The general price
index in the country was 60.1 on that date. On December 31, 2021, the general price
index had risen to 240.4. If the entity operates in a hyperinflationary economy,
what would be the carrying amount in the financial statements of the property after
restatement?
a. 20 million baht c. 80 million baht
b. 1,200.2 million baht d. 4.808 million baht
5. Reyes, Silva, and Tan formed a joint venture. Reyes was designated as the manager
and was to record the joint venture’s transactions in his own books. As a manager,
Reyes was to be allowed a salary of P12,000; the remaining profit or loss was to
be divided equally.
The following balances appeared at the end of 2018, before adjustment for venture
inventory and profit:
Debit Credit
Joint venture cash P 48,000 P -
Joint venture - 15,000
Silva, capital 1,000
Tan, capital 27,000
The venture was terminated on December 31, 2018, and unsold merchandise costing
P10,500 was taken over by Tan. Reyes made cash settlement with Silva and Tan.
In the final settlement, how much did Tan receive?

a. P31,500 c. P21,000
b. 27,000 d. 10,500
6. MM is trying to decide whether to accept a salary of P40,000 or a salary of P25,000

plus bonus of 10% of net income after salaries and bonus as a means of allocating
profit among the partners. Salaries traceable to the other partners are estimated
to be P100,000. What amount of income would be necessary so that MM would consider
the choices to be equal?
a. P165,000 c. P265,000
b. P290,000 d. P305,000
Page 1 of 24 0915-2303213  resacpareview@gmail.com
ADVANCED FINANCIAL ACCOUNTING & REPORTING
ReSA Batch 46 – October 2023 CPALE Batch
17 September 2023  03:00 PM to 06:00 PM AFAR Final Pre-Board
Exam
Use the following information for questions 7 and 8:
On November 2, 2022, Swan Corporation entered into a 90-day contract to sell 220,000
Foreign Currency units (FCUs) in a transaction accounted for as speculation. The spot
rate for FCU on November 2 was P0.74 and the current quotation for 90-day forward rates
was P0.68. On December 31, 2022, the spot rate was P0.78 and the quotation for 30-day
forwards was P0.70.
7. Swan’s entry on November 2, 2022 included a:

a. debit to Contract Receivable denominated in FCUs for P149,600
b. credit to Contracts Payable denominated in FCUs for P149,600
c. debit to Contract Receivable denominated in FCUs for P154,000
d. credit to Contracts Payable denominated in FCUs for P154,000
8. What amount of exchange gain or (loss) was included in Swan’s 2022 income?
a. P(8,800) c. P 4,400
b. P(4,400) d. P 8,800
9. Connie Corporation had a realized foreign exchange loss of P15,000 for the year
ended December 31, 2022 and must also determine whether the following items will
require year-end adjustment:
• Connie had an P8,000 loss resulting from the translation of the accounts of
its wholly-owned foreign subsidiary for the year ended December 31, 2022.
• Connie had an account payable to an unrelated foreign supplier payable in the
supplier’s local currency. The Philippine peso equivalent of the payable was
P64,000 on the October 31, 2022 invoice date, and it was P60,000 on December
31, 2022. The invoice is payable on January 30, 2023.
In Connie’s 2022 consolidated income statement, what amount should be included as

foreign exchange loss?
a. P11,000 c. P19,000
b. P15,000 d. P23,000
10. On April 1, 2022, Argo Company imported 10,000,000 barrels of oil from an Indonesian
Company at a price of P3,185 per barrel payable in Indonesian rupiah. The invoice
was paid 30 days later. Indirect exchange rates for the Indonesian rupiah were:
April 1, 2022: P1 = 132 rupiah
April 30, 2022: P1 = 130 rupiah
What is the cost of the oil?

a. 132 million rupiah c. P31.85 billion
b. 130 million rupiah d. P1.32 billion
11. Cebu Enterprises is a Philippine exporter of souvenir items manufactured in the

capital city of Cagayan. The following overhead cost data have been accumulated:
Activity Cost Amount of Center
Center Driver Activity Costs
Materials Handling Grams handled 100,000 grams P 50,000
Painting Units painted 50,000 units 200,000
Assembly Labor hours 4,000 hours 120,000
Job 1234 contains 3,000 units. It weighs 10,000 grams and uses 300 hours of labor.
Compute the total overhead costs that should be assigned to Job 1234.
a. P31,955 c. P26,000
b. 27,750 d. 32,000
12. LL Corporation owns a foreign subsidiary with 2,600,000 local currency units (LCU)
of property, plant, and equipment before accumulated depreciation on December 31,
20x4 of this amount. 1,700,000 LCU were acquired in 20x2 when the rate of exchange
was 1.5 LCU = P1, and 900,000 LCU were acquired in 20x3 when the rate of exchange
was 1.6 LCU = P1. The rate of exchange in effect on December 31, 20x4, was 1.9 LCU
= P1. The weighted average of exchange rates that were in effect during 20x4 was
1.8 LCU = P1. Assuming that the property, plant, and equipment are depreciated
using the straight-line method over a 10-year period with no salvage value
How much depreciation expense relating to the foreign subsidiary’s property, plant,
and equipment should be charged in LL’s statement of income for 20x4?

Exam
Functional Currency – LCU Functional Currency is Peso
a. P144,444 P169,583
b. P144,444 P144,444
c. P169,583 P144,444
d. P169,583 P169,583
13. On January 1, 20x4, PP Company formed a foreign subsidiary. On February 15, 20x4,
PP’s subsidiary purchased 100,000 local currency units (LCU) of inventory. Of the
original inventory purchased on February 15, 20x4, 25,000 LCU made up the entire
inventory on December 31, 20x4. The exchange rates were 2.2 LCU= P1 from January
1, 20x4, to June 30, 20x4, and 2 LCU = P1 from July 1, 20x4, to December 31, 20x4.
The December 31, 20x4, inventory balance for PP’s foreign subsidiary should be
restated in pesos in the amount of:
Functional Currency – LCU Functional Currency is Peso
a. P12,500 P11,364
b. P12,500 P12,500
c. P11,364 P12,500
d. P11,364 P11,364
14. The following accounts are as they appear on the separate company financial
statements of a parent and its 100%-owned subsidiary (created in 20x1) at the end
of 20x6:
Parent Subsidiary
Dividend income (from subsidiary)…………………………………… P 10,000
Investment in subsidiary ………………………………………………………… 100,000
Common stock ………………………………………………………………………………………… 400,000 P 2,000
Additional paid-in capital …………………………………………………… 100,000 98,000
Retained earnings (deficit)…………………………………………………… 360,000 (40,000)
Dividends declared ………………………………………………………………………… (80,000) (10,000)
Additional information:
Reported net income (loss) for 20x4 …………………………… P160,000 P(22,000)
What amount should be reported for consolidated retained earnings at the end of
20x6?
a. P310,000 d. P360,000
b. P320,000 e. None of the above.
c. P350,000
Items 15 and 16 are based on the following information:

Pot Co. holds 90% of the common stock of Skillet Co. During 2022, Pot reported sales
of P1,120,000 and cost of goods sold of P840,000. For this same period, Skillet had
sales of P420,000 and cost of goods sold of P252,000. Also during 2022, Pot sold
merchandise to Skillet for P140,000. The subsidiary still possesses 40% of this
inventory at the end of 2022. Pot had established the transfer price based on its
normal markup.
15. What are consolidated sales and cost of goods sold?

a. P1,400,000 and P952,000
b. P1,400,000 and P966,000
c. P1,540,000 and P1,078,000
d. P1,400,000 and P1,022,000
e. P1,540,000 and P1,092,000
16. Assuming that the transfers were from Skillet Co. to Pot Co., what are consolidated
sales and cost of goods sold?
a. P1,400,000 and P952,000
b. P1,400,000 and P966,000
c. P1,540,000 and P1,078,000
d. P1,400,000 and P1,022,000
e. P1,540,000 and P1,092,000
Use the following information for questions 17 and 18.

CC Corporation subsidiary buys marketable equity securities and inventory on April 1,
20x4, for 100,000 foreign currencies each. It pays for both items on June 1, 20x4, and
they are still on hand at year- end. Inventory is carried at cost under the lower-of-
cost-or-NRV [or market (US GAAP)]. Currency exchange rates for 1 peso follow:

Exam
January 1, 20x4 …………………… P0.15=1 FC
April 1, 20x4 ………………………… 0.16=1
June 1, 20x4 …………………………… 0.17=1
December 31, 20x4 ……………… 0.19=1
17. Assume that the FC (foreign currency) is the subsidiary’s functional currency.
What balances does a consolidated balance sheet report as of December 31,20x4?
a. Marketable equity securities = P16,000 and Inventory = P16,000.
b. Marketable equity securities = P17,000 and Inventory = P17,000.
c. Marketable equity securities P19,000 and Inventory = P16,000.
d. Marketable equity securities P19,000 and Inventory P19,000.
18. Assume that the peso is the subsidiary’s functional currency. What balances does
a consolidated balance sheet report as of December 31, 20x4?
a. Marketable equity securities = P16,000 and Inventory = P16,000.
b. Marketable equity securities = P17,000 and Inventory = P17,000.
c. Marketable equity securities P19,000 and Inventory = P16,000.
d. Marketable equity securities P19,000 and Inventory P19,000.
19. The following selected data were taken from the books of the Bixby Box Company.
The company uses job costing to account for manufacturing costs. The data relate
to June operations.
(a)Materials and supplies were requisitioned from the stores clerk as follows:
Job 405, material X, P7,000.
Job 406, material X, P3,000; material Y, P6,000.
Job 407, material X, P7,000; material Y, P3,200.
For general factory use: materials A, B, and C, P2,300.
(b) Time tickets for the month were chargeable as follows:

Requisition No. Amount
Job No. 405 P11,000 3,000 hours
Job No. 406 P14,000 3,600 hours
Job No. 407 P 8,000 1,900 hours
Indirect labor P 3,700
(c) Other information:

Factory paychecks for P35,200 were issued during the month.
Various factory overhead charges of P19,400 were incurred on account.
Depreciation of factory equipment for the month was P5,400.
Factory overhead was applied to jobs at the rate of P3.50 per direct labor hour.
Job orders completed during the month: Job 405 and Job 406.
Selling and administrative costs were P2,100.
(1) If Job 406 were sold on account for P41,500 how much gross profit would be
recognized? (2) The balance in the factory overhead account would represent the
fact that overhead:
a. (1) P5,900; (2) P1,050 overapplied
b. (1) P 5,900; (2) P1,050 underapplied
c. (1) P18,500; (2) P1,050 underapplied
d. (1) P18,500; (2) P1,000 underapplied
20. Andrews And Block are partners in an engineering consulting firm sharing profits
and losses 40% and 60%, respectively, and their capital balances are P110,000 and
P150,000, respectively. The recorded net assets of the company are as follows:
Book Value Fair Value
Working capital P240,000 P220,000
Net property and equipment 80,000 108,000
Noncurrent liabilities 60,000 60,000
In addition to the recorded assets, the partners feel that the company has goodwill
valued at P40,000 because the company enjoys a strong client base and has earnings
that are consistently above industry averages.
Carver is interested in merging his environmental consulting company with Andrews

and Block. Carver’s net assets to be conveyed to the partnership include the
following:

Exam
Book Value Fair Value
Working capital P 50,000 P 40,000
Net property and equipment 60,000 50,000
In addition to the above recorded net assets, Carver feels that his business
contacts and expertise will add value to the existing partnership. Carver has
valued these intangibles at P20,000.
If Carver were to acquire a 30% interest in the new partnership, how much
additional cash would have to contribute to the partnership?
a. P20,000 c. P42,000
b. P22,000 d. None of the above
21. DJD Builders has identified the following overhead costs and cost drivers for the
coming year:
Overhead Item Cost Driver Budgeted Cost Budgeted Activity Level
Machine Setup Number of P 20,000 200
setups
Inspection Number of
Inspections P 130,000 6,500
Material Number of
handling Material P 80,000 8,000
moves
Engineering Engineering
Hours P 50,000 1,000
P 280,000
The following information was allocated on three jobs that were completed during
the year:
Job 101 Job 102 Job 103
Direct materials P 5,000 P12,000 P 8,000
Direct labor P 2,000 P 2,000 P 4,000
Units completed 100 50 200
Number of setups 1 2 4
Number of inspections 20 10 30
Number of material moves 30 10 50
Engineering hours 10 50 10
Budgeted direct labor cost was P100,000 and budgeted direct material cost was
P280,000.
Compute the cost of each unit of Job 102 using Activity-Based Costing:
a. P340 c. P440
b. P392 d. P520
22. The Hotel Dian Manufacturing Company has a cycle of 3 days, uses a raw and in
process (RIP) account, and charges all conversion costs to Costs of Good Sold.
At the end month, all inventories are counted, their conversion cost components
are estimated and inventory account balances are adjusted. Raw material cost is
back flushed from RIP to Finished Goods.
The following information is for June:

Beginning balance of RIP account, including P2,000
of conversion cost……………………………………………………………………………… P 15,000
Beginning balance of finished goods account,
including P3,000 of conversion cost………………………………… 23,000
Raw materials credit on credit.……………………………………………………… 500,000
Ending RIP inventory per physical count,
including P2,500 conversion cost estimate………………… 22,500
Ending finished goods inventory per physical count,
including P1,000 conversion cost estimate…………………… 16,000
Compute the amount of Cost of Goods Sold after adjustments were made:
a. P499,500 c. P498,000
b. P493,000 d. P500,000

Exam
Items 23 and 24 are based on the following information:
A chemical company manufactures joint products Pep and Vim, and a by-product. Zest.
Costs are assigned to the joint products by the market value method, which considers
further processing costs in subsequent operations. For allocating joint costs to the
by-product, the market value or reversal cost method is used. The total manufacturing
costs for 10,000 units were P172,000 during the quarter. Production and cost data
follow:
Pep Vim Zest
Units produced 5,000 4,000 1,000
Sales price per unit P50 P40 P 5
Further processing cost per unit 10 5 -
Selling and administrative expense per unit 2
Operating profit per unit 1
23. The value of Zest to be deducted from the joint costs is:
a. P5,000 c. P2,000
b. P3,000 d. Zero
24. Compute the gross profit for Pep:

a. P 0 c. P 80,000
b. P70,000 d. P100,000
25. The debits to Work-in-Process for Department #2 for the month of April of the
current year, together with information concerning production, are presented
below. All direct materials come from Department #1. The units completed include
the 1,200 in process at the beginning of the period. Department #2 uses FIFO
costing.
Work-in-Process – Department #2
1,200 units, ¼ completed P1,200 Product X, 6,200 units P ?
From Dept. 1, 6,000 units 3,600
Direct Labor 8,000
Factory Overhead 4,800
1,000 units, ½ complete P ?
The cost of goods transferred to finished goods is:

a. P17,660 c. P13,000
b. P16,000 d. P12,800
26. On January 1, 20x8 SME A and B each acquired 30 per cent of the ordinary shares
that carry voting rights at a general meeting of shareholders of entity Z for
P300,000. Entities A and B immediately agreed to share control over entity Z. For
the year ended December 31, 20x8 entity Z recognized a profit of P400,000.
On January 2, 20x8 entity Z also declared a dividend of P100,000 for the year
20x7.
On December 30, 20x8 entity Z declared and paid a dividend of P150,000 for the
year 20x8. At December 31, 20x8 the fair value of each venturers’ investment in
entity Z is P400,000. However, there is no published price quotation for entity
Z.
SME A and B must each recognize dividend income for the year 20x8 amounted to:
Cost Model Fair Value Model Cost Model Fair value Model
a. P 45,000 P75,000 c. P 75,000 P75,000
b. P 75,000 P45,000 d. None
27. A local partnership was considering the possibility of liquidation since one of
the partners is solvent (Tillman) and the others are insolvent. Capital balances
at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis,
respectively.
Ding, capital……………………………………………………………………………………………………………… P 60,000
Laurel, capital………………………………………………………………………………………………………… 67,000
Ezzard, capital………………………………………………………………………………………………………… 17,000
Tillman, capital……………………………………………………………………………………………………… 96,000
Ding's creditors filed a P25,000 claim against the partnership's assets. At that
time, the partnership held assets reported at P360,000 and liabilities of P120,000.

Exam
If the assets could be sold for P228,000, what is the minimum amount that Ding's
creditors would have received?
a. P 0 c. P36,000
b. P 2,500 d. P38,720
28. The Keaton, Lewis and Meador partnership had the following balance sheet just
before entering liquidation:
Cash……………………………………………………… P 10,000 Liabilities……………………………… P130,000
Non-cash assets………………………… 300,000 Keaton, capital…………………… 60,000
Lewis, capital……………………… 40,000
________ Meador, capital…………………… 80,000
P310,000 P310,000
Keaton, Lewis and Meador share profits and losses in a ratio of 2:4:4. Noncash
assets were sold for P180,000. Liquidation expenses were P10,000. Assume that
Keaton was personally insolvent with assets of P8,000 and liabilities of P60,000.
Lewis and Meador were both solvent and able to cover deficits in their capital
accounts, if any. What amount of cash could Keaton's personal creditors have
expected to receive from partnership assets?
a. P 0 c. P30,000
b. P26,000 d. P34,000
29. The following account balances were available for the Perry, Quincy and Renquist
partnership just before it entered liquidation:
Cash……………………………………………………… P 90,000 Liabilities……………………………… P170,000
Non-cash assets………………………… 300,000 Perry, capital……………………… 70,000
Quincy, capital…………………… 50,000
________ Renquist, capital……………… 100,000
P 390,000 P390,000
Perry, Quincy and Renquist had shared profits and losses in a ratio of 2:4:4.
Liquidation expenses were expected to be P8,000. All partners were solvent. What
would be the minimum amount for which the non-cash assets must have been sold for,
in order for Quincy to receive some cash from the liquidation?
a. Any amount in excess of P175,000
b. Any amount in excess of P117,000
c. Any amount in excess of P183,000
d. Any amount in excess of P198,667
30. On December 30, 2019, Leigh Museum, a not-for-profit organization received a

P7,000,000 donation of Day Company shares with donor-stipulated requirements as
follows:
• Shares valued at P5,000,000 are to be sold, with the proceeds used to erect
a public viewing building.
• Shares valued at P2,000,000 are to be retained (invested indefinitely), with
the dividends used to support current operations.
As a consequence of the receipt of the Day shares, how much should Leigh report
as temporarily restricted net assets on its 2019 statement of financial position
(balance sheet)?
a. P 0 c. P5,000,000
b. P2,000,000 d. P7,000,000
31. Jenny Co Acquired 80 per cent of the equity share capital of Smith Co on 1 October
20x3. The consideration given was P2,000,000 in cash and 400,000 equity shares of
Jenny Co. On 1 October 20x3 the market value of each Jenny Co’s shares was P3 and
the fair value of Smith Co’s net tangible assets was P2,000,000. The non-
controlling interest was measured at the proportionate share of the acquirer’s
net assets. Due to poor trading conditions the goodwill arising on the acquisition
of Smith Co, goodwill was determined to be impaired by 25 per cent by the reporting
date of 31 March 20x4.
What is the amount of goodwill reported in Jenny Co’s consolidated accounts at 31

March 20x4?
a. nil c. P900,000
b. P300,000 d. P1,200,000

Exam
32. For Job Order No. 369, Escalera Company incurred the following costs for the
manufacture of 200 units of a novelty gadget:
Original cost accumulation:
Direct materials………………………………………………………………………… P 13,200
Direct labor…………………………………………………………………………………… 16,000
Factory overhead (150% of direct labor)…………… 24,000
Total……………………………………………………………………………………………………… P 53,200
Direct costs of ten reworked units:

Direct materials………………………………………………………………………… P 2,000
Direct labor…………………………………………………………………………………… 3,200
Total……………………………………………………………………………………………………… P 5,200
The rework cost was attributable to exacting specifications required by the job
and was charged to the specific order. The units cost of Job Order No. 369 is:
a. P266 c. P292
b. P280 d. P316
33. The Moon Company acquired a 70% interest in The Swan Company for P1,420,000 when
the fair value of Swan's identifiable assets and liabilities was P1,200,000. Moon
acquired a 65% interest in The Homer Company for P300,000 when the fair value of
Homer's identifiable assets and liabilities was P640,000. Moon measures non-
controlling interests at the relevant share of the identifiable net assets at the
acquisition date. Neither Swan nor Homer had any contingent liabilities at the
acquisition date and the above fair values were the same as the carrying amounts
in their financial statements. Annual impairment reviews have not resulted in any
impairment losses being recognized. Under PFRS 3 Business combinations, what
figures in respect of goodwill and of gains on bargain purchases should be included
in Moon's consolidated statement of financial position?
a. Goodwill: P580,000; Gains on the bargain purchases: P116,000
b. Goodwill: Nil or zero; Gains on the bargain purchases: P116,000
c. Goodwill: Nil or zero; Gains on the bargain purchases: Nil or zero
d. Goodwill: P580,000; Gains on the bargain purchases: Nil or zero
34. Summary adjusted trial balance for the home office and branch of TJ Corporation
at December 31, 20x4 are as follows:
Debits: Home Office Branch
Other assets………………………………………………………………………… P 530,000 P 165,000
Inventories, January 1, 20x4 ……………………………… 50,000 45,000
Branch ……………………………………………………………………………………… 200,000 -
Purchases ……………………………………………………………………………… 500,000 -
Shipments from home office ………………………………… - 240,000
Expenses…………………………………………………………………………………… 120,000 50,000
Dividends………………………………………………………………………………… ___100,000 __ _ -
Total debits……………………………………………………………………………… P1,500,000 P 500,000
Credits:
Other liabilities………………………………………………………… P 90,000 P 25,000
Capital stock…………………………………………………………………… 500,000 -
Retained earnings………………………………………………………… 100,000 -
Home office………………………………………………………………………… - 175,000
Unrealized profit in branch inventory…… . 10,000 -
Sales………………………………………………………………………………………… 537,500 300,000
Shipments to branch…………………………………………………… 200,000 -
Branch profit…………………………………………………………………… ____62,500 _________
Total credits…………………………………………………………………………… P1,500,000 P 500,000
Additional information:
a. The home office ships merchandise to its branch at 120% of home office cost.
b. Inventories at December 31, 20x4 are P70,000 for the home office and P60,000
for the branch. The branch inventory is at transfer prices.
Compute the combined:

Net Income Cost of Goods Sold
a. P 370,000 P 480,000
b. P 200,000 P 480,000
c. P 132,500 P 467,500
d. P 200,000 P 467,500

Exam
35. Pasig Garment Company operates a branch in Cabanatuan City. At the end of the
year, the Branch account in the books of the home office at Manila shows a balance
of P150,000. The following information are ascertained:
1. The home office has billed the branch the amount of P37,500 for the
merchandise, which was in transit on December 31.
2. A home office accounts receivable for P10,500 was collected by the branch.
Said collection was not reported to the home office by the branch.
3. Supplies of P4,500 was returned by the branch to the home office but the home
office has not yet reflected in its records the receipt of the supplies.
4. The branch made profit of P10,100 for the month of December but the home
office erroneously recorded it as P11,180.
5. The branch has not received the cash in the amount of P25,000 sent by home
office on December 31. This was charged to General Expense account.
All transactions are presumed to have been properly recorded.
(1) What is the balance of the Home Office account on the books of the branch as
of December 31, before adjustments? (2) What is the adjusted balance of the
reciprocal accounts?
a. (1) P117,420; (2) P106,920 c. (1) P117,420; (2) P179,920
b. (1) P123,000; (2) P 96,420 d. (1) P121,920; (2) P179,920
36. A company enters into bankruptcy proceedings on April 30. Its balance sheet on
that date is as follows:
Cash P 25,000 Accounts payable P 70,000
Merchandise 60,000 Loan payable 150,000
Plant and equipment, net 100,000 Stockholders’ equity (35,000)
Total P185,000 Total P185,000
None of the liabilities are secured. The following transactions occur between
April 30 and August 31:
• Merchandise with a book value of P45,000 was sold for P30,000.
• Plant and equipment with a book value of P40,000 was sold for P25,000.
• Wages and administrative expenses of P10,000 were accrued.
• An initial payment of 30 cents per peso of indebtedness was paid to the
unsecured creditors.
The statement of realization and liquidation would show total: (a)“assets to be

realized” and (b) “liabilities not liquidated”:
a. (a) P160,000; (b) P164,000 c. (a) P160,000; (2) P154,000
b. (a) P185,000; (b) P164,000 d. (a) P185,000; (2) P154,000
37. On 25 June 20x9 Cambridge Co received an order from a new customer, Circus Co.
for products with a sales value of P900,000. Circus Co enclosed a deposit with
the order of P90,000.
On 30 June 20x9 Cambridge Co had not completed credit checks on Circus Co and had
not despatched any goods. Cambridge Co is considering the following possible
entries for this transaction in its financial statements for the year ended 30
June 20x9.
(i) Create a trade receivable for P810,000.
(ii) Include P90,000 in revenue for the year.
(iii) Recognise P90,000 as a contract liability.
(iv) Include P900,000 in revenue for the year.
(v) Do not include anything in revenue for the year
According to PFRS 15 Revenue from Contracts with Customers, how should Cambridge
Co record this transaction in its financial statements for the year ended 30 June
20x9?
a. (i) and (iv) only c. (ii) and (v) only
b. (ii) and (iv) only d. (iii) and (v) only
38. Following are the cost data available:

I. Simpson Company manufactures electric drills to the exacting specifications
of various customers. During April 2012, Job 403 for the production of 1,100
drills was completed at the following costs per unit:

Exam
Direct materials………………………………………………………………………… P 10
Direct labor…………………………………………………………………………………… 8
Applied factory overhead…………………………………………………… 12
P 30
Final inspection of Job 403 disclosed 50 defective units and 100 spoiled
units. The defective drills were reworked at a total cost of P500 and the
spoiled drills were sold for P1,500. What would be the unit cost of the good
units produced on Job 403?
a. P33 b. P32 c. P30 d. P29
II. Bagley Company has two service departments and two producing departments.
Square footage of space occupied by each department follows:
Custodial Services 1,000 ft.

General Administration 3,000 ft.
Producing Department A 8,000 ft.
Producing Department B 8,000 ft.
Total 20,000 ft.
The department costs of Custodial Services are allocated on a basis of square

footage of space. If these costs are budgeted at P38,000 during a given
period, the amount of cost allocated to General Administration under the
direct method would be
a. P15,200 b. P7,125 c. P6,000 d. P 0
a. I – c; II – c c. I – a; II – d
b. I – b; II – d d. None of the above
39. The following information is available for K Co. for June:

Started this month 80,000 Units
Beginning WIP (40% complete) 7,500 Units
Normal spoilage (discrete) 1,100 Units
Abnormal spoilage (discrete) 900 Units
Ending WIP(70% complete) 13,000 Units
Transferred out 72,500 Units
Beginning Work in Process Costs:
Material P 10,400
Conversion 13,800
Current Costs:
Material P120,000
Conversion 350,000
All materials are added at the start of production and the inspection point is at
the end of the process.
What is the cost assigned to ending inventory using FIFO?
a. P75,920 c. P56,420
b. P58,994 d. P53,144
40. Reynolds (Philippine company) acquires 70 percent ownership of Pishot’s

(Indonesian Company) on January 1. At the acquisition date, Pishot’s plant assets
have an historical cost, accumulated depreciation, and remaining life of
675,000,000-rupiah, 135,000,000 rupiah, and eight years, respectively. On May 1,
Pishot acquired plant assets for 60,000,000 rupiah. All assets are depreciated
straight-line with a ten-year life and no salvage value. Below are relevant
exchange rates for the year.
January 1 P.0086
May 1 P.0088
December 31 P.0085
Average January 1 - May 1 P.0089
Average May 1 - December 31 P.0083
Average January 1 - December 31 P.0084
What is the peso amount of (i) depreciation expense and (ii) accumulated
depreciation on the Philippine peso trial balance if the temporal method is
applied?
a. (i) P615,700; (ii) P1,776,700 c. (i) P615,700; (ii) P1,772,250
b. (i) P616,800; (ii) P1,766,700 d. (i) P616,800; (ii) P1,772,250

Exam
41. A hospital has the following account balances:
Revenue from newsstand P 50,000
Amount charged to patients 800,000
Interest income 30,000
Salary expense – nurses 100,000
Bad debts 10,000
Undesignated gifts 80,000
Contractual adjustments 110,000
What is the hospital’s net patient service revenue?
a. P880,000 c. P690,000
b. P800,000 d. P680,000
42. A not-for-profit organization receives two gifts. One is P80,000 and is restricted
for paying salaries of teachers who help children learn to read. The other is
P110,000, which is restricted for purchasing playground equipment. The
organization spends both amounts properly at the end of this year. The organization
records no depreciation this period, and it has elected to view the equipment as
having a time restriction. On the statement of activities, what is reported for
unrestricted net assets?
a. An increase of P80,000 and a decrease of P80,000.
b. An increase of P190,000 and a decrease of P190,000.
c. An increase of P190,000 and a decrease of P80,000.
d. An increase of P80,000 and no decrease.
43. A voluntary health and welfare organization receives a gift of new furniture
having a fair value of P2,100. The group then gives the furniture to needy families
following the Ondoy flood. How should the organization record receipt and
distribution of this donation?
a. Make no entry.
b. Recognize public support of P2,100 and community assistance expense of
P2,100.
c. Recognize revenue of P2,100.
d. Recognize revenue of P2,100 and community expenditures of P2,100.
44. Southern Company’s balance sheet is as follows:

Current assets P 12,000,000
Plant & equipment 150,000,000
Total P 162,000,000
Liabilities P 130,000,000
Common stock, P1 par 400,000
Additional paid-in capital 23,800,000
Retained earnings (10,000,000)
Treasury stock, 6,000 shares (400,000)
Accumulated OCI 18,200,000
Total P 162,000,000
Pecan Corporation is in the process of acquiring Southern. Its research reveals
that Southern’s current assets are carried at P2,000,000 more than fair value,
its plant & equipment is carried at P60,000,000 more than fair value, and it has
the following unreported intangibles:
Fair value
Non-competition agreement P 8,000,000
Skilled employees 4,000,000
Business from prospective customers 16,000,000
Order backlog, i.e. customer related contract 30,000,000
Pecan includes an earnings contingency, with a present value of P1,000,000, as
part of the acquisition agreement.
(1) Pecan finances the acquisition with bonds. If Southern’s shareholders are to
receive P72 per share in cash on acquisition, how much cash must Pecan generate
from the sale of bonds? (2) How much cash must Pecan generate from the sale
of bonds, if it wants to report P40,000,000 in goodwill?
a. (1) P28,368,000; (2) P47,000,000
b. (1) P28,368,000; (2) P48,800,000
c. (1) P28,800,000; (2) P47,000,000
d. (1) P30,368,000; (2) P43,000,000

Exam
Items 45 to 47 are based on the following information:
Joey Monitor Muffler sells franchise arrangements throughout Luzon and Visayas. Under
a franchise agreement, Joey receives P600,000 in exchange for satisfying the following
separate performance obligations:
• franchisees have a five-year right to operate as a Joey Monitor Muffler retail
establishment in an exclusive sales territory
• franchisees receive initial training and certification as a Joey Monitor
Mechanic, and
• franchisees receive a Joey Monitor Muffler building and necessary equipment.
The stand-alone selling price of the initial training and certification is P15,000,
and P450,000 for the building and equipment. Joey estimates the stand-alone selling
price of the five-year right to operate as a Joey Monitor establishment using the
residual approach. Joey Monitor received P75,000 on July 1, 20x6, from Althea and
accepted a note receivable for the rest of the franchise price. Joey Monitor will
construct and equip Altheas’ building and train and certify Althea by September 1,
and Altheas’ five-year right to operate as a Joey Monitor establishment will commence
on September 1 as well.
45. What amount would Joey calculate as the stand-alone selling price of the five year
right to operate as a Joey Monitor retail establishment?
a. P135,000 c. P585,000
b. P150,000 d. P600,000
46. What journal entry would Joey Monitor record on July 1, 20x6, to reflect the sale
of a franchise to Althea?
a. Cash …………………………………………………………………………………… 600,000
Unearned franchise revenue ……………… 600,000
b. Cash …………………………………………………………………………………… 75,000
Notes receivable …………………………………………………… 525,000
Unearned franchise revenue ……………… 600,000
c. Cash …………………………………………………………………………………… 75,000
Franchise revenue …………………………………… 75,000
Unearned franchise revenue …………… 525,000
d. Cash …………………………………………………………………………………… 75,000
Franchise revenue ……………………………………… 600,000
47. How much revenue would Joey Monitor recognize in the year ended December 31, 20x6,
with respect to its franchise arrangement with Althea? (Ignore any interest on
the note receivable.)
a. P 9,000 c. P465,000
b. P450,000 d. P474,000
48. Gupta Industries received a P300,000 prepayment from Packard Associates for the
sale of new equipment. Gupta will bill Packard an additional P100,000 upon
delivery of the equipment. Upon receipt of the P300,000 prepayment, how much
should Holt recognize for a contract asset, a contract liability, and accounts
receivable?
a. Contract asset: P0; contract liability: P300,000, accounts receivable, P0.
b. Contract asset: P300,000; contract liability: P0, accounts receivable, P0.
c. Contract asset: P0; contract liability: P300,000, accounts receivable,
P100,000.
d. Contract asset: P300,000; contract liability: P0, accounts receivable,
P100,000.
49. Accorsi& Sons specializes in selling and installing upscale home theater systems.
On March 1, 20x6, Accorsi sold a premium home theater package that includes a
projector, set of surround speakers, and high-quality leather seats, along with
complete installation service, for P32,500. If sold separately, each of these
goods and services would have cost P15,000 (projector), P12,500 (speakers),
P17,500 (seats), and P3,000 (installation), respectively. How much of the
transaction price would be allocated to the projector, the speakers, the leather
seats, and the installation service, respectively assuming that each of these four
parts of the contract is a separate performance obligation:
a. P15,000;P12,500;P17,500; P3,000 c. P32,500;P0;P0; P0
b. P10,156;P8,463;P11,849; P2,031 d. P27,500;P0;P20,500; P0

Exam
50. NN Company consigns sign pens to retailers, debiting Accounts Receivable for the
retail sales price of the sign pens consigned and crediting Sales. All costs
relating to the consigned sign pens are debited to expenses of the current
accounting period. Net remittances of the consignees are credited to Accounts
Receivable
In December, 800 sign pens costing P60 each and retailing for P100 a unit were
consigned to SS Store. Freight cost of P800 was debited to Freight Expense by the
consignor. On December 31, SS Store remitted P35,505 to NN Company in full
settlement of the balance due. Accounts Receivable was credited for this amount.
The consignee deducted a commission of P10 on each sign pens sold and P45 for
delivery expense. The number of sign pens sold by SS Store is:
a. 355 c. 400
b. 395 d. None of the above
51. How should the cost of issuing debt in an acquisition be recognized in business
combination?
a. Expensed
b. Amortized over the term of the debt
c. Deducted from the value of the debt
d. Deducted from shareholders' equity
52. How should accounting fees for an acquisition be treated in business combination?
a. Expensed in the period of acquisition
b. Capitalized as part of the acquisition cost
c. Deferred and amortized
d. Deferred until the company is disposed of or wound-up
53. A parent company received dividends in excess of the parent company’s share of
the subsidiary’s earnings subsequent to the date of the investment. How will the
parent company’s investment account be affected by those dividends under each of
the following accounting methods?
Cost Model/Method Fair Value Model Cost Model/Method Fair Value Model
a. No effect Decrease c. No effect No effect
b. Decrease No effect d. Decrease Decrease
54. In the preparation of a consolidated statements work paper, dividend income

recognized by a parent company for dividends distributed by its subsidiary is
a. included with parent company income from other sources to constitute
consolidated net income.
b. assigned as a component of the non-controlling interest.
c. allocated proportionately to consolidated net income and the non-
controlling interest.
d. eliminated.
55. When multiple performance obligations exists in a contract, they should be

accounted for as a single performance obligation when
a. each service is interdependent and interrelated.
b. the performance obligations are distinct but interdependent.
c. the product is distinct within the contract.
d. determination cannot be made.
56. Sales from one subsidiary to another are called

a. downstream sales c. inter subsidiary sales
b. upstream sales d. horizontal sales
57. Non-controlling interest in consolidated income is never affected by

a. upstream sales
b. downstream sales
c. Non-controlling interest is affected by all sale
d. None of the above
58. Any intercompany gain or loss on a downstream sale of land should be recognized
in consolidated net income:
I. In the year of the downstream sale.
II. over the period of time the subsidiary uses the land.
III. in the year the subsidiary sells the land to an unrelated party.
a. I c. III
b. II d. I or II
Exam
59. From the viewpoint of a Philippine company, a foreign currency transaction is a
transaction:
a. measured in a foreign currency
b. denominated in a foreign currency.
c. measured in Philippine currency.
d. denominated in Philippine currency.
60. The exchange rate quoted for future delivery of foreign currency is the definition
of a(n):
a. direct exchange rate. c. spot rate.
b. indirect exchange rate. d. forward exchange rate.
61. The best definition for direct quotes would be "direct quotes” measure
a. how much foreign currency must be exchanged to receive 1 domestic currency.
b. current or spot rates.
c. how much domestic currency must be exchanged to receive 1 foreign currency.
d. exchange rates at a future point in time.
62. In a hedge of a firm purchase commitment using an FX forward, how should FX gains
and losses occurring during the exposed liability position period be reported?
a. Recognize currently in earnings.
b. Defer until the transaction date.
c. Defer until the settlement date.
d. Recognize currently in earnings or defer (management’s discretion).
e. None of the above.
63. Which of the following is not one of the four types of hedging categories that
exist?
a. Cash flow hedge. d. Designated hedge.
b. Fair value hedge. e. None of the above
c. Net investment hedge.
64. The arrangement is governed by a contract between the operator and the government
(the grantor) that sets out performance standards, mechanisms for adjusting prices
or rates and arrangement for arbitrating disputes. Such arrangements are often
described as:
a. A “build-operate-transfer” (BOT) arrangement, a “rehabilitate-operate-
transfer” (ROT) or “public-to-private” service concession arrangement.
b. Conditional Cash Transfer Program
c. Feeding Program
d. Housing Program
65. The PFRIC 12 applies only if:

a. the grantor controls or regulates what services the operator must provide
with the infrastructure, to whom it must provide them, and at what price;
and
b. the grantor controls – through ownership, beneficial entitlement or
otherwise - any significant residual interest in the infrastructure at the
end of the term of the arrangement.
c. Both a and b
d. None of the above
66. In comparing the translation and the remeasurement process, which of the
following is true?
a. The reported balance of inventory is normally the same under both methods
b. The reported balance of equipment is normally the same under both methods.
c. The reported balance of sales is normally the same under both methods.
d. The reported balance of depreciation expense is normally the same under both
methods.
67. Which of the following would be used in the calculation of the gross profit
recognized in the third and final year of a construction contract that is accounted
for using the percentage-of-completion (overtime) method?
Actual contract Price Total Costs Income Previously Recognized
a. Yes Yes No
b. Yes Yes Yes
c. Yes No Yes
d. No Yes Yes

Exam
68. When comparing the percentage-of-completion (overtime) and cost recovery methods
of accounting for long-term construction contracts, both methods will report
a. the same balances each period in the Progress Billings account.
b. the same expense for cost of construction each year.
c. the same amount of income in the year of completion.
d. the same inventory carrying value each year during the construction period.
69. The third step in the process for revenue recognition is to

a. determine the transaction price.
b. identify the separate performance obligations in the contract.
c. allocate transaction price to the separate performance obligations.
d. recognize revenue when each performance obligation is satisfied.
70. Partial satisfaction of a multiple performance obligation is reported on the

statement of financial position as
a. contract liability. c. contract asset.
b. receivable. d. unearned service revenue.
- END OF EXAMINATION –
GOD BLESS as ALWAYS!!!
The greatest friend of truth is Time, her greatest enemy is Prejudice, and her
constant companion is Humility.
Humility is nothing but truth, and pride is nothing but lying.
There is no chance, no destiny, no fate, that can hinder or control the firm resolve
of a determined soul.
Unless someone can look into the core of your heart, and see the degree of your
passion, or look into the depths of your soul and see the extent of your will, then
they have no business telling you what you can or cannot achieve. Because while they
may know the odds, they do not know you.

Exam
ANSWERS & SOLUTIONS/CLARIFICATIONS
1. B – (P.93 – P.90) x 100,000 FCs, or
12/12/2022: Original forward rate (90 days) ………………………………… P .90
12/31/2022: Current (remaining) forward rate (71 days) ………………… .93
Forex gain per unit ………………………………………………………………. P .03
Multiplied by: Number of foreign currencies ……………………………….. 100,000
Foreign exchange gain due to hedging of exposed liability ………….. P 3,000(b)
Or,
Manage an exposed position:
Value the forward exchange contract (FEC) at its fair value, measured by changes in the forward
exchange rate (FER). Note that the question asks only for the effect on income from the forward
contract transaction; thus, any effect on income from the foreign currency denominated account
payable is not included in the answer.
FER, 12/12/22 P.90
FER, 12/31/22 P.93
AJE:
Forward Contact Receivable 3,000
Foreign Exchange Gain 3,000
Revalue forward contract:
P3,000 = 100,000 FCU x (P.93 - P.90) change in forward rates
Foreign Exchange Loss 10,000

Account Payable 10,000
Revalue foreign currency payable:
P10,000 = 100,000 FCU x (P.98 - P.88) change in spot rates
2. B – (P.93 – P.90) x 100,000 FCs, or

12/12/2022: Original forward rate (90 days) ……………………………………….. P .90
12/31/2022: Current (remaining) forward rate …………………………………….. .93
Forex gain per unit ……………………………………………………………………… P .03
Multiplied by: Number of foreign currencies ……………………………………… 100,000
Foreign exchange gain due to foreign currency commitment ………………. P 3,000
Or,
Hedge of a Firm Commitment:
Value FEC based on changes in forward rate.
AJE:
Forward Contract Receivable 3,000
Revalue forward contract, using the forward rates.
Foreign Exchange Loss 3,000
Firm Commitment 3,000
Recognize loss on firm commitment.
Again, note that the question asks only about the effect on income from the forward contract, not the
underlying firm commitment portion of the transaction
3. B – (P.93 – P.90) x 100,000 FCs, or

12/12/2022: Original forward rate (90 days) ………………………………………….. P .90
12/31/2022: Current (remaining) forward rate (71 days) …………………………… .93
Forex gain per unit ………………………………………………………………………… P .03
Multiplied by: Number of foreign currencies ………………………………………… 100,000
Foreign exchange gain due to speculation …………………………………………. P 3,000(b)
Or,
Speculation:
Value forward exchange contract at fair value based on changes in the forward rate
AJE:
Forward Contract Receivable 3,000
4. C – 20 million x 240.4/60.4 = 80 million

Exam
5. C - joint arrangement – partnership in nature
Investment in JO Tan
15,000 before adj. 10,500 27,000
10,500 MI, end 4,500
Sal. 12,000 25,500 Net Income 10,500 31,500
13,500 NI after salary 21,000
6. B
To equate P40,000 to P25,000 plus bonus, the bonus should amount to P15,000 (P40,000 – P25,000). Based
on the foregoing the following equation should be developed:
Bonus = 10% (NI – Salaries – Bonus)
P15,000 = .10 [NI – (P100,000 + P25,000) – P15,000]
P15,000 = .10 [NI – P140,000]
P15,000 = .10 NI – P14,000
P29,000/.1 = NI
NI = P290,000 (b)
OR, Alternatively
P40,000 = P25,000 + .10 (NI – salaries – bonus)
P40,000 = P25,000 + .10 [NI – (100,000 + P25,000) – P15,000]
P40,000 = P25,000 + .10 [NI – P140,000]
P40,000 = P25,000 + .10 NI – P14,000
P40,000 = P11,000 + .10 NI
P29,000 = .10 NI
NI = P290,000 (b)
7. B - (220,000 FCUs)x (P0.68) = P149,600
8. B - (220,000 FCUs)x(P.68 - P.70) = P4,400 loss
9. A
Foreign exchange loss before adjustments…………………………………………………P 15,000
Add (deduct): adjustments
Gain on accounts payable – buyer (P64,000 – P60,000)…………………………....( 4,000)
Adjusted foreign exchange loss in the income statement.………………………………P 11,000
The P8,000 loss resulting from translation of a subsidiary is presented at the stockholders’ equity
section of the consolidated balance sheet.
10. C
Cost of the oil: 10,000,000 barrels x P3,185 = P31,850,000,000;
or, alternatively: for every P1:132 rupiah, therefore for P3,185: 420,420 rupiahs. If converted, the cost of
oil in terms of Indian rupiah amounted to 4,204,200,000,000 (10,000,000 barrels x 420,420 rupiahs. The
4,204,200,000,000 rupiah peso equivalent would be P31,850,000,000 (4,204,200,000,000 x P1/132 rupiah).
11. C
Total Overhead Costs assigned to Job 1234:
Materials Handling: 3,000 x (P50,000/100,000)………………………………………… P 12,000
Painting: 200,000 x (P200,000/50,000 units)……………………………………………….. 5,000
Assembly: 120,000 x (P120,000/4,000)……………………………………………………… 9,000
P26,000
12. A
LCU – it is assumed that historical rate is not practicable (despite the presence of it), then PAS 21
requires the use of average rate [(2,600,000 - 0)/10 years x 1.8LCU per peso = P144,444]
Peso - expense related to nonmonetary asset such as depreciation should be remeasured using the
historical exchange rate (exchange rate when the equipment was acquired), i.e., :
20x2: (1,700,000 LCU – 0)/10 years = 170,000 LCU /1.5 LCU per peso..P113,333
20x3: (900,000 LCU – 0)/10 years = 90,000 LCU /1.6 LCU per peso…… 56,250
Total………………………………………………………………………………P169,583

Exam
13. A
LCU – is the functional currency, so, the current rate method (translation functional currency into the
presentation currency - FCPC) since the functional currency is the LCU (local currency unit; it should
be noted that if the term “translated” was used it is simply a current rate method). Inventory
account is translated at current rate (25,000 LCU / 2 LCU per peso = P12,500)
Peso – is the functional currency, so, the temporal/remeasurement method (translation into the
functional currency) is appropriate. Inventory is a nonmonetary asset (carried at cost) is
remeasured at the historical exchange rate of 2.2 LCU per peso (25,000 LCU / 2.2 LCU per peso =
P11,364)
14. B
Retained earnings of Parent, 12/31/20x6, Cost Model 360,000
Less: Decreased in Retained earnings of Subsidiary _40,000
RE of Parent, 12/31/20x6, Equity Method (same with Consolidated RE) 320,000
15. B (downstream sales)

Sales – Pot (parent) 1,120,000
- Skillet (subsidiary) 420,000
Total 1,540,000
Add(Deduct): Intercompany sales – down ( 140,000)
Consolidated Sales 1,400,000
CGS – Pot (parent) 840,000
Total 1,092,000
Add(Deduct): Intercompany sales - down ( 140,000)
Unrealized Profit in
Ending Inventory of
Skillet (subsidiary)-down
EI of Skillet :
Sales of Pot 140,000
x: EI of Skillet 40%
EI of Skillet 56,000
X: GP of Pot
(1,120 – 840)
1,120 25% 14,000
Consolidated CGS 966,000
16. B – it should be noted that Parent Company established the transfer price based on its normal price (in
this case it is assumed that the mark-up of the parent which is 25% is also the normal transfer price).
Sales – Pot (parent) 1,120,000
Total 1,540,000
Consolidated Sales 1,400,000

Total 1,092,000
Ending Inventory of
Skillet (subsidiary)-down
EI of Skillet :
Sales of Pot 140,000
x: EI of Skillet 40%
EI of Skillet 56,000
X: GP of Pot
(1,120 – 840)
1,120 25% 14,000
On the other hand, if there was no indication as to the established transfer price as stated in the
problem, then the mark-up of Subsidiary Skillet should be used. The answer then, would be:P1,400,000
and P974,400 (upstream sales)

Exam
Total 1,092,000
Add(Deduct): Intercompany sales - upstream ( 140,000)
Ending Inventory of
Pot (subsidiary)-upstream
EI of Pot:
Sales of Skillet 140,000
x: EI of Pot 40%
EI of Pot 56,000
X: GP of Skillet
(420 – 252)
420 40% 22,400
17. D The foreign currency is the functional currency, so a translation (or current rate method) is
appropriate. All assets are translated at the current exchange rate of P.19.
18. C The peso is the functional currency, so a remeasurement (or temporal method) is appropriate.
Inventory is a nonmonetary asset (carried at cost) is remeasured at the historical exchange rate of
P.16. Marketable equity securities is a nonmonetary asset (carried at market value) are remeasured
at the current exchange rate of P.19.
19. B
I.
P41,500 - [(P3,000 + 6,000) + P14,000 + (P3.50 x 3,600)]…….P 5,900
II.
Actual Factory Overhead (Control):
P2,300 + P3,700 + P19,400 + P5,400 = P30,800
Less: Applied Manufacturing Overhead: P3.50 x 8,500 = 29,750
Underapplied Overhead = P30,800 P29,750 P 1,050
20. B
CC AC Additional
Old 308,000 308,000 / 70%
New 110,000 132,000 22,000
418,000 440,000 = 100%
Old (A & B) New (Carver)

Assets *368,000 *110,000
-: Liabilities 60,000 -0-
Capital (contributed) 308,000 110,000
* Old: P220,000 + P108,000 = P368,000

New: P40,000 + P50,000 + P20,000, intangibles = P110,000
21. A
Job 102:
Direct materials……………………………………………………………………………. P 12,000
Direct labor………………………………………………………………………………….. 2,000
Overhead:
Machine Setup: P20,000/200 = P100 x 2………………………P 200
Inspection: P130,000/6,500 = P20 x 10……………………………………. 200
Material Moves: P80,000/8,000 = P10 x 10………………………………. 100
Engineering: P50,000/1,000 = P50 x 50…………………………………… 2,500 3,000
Production/Manufacturing Costs…………………………………………………….. P 17,000
Divided by: Units completed………………………………………………………….. 50
Cost per unit under ABC………………………………………………………………… P 340

Exam
22. A
Raw and In Process Finished Goods Cost of Goods Sold
13,000 20,000 500
500,000 493,000 493,000 498,000 498,000
2,000
20,000 15,000 499,500
RIP – Conversion Cost FG – Conversion Cost

2,000 3,000
500 2,000
2,500 1,000
23. C
MV of By-product Zest…………………………………………………………………………………………P 5
Less: Selling and administrative expense……………………………………… 2
Operating profit………………………………………………………………………………… 1
Share in Joint Cost per unit………………………………………………………………………P 2
x: Units produced…………………………………………………………………………………………………… 1,000
Share in joint cost………………………………………………………………………………………………P 2,000
24. D
Hyp. MVJt. Costs
Pep: 5,000 x (P50-P10)= P 200,000 x 50% = P100,000
Vim: 4,000 x (P40-P 5) = 140,000 x 50%
P340,000 P170,000*
Joint Costs……………………………………………………………………………………………………………………P172,000
Less: Joint costs allocated to By-product…………………………………… 2,000
Joint costs to joint products……………………………………………………………………P170,000
Sales of Pep: (P50 x 5,000)…………………………………………………………………………P 250,000
Less: Cost of Sales:
Joint costs…………………………………………………………………………P100,000
Further processing cost………………………………………… 50,000 150,000
Gross profit…………………………………………………………………………………… P 100,000
25. B - [P1,200 + 900(2.00)] + [5,000 x (P2.60)] = P16,000
26. C
Dividends declared in 20x8 (P100,000 + P150,000)……………………………………. P 250,000
x: ownership percentage…………………………………………………………………… 30%
Dividend income……………………………………………………………………………...P 75,000
27. B
Ding Laurel Ezzard Tillman Total
Capital before realization 60,000 67,000 17,000 96,000 240,000
Loss on sale (4:2:2:2) (52,800) ( 26,400) (26,400) (26,400) (132,000)
7,200 40,600 ( 9,400) 69,600 108,000
Possible insolvency loss (4:2:2) ( 4,700) ( 2,350) ( 9,400) ( 2,350) -0-
Safe payments 2,500 38,250 0 67,250 108,000
28. D -
Keaton Lewis Meador
Total
Total Interest 60,000 40,000 80,000
180,000
Loss (2:4:4) (26,000) (52,000) (52,000)
(130,000)
34,000 (12,000) 28,000
*50,000
Additional investment 12,000 -
Payments to partners 34,000 28,000 50,000
*Cash, beginning balance………………………………………………… P 10,000
Proceeds……………………………………………………………………. 180,000
Payment of liabilities (assumed paid)…………….………………...... ( 130,000)
Payment of liquidation expenses……………………………………….( 10,000)
Payment to Partners……………………………………………………… P 50,000*

Exam
29. C
Quincy capital before liquidation …………………………………………………… P 50,000
Less: Share in liquidation expenses (8,000 x 40%) …………………………………. P 3,200
Quincy capital before realization of non-cash assets …………………………... P 46,800
Less: Cash received by Quincy (minimum) ………………………………………... P 0
Share in the loss on realization …………………………………………………………P 46,800
Divided by: Profit and loss ratio ……………………………………………………….. P 40%
Loss on realization ………………………………………………………………………..P 117,000
Less: Non-cash assets ……………………………………………………………………. 300,000
Proceeds from sale …………………………………………………………………… P 183,000
30. C
The shares valued at P5,000,000 should be classified as temporary restricted net assets since it is intended
for a particular purpose (purpose restrictions) which were not yet released. While, the P2,000,000 should
be considered as permanently restricted for reason that they are to be retained indefinitely
(perpetually).
31. D
FV of Subsidiary:
Consideration transferred:
Cash P 2,000,000
Shares: 400,000 shares x P3 1,200,000
FV of NCI (20% x P2,000,000) 400,000 P 3,600,000
Less: BV of Smith 2,000,000
Allocated excess P 1,600,000
Less: O/U of A & L (BV=FV) -0-
Positive Excess: Goodwill P 1,600,000
Less: Goodwill impairment (25%) ____400,000
Positive Excess: Goodwill (net of impairment) P 1,200,000
32. D
Original costs charged to Work-in-Process P 53,200
Add: Rework Costs
Direct Materials P 2,000
Direct Labor 3,200
Applied Overhead (150% of P3,200) 4,800 10,000
Total Costs of Job No. 369 P 63,200
Divided by: Good Units _____200
P 316
33. D
Fair value of Subsidiary - Swan
Consideration transferred………………………………………………………………… P1,420,000
Less: Fair value of identifiable assets and liabilities of Swan (70% x P1.2 million).. 840,000
Goodwill (partial)..……………………………………………………………………………P 580,000
Goodwill is carried as an asset in the consolidated statement of financial position.
Fair value of Subsidiary - Homer

Consideration transferred………………………………………………………………… .P 300,000
Less: Fair value of identifiable assets and liabilities of Homer (65% x P640,000)….. 416,000
Gain on bargain purchases…………………………………………………………………P(116,000)
Gain on a bargain purchase is recognized in profit or loss not on the statement of financial position.
Notes:
1. Moon measures non-controlling interests at the relevant share of the identifiable net assets at the
acquisition date; therefore partial goodwill is in effect.
2. Fair value is assumed to be the same with the carrying/book value.

Exam
34. D
Sales (P537,500 + P300,000)……………………………………………….………. P 837,500
Less: Cost of goods sold
Merchandise inventory, beg. [P50,000 + (P45,000 / 1.20)]P 87,500
Add: Purchases…………………………………………………. 500,000
Cost of Goods Available for Sale…………………………... P 587,500
Less: MI, ending [P70,000 + (P60,000 / 1.20)]………………. 120,000 467,500
Gross profit………………………………………………………………. P 370,000
Less: Expenses (P120,000 + P50,000).………………………………. 170,000
Net Income……………………………………………………………… P 200,000
35. C- use T-accounts if possible.

Home Office Books Branch Books
(Branch Current- Dr. (Home Office Current –
balance) Cr. balance)
Unadjusted balance P150,000 P117,420
Add (deduct) adjustments:
In transit 37,500
HO A/R collected by br. 10,500
Supplies returned ( 4,500)
Error in recording Br. NI ( 1,080)
Cash sent to branch
to General Expense by HO 25,000 25,000
Adjusted balance P 179,920 P 179,920
36. A
Statement of Realization and Liquidation

Assets to be
realized: Assets realized:
Merchandise P 60,000 Merchandise P 30,000
Plant and Plant and
equipment _100,000 P160,000 equipment _25,000 P 55,000
Liabilities liquidated: Assets not realized:

Accounts payable P 21,000 Merchandise P 15,000
Plant and
Loan payable __45,000 66,000 equipment _60,000 75,000
Liabilities not Liabilities to be

liquidated: liquidated:
Accounts payable P 49,000 Accounts payable P 70,000
Loan payable 105,000 Loan payable _150,000 220,000
Accrued expenses __10,000 164,000
Liabilities incurred:
Accrued expenses 10,000
________ Loss on realization 30,000

Total P390,000 Total P390,000
37. D – no sale has taken place as control of the goods has not been transferred, but Cambridge Company
must recognize a contract liability (since no delivery of goods yet). It reflects the fact that it has received
P90,000 prior to transferring goods to its customer.
38. B
I. – (b)
The original production of 1,100 drills cost P33,000 (1,100 drills x P30 per drill). The reworking of the defective
drills (i.e. P500) increased the cost total to P33,500. The P1,500 received from the sale of the 100 defective
units should be subtracted from the total cost incurred in producing the 1,100 drills. Therefore, the total cost
for producing 1,000 good drills equals P32,000 (P33,000 + P500 – P1,500). Yielding a unit cost good drills of
P32.
II. – (d) - Zero, there are no allocations between service departments when using the direct method.
Exam
39. B
Actual
IP, beginning 7,500
Started in Process 80,000
87,500
FIFO
Actual WD EUP- M WD EUP-CC
IP, beginning 7,500 0 0 60% 4,500
Started, Fin. and Transf 65,000 100%65,000 100% 65,000
IP, ending 13,000 100%13,000 70% 9,100
NL 1,100 100% 1,100 100% 1,100
AL ___900 100%___900 100% ___900
87,500 80,000 80,600
Cost per EUP P120,000 P350,000
80,000 80,600
P1.50 P4.34
Cost of IP, ending:
CPD:……………………………………………………………………………………………………………………………………………………P -0-
CTD: (Current)
Materials: 13,000 x P1.50……………………………………………………………………………… 19,500
Conversion cost: 9,100 x P4.34………………………………………………………………… 39,494
P 58,994
40. A
(i) [(675,000,000 - 135,000,000)/8] x P.0086 + (60,000,000/10) (8/12) x P.0088 = P 615,700
(ii) Beginning balance 135,000,000 x P.0086 P1,161,000
Current period depreciation expense
[(675,000,000 - 135,000,000)/8]x P.0086 + (60,000,000/10) (8/12) x P.0088 __615,700
Ending balance P1,776,700
41. C - Amounts charged to patients of P800,000 less contractual adjustments, P110,000 = P690,000.
42. A - (Because of the time restriction, the amount spent for playground equipment remains in temporarily
restricted net assets until depreciated. The equipment was bought at the end of the year so that no
depreciation was recorded and no reclassification was made.)
43. B
44. A
(1) Southern has 400,000 – 6,000 = 394,000 shares outstanding. 394,000 x P72 = P28,368,000
(2) Fair value of identifiable net assets acquired = P10,000,000 + P90,000,000 + P8,000,000 +
P30,000,000 - P130,000,000 = P8,000,000.
To report P40,000,000 in goodwill, the total acquisition cost must be P48,000,000. The earnings
contingency is P1,000,000, so P47,000,000 in cash must be paid.
45. A
Total amount of franchise agreement P 600,000
Less: stand-alone selling price of training (15,000)
Less: stand-alone selling price of building and equip. __(450,000)
Stand-alone selling price of five-year right P 135,000
46. B - As of July 1, 20x6, Joey Monitor has not fulfilled any of its performance obligations, so the entire
P600,000 franchise fee is recorded as deferred revenue.
Cash 75,000
Notes receivable 525,000
Unearned/Deferred revenue 600,000
47. D - On September 1, 20x6, Joey Monitor has satisfied its performance obligations with respect to training
and certifying Perkins and delivering an equipped Joey Monitor building. Therefore, Joey Monitor
should recognize revenue of P15,000 + P450,000 = P465,000 on that date. In addition, by December 31,
20x6, Joey Monitor has earned 4 months of revenue (September – December) associated with the five-
year right it granted to Althea, so Joey Monitor should recognize revenue of P135,000 × (4 ÷ (5 × 12)) =
P9,000 associated with that right. Total revenue recognized for the year ended December 31, 20x6, is
P465,000 + P9,000 = P474,000.

Exam
48. A - The P300,000 is a prepayment and so is a contract liability. The P100,000 owed upon delivery is
neither a contract asset nor an account receivable, because Gupta has not fulfilled its performance
obligation and so has neither a conditional nor an unconditional right to receive payment.
49. B – Accorsi & Sons must identify each obligation’s share of the sum of the stand-alone selling prices of
all performance obligations:
P15,000
Projector: = 31.25%
P15,000 + 12,500 + 17,500 + 3,000
P12,500
Surround speakers: = 26.04%
P15,000 + 12,500 + 17,500 + 3,000
P17,500
Leather seats: = 36.46%
P15,000 + 12,500 + 17,500 + 3,000
P3,000
Installation service: = 6.25%
P15,000 + 12,500 + 17,500 + 3,000
Accorsi & Sons would allocate the total selling price of P32,500 based on the stand-alone selling
prices:
Projector: P32,500 × 31.25% = P10,156.25
Surround speakers: P32,500 × 26.04% = 8,463.00
Leather seats: P32,500 × 36.46% = 11,849.50
Installation service: P32,500 × 6.25% = 2,031.25
Total: 100.00% P32,500.00
50. B – 395
Sales (unknown) x
Less Charges:
Commission (unknown)
( )
__x__ P10
P100
Delivery expense __P45__ ________
Remittance P35,505
x- [( _x__ ) P10 + P45 ] = P35,505

100
x – _P10x_ = P35,550
P100
P100x – P10x = P3,555,000
P90x = P3,555,000
x = P39,500
Number of ball pens sold = _P39,500_ = 395
P100 per unit
51. C 56. D 61. C 66. C

52. A 57. B 62. A 67. B
53. C 58. C 63. D 68. A
54. D 59. B 64. A 69. A
55. A 60. D 65. C 70. C
Good luck and GOD BLESS!!!

**The greatest mistake you can make is to continually fear making mistakes.**
**When all else is lost, the future still remains.**
**The greatest mistake you can make is to continually fear making mistakes.**
Great achievements are not done by strength but by perseverance.
The secret of life is not just to live, but to have something worthwhile to live for.
Your mind was framed to succeed
Your hand was armed with skill,
Your face was the mould of great faith and courage,
And your HEART with the throne of will.
It is the habit of a mind which attaches to abstractions with passion which gives vast results.
There are storms to be considered, problems to be reckoned with, crisis to be encountered, high seas to contend
with, unfateful events that should be hurdled and they are phenomenon to be shunned with great faith and
courage.
Parting is a very sweet sorrow…
GOD’s LOVE is like a river that keeps on flowing…

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ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

ADVANCED FINANCIAL ACCOUNTING and REPORTING FINAL PRE-BOARD EXAMINATION

Use the following information for questions 1 to 3:

2. DD entered into the second forward contract to hedge a commitment to purchase

In the final settlement, how much did Tan receive?

6. MM is trying to decide whether to accept a salary of P40,000 or a salary of P25,000

7. Swan’s entry on November 2, 2022 included a:

In Connie’s 2022 consolidated income statement, what amount should be included as

What is the cost of the oil?

11. Cebu Enterprises is a Philippine exporter of souvenir items manufactured in the

Page 2 of 24 0915-2303213  resacpareview@gmail.com

Items 15 and 16 are based on the following information:

15. What are consolidated sales and cost of goods sold?

Use the following information for questions 17 and 18.

Page 3 of 24 0915-2303213  resacpareview@gmail.com

(b) Time tickets for the month were chargeable as follows:

(c) Other information:

Carver is interested in merging his environmental consulting company with Andrews

Page 4 of 24 0915-2303213  resacpareview@gmail.com

The following information is for June:

Page 5 of 24 0915-2303213  resacpareview@gmail.com

24. Compute the gross profit for Pep:

The cost of goods transferred to finished goods is:

Page 6 of 24 0915-2303213  resacpareview@gmail.com

30. On December 30, 2019, Leigh Museum, a not-for-profit organization received a

What is the amount of goodwill reported in Jenny Co’s consolidated accounts at 31

Page 7 of 24 0915-2303213  resacpareview@gmail.com

Direct costs of ten reworked units:

Compute the combined:

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All transactions are presumed to have been properly recorded.

The statement of realization and liquidation would show total: (a)“assets to be

38. Following are the cost data available:

Page 9 of 24 0915-2303213  resacpareview@gmail.com

Custodial Services 1,000 ft.

The department costs of Custodial Services are allocated on a basis of square

39. The following information is available for K Co. for June:

40. Reynolds (Philippine company) acquires 70 percent ownership of Pishot’s

Page 10 of 24 0915-2303213  resacpareview@gmail.com

44. Southern Company’s balance sheet is as follows:

Page 11 of 24 0915-2303213  resacpareview@gmail.com

Page 12 of 24 0915-2303213  resacpareview@gmail.com

54. In the preparation of a consolidated statements work paper, dividend income

55. When multiple performance obligations exists in a contract, they should be

56. Sales from one subsidiary to another are called

57. Non-controlling interest in consolidated income is never affected by

65. The PFRIC 12 applies only if:

Page 14 of 24 0915-2303213  resacpareview@gmail.com

69. The third step in the process for revenue recognition is to

70. Partial satisfaction of a multiple performance obligation is reported on the

GOD BLESS as ALWAYS!!!

Page 15 of 24 0915-2303213  resacpareview@gmail.com

Foreign Exchange Loss 10,000

2. B – (P.93 – P.90) x 100,000 FCs, or

3. B – (P.93 – P.90) x 100,000 FCs, or

4. C – 20 million x 240.4/60.4 = 80 million

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Sal. 12,000 25,500 Net Income 10,500 31,500

13,500 NI after salary 21,000