No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

AFAR Batch 6 Joshua Final Preboard Questionnaire

1. The sale of inventories by a parent company to a subsidiary:

A. Affects consolidated net income under a periodic inventory system but not
under a perpetual inventory system.
B. Does not result in consolidated income until the merchandise is sold to
outside parties.
C. Does not require a working paper adjustment if the merchandise was
transferred at cost.
D. Enters the consolidated revenue computation only if the transfer was at arms-
length.

2. Manor Construction Corporation entered into a fixed-price contract to construct

an office building for P5,000,000 during the year 2012. Information relating to the
contract is as follows:
Year-end 2012 Year-end 2013
Percentage of completion 20% 60%
Estimated total cost of 3,750,000 4,000,000
completion
Income recognized 250,000 600,000
(cumulative)

Contract cost incurred during 2013 was:

A. 2,400,000 B. 1,600,000 C. 1,650,000 D. 1,750,000

3. A home office has a branch in Cebu. The branch buys merchandise from outside
parties and also receives merchandise from the home office for which it is billed
at 20% above cost. Below are excerpts from the trial balances and other data of
the home office and its branch for the month just ended:

Home Office:
Cr: Allowance for overvaluation 1,850,000
Cr: Shipments to branch 4,250,000
Cebu Branch:
Dr: Beginning Inventory 7,200,000
Dr: Shipments from home office 5,100,000
Dr: Purchases 2,050,000
Month-end branch inventory:
From home office, at billed price 5,850,000
From outside parties, at cost 1,450,000

What is the amount of adjustment to cost of sales because of branch sales for the
month just ended?

A. 875,000 B. 1,000,000 C. 1,850,000 D. 975,000

4. Marikina Micro is a manufacturer of leather cases for cellphones. Its cost

accounting system follows process costing using average cost method. An
examination of the company’s production process reveals that materials are
added at the beginning of production and overhead is applied to each product at
the rate of 70 percent of direct labor cost. There was no finished goods inventory

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

at the beginning of June. A further review of the company’s inventory cost

records provides you with the following data:

QUANTITIES
Work in process, June 1, 2013
(70% complete as to labor and overhead) 50,000
Units started during June 650,000
Work in process, June 30, 2013
(40% complete as to labor and overhead) 200,000

COST DATA Materials Direct Labor

Work in process, June 1 1,875,000 537,500
Cost added in June 12,125,000 8,162,500

At the end of June, the cost of finished goods inventory was determined to be P72,500.
What is the cost of goods sold?

A. 2,200,500 B. 2,202,500 C. 2,502,500 D. 2,275,000

5. Hans, Lance, Arthur and Sidd own a publishing company that they operate as a
partnership. Their agreement includes the following:
 Hans will receive a salary of P20,000 and a bonus of 3% of income after all the
bonuses
 Lance will receive a salary of P10,000 and a bonus of 2% of income after all the
bonuses
 All the partners are to receive the following: Hans – P5,000; Lance – P4,500;
Arthur – P2,000; and Sidd – P4,700, representing 10% interest on their average
capital balances.
 Any remaining profits are to be divided equally among the partners
 Partnership reports a profit of P40,000
How much is Lance’s share in the profit if profit is distributed in the following order of
priority: Interest on invested capital, then bonuses, then salary, and then according
to profit and loss percentage?
A. 12,560 B. 13,235.75 C. 12,433 D. 12,830.75

6. Bly Company uses the weighted-average method in its process costing system.
During March, Bly Company's Department Y costs per equivalent unit were as
follows:

Materials P1
Conversion 3
Transferred-in 5

There were 4,000 units (40% complete with respect to conversion cost and 0%
complete with respect to materials cost) in Work in Process at March 31. The total costs
assigned to the March 31, Work in Process inventory should be:
A. 36,000 B. 28,800 C. 27,200 D. 24,800

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

7. The following information for Cedric Company during March:

Accounts payable, March 1 36,000
Work in process, March 1 180,000
Finished goods, March 1 300,000
Materials, March 31 90,000
Accounts payable, March 31 60,000
Finished goods, March 31 360,000
Actual factory overhead for March 900,000
Cost of goods sold 1,800,000
Payment of accounts payable (account is 210,000
used for materials only)

Factory overhead is applied at 200% of direct labor cost. Jobs still in process on March
31 have been charged P36,000 for materials and P72,000 for direct labor (3,000 hours).
Actual direct labor hours, 60,000 at P8 per hour. Compute for the materials inventory on
March 1:

A. 234,000 B. 204,000 C. 348,000 D. 408,000

8. Makati Garment Company operates a branch in Bacolod City. At the end of the
year, the branch account in the books of the home office at Makati shows a
balance of P600,000. The following information is ascertained:

 The branch made a profit of P40,400 for the month of December but the home
office erroneously recorded it as P44,720.
 The branch has not received the cash in the amount of P100,000 sent by home
office on December 31. This was charged to General Expense account by the
home office.
 The home office has billed the branch the amount of P150,000 for merchandise,
which was in transit on December 31.
 Supplied of P18,000 was retuned by the branch to the home office but the home
office has not yet reflected in its records the receipt of the supplies.
 A home office accounts receivable for P42,000 was collected by the branch. Said
collection was not reported to the home office by the branch.

What is the unadjusted balance of the Home Office account of Bacolod branch:
A. 427,680 B. 569,680 C. 385,680 D. 469,680

9. Entity P has a 90% controlling interest in Entity S. On December 31, 2030, the
carrying value of Entity S’s net assets in Entity P’s consolidated financial
statements is P450,000 and the carrying amount attributable to the non-
controlling interest’s in Entity S is 45,000. On January 1, 2031, Entity P sells
80% of the share in Entity S to a third party for cash proceeds of P540,000. As a
result of the sale, Entity P loses control of Entity S but retains a 10% non-
controlling interest in Entity S. The fair value of the retained interest on that date
is P54,000.

Determine the gain or loss on disposal (deconsolidation)

A. P144,000 gain C. P189,000 gain
B. P144,000 loss D. P189,000 loss

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

10. A Philippine entity acquired 60% of the share capital of a foreign entity on June
30, 20x1. The fair value of the net assets of the foreign entity at that date was
$4.5 million. This value was $1.2 million higher than the carrying amount of the
net assets of the foreign entity. The excess was due to the increase in value of
non-depreciable land. The functional currency of the entity is the Php (Peso). The
financial year-end of the entity is December 31, 20x1. The exchange rates at
June 30, 20x1, and December 31, 20x1 were $1 = 40 Php and $1 = 45 Php,
respectively. What figure for the fair value adjustment should be included in the
consolidated financial statements for the year ended December 31, 20x1?

a. Php 202.5 million

b. Php 54.0 million
c. Php 121.5 million
d. Php 32.4 million

11. On December 1, 2029, Marang, Inc. entered into a 120-day forward contract to
purchase 250,000 US dollars for speculative purposes. Marang, Inc. fiscal year
ends on December 31. The exchange rates are as follows:
Date Spot rate Forward rate (3/31/30)
December 1, 2009 P45.00 P45.50
December 31, 2009 46.00 46.50
January 30, 2030 45.60 45.30
March 31, 2030 45.10

How much is the forex gain or (loss) to be reported from this forward contract in 2030?
a. P(50,000) b. (P350,000) c. P300,000 d. (P225,000)

12. Y hospital, a Not for Profit hospital affiliated with a religious group, reported the
following information for the year ended December 31, 2030:

Patient service rendered P2,400,000

Bad debts expense 50,000
Contractual adjustments with third party payors 200,000
Charity care 150,000
Allowance for discounts to hospital employees 90,000

Net patient service revenues for Y hospital for the year ended December 31, 2030 is

a. P2,250,000 b. P2,110,000 c. P1,960,000 d. P1,910,000

13. On April 1, The collecting officer of Department of Foreign Affairs collected

P100,000 for passports and visa fees. On April 10, the Department of Finance
remitted the P100,000 to the Bureau of Treasury. What is the journal entry to
record the collection of passports and visa fees?

a. Debit Cash- Treasury/Agency Deposit, Regular and Credit Passport and Visa Fees
P100,000
b. Debit Cash- Treasury/Agency Deposit, Regular P100,000 and Credit Cash-
Collecting Officer P100,000.
c. Debit Cash in Bank- Local Currency Current Account P100,000 and Credit Cash
Collecting Officers P100,000.
d. Debit Cash Collecting Officers P100,000 and Credit Passport and Visa Fees
P100,000.

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

14. TIP University received P4,560,000 from student tuition and fees for the school
year 20x1summer session. The session began on June 30, 20x1, and ended in
August 5,20x1. The university’s fiscal year end is June 30. How should the
university report the P4,560,000 of receipts in its financial statements for the year
ended June 30, 20x1?
a. Deferred revenue of P4,560,000
b. Current revenue of 4,560,000
c. Current revenue of P1,140,000
d. Restricted current revenue of P4,560,000

15. On July 1, 2020, the parent corporation issued financial liability classified at fair
value through profit or loss as part of consideration given up to acquire 80% of
ordinary shares of subsidiary which resulted to goodwill from business
combination. At the end of reporting period, the fair value of the said financial
liability increases due to movement of its trading price in the exchange market.
How shall the change be accounted for by the parent corporation?

a. The financial liability shall not be remeasured and its subsequent settlement shall be
accounted for within equity.
b. The change in fair value shall be recognized by parent corporation as loss on
changes in fair value in its profit or loss of Statement of Comprehensive Income.
c. The change in fair value shall be recognized by parent corporation as loss on
changes in fair value in its other comprehensive income with reclassification
adjustment of Statement of Comprehensive Income.
d. The change in fair value shall be retroactively adjusted to goodwill from business
combination by increasing it because it is a measurement period adjustment which
occurred within a period of 12 months from the acquisition date.

16. Under IAS 27, if the parent corporation prepares separate financial statements,
which of the following statements concerning the three alternative methods of
accounting for investment in subsidiary is true?

a. Under fair value model, dividend income from subsidiary shall not be recognized by
the parent corporation because it shall be eliminated.
b. Under cost model, share in net income of subsidiary shall be recognized by the
parent corporation.
c. Under equity method, dividend income from subsidiary shall be recognized at the
date of declaration by the subsidiary corporation’s board of directors.
d. Under equity method, gain on bargain purchase shall be recognized by the parent
corporation at the date of acquisition if the consideration given up is less than the fair
value of net asset acquired.

17. Under IFRS 11, which of the following is the proper accounting treatment by joint
venturer in its interest in joint venture?

a. The joint venturer shall subsequently measure its investment in joint venture at fair
value with gain or loss on changes in fair value presented in profit or loss.
b. The joint venturer shall recognize as dividend income in its profit or loss the amount
of dividend received from the joint venture.
c. The joint venturer shall recognize its share in the net income of the joint venture in
its profit or loss by increasing its investment account.
d. The joint venturer shall proportionately consolidate its interest in the joint venture in
its consolidated financial statements.

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

18. Which of the following statements is FALSE regarding the Government

Accounting Manual?

a. Implementing agency refers to the agency to which the funds are transferred for the
purpose of prosecuting the project.
b. The Department of Finance shall keep the general accounts of the Government and,
for such period as may be provided by law, preserve the vouchers and other
supporting papers pertaining thereto.
c. Government funds or property shall be spent or used solely for public purposes.
d. The Tax Remittance Advice is used by the Bureau of Internal Revenue to recognize
the income from taxes withheld by various National Government Agencies.

19. Under IAS 21, which of the following statements is true when translating entity’s
financial statements in functional currency into entity’s presentation currency?

a. Monetary assets and liabilities are translated at closing rate while nonmonetary
assets and liabilities are translated at transaction rate.
b. Equity accounts such as ordinary shares, share premium and treasury shares are
translated at closing rate.
c. Retained earnings are translated at closing rate.
d. Income and expense accounts are translated at date of transaction rate.

20. CC is admitted into the partnership of AA and BB by investing cash equivalent ¼

of their capital. Which of the following is true after the admission of CC?
A. The capital of AA and BB will decrease by ¼
B. Assets of the partnership will remain the same
C. Assets of the partnership will increase
D. Total partners’ equity will remain the same

21. In the separate financial statement of the parent company, which of the following
statements concerning the different accounting treatment for investment in
subsidiary is correct?
A. Under equity method, cash or property dividend received shall be recognized
as dividend income by the parent.
B. Under cost method, the transaction cost directly attributable to acquisition of
the investment shall be expensed as incurred.
C. Under fair value model, the parent company shall recognize share in net
income from the subsidiary.
D. Regardless of the method, the investment in subsidiary account shall be
presented as noncurrent asset in the parent’s separate statement of financial
position.

22. In the consolidated statement of comprehensive income to be prepared by the

parent corporation, which of the following items will affect both consolidated net
income attributable to parent and non-controlling interest in net income?
A. Amortization of difference between fair value and book value of liability of
subsidiary.
B. Recognition of gain on bargain purchase arising from business combination.
C. Realization of unrealized gain or (loss) from sale of parent company to
subsidiary company.
D. Impairment loss on goodwill recognized when the noncontrolling interest is
measured at proportionate share of fair value of net assets of subsidiary.

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

23. In presenting foreign currency denominated transactions to the functional

currency of the entity, which of the following statements is correct?
A. Monetary items shall be initially recognized and measured at the exchange
rate prevailing at the end of the reporting period.
B. Foreign currency gain or loss arising from translation of the foreign currency
denominated items to functional currency shall be presented in other
comprehensive income with reclassification adjustment to profit or loss if
realized.
C. When nonmonetary items are translated from foreign currency to functional
currency in the financial statements, foreign currency gain of loss will be
recognized.
D. Foreign currency denominated income statement accounts shall be translated
using the exchange rate at the date of transaction.

24. A branch journal entry debiting Home Office and crediting Cash may be prepared
for
A. A home office’s transmittal of cash to the branch
B. A home office’s collection of branch’s accounts receivable
C. A branch’s acquisition for cash of plant assets to be carried in the home office
accounting records
D. A home office’s payment of branch expenses

25. Which of the following statements is true?

A. An income reported by the branch is recorded by the home office as a debit to
Income Summary – Branch
B. The transfer of branch net income to the home office represents a branch
closing entry
C. Upon instruction by the home office, the branch (Branch 1) sends cash to
another branch (Branch 2). The home office records the transaction by
debiting the Investment in Branch 1 and a credit to Branch 2
D. All of the above are true

26. Under the cost-recovery method,

A. Revenue is recognized using the percentage of completion
B. Cost is recognized using the percentage of completion
C. The gross profit shall be recognized upon completion
D. Revenue is not recognized during construction

On April 1, 2023, Rosé Company, a Philippine entity, sold merchandise to a foreign

entity on account. The invoice price is FC100,000 and the payment is due in 60 days.
The buyer was able to pay the amount in full at the due date.

The following currency exchange rates are provided:

Buying Selling
January 1, 2023 P24.12 P24.25
April 1, 2023 24.03 24.15
April 30, 2023 24.02 24.14
May 1, 2023 24.18 24.30
May 31, 2023 24.15 24.22
December 31, 2023 (year-end) 24.12 24.25

7|P a g e RFERRER /RSoriano/PDEJESU/AT ang

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

27. How much is the sales to be recognized for the year?

A. P2,403,000
B. P2,415,000
C. P2,422,000
D. P2,412,000

28. How much is the amount of foreign exchange gain (loss) to be recognized upon
receipt of cash?
A. P15,000 gain
B. P15,000 loss
C. P12,000 gain
D. P12,000 loss

On January 1, 2023, AA, BB and CC agreed to establish a joint operation for the
purpose of manufacturing raw materials to be used in their respective businesses. They
agreed to contribute the following:
 AA – P200,000 cash
 BB – Equipment carried at P215,000 and a fair value of P200,000
 CC – Machinery carried at P185,000 and a fair value of P200,000

The equipment is to be depreciated over 5 years while the machinery is to be

depreciated over 10 years.

29. How much is the amount of property, plant and equipment, net to be recognized
in the statement of financial position as of December 31, 2023 of BB?
A. P340,000
B. P326,500
C. P352,000
D. P338,500

30. How much is the amount of property, plant and equipment, net to be recognized
in the statement of financial position as of December 31, 2023 of CC?
A. P340,000
B. P326,500
C. P352,000
D. P338,500

The Home Office had two branches, Cebu and Davao. At the end of the year,
December 31, 2023, the reciprocal account in Cebu Branch was P256,600. However,
there were transactions discovered to have errors.
 The home office shipped merchandise costing P87,000 to Cebu branch, but was
record by the branch in the amount of P78,000.
 Cebu collected Davao’s customer accounts worth P25,000, but Davao charged
its reciprocal account in the amount of P52,000 and the home office recorded the
correct transaction.

31. How much is the unadjusted balance of the Investment in Cebu account?
A. P247,600
B. P220,600
C. P238,600
D. P265,600

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

32. How much is the net adjustment in the Home Office Current account of Cebu
branch?
A. P8,900 debit
B. P35,900 debit
C. P17,900 debit
D. P9,000 credit

33. How much is the adjusted balance of the reciprocal accounts?

A. P265,600
B. P247,600
C. P220,600
D. P238,600

On January 1, 2023, P Company purchased 64,000 shares of the 80,000 outstanding

shares of S Company at a price of P1,200,000, with an excess of P30,000 over the
book value of S Company's net assets. P13,000 of the excess is attributed to an
undervalued equipment with a remaining useful life of eight years from the date of
acquisition and the rest of the amount is attributed to goodwill. For the year 2023, P
Company reported a net income of P750,000 and paid dividends of P180,000, while S
Company reported a net income of P240,000 and paid dividends to P Company
amounting to P39,000. The retained earnings of P Company at the end of 2023 per
books is P1,025,000. P Company uses the cost method to account for its investment in
S Company and elected to measure non-controlling interest at fair value on date of
acquisition.

34. How much is the consolidated net income attributable to controlling interests?
A. P901,700
B. P909,500
C. P903,000
D. P750,000

35. How much is the consolidated net income attributable to non-controlling

interests?
A. P47,675
B. P48,325
C. P37,925
D. P48,000

36. How much is the non-controlling interest in net assets as of December 31, 2023?
A. P338,250
B. P328,175
C. P337,925
D. P339,875

37. The Home Office ledger account in the accounting records of a branch is best
described as
a. A revenue account
b. An equity account
c. A deferred revenue account
d. None of the foregoing

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

38. The following journal entry (explanation omitted) appeared in the accounting
records of Marty Corporation's only branch:
Operating Expenses 600,000
Home Office 600,000
The journal entry indicates that:
a. The branch incurred operating expenses for the benefit of the home office
b. The home office incurred operating expenses for the benefit of the branch
c. The branch paid the home office for services rendered to the branch
d. None of the foregoing occurred

39. A debit to the Income Summary ledger account and a credit to the Home Office
account appear in:
a. The accounting records of the home office to record the net income of the
home office
b. The accounting records of the home office to record the net income of the
branch
c. The accounting records of the branch to record the net income of the
branch
d. Some other manner

40. Control over an acquiree can be attained through which of the following?
A. Acquisition of the acquiree assets
B. Acquisition of the acquiree stock
C. Either acquisition of the acquiree assets or stock
D.Neither acquisition of the acquiree assets or stock

41. In an acquisition where there is an exchange of assets for assets, how does the
ownership structure of the acquiree change?
A. There is no change in the acquiree ownership structure
B. The acquirer stockholders become the acquiree stockholders
C. The acquirer and acquiree stockholders share ownership of the
acquiree
D. It is not possible to determine if there is a change in the acquiree
ownership structure

42. In an acquisition where there is an exchange of stock (acquirer) for assets

(acquiree), how does the value of the acquiree net assets change
A. The net assets increase
B. The net assets decrease
C. There is no change in net assets
D. The net assets may increase, decrease or remain the same

43. Which of the following is not a true statement with regard to a statutory merger?
A. One entity continues to exist
B. One entity ceases to exist
C. The name of the new entity is not the same as either of the entities
D. All of the above one true statements with regard to a statutory merger

10 | P a g e RFERRER /RSoriano/PDEJESU/AT ang

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

44. When a subsidiary is acquired sometime after the first day of the fiscal year,
which of the following statements is true?
A. Income from subsidiary is not recognized until there is an entire year of
consolidated operations.
B. Income from subsidiary is recognized from date of acquisition to year-end.
C. Excess cost over acquisition value is recognized at the beginning of the
fiscal year.
D. No goodwill can be recognized.

45. When preparing a consolidated balance sheet. the noncontrolling interest amount
must be presented:
A. It is not disclosed on the balance sheet
B. As a part of liabilities
C. As a part of stockholders' equity
D. In the notes to financial statements

46. Which one of the following balances appears on consolidated financial

statements
A. Goodwill previously reported on the subsidiary's books
B. Investment in subsidiary, reported on the parent's books
C. Dividends, reported on the subsidiary's books
D. Plant assets, reported on the subsidiary's books

47. The business or businesses that the acquirer obtains control of in a business
combination.
a. Business combination
b. Acquirer
c. Acquiree
d. mutual entity

48. An entity that acquires control is

a. Business combination
b. Acquirer
c. Acquiree
d. mutual entity

49. The date on which the acquirer obtains control of the acquiree
a. Acquisition date
b. Settlement date
c. Measurement date
d. Agreement date

50. A business combination in which a new corporation is formed to take over the
assets and operations of two or more separate business entities, with the
previous separate entities being dissolved, is a:
a. Consolidation
b. Merger
c. Pooling of interest
d. Purchase

51. The power to govern the financial and operating policies of an entity so as to
obtain benefits from its activities.
a. Significant influence
b. Joint control
c. Control
d. Dominance

11 | P a g e RFERRER /RSoriano/PDEJESU/AT ang

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

52. The equity in a subsidiary not attributable, directly or indirectly, to a parent.

a. Controlling interest
b. Legal parent
c. Economic subsidiary
d. Non-controlling interest

53. The measurement period shall not exceed

a. One year from the date of acquisition
b. 2 year from the date of acquisition
c. One year from the date of settlement
d. 2 year from the date of settlement

54. Values which the standards allows as temporary valuation for items of assets
and liabilities until the necessary information becomes available
a. Trial and error value
b. Assigned values
c. Provisional amounts
d. Transitory values

55. Acquisition related costs are treated as

a. part of goodwill.
b. adjustment to the cost of combination.
c. expense.
d. contingent consideration.

56. In a purchase business combination, the direct cost of registering and issuing
equity securities to as consideration in a business combination are
a. Added to the parent/investor company’s investment account
b. Charged against share premium of the acquirer
c. Deducted from income in the period of combination
d. None of the above

Bulacan Corporation operates a main store in Baliwag and a branch store in San
Rafael. The branch substantially acquires all its merchandise from the main store,
billed at 30% above the latter’s cost. At August 31, 2022, the records of the branch
indicated the following:
August sales P 87,500
Inventory, August 1 21,250 (50% from outside suppliers)
Shipment from home office 34,375 at billed prices
Purchase from outsiders 15,000
Expenses 25,000
Inventory, August 31 18,750 (P5,000 from outside suppliers)

57. The net income reported by the branch for the month of August, 2022 is
a. P12,560 c. P15,260
b. P16,520 d. P10,625

58. The cost of sales per home office cost is (round computations to next higher
peso).
a. P44,366 c. P46,636
b. P44,663 d. P46,336

59. The inventory allowance realized from branch’s sales to outsiders in August is
a. P 7,509 c. P 5,239
b. P 7,212 d. P 5,539

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

BRAVADO ELECTRONICS has one branch office. The home office bills its branch at
25% above its acquisition cost of merchandise shipped later to the branch. Selected
balances from the Home Office books and the Branch books follow:
HO BOOKS BR BOOKS
Inventory, January 1 P 56,250 P 90,000
Shipment from Home Office 525,000
Purchases 1,687,500 562,500
Shipment to Branch 450,000
Deferred Profit 123,750
Sales 2,250,000 1,350,000
Operating expenses 543,750 206,250

The ending inventory of the Home Office is P281,250; the Branch Office, P135,000. The
cost of sales in the branch is P95,250 more than its actual cost.

60. Calculate the true branch net income

a. P101,250 c. P157,200
b. P196,500 d. P175,200

61. Calculate the combined net income

a. P980,000 c. P890,250
b. P982,500 d. P980,520

On June 1, 2022, Portland Company acquires 100% of the stock of Seattle

Company. On this date Portland has Retained Earnings of P100,000 and
Seattle has Retained Earnings of P50,000. On December 31, 2022, Portland
has Retained Earnings of P120,000 and Seattle Company has Retained
Earnings of P60,000.

62. The amount of Retained Earnings that should appear in the December 31, 2022
consolidated balance sheet is:
a. P180,000 c. P150,000
b. P130,000 d. P120,000

The balance sheet of Piedmont Enterprises and Skelton Company at December 31,
2021 are summarized as follows:
Piedmont Skelton
Assets P5,000,000 P 2,000,000
Liabilities P1,500,000 P 500,000
Capital stock , P40 par 2,500,000
Capital stock, P25 par 1,000,000
Retained earnings 1,000,000 500,000

At the date of acquisition, Skelton’s assets are understated while its liabilities are fairly
valued.

On January 1, 2022, Piedmont purchased 80% of Skelton Company’s outstanding

shares for P2,000,000 when the fair value of Skelton’s net assets was P2,200,000.
Piedmont issued 10,000 previously unissued shares in consideration of the acquisition.

13 | P a g e RFERRER /RSoriano/PDEJESU/AT ang

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

Piedmont is to assign an amount to the non-controlling interests at the date of

acquisition based on the total fair value of Skelton’s outstanding shares.
63. How much is the consolidated assets at the date of acquisition?
a. P9,000,000 c. P8,000,000
b. P9,700,000 d. P 8,700,000

64. How much is the consolidated liability at the date of acquisition?

a. P2,000,000 c. P1,800,000
b. P1,500,000 d. P 500,000

65. How much is the stockholders’ equity in the consolidated balance at January 1,
2022?
a. P7,000,000 c. P6,000,000
b. P5,500,000 d. P6,700,000

66. Assume the amount assigned to the non-controlling interest at the date of
acquisition is based on the total fair value of identifiable net assets at that date,
calculate the amount of goodwill recognized at January 1, 2022.
a. P300,000 c. P 20,000
b. P280,000 d. P240,000

Parent Corporation regularly sells merchandise to its 80%-owned subsidiary, RBD

Enterprises. In 2021, Parent sold merchandise that cost P64,000 to RBD for P80,000.
Half of this merchandise remained in RBD’s December 31, 2021 inventory. During
2022, Parent sold merchandise that cost P100,000 to RBD for P125,000. Forty percent
of this merchandise inventory remained in RBD’s December 31, 2022 inventory.
Selected income statement information for the two affiliates for the year 2022 is as
follows:
Parent Company RBD Enterprises
Sales revenue P 600,000 P 300,000
Cost of goods sold 480,000 250,000
Gross profit P 120,000 P 50,000

67. Consolidated sales revenue for Parent and Subsidiary for 2022 are:
a. P775,000 c. P855,000
b. P800,000 d. P900,000

68. Consolidated cost of goods sold for Parent and Subsidiary for 2022 are:
a. P603,000 c. P615,000
b. P607,000 d. P732,000

P Corporation acquires 70% of the voting shares of S Company at a time when the net
assets of S Company are fairly valued. Separate income statements of P Corporation
and S Company are as follows:
P Corporation S Company
Sales P506,880 P280,320
Cost of sales ( 307,200) (153,600)
Operating expenses ( 92,160) ( 76,800)
Net Income from own operations P107,520 P 49,920

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

Intercompany sales for 2020 and 2021 are summarized as follows:

Selling Unsold at
Cost Price Year-end
Downstream Intercompany sales - 2020 P192,000 P299,520 30%
Upstream Intercompany sales - 2021 134,400 211,200 40%

69. Calculate the consolidated net income for 2021.

a. P158,976 c. P185,769
b. P195,867 d. P167,895

70. Calculate the (1) consolidated net income attributable to the parent’s
shareholders and (2) that which is attributable to the non-controlling interest.
a. (1) P145,671 and (2) P22,224
b. (1) P146,946 and (2) P48,921
c. (1) P146,496 and (2) P39,273
d. (1) P154,176 and (2) P 4,800

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