Problem1: CG and CV, both sole proprietors, decided to combine their business

and form a partnership.

Cash
Accounts Receivable
Property, Plant &
Equipment, net
Other Assets
Goodwill
Total Assets

Accounts Payable
Bank Loan
CG, Capital
CV, Capital
Total Liabilities and Equity

CG
307,
120
1,857,528

3,748,074

4,704,084

2,778,336

746,528
P 7,615,
260

695,622
844,810

P
1,417,205
1,800,000
4,398,055
P
7,615,260

CV
347, 540

8,414,382

3,768,090
4,646,292
8,414,382

The agreed value of the partners property, plant and equipment is only half of their
respective carrying values. In addition, the accounts receivable of 205,000 in CGs
book and 798,600 in CVs book are uncollectible. All liabilities in the books of the CG
and CV will all be assumed by the partnership. Other assets, including goodwill, are
fairly valued. CG is willing to invest/withdraw cash to/from the partnership to bring
his capital balance in accordance with the 50 50 profit and loss ratio.
How much will CG invest (withdraw) to (from) the partnership?
a. 617,511
b. (227, 299)
c. (617,511)
d. 227, 299
ANS: B
Problem 2: The partnership of Master, Idol, and Star has the following account
balances:
Cash
P
36,000
Noncash assets
100,000
Liabilities
P17,000
Master, Capital
69,000
Idol, Capital
(8,000)
Star, Capital
58,000
This partnership is in the process of being
liquidated. Master and Idol are each entitled to 40% of all profits and losses with the
remaining 20% to Star.
What is the maximum amount that Idol has to contribute to this partnership
because of the deficit capital balance?
a. 48,000
b. 19,000
c. 84,000
d. 29,000
Ans: A

Problem 3: Movements in the capital accounts

were as follows:
France, Capital
Paris, Capital
1/1 P
8/25 P
1/1 3/5
P P 8,400
40,000
13,500
60,000
7/6
4/3
9,000
Net income 8,000
10/8
10/31
and interest)
7,500
9,000
The net income

of the partners for the year 2012

(before any deductions for salary

for the year amounts to P 60,000.
is to be divided by:
a. Salaries to Paris and France for the amount of 16,000 and 10,500 respectively
b. Each partner is to be credited 12% interest based on their average capital.
c. Any remainder income or loss is to be allocated based on their beginning
capital.

How much of the net income will be credited to Paris and France?
a. Paris: 36,261 ; France: 23,739
b. Paris: 23,711 ; France: 36,289
c. Paris: 36,289 ; France: 23,711
d. Paris: 23,739 ; France: 36,261
Ans: C
Problem 4: Louis, Vuitton, and Hermes, with capital balances of P133,600;
P83,250; and P65,900 respectively, decided to dissolve the partnership 6 months
prior to year-end. Their profit and loss ratio is 45:25:30. Net income for the period is
P72,000. Balance sheet shows cash at P126,700 and liabilities at P174,960. If
Hermes received P98,750 after payment of P139,710 to outside creditors, how
much was received from sale of non-cash assets?
a. P365,510
b. P440,510
c. P405,260
d. P330,260
Ans: B

Problem 5: Eric, Lydia and Ann established a partnership which is in operation for
two years. Presented below are excerpt from their statement of financial position
for two years.
2012
2011
Accounts receivable
P
P 254,000
312,000
Inventory
278,000
239,000
Prepaid expenses
35,000
21,000
Property,
plant,
and 536,000
409,000
equipment
Accumulated depreciation (76,000)
(53,000)
Accounts payable
Accrued expenses

212,000
98,000

198,000
76,000

Eric, Capital (40)

Lydia, Capital (30)
Ann, Capital (30)

?
?

277,600
208,200
208,200

Cash received from customers

P3,503,000; cash paid to suppliers P2,814,000; payment for expenses
P490,000. After receiving her share from partnership income, Ann decided to retire
from the partnership. Ann is to be paid an amount equal to 90 percent of her
adjusted equity as of the date of her retirement. Assuming there are no
investments/withdrawals during the year, compute for (1) net income for 2012 and
(2) capital balance of Eric after retirement of Ann.
a. (1) P251,000; (2) P361,800
b. (1) P274,000; (2) P403,794
c. (1) P247,000; (2) P370,606
d. (1) P251,000; (2) P394,200
Ans: D
Problem 6: Originals Corporation which is undergoing liquidation. The trustee of
the Originals Co. presents the following information:
P70,000 assets are available to unsecured creditors, P10,000 of which
represents Inventories. It was ascertained that inventories were not pledged
to any liabilities.
Unpaid liabilities are as follows: administrative expenses: P3,500; taxes:
P6,000 and wages: P2,500
Accounts payable and notes payable totalled P100,000. No assets were
pledged on the said liabilities.
Payment to fully secured creditors and partially secured creditors amounts to
P68,000 and P135,000 respectively.
If the recovery percentage is 35 percent, determine the amount of (1) Assets
pledged to fully secured liabilities and (2) partially secured liabilities.
a. (1) P150,000; (2) P100,000
b. (1) P150,000; (2) P200,000
c. (1) P140,000; (2) P200,000
d. (1) P140,000; (2) P100,000
Ans: C

Problem 7: Elizabeth Arden Co. is insolvent and its statement of affairs shows the
following information:
Estimated losses on realization of
P
assets
2,500,000
Estimated gains on realization of
1,450,000
assets
Additional assets
1,300,000
Additional liabilities
520,000
Capital stock
2,220,000
Deficit
1,320,000
The pro-rate payment on the peso to stockholders (estimated amount to be
recovered by stockholders) is:
a. P 0.70
b. P 0.17
c. P 0.87
d. P 0.60
Ans: A
Problem 8: Tumblr, Twitter, and Googleplus formed a joint venture. The contractual
arrangement provides that Googleplus is to manage the venture and is to receive a
salary of 13% of the profit after deduction of the salary as an expense. The net
profit after the salary is to be divided as follows: Tumblr,40%; Twitter,25% and
Googleplus,35%. No separate books are used for the Joint Venture.
Joint venture is terminated after six months of operation. The trial balance prepared
by Googleplus shows the following balances.
Debit
Credit
Joint Venture Cash
P 315,000
Joint Venture
P 209,500
Tumblr, Capital
180,000
Twitter, Capital
85,000
The venture has still some unsold merchandise worth P10,850 which is to be taken
by Googleplus. How much is the total interest of Googleplus?
a. P 294,100
b. P 283,250
c. P 200,500
d. P 93,600
Ans: A

Problem 9: Nicole, Jennifer, and Beyonce formed a joint venture on October 1,

2012. Nicole acts as manager of the venture and is allowed a bonus of 25% of the
profit after the bonus. Jennifer and Beyonce are to be allowed 6% interest on their
original investments. The balance of the profit after bonus is to be divided equally.
Jennifer and Beyonce contributed P99,000 and P135,000 respectively. The venture
sales on account amounted to P360,000. Sales discount of P1,875 were taken. Sales
return amounted to P4,200 and P9,675 were written off. Venture expenses of
P87,840 were paid. They decided to terminate the joint venture on December 31
and to charge unsold merchandise of P22,500 and P17,100 to Jennifer and Beyonce
respectively. How much cash was received by Jennifer and Beyonce upon
settlement?
a. P108,499 ; P138,249
b. P94,296 ; P137,856
c. P110,202 ; P152,682
d. P93,351 ; P135,291
Ans: D
Problem 10: On February 29, 2012 the SME G and SME O each acquired 25 percent
of the equity of entity D for P270,000. The two SMEs are to have joint control over
entity D. At year-end, D declared P85,000 of dividends and reported a profit of
P150,000 (P25,000 of which was earned during the first two months). Also, it was
determined that the recoverable amount of each venturers investment is P287,000.
Q10-1Under the equity method, how much is to be recognized as profit (loss) by
each venture?
a. P58,750
b. P52,500
c. P31,250
d. P37,500
Q10-2 In relation to the previous question, by how much will your answer change if
fair value method was used and there were:
Transaction cost: 1 percent of purchase price
Cost to sell: 4 percent of fair value
a. P48,550
b. P35,550
c. P17,300
d. P11,050
Ans: C, C
Problem 11: X Trading purchases goods from Y, a company based on France for
1,200,000 Euros (). The exchange rate at this time is P1 = 12.5. X pays 22 days
later when the prevailing exchange rate is P1 = 16. How much is the foreign
currency gain/loss on the books of X and Y respectively?
a. 21,000 gain; 21,000 loss
b. 21,000 gain; 0
c. 4,200,000 loss; 0
d. 4,200,000 loss; 4,200,000 gain
Ans: B
Problem 12: Celica Motors sold a car for 180,000 pounds () to a customer in
London on March 16, 2012 when the spot rate was P68.45 = 1. On April 20,2012,
Celica received thirty percent of the selling price as partial payment. The spot rate
at that time was P67.48 = 1. The balance was paid on May 5 when the spot rate
was P68.63= 1. How much was the foreign currency gain/loss on this transaction?
a. P29,700 loss
b. P29,700 gain
c. P142,200 loss
d. P142,200 gain
Ans: A

Problem 13: Lebron intends to sell400,400 under a forward contract dated

December 1. At what amount must Forward Contract Receivable and Forward
Contract Payable be presented on December 31?
Dates
Forward Rates
Spot Rates
December
P 0.55
P 0.53
1
December
P 0.50
P 0.49
31
March 22
P 0.48
P 0.46
FC
receivable
a. 220,220
b. 200,200
c. 212,212
d. 200,200
Ans: A

FC Payable
200,200
220,220
196,196
200,200

Problem 14: On January 1, 2012 Lucky Inc. paid P9,800 to acquire a put option.
This is in relation to the sale of merchandise worth $65,000. (Strike price = P4.965)
Spot rate
Fair value
option

of

1/1/2012
P 4.934
9,800

3/31/2012
P 4.908
11,400

6/20/2012
P4.75
13,935

How much is the foreign currency gain/loss on the intrinsic portion on March
31,2012?
a. P1,690
b. (P1,690)
c. P1,600
d. (P90)
Ans: A

Problem 15: On January 1, 2012 Lucky Inc. paid P9,800 to acquire a put option.
This is in relation to the sale of merchandise worth $65,000. (Strike price = P4.925)
Spot rate
Fair value
option

of

1/1/2012
P 4.934
9,800

3/31/2012
P 4.908
11,400

6/20/2012
P4.75
13,935

How much is the foreign currency gain/loss on the intrinsic portion on March
31,2012?
a. P495
b. (P90)
c. P1,690
d. P1,105
Ans: D
Problem 16: On November 1, 2012, Word Inc. paid P45,000 to acquire call foreign
exchange option for HK$90,000. The option is acquired to hedge the 2012
anticipated purchase of merchandise for HK$90,000. The option expires on March
30,2013.
11/1/2012
12/31/2012
3/31/2013
Spot rate
P 3.46
P 3.40
P3.39
Fair value of
45,000
50,500
72,000
option
Strike price
3.47
3.47
3.47
At what amount must the merchandise be presented as of December 31, 2012?
a. P3,114,000
b. P3,123,000
c. P3,060,000
d. P 0
Ans: D
Problem 17: Kdrama Inc. uses cost recovery method to account for its instalment
sales. The following data were obtained from its first three years of operation.
Instalment sales
Gross profit rates (based on cost)
Instalment Accounts receivable
balances:
December 31:
2010
2011
2012

2010
P
1,750,000
40

2011
P
2,275,000
30

2012
P
2,565,000
35

950,000

360,000
1,706,250

145,000
287,500
1,150,000

How much is the realized gross profit on instalment sales on 2012?

a. P215,000
b. P610,000
c. P452,500
d. P237,500
Ans: C
Problem 18: If after repossession the repossessed merchandise was sold for
P150,000, yielding a 34 percent gross profit rate, a rate similar to the usual gross
profit rate on instalment sales, what was the entry to record the previous
repossession? Provided that prior to the said sale, P9,000 was spent to recondition
the merchandise and that loss on repossession amounted to P5,700.
a. Repossessed Merchandise
Loss on Repossession
Instalment
accounts
receivable
b. Repossessed Merchandise
Loss on Repossession
Deferred gross profit

99,000
5,700
104,700
90,000
5,700
49,300

Instalment
accounts
receivable
c. Repossessed Merchandise
Deferred gross profit
Instalment
accounts
receivable
d. Repossessed Merchandise
Loss on Repossession
Instalment
accounts
receivable
Ans: B

145,000
90,000
55,000
145,000
90,000
5,700
95,700

Problem 19: Pressured Builders Co. Has used cost-to-cost percentage-ofcompletion method of recognizing revenue on its construction projects. The
company just recently completed a project for which the total contract price was
P3,800,000. The following were discovered upon review of their records.
Gross profit (loss)
Cost incurred per
year

2010
P76,000

2011
?

2012
P(38,000)

684,000

1,254,000

1,558,000

How much was the total estimated gross profit for 2011?
a. P304,000
b. P665,000
c. P570,000
d. P 0
Ans: C
Problem 20: Germany Construction Company began a project by 2010 with a
contract price of P6.3 million. The following data described the progress of the
construction.
2010:
Cost incurred to December 31, 2010 including
materials worth P50,000 which are stored to
be used in 2012 to complete the project.
Estimated cost to complete, January 1, 2011
2011:
Cost incurred to date
Cost to complete, December 31, 2011
2012
Cost incurred to date
Cost to complete, December 31, 2011

P1,425,00
0
4,075,000
3,040,000
1,960,000
3,672,000
1,977,500

What is the realized gross profit (loss) to be reported for the year 2012 using the
percentage of completion?
a. P790,400
b. P367,900
c. P422,500
d. P(354,900)
Ans: D
Problem 21: On November 1, 2011, LG, Inc. authorized Warren Buffet to operate as
a franchisee for an initial franchise fee of P1,500,000. Of this amount, 40% was
received upon contract signing and the balance, represented by a note, is due in
three annual instalments starting December 31, 2011. A 65-day period of refund
was granted. According to the agreement, the downpayment represents a fair
measure of the services initially performed. The collectibility of the note is
reasonably certain. (PV factor of 2.4)
How much is the unearned franchise fee?
a. P1,320,000
b. P720,000
c. P600,00
d. P0
Ans: A

Problem 22: The following information concerning Motts branch in Laguna were
gathered after the branchs first year of operation. Laguna branch acquires all of its
inventories from the home office and twenty-five percent of the shipments from the
home office remained unsold.
Branch
Branch
Branch
Branch

sales
cost of goods sold
expenses
net income

per Branch books

P950,000
425,700
424,300
100,000

per Home office books

332,200

How much was the cost of the merchandised shipped to the Laguna branch?
a. P567,600
b. P258,000
c. P309,600
d. P232,200
Ans: B
Problem 23: Hilton Co. established a sales agency in Mactan, Cebu on July 1, 2012.
The company sent merchandise samples which costs P21,600. These samples were
intended to last until April 1, 2013 during which P300 can still be realized. During
2012, the agency transmitted to the home office sale of goods costing P115,000,
but only half of the sales orders were actually filled-up. The agency paid expenses
amounting to P25,000. Unpaid expenses amounts to 10% of the net sales.
Equipment purchased by the home office for the use of the agency costs 100,000 to
be depreciated 20% per annum. Total collections from customers amounted to
P194,000, net of 3% sales discount. If the net income of the agency was P270,400,
how much was the gross sales?
a. P425,667
b. P377,100
c. P425,000
d. P419,000
Ans: C
Problem 24: The Steadler Corp. has a branch in Batangas. During 2012, shipmets
to the branch costs P100,000, billed at 130% of cost. Purchases from outsiders was
P125,000 where sixty-four percent of which remained unsold by year-end. P405,000
branch sales was reported. Expense allocated to the branch totalled P115,000. On
June 20, the home office purchased an equipment for the use of the branch
amounting to P200,000. The home office will maintain the records for the said fixed
asset. Useful life is 5 years. The separate income of the home office is P170,000.
24 1 How much is the net income per branch books?
a. P95,000
b. P145,000
c. P125,000
d. P155,000
Ans: A

24 2 How much is the combined net income to be presented in the financial

statements?
a. P265,000
b. P315,000
c. P325,000
d. P295,000
Ans: D
Problem 25: On January 1, 2012, Standard Co. acquired 80% of Setter Inc.s
outstanding stocks for P1,600,000 cash. Setter Inc.s balance sheet shows
P3,000,000 identifiable assets and P1,800,000 liabilities. All assets and liabilities of
Setter are fairly valued, except for an undervalued equipment. The stock acquisition
resulted to a goodwill of P700,000. Assume Standard had P5,000,000 total assets
prior to the said transaction. NCI is measured at fair value.
How much is the combined total assets after the stock acquisition?
a. P7,000,000
b. P5,400,000
c. P7,100,000
d. P7,200,000
Ans: D
Problem 26: On February 1, 2012 the Primex Co. acquired 100% of T&R Co. when
the fair value of the latters net assets was P29M. The consideration transferred
comprised of P22M cash paid at the acquisition date plus another P10M cash to be
paid after February 1 provided a specified profit target was met by T&R. At
acquisition date, there was only low probability of the profit target being met, so the
fair value of the contingent consideration liability was P1.5M. Before the year ended,
the profit target was met and P10M cash was transferred.
How much will consolidated earnings change?
a. P5.5M income
b. P7M income
c. P3M loss
d. P8.5M loss
Ans: C
Problem 27: Beauty paid P380,000 for the 25% of Geeks common stock. Five
months after, Beauty Inc. purchased another 45% of Geeks common stock for
P900,000. On this date, Geek reports identifiable assets with carrying value of
P1,800,000 and fair value of P1,850,000 and liabilities with book value of P700,000
and fair value of P800,000. The 30% non-controlling interest has a fair value of
P290,000.
How much is the goodwill if valued on a fair value basis?
a. P640,000
b. P665,000
c. P950,000
d. P520,000
Ans: B

Problem 28: Tyra Company acquires 70% of Heigl Inc. on October 1, 2011 and an
additional 10% on March 31, 2012. Total annual amortization of P19,000 relates to
the first acquisition. Heigl Inc. reports the following at December 31, 2012:
Sales
P300,000
Cost of goods sold
100,000
Expenses
50,000
Dividends declared
75,000
Tyra Company reports a net income of PP450,000.
Assuming the that the profit is earned evenly throughout the year, how much is the
controlling interest in the consolidated net income for 2012?
a. P491,525
b. P521,000
c. P494,000
d. 551,525
Ans: A
Problem 29. Gion Corporation has identified activity centers to which overhead
costs are assigned. The cost pool amounts for these centers and their selected
activity drivers for 2011 follow:
Activity Centers
Set-ups
Utilities
No. of parts

Costs
P620,000
P950,000
P320,000

Activity Drivers
24,800 set-ups
125,000 machine hours
16,000 parts

Direct costs of producing product GG amounted to P75,000. The said product took
17,000 direct labor hours and 15,000 machine hours to finish. Also, the product
needed 7,500 set-ups and 550 parts to complete. 25,000 units of product GG were
produced during 2011. How much was the full cost per unit of product GG using
ABC?
a.
b.
c.
d.

P12.50
P16.07
P15.50
P19.07

Ans: C
Problem 30.During April 2011, Faithfully Inc. incurred the following costs for Job
522 (450 drum sets):
Direct materials
Direct labor
Factory overhead

P42,500
P65,250
P78,300

45 units of drum sets were found to be defective and Faithfully Inc. had to incur the
following to remedy the said defects:
Direct materials
Direct Labor

P13,550
P15,250

If the rework cost is normal but specific to Job 522, the cost per finished unit is:
a.
b.
c.
d.
Ans: B

P497.75
P518.11
P484.22
P575.68

Problem 31. Superhuman Co. provided the following data:

Direct materials
Direct labor
Overhead rate without spoilage
Overhead rate with spoilage
Units produced

P450,000
P520,000
P5.50 per unit
P7.50 per unit
120,000

Superhuman do not typically expect spoilage in its production process. On Job 912,
the cost of the spoiled units is P52,200, but the disposal value of these units were
determined to be P24,000 and P17,000 were found to be abnormal costs of
spoilage. How much is the total cost of good units?
a.
b.
c.
d.

P1,846,000
P1,817,800
P1,577,800
P1,606,000

Ans: D
Problem 32.
IDOL Inc. adds materials at the beginning of the process in
department USB. Conversion costs were 70% complete as to the 9,500 work-inprocess units on September 1 and 40% incomplete as to the 7,000 work-in-process
units on September 30. During September, 12,000 units were completed and
transferred to the next department. An analysis of the cost relating to work-inprocess on September 1 and to production activity for September is as follows:

Work-in-process,
September 1
Costs
incurred
September

during

Materials
P10,000

Costs
Conversion
P7,500

P42,750

P52,525

The total cost per equivalent unit for September under FIFO and average:
a.
b.
c.
d.

P11.84 ; P5.49
P10 ; P5.49
P10 ; P6.49
P11.84 ; P6.49

Ans: C
Problem 33 and 34.
Silent Sanctuary Corporation manufactures a product
through a continuous process in different departments. As their cost accountant,
you are given the production data of Department A to accumulate costs and prepare
the necessary reports:
Work-in-process, May 1, 2011 (30% to
complete)
Units started and completed
Work-in-process, May 31, 2011 (50%
complete)
Normal lost units discovered at the end
of process
Materials
Conversion
Work-in-process cost, May 1, 2011

Units
15,000
60,000
3,000
2,000

Costs
P78,000
P85,000
P45,000

Materials are added at the start of the production while conversion costs are evenly
distributed during the production process.

33. Compute the current total unit cost for materials and conversion:
a.
b.
c.
d.

P2.53
P3.14
P2.45
P2.23

Ans: C
34. Compute the cost per unit of completed units as of May 1, 2011:
a.
b.
c.
d.

P2.34
P2.70
P2.64
P2.56

Ans: B
Problem 35. Analog Heart Inc. makes three products from mangoes it harvests:

Mango shake
Dried mangoes
Ice candy

Units of output

Selling price at
split-off

5,250
2,000
750

P3
P1.50
P2.50

Incremental
processing
costs
P2
P2.50
P0.50

Final
price

selling

P7.50
P3
P3

Which of the following is false regarding processing the three products beyond splitoff point?
a. The company can either sell the ice candy at split-off or process it further and
sell it at P3 because the incremental profit is zero
b. If the dried mangoes are processed beyond split-off, the company will have
an incremental profit of P1
c. The company should process the mango shake further because an
incremental profit of P2.50 would be realized
d. None of the statements is false
Ans: B
Problem 36. Breakout Co. produces two products which go through a single
process. The same amount of disposal cost is incurred whether the products are
sold at split-off or after further processing. On May 2011, the joint cost of the
production process amounted to P105,000
Products
A
B
Remnants

Units produced
4,000
12,000
4,000

Net realizable value

P5
P2.50
P4

Remnants are considered a by-product of the process and are sold to other
factories. If the company accounts for the by-product using the NRV method, and if
it costs the company an additional P1.50/unit to process product A, how much is the
total cost of producing product A?
a.
b.
c.
d.

P35,600
P59,400
P53,400
P41,600

Ans: D

Problem 37. GBX Inc.s capacity for a month is 40,000 machine hours. Overhead
is 40% variable and 60% fixed. During June 2011, GBX produced 3,500 units of its
product and incurred 38,000 machine hours. Each unit of a product requires 12
machine hours. Unfavorable non-controllable variance for the month of June is
P28,500. What is the companys variable overhead rate?
a. P19.75
b. P9.50

c. P14.25
d. P23.75
Ans: B
Problem 38. Emoted Inc. purchased 80,000 ounces of materials needed to
produce its perfume at a cost of P5 per ounce. During April, Emoted used 70,000
ounces to produce 3,500 bottles of perfume. The standard price of the materials
used is P4.75 per ounce and Emoted expects to use 15 ounces of the material to
produce 1 bottle of perfume. How much is the (1) material price variance and (2)
material quantity variance?
a.
b.
c.
d.

P20,000
P20,000
P20,000
P17,500

F ; P130,625 U
U ; P130,625 F
U ; P83,125 U
U ; P83,125 U

Ans: C
Problem 39. Agency AAs allotment and Notice of Cash Allocation (NCA) for the
year were P5,000,000 and P3,000,000, respectively. Checks issued amounted to
P1,500,000. What closing entry should be made for the unused NCA as of year-end?
a. Cash National Treasury, MDS
Subsidy income from National Government
b. Subsidy income from National Government
Cash National Treasury, MDS
c. Subsidy income from National Government
Cash National Treasury, MDS
d. Memorandum entry

P (1,000,000)
P (1,000,000)
P 1,500,000
P 1,500,000
P 3,500,000
P 3,500,000

Ans: B
Problem 40. LTO collected motor vehicles registration fees amounting to P250.
These were remitted to the Bureau of Treasury. To record the remittance by LTO in
the National Government books, the entry would be:
a. Cash National Treasury, MDS
Registration fees
b. Registration fees
Cash National Treasury, MDS
c. Registration fees
Cash Collecting Officer
d. Cash Disbursing Officer
Cash Collecting Officer
Ans: C

P 250
P 250
P 250
P 250
P 250
P 250
P 250
P 250

Problem 41. Bleeding Love Hospital has the following account balances:
Interest income
Bad debt expense
Unrestricted gifts
Charity care
Amounts charged to patients

P25,000
15,000
70,000
75,000
384,000

Contractual adjustments
Revenue from parking spaces

90,000
52,000

What is the hospitals net patient service revenue?

a. P204,000
b. P219,000

c. P294,000
d. P271,000
Ans: C
Problem 42. Broken Heart University, a nonprofit university, received the following
cash contributions from donors during the year 2011:
Unrestricted contributions
Contributions restricted by donors for scholarship programs
Contributions from a donor who stipulated that the money be spent in
accordance to the wishes of the hospitals board of trustees
Contributions restricted by donors for equipment acquisitions

P250,000
100,000
75,000
125,000

Assuming the university spent P75,000 of the donors contributions for scholarship
programs on financing this years scholars, how much should be included in its
current funds revenue for the year ended December 31, 2011?
a.
b.
c.
d.

P350,000
P325,000
P400,000
P250,000

Ans: C
Problem 43. Agency X have an obligation for equipment per purchase order
amounting to P800,000. Subsequently, the agency liquidates the equipment
acquired in full. The entry to record this transaction would be (ignore tax
implication)
A. Memorandum entry in RAOCO
B. Accounts Payable
800,000
Cash National Treasury, MDS
800,000
C. Subsidy Income from National Government
800,000
Cash National Treasury, MDS
800,000
D. Obligation Liquidated
800,000
Cash National Treasury, MDS
800,000
Ans: B
Problem 44. On 1 January 2011, an entity reporting under PFRS for SME,
purchased a tract of vacant land that is situated overseas for Baht90,000. The
entity classified the land as an investment property. The fair value of the land at 31
December 2011 is Baht100,000.The entitys functional currency is the Php (Peso):
Spot currency exchange rates:
1 January 2011: 1 Baht = P2.00
31 December 2011: 1 Baht = P2.10
Weighted average exchange rate in 2011: 1 Baht = P2.04
What is the carrying amount of the investment property at 31 December 2011 and
whatamount/s would be presented in profit or loss for the year ended 31 December
2011?

a. Carrying amount of investment property = P210,000. Profit for the year

includesP30,000 increase in the fair value of investment property.
b. Carrying amount of investment property = P210,000. Profit for the year
includesP20,400 increase in the fair value of investment property and P9,600
foreign exchange gain.
c. Carrying amount of investment property = P180,000. Profit for the year
includes no amount in respect of the investment property.
d. Carrying amount of investment property = P189,000. Profit for the year
includes P9,000 foreign exchange gain.
Ans: A
Problem 45. An entity purchases plant from a foreign supplier for 3 million euros
on January 31, 2011, when the exchange rate was 2 euros = 1 US dollar. At the
entitys year-end of March 31, 2011, the amount has not been paid. The closing
exchange rate was 1.5 euros = 1 US dollar. The entitys functional currency is the
US dollar. Which of the followings statements is correct?
a. Cost of plant $2 million, exchange loss $0.5 million, trade payable $2 million
b. Cost of plant $1.5 million, exchange loss $0.5 million, trade payable $2
million
c. Cost of plant $1.5 million, exchange loss $0.6 million, trade payable $2
million
d. Cost of plant $2 million, exchange loss $0.5 million, trade payable $1.5
million
Ans: B
Problem 46. On December 12, 2011, Winning Co. entered into a forward exchange
contract to purchase 100,000 euros in 90 days. The relevant exchange rates are as
follows:
Spot rate
Forward rate (for March 12,
2012)
November 30, 2011
$0.87
$0.89
December 12, 2011
0.88
0.90
December 31, 2011
0.92
0.93
The purpose of this forward contract is to hedge a purchase of inventory in
November 2011, payable in March 2012. At December 31, 2011, what amount of
foreign currency transaction from this forward contract should Winning include in
profit or loss?
a.
b.
c.
d.

$4,000
$3,000
$3,000
$4,000

loss
loss
gain
gain

Ans:C
Problem 47. A Philippine entity acquired 60% of the share capital of a foreign
entity on June 30, 2011. 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, 2011. The exchange rates at June
30, 2011, and December 31, 2011 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, 2011?
a.
b.
c.
d.

Php
Php
Php
Php

202.5 million
54.0 million
121.5 million
32.4 million

Ans:B

Problem 48. On 1 January 2011 a parent entity, applying PFRS for SME, (whose
functional currency is CU) made a FCU20,000 loan to a foreign subsidiary (whose
functional currency is FCU). The parent has informed the subsidiary that it will not
demand repayment and the subsidiary do not expect to repay the loan. The
amortized cost of the loan at each reporting date is FCU20,000.
The exchange rates are as follows:
1 January 2011: CU1 = FCU 2
31 December 2011: CU1 = FCU 2.1
In preparing the consolidated financial statements, what is the entry for the
consolidation adjustment related to the exchange difference?
a. No entry
b. Dr. Profit or loss exchange difference
Cr. Long term receivable
476
c. Dr. Long term payable
Cr. Other comprehensive income
2,000

CU 476
CU
CU 2,000
CU

d. Dr. Other comprehensive income

Cr. Profit or loss exchange difference
476

CU 476
CU

Ans:D

Problem 49. On January 1, 2011, the fair values of J.Lo Companys net assets were
as follows:
Current assets
P100,000
Equipment
150,000
Land
50,000
Buildings
300,000
Liabilities
80,000
On January 1, 2011, Steven Company purchased the net assets of J.Lo Company by
issuing 100,000 shares of its P1 par value stock when the fair value of the stock was
P6.20. It was further agreed that Steven would pay an additional cash amount on
January 1, 2013, if the average income during the 2 year period of 2011-2012
exceeded P250,000 per year. The expected value of this consideration was
calculated as P184,000. On July 30, 2011, the fair value estimate of the contingent
consideration was revised to P170,000 due to updates on the likelihood of various
outcomes based on weighted probabilities. Assuming that on January 1, 2013, the
date of settlement of the contingent consideration (CC) clause agreement for
P195,000, the entry should be:
A. Estimated liability for CC
Loss on estimated CC

170,000
25,000

Cash

195,000

B. Estimated liability for CC

Cash

195,000
195,000

C. Estimated liability for CC

Loss on estimated CC
Cash

184,000
11,000
195,000

D. No entry required

Ans :A

Problem 50. Atlas Corporation acquired an 80% interest in Rogets Company on

January 1, 2010 for P1,225,000. On this date the capital stock and retained earnings
of the two companies were as follows:
Atlas
Rogets
Capital stock
P3,150,000 P875,000
Retained earnings
1,400,000 175,000
The assets and liabilities of Rogets were stated at their fair values when Atlas
acquired its 80% interest and the proportionate share in net identifiable assets was
used to initially measure the non-controlling interest. Atlas uses the cost method to
account for its investment in Rogets
Net income and dividends for 2010 for the affiliated companies were:
Atlas
Rogets
Net income
P525,000
P157,500
Dividends declared
315,000
87,500
Dividends payable December 31, 2010
157,500
43,750
End of year evaluation indicates P12,000 impairment in goodwill.
The consolidated retained earnings at December 31, 2010:
A. P2,041,400
B. P1,969,000
C. P1,656,400
D. P1,654,000
Ans :D