SUCCEED REVIEW CENTER

PRACTICAL ACCOUNTING II

CHRISTOPHER I. GERMAN

FOREIGN CURRENCY TRANSACTIONS/DERIVATIVES & HEDGING/ TRANSLATION OF FINANCIAL STATEMENTS

(IAS 21 AND IAS 39)
Problem 1.
On November 19, 2013, Risk Company, a Philippine Company ordered merchandise from Wales Company for 31,800
pounds. The merchandise was delivered on December 18, 2013. The invoice was dated December 2, 2013, the
shipping date (FOB shipping point). Risk Company paid the invoice on January 28, 2014.
The spot rates for a pound on the respective dates were:
November 19, 2013
December 2, 2013
December 18, 2013
December 31, 2013
January 28, 2014

P76.90
P76.15
P75.75
P72.35
P73.15

What amount will affect profit or loss in 2013?

A. P120,840 gain

B. P108,120 gain

C. P25,440 loss

D. P144,690 gain

Problem 2.
On October 5, 2013, Density Company sold goods on account to Britain Corporation for 50,320 pounds. The date of
invoice is October 29, 2013 and payment is due on January 30, 2014.
Exchange rates were as follows:
BID rate
Oct. 05, 2013
Oct. 29, 2013
Dec 31, 2013
Jan. 30, 2014

OFFER rate

P67.50
P68.70
P64.10
P62.40

P69.20
P66.80
P63.40
P65.50

What amount will affect profit or loss in 2014?

A. P171,088 loss

B. P85,544 loss

C. P231,472 loss

D. P105,672 gain

Problem 3.
The following data applies to Velocity Companys purchase of 45,400 Belgium francs under a forward contract dated
November 1, 2013, for delivery on January 31, 2014:

Spot rates
30-day forward rate
60-day forward rate
90-day forward rate

11/1/13

12/31/13

P55.75
P51.30
P57.65
P54.25

P53.90
P56.15
P52.30
P55.45

01/31/14
P54.50
P53.20
P55.75
P52.10

Velocity entered into the forward contract to speculate in the foreign currency.
In its income statement for the year ended December 31, 2013, what amount of gain/loss should Velocity report from this
forward contract?
A. P83,990 gain

B. P83,990 loss

C. P86,260 loss

D. P86,260 gain

Problem 4.
Zest Company sold merchandise for 111,200 euros to a customer in France on November 02, 2013. Collection in euros
was due on January 31, 2014. On the same date, to hedge this foreign currency exposure, Zest Company entered into a
futures contract to sell 111,200 euros to Metro bank for delivery on January 31, 2014.
Exchange rates for euros on different dates are as follows:
Nov. 2
Dec. 31
Spot rate
81.9
80.7
30-day futures
82.3
80.4
60-day futures
81.8
80.3
90-day futures
80.6
81.6
120-day futures
80.1
81.4

Jan. 31
80.1
83.9
82.6
83.4
82.8

1. What amount will affect profit or loss regarding the hedged item on the financial statement date in 2013?
A. P22,240 gain

B. P22,240 loss

C. P133,440 gain

D. P133,340 loss

2. What amount will affect profit or loss regarding the hedging instrument on the settlement date in 2014?
A. P66,720 gain

B. P66,720 loss

C. P33,360 gain

D. P11,120 gain

3. As a result of all foregoing transactions, what amount will affect current earnings on the settlement date in 2014?
A. P33,360 gain

B. P33,360 loss

C. P11,120 loss

D. P11,120 gain

Problem 5.
Return Company acquired machinery for $169,200 from a vendor in New York on December 1, 2013. Payment in US
Dollars was due on March 31, 2014. On the same date, to hedge this foreign currency exposure, Return entered into a
futures contract to purchase $169,200 from a BDO for delivery on March 31, 2014.
Exchange rates for US Dollars on different dates are as follows:
Dec. 1
Dec. 31
March 31
Selling spot rate
41.4
42.3
43.7
30-day futures
42.3
41.8
43.2
60-day futures
41.8
42.2
42.6
90-day futures
40.6
42.5
43.4
120-day futures
42.2
42.8
42.9
1.

What amount will affect profit or loss regarding the hedged item on its settlement date in 2014?
A. P152,280 loss

1.

C. P236,880 loss

D. P236,880 gain

What amount will affect profit or loss regarding the hedging instrument on the financial statement date in 2013?
A. P50,760 loss

2.

B. P152,280 gain

B. P50,760 gain

C. P16,920 loss

D. P16,920 gain

As a result of all foregoing transactions, what amount will affect current earnings on the financial statement date in
2013?
A. P33,840 gain

B. P33,840 loss

C. P101,520 loss

D. P101,520 gain

Problem 6.
On October 1, 2013, Hunt Philippines took delivery from Thailand firm of inventory costing 1,140,000 baht. Payment is
due on January 30, 2014. Concurrently, Hunt Philippines paid P15,700 cash to acquire an at-the-money call option for
1,140,000 baht. Strike price is P12.40
Market price
Fair value of call option

10/1/2013
P12.40

12/31/2013
P12.423
P28,200

1/30/2014
P12.427
P30,780

1. The gain/loss on hedging instrument due to change in the ineffective portion on December 31, 2013:
A. P12,500 gain
B. P26,220 loss
C. P26,220 gain
D. P13,720 loss
2. The gain/loss on hedging instrument due to change in the effective portion on December 31, 2014:
A. P4,560 loss
B. P4,560 gain
C. P2,580 gain
D. P1,980 loss
3. The December 31, 2013 gain/loss in the hedging activity amounted to:
A. P13,720 loss
B. P13,720 gain
C. P38,720 gain
D. P38,720 loss
4. The gain/loss on hedging instrument in 2014 if changes in the time value will be included from the assessment of
hedge effectiveness:
A. P4,560 gain
B. P1,980 loss
C. P1,980
. P2,580 gain
Problem 7.
On December 1, 2013, Kraft Corporation acquired 4,600 shares of Quest Company at a cost of P28 per share. Kraft
classifies them as available-for-sale securities. On this same date, Kraft decides to hedge against a possible decline in
the value of the securities by purchasing, at a cost of P11,900, an at-the-money put option to sell the 4,600 shares. The
option expires on April 1, 2014. The fair values of the investment and the options follow:
Quest Company shares:
Per share
Put Option (4,600 shares)
Market value

12/1/13

12/31/13

4/1/14

P28

P 26.50

P23.50

P15,400

P20,700

1. The gain/loss on option contract due to change in time value on December 31, 2013:
A. P3,400 gain
B. P6,900 loss
C. P3,400 loss
D. P6,900 gain

2. The gain/loss on option contract due to change in intrinsic value in 2014:

A. P5,300 gain
B. P5,300 loss
C. P13,800 loss
3. The 2014 net gain/loss in the hedging activity amounted to:
A. P13,800 loss
B. P13,800 gain
C. P8,500 loss
4. The gain/loss on option contract on December 31, 2013:
A. P3,400 loss
B. P3,500 gain
C. P6,900 gain

D. P13,800 gain
D. P5,300 gain
D. P6,900 loss

Problem 8.
On August 1, Escrow Company forecasted the purchase of 60,000 units of inventory from Thailand Company. The
purchase would probably occur on November 2 and require the payment of 2,340,000 baht. It is anticipated that the
inventory could be further processed and delivered to customers by early December. On August 1, the company
purchased a call option to buy 2,340,000 baht at a strike price of 1FC = P7.95. An option premium of P8,850 was paid.
Changes in the value of the option will be excluded from the assessment of hedge effectiveness.
Spot rates and option values are as follows;
Spot rate
Fair value of call option

Aug 1
P7.93
P8,850

Aug 31
P7.952
P15,690

September 30
P7.963
P34,410

November 2
P7.97
P46,800

On November 2, Escrow Company purchased 60,000 units of inventory at a cost of 2,376,000 baht. The option was
settled/sold on November 2 at its fair value. After incurring further processing costs of P240,000, the inventory was sold
for P29,400,000 on December 7.
1. The gain/loss on option contract on August 31 that would affect earnings:
A. P4,680 gain
B. P6,840 gain
C. P2,160 gain
2. The gain/loss on option contract on September 30 presented as other comprehensive income:
A. P4,860 loss
B. P7,020 loss
C. P30,420 gain
3. The gain/loss on option contract on November 2 that would affect earnings:
A. P8,850 loss
B. P3,990 loss
C. P12,390 gain
4. What is the net income effect of the above transactions?
A. P10,214,430
B. P10,223,280
C. P10,261,230

D. P 0
D. P25,740 gain
D. P16,380 gain
D. P10,270,080

Problem 9. Cleared Corp. owns a subsidiary in Singapore whose statement of financial position in Singapore Dollars for
the last two years follow:

Assets
Cash
and
Cash
equivalents
Receivables
Inventory
Property and Equipment,
net
Total Assets
Liabilities and Equity
Accounts Payable
Long-term debt
Common stock
Retained earnings
Total Liabilities and Equity

December 31, 2013

December 31, 2014

S$

S$

90,000

75,000

367,500
480,000
765,000

442,500
510,000
690,000

S$ 1,702,500

S$ 1,717,500

S$

S$

165,000
967,500
345,000
225,000
S$ 1,702,500

225,000
855,000
345,000
292,500
S$ 1,717,500

Relevant exchange rates are:

January 1, 2013
December 31, 2013
December 31, 2014
Average 2013
September 12, 2013

S$ 1 = P 45
S$ 1 = P 42.50
S$ 1 = P 47.50
S$ 1 = P 43.75
S$ 1 = P 40

Cleared formed the subsidiary on January 1, 2013. Income of the subsidiary was earned evenly throughout the years and
the subsidiary declared dividends worth S$15,000 on September 12, 2013 and none were declared during 2014.
How much is the cumulative translation adjustment for 2014?
A. P1,875,000
B. P1,706,250
C. P3,018,750
D. P2,625,000

CONSOLIDATED FINANCIAL STATEMENTS (IAS 11)

Problem 1.
On January 2, 2014, Arrow Corporation acquired 80% of CEO Companys ordinary shares for P3,240,000. P150,000 of
the excess is attributable to goodwill and the balance to a depreciable asset with an economic life of ten years. Noncontrolling interest is measured at its fair value on date of acquisition. On the date of acquisition, stockholders equity of
the two companies were as follows:
Arrow Corporation
CEO Company
Ordinary shares
P5,250,000
P1,200,000
Retained earnings
7,800,000
2,100,000
On December 31, 2014, CEO Company reported net income of P525,000 and paid dividends of P180,000 to Arrow.
Arrow reported earnings from its separate operations of P1,425,000 and paid dividends of P690,000. Goodwill had been
impaired and should be reported at P30,000 on December 31, 2014.
1. How much is the non-controlling interest in profit of CEO Company on December 31, 2014?
A. P93,750
B. P93,000
C. P105,000
D. P69,000
2. How much is the consolidated profit on December 31, 2014?
A. P1,788,750
B. P1,893,750
C. P1,800,000
D. P1,770,000
3. How much is the consolidated retained earnings attributable to parents shareholders equity on December 31,
2014?
A. P8,811,000
B. P8,790,000
C. P8,787,000
D. P10,398,750
4. What amount of non-controlling interest is presented in the consolidated statement of financial position on
December 31, 2014?
A. P821,250
B. P834,000
C. P772,500
D. P727,500
PROBLEM 2.
YSL Corporation acquired 80% of the outstanding ordinary shares of GBX Company on June 1, 2014 for P586,250. GBX
Companys stockholders equity components at the end of this year were as follows: Ordinary shares, P100 par,
P250,000, Share premium P112,500, Retained Earnings P222,500.
Non-controlling interest is measured at fair value. All the assets of GBX were fairly valued, except for inventories, which is
overstated by P11,000, and equipment, which is understated by P15,000. Remaining useful life of equipment is 4 years.
Both companies use the straight-line method for depreciation and amortization.
Stockholders equity of YSL on January 1, 2014 is composed of Ordinary shares P750,000, Share premium P175,000,
Retained Earnings P525,000.
Fair value of non-controlling interest on the date of acquisition is P117,500. Goodwill, if any, should be written down by
P14,225 at year-end. Net Income for the first year of parent and subsidiary are P75,000 and P42,500 ( from date of
acquisition) respectively. Dividends declared at the end of the year amounted to P20,000 and P15,000. During the year,
there was no issuance of new ordinary shares.
1. What is the amount of the non-controlling interest in net assets of GBX Company on December 31, 2014?
A. P145,167.50
B. P127,242.50
C. P124,242.50
D. P121,917.50
2. What is the amount of consolidated shareholders equity?
A. P1,520,345
B. P1,642,262.50
C. P1,462,262.50
D. P1,644,587.50
INTERCOMPANY TRANSACTIONS
PROBLEM 1.
Pure Corporation acquired an 80% interest in Sincere Company on January 2, 2013 for P2,520,000. On this date, the
share capital and retained earnings of the two companies follow:
Share Capital
Retained Earnings

Pure Corp.
P6,000,000
3,000,000

Sincere Co.
P2,250,000
450,000

On January 2, 2013, the assets and liabilities of Sincere Co. were stated at their fair values except for machinery which is
undervalued by P225,000 (remaining life is 3 years). On September 30, 2013, Sincere sold merchandise to Pure at an
inter-company profit of P150,000; 25% was still unsold at year-end. Likewise, on October 1, 2014, Sincere purchased
merchandise from Pure for P3,600,000. The selling affiliate included a 20% mark-up on cost on this sale. Only 75% of
these purchases had been sold to unrelated parties as of December 31, 2014. As of December 31, 2014, goodwill was
determined to be impaired by P60,000.
The following is the summary of the 2014 transactions of the affiliated companies:
Net Income
Dividends declared and paid

Pure Corp.
P1,500,000
600,000

Sincere Co.
P600,000
180,000

On the 2014 consolidated financial statements, how much would be the:

1. Net income attributable to Parent
A. P1,638,000
B. P1,708,500
2. Non-controlling interest in net income
A. P70,500
B. P100,500

C. P1,608,000

D. P1,686,000

C. P82,500

D. P85,500

PROBLEM 2.
On January 2, 2013, Power Company acquired 90% of the outstanding shares of Solar Inc. at book value. During 2013
and 2014, intercompany sales amounted to P2,000,000 and P4,000,000, respectively. Power Company consistently
recognized a 25% mark-up based on cost while Solar Inc. had a 25% gross profit on sales. The inventories of the buying
affiliate, which all came from inter-company transactions show:
Power
Solar

December 31, 2013

P240,000
100,000

December 31, 2014

P160,000
40,000

On October 1, 2013, Solar Inc., purchased a piece of land costing P1,000,000 from Power Company for P1,500,000. On
December 1, 2014, Solar Inc., sold this land to unrelated party for P1,500,000. On the other hand, on July 1, 2014, Solar
Inc., sold a used photo-copier with a carrying value of P60,000 and remaining life of 3 years to Power Company for
P42,000.
Separate Statement of Comprehensive Income for the two companies for the year 2014 follow:
Sales
Cost of Sales
Gross Profit
Operating Expenses
Operating Profit
Loss on Sale of Office Equipment
Dividend Revenue
Net Income

Power Company
Solar Inc.
P25,000,000
P14,000,000
(15,000,000)
( 8,400,000)
P10,000,000
P 5,600,000
(6,000,000)
(3,800,000)
P 4,000,000
P 1,800,000
( 18,000)
____
40,000
P4,000,0000
P 1,822,000

Compute the following amounts for/as of December 31, 2014

1. Consolidated Gross Profit
A. P19,632,000
B. P15,712,000
2. Consolidated Net Income attributable to Parent
A. P6,183,300
B. P6,369,000
3. Non-controlling interest in Net Income
A. P189,700
B. P185,700
4. Consolidated Operating Expense
A. P9,800,000
B. P9,788,000

C. P15,632,000

D. P15,584,000

C. P6,169,800

D. P6,191,300

C. P188,200

D. P184,200

C. P9,803,000

D. P9,789,500

JOINT ARRANGEMENTS (IFRS 11)

PROBLEM 1.
GX Builders Corp. and JQ Progress Co. are two companies whose businesses are the construction of many types of
public and private construction services. They set up a contractual arrangement to work together for the purpose of
fulfilling a contract with the government for the construction of a motor way between two cities for P144 million fixed price
contract.
The contractual arrangement determines the participation shares of GX and JQ and establishes:

Joint control of the arrangement

The rights to all the assets needed to undertake the activities of the arrangement are shared by the parties on the
basis of their participation shares in the arrangement.
The parties have joint responsibility for all operating and financial obligations relating to the activities of the
arrangement on the basis of their participation shares in the arrangement; and
The profit and loss resulting from the activities of the arrangement is shared by GX and JQ on the basis of their
participation shares in the arrangement.

In 2013, in accordance with the agreement between GX and JQ:

GX and JQ each used their own equipment and employees in the construction activity
GX constructed three bridges needed to cross rivers on the route at a cost of P48 million
JQ constructed all of the other elements of the motorway at a cost of P60 million.
GX and JQ shares equally in the 144 million jointly invoiced to and received from the government.

1.

What is the gross profit of the joint arrangement?

A. P48 million
B. P84 million
C. P36 million

D. P24 million

2. What is the gross profit earned by GX in 2013

A. P36 million
B. P84 million

C. P24 million

D. P12 million

PROBLEM 2.
Two real estate companies, RK Developers and SV Holdings set up a separate vehicle (entity DP) for the purpose of
acquiring and operating a shopping centre. The contractual arrangement between the parties establishes joint control of
the activities that are conducted by entity DP. The main feature of entity DPs legal form is that the entity, not the parties,
has rights to the assets and obligations for the liabilities relating to the arrangement. These activities include the rental of
the retail units, managing the car park, maintaining the centre and its equipment, such as lifts, and building the reputation
and customer base for the centre as a whole.
The terms of the contractual arrangement are such that:
Entity DP owns the shopping centre. The contractual arrangement does not specify that the parties have rights to
the shopping centre.
The parties are not liable in respect of the liabilities of entity DP. If entity DP is unable to pay any of its liabilities,
the liability of each to any third party will be limited to the parties unpaid contribution.
The parties have the right to sell or pledge their interests in entity DP
Each party receives a share of the income from the shopping centre(rental income net of operating costs)in
accordance with its interests in entity DP.
Transactions of the contractual arrangement for 2012 and 2013 follow:
2012

RK and SV contributed 60 million each for a interest in the net assets of Entity DP.
Organization expenses incurred amounts to P600,000.
Entity DP acquired land at a cost of P12 million.
Constructed a building (shopping centre) at a cost of P90 million.
Operating expenses for the year amounts to P6 million
Rental income collected from the tenants, P60 million
Net income or loss is distributed to the venturers in accordance with their interest.

2013

Operating expenses (including depreciation) incurred for the year, P21 million
Rental income collected for the year, P72 million
Each venture receives a share of the income or loss from rental income net of the operating expenses.

1. What is the interest of RK Developers in the joint venture as of December 31, 2012?
A. P84 million
B. P86.7 million
C. P90 million
D. P120 million
2. What is the net income (loss) of entity DP on December 31, 2013?
A. P51 million
B. P72 million
C. P93 million
D. P63 million
3. What is the interest of SV Holdings in the joint arrangement as of December 31, 2013?
A. P112.2 million
B. P87 million
C. P60 million
D. 84 million
NON-PROFIT ORGANIZATION
I
The Cure, a Not for Profit Hospital, reported the following information for the year ended December 31, 2014:
Revenue from pharmacy/drugstore
Amounts charged/billed to patients
Bad debts expense
Revenue from gift shop and cafeteria
Contractual adjustments PhilHealth/Medicare
Unrestricted gifts
Charity care
Allowance for discounts to hospital employees
Salary Expense medical staff

P 750,000
2,400,000
10,000
410,000
200,000
25,000
150,000
90,000
150,000

Net patient service revenues for The Cure Hospital for the year ended December 31, 2014 is
A. P3,270,000

B. P2,110,000

C. P1,960,000

D. P3,120,000

II
Learning College, a private not-for-profit college received P180,000 from Ms. GV on May 25, 2014. Ms. GV stipulated that
her contribution be used to support faculty continuing education program during the fiscal year beginning on July 1, 2014.
On July 15, 2014, administrators of Learning College awarded scholarship and training grants totaling P165,000 to
several faculty members in accordance with the wishes of Ms. GV. For the year ended June 30, 2014. Learning College
should report the P180,000 contribution as
A.
B.
C.
D.

Temporarily restricted revenues on the statement of activities

Unrestricted revenue on the statement of activities
Temporarily restricted deferred revenue on the statement of activities
An increase in fund balance on the statement of financial position

III
Knowledge University, a private not-for-profit university, had the following cash inflows during the year ended June 30,
2014:
I. P800,000 from students for tuition.
II. P450,000 from a donor who stipulated that the money be invested indefinitely.
III. P280,000 from a donor who stipulated that the money be spent in accordance with the wishes of Knowledge
Universitys governing board.
On Knowledge Universitys statement of cash flows for the year ended June 30, 2014, what amount of these cash
flows should be reported as financing activities?
A.
B.
C.
D.

P280,000
P730,000
P1,080,000
P450,000

IV
Safari Life, a private not-for-profit zoological society, received contributions restricted for research totaling P175,000 in
2012. None of the contributions were spent on research in 2012. In 2013, P122,500 of the contributions were used to
support the research activities of the society. The effect on the statement of activities for the year ended December 31,
2013, for Safari Life would be a
A.
B.
C.
D.

P52,500 increase in temporarily restricted revenue.

P122,500 decrease in temporarily restricted revenue.
P122,500 increase in temporarily restricted net assets.
P122,500 decrease in unrestricted revenue.

V
Wisdom College, a private not-for-profit college, received the following contributions during 2014:
I. P1,250,000 from alumni foundation for renovation of the gymnasium in 2015.
II. P250,000 from a donor who stipulated that the contribution be invested indefinitely and that the earnings be used
for spiritual activities. As of December 31, 2014, earnings from investment amounted to P12,500.
For the year ended December 31, 2014, what amount of these contributions should be reported as restricted
revenues on the statement of activities?
A.
B.
C.
D.

P12,500
P1,262,500
P1,250,000
P1,512,500

6. Which of the following statements is true?

A. Contributed services and facilities are recognized both as asset and contributions revenue, net of expense.
B. Financial statements of not for profit organization, focuses on distinctions between current and non-current
fund.
C. Unconditional pledges are recognized as receivables and contributions revenue when collected.
D. The required financial statements for nonprofit organizations include: statement of financial position,
statement of cash flows, statement of activities and specifically for Voluntary Health and Welfare
Organizations Statement of Functional Expenses.
7. Which of the following statements is true?
A. An endowment fund is used to account for assets held by a nonprofit organization as a custodian. The assets
are disbursed only as instructed by their owner.
B. In the statement of financial position, the balances of the Contractual Adjustments account and the
Expenditures- Student Aid account are to be deducted from the total service revenues to compute the net
service revenue for the month.

C. Contributions of cash and other assets are recognized when received and credited to contributions revenue
whether restricted or unrestricted.
D. Statement of Financial Position shows assets and liabilities similar to commercial accounting. Net assets are
classified into: unrestricted fund which has no donor imposed restrictions ; temporarily restricted fund which
has donor imposed stipulations and permanently restricted fund with donor imposed restrictions that can
expire and can be removed by non-profit organization activity.
GOVERNMENT ACCOUNTING
I
The approved appropriation of Department of Health for 2014 was P18,000,000. Eighty five percent of this appropriation
was allotted by the Department of Budget and Management (DBM) accompanied with Notice of Cash allocation (80%) of
the allotment. During the year, the amount of obligations incurred was equivalent to ninety percent of the NCA but only
seventy percent of these obligations were paid by checks. Determine which of the following is true.
A. Department of Health records the receipt of the NCA by debiting to Cash Collecting Officer an amount equivalent
to P12,240,000
B. The obligation incurred is recorded by means of a memorandum entry.
C. At the end of the year, to adjust the unused NCA, Subsidy Income from National Government would be debited by
P4,528,800
D. The approved appropriation is debited to Cash National Treasury Modified Disbursement System
II
Agency V collected cash of P50,000 for services rendered. Agency V is authorized to use its collections. The collection
was deposited to the Bank of the Philippine Islands (BPI). What is the entry to record the use of the collection?
A.
B.
C.
D.

Debit, Cash in Bank LCCA and Credit, Cash Disbursing officer for P50,000
Debit, Cash - NT - MDS and Credit, Cash Collecting officer for P50,000
Debit, Asset / Expense and Credit, Cash in Bank - LCCA for P50,000
Debit, Asset / Expense and Credit, Cash Disbursing officer for P50,000

III
During 2014, Agency W transferred cash of P1,000,000 to Agency X for a Village Park project. Subsequently, Agency W
received a report from Agency X about the project. Which of the following is incorrect?
A.
B.
C.
D.

The obligation of P1,000,000 is entered in the RAOFE prior to transfer of funds.

Source Agency debits Due from Implementing Agency upon transfer of cash
Receiving Agency credits Due to Source Agency upon receipt of cash
Source Agency debits the title of the project completed upon receipt of the completion report from the
implementing agency.

IV
On September 10, 2014 Bureau of Customs collected taxes from articles in the amount of P875,000. The BC has no
authority to use these collections in their operation and therefore deposited it to the Bureau of Treasury. What is the
journal entry to record the collections in the National Government Books?
A. Cash-National Treasury MDS
Subsidy Income from NG

875,000

B. Cash-Collecting Officer
Excise taxes-Articles

875,000

C. Cash-Disbursing Officer
Contributions Revenue

875,000

D. Cash-in Bank-LCCA
Excise taxes-Articles

875,000

875,000
875,000
875,000
875,000

V
Agency SS issued a purchase order for the acquisition of office equipment costing P75,000. The equipment was
received with the charge invoice and was paid by check after withholding tax of 10%. Agency SS remitted the tax
withheld to BIR thru a government depository bank. What is the entry of Agency SS to record the payment?
A. Accounts Payable
Due to BIR
Cash-National Treasury-MDS

75,000

B. Office Equipment
Cash-National Treasury-MDS

75,000

C. Office Equipment
Due to BIR
Cash-National Treasury-MDS

75,000

7,500
67,500
75,000
7,500
67,500

D. Accounts Payable
Cash-National Treasury-MDS

67,500
67,500

VI
On May 1, 2014 Agency G signed a contract for the construction of a building. The contract price is P75 million. The
agency made a down payment of 30% of the contract price. On September 1, 2014, Agency G received the first billing of
50% of the contract price. The agency paid the first billing less P150,000 withholding tax.
Which of the following is true to record the receipt of the first billing?
A. Debit Contract Billings, P37.5 million
B. Debit Construction in Progress, P75 million
C. Credit Advances to contractor, P22.5 million
D. Credit Accounts payable, P22.5 million
Which of the following is false to record the payment of the first billing?
A. Debit Accounts payable, P15 million
B. Credit Cash NT-MDS, P14.85 million
C. Debit Accounts payable, P37.5 million
D. Credit Due to BIR, P150,000
VII
Agency J prepares the payroll fund for the month of August, 2014:
Salaries and wages
ADCOM
PERA
Gross Payroll
Less: Withholding tax
GSIS contribution
Pag-ibig contribution
Philhealth contribution

P 300,000
90,000
60,000
P 450,000
12,000
9,000
6,000
3,000
30,000
P420,000

Net payroll
The net payroll is advanced to a Disbursing Officer.

Which of the following is true to record the advances to the disbursing officer?
A.
B.
C.
D.

Debit Cash Disbursing Officer, P450,000

Credit Cash-NT-MDS, P420,000
Debit Cash in Bank LCCA, P420,000
Credit Cash NT-MDS, P450,000
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