27.

KLM Company has the following information for February:

Units Started 100,000 units

BWIP (65% incomplete) 20,000 units
Normal Spoilage 3,500 units
abnormal Spoilage 5,000 units
EWIP (30% incomplete) 14,500 units
Transferred out 97,000 units
Beginning WIP Costs:
Material P 15,000
Conversion 10,000

All materials are added at the start of the production process. KLM company inspects goods at 75%
completion as to conversion. Assume that the costs per EUP for materials and conversion are P2.50 and
P3.75, respectively. Using FIFO, What is the total cost assigned to the transferred out units ( rounded to
nearest perso)?

a. 573,594 b. 573,954 c. 555,000 d. 548,594

28. TUV Company produces four solvents from the same process: C, D, E and G. Joint product costs
are P9,000. (Round all answer to the nearest peso).
Sales Price Disposal Cost Further
per barrel at per barrel at Processing
Barrels Split off Split off Costs
C 750 10.00 6.50 13.50
D 1000 8.00 4.00 10.00
E 1400 11.00 7.00 15.50
G 2000 15.00 9.50 19.50

If TUV sells the product after further processing, the following disposal costs will be incurred: C-2.50;
D-1.00 ; E-3.50 ; and G- 6.00

Using the sales value at split off, What amount of joint processing cost is allocated to product E?
a. 4,433 b. 2,276 c. 1,182 d.1,106

29. On December 31, 2009, Batangas Corporation had the following foreign currency denominated
balances. The functional currency of the entity is the Philippines peso. If the exchange rate will
fluctuate by 10% in favor of the US dollar from the closing rate, What is the effect in income before
tax?

Account Amount Transaction date spot rate Closing rate

Cash $30,000 P45.50 P47.20
Accounts Receivable 125300 44.40 47.20
Inventories 202,000 46.80 47.20
Prepaid Insurance 13,500 47.30 47.20
Property and equipment 120000 46.20 47.20
Accounts payable 101400 45.50 47.20
Unearned service income 34700 47.00 47.20
Loans payable 200200 45.80 47.20
Accrued pension liability 80000 48.10 47.20
a. (P1,231,920) b. (P690,536) c. P351,640 d. (P1.068.136)

30. D, E F formed a joint venture. F is to act as a manager and is designated to record the joint venture
transactions in his books. As a manager, he is allowed a salary of P17,000. Remaining profit (loss) is to
be divided equally. The following balances appear the end of 2010 before adjustment for venture
inventory and profit.

Debit Credit
Joint venture cash P50,000
D, Capital P30,000
E, Capital 4,000

The venture is to terminate on December 31, 2010 with unsold merchandise costing P14,100.
Assuming the joint venture loss is P7,200, what is the balance of the joint venture account before
distribution of profit?
a. P6,900 (debit) b. P21,300 (debit) c. P38,300 (debit) d. P6900 (credit)

31. Marie Corp. Recognizes construction revenue and cost using the percentage of completion method.
During 2009, a single long term project begun which continued through 2010 information on the
project follows:

2009 2010
Collections 200,000 600,000
Construction in progress net of billings 44,000 current assets 112,000 current liabilities
Contract billings 200,000 840,000
Current year gross profit 34,000 100,000

How much is the cost incurred each year?

a. 210,000 ; 684,000 c. 125,000; 356,000
b. 210,000 ; 384,000 d. 125,000; 796,000

32. Math, Science and PE share profits and losses from their partnership in the ratio of 35%, 45% and
20% respectively. Capital and loan balances related to each partner are as follows:

Loan to Partner from Loan to Partnership Capital

Partnership from partner
Math P 100,000 P500,000
Science P 70,000 280,000
PE 200,000 250,000

In addition to loan to partner, assets of the partnership includes cash of P110,000, inventory of
P360,000, receivable of P260,000 and plant and equipment of P710,000. Partnership liabilities to non-
partners amount to P180,000.

If Math receives already P450,000, how much PE receives at this point?

a. P364,286 b. P321,155 c. P375,000 d. P450,000

33. Commercial Corp. acquired inventories on September 1, 2009 from its 75% owned subsidiary,
Trademark Company. The inventories were sold for P258,000, including the 20% mark up on cost. Out
of the inventories, 60% were sold to outsiders. During the year, Commercial reported ner income of
P555,000 and Trademark reported net income of P375,000.

How mcuh is the realized profit to be allocated to non-controlling interest in 2010?

a. P6,450 b. P4,300 c. P17,200 d. P8,600

34. November 22, 2009, Bongga Company entered into a forward contract to purchase 375,000 foreign
currency in 90 days. The relevant exchange rates are as follows:

Spot Rate Forward rate (2/20/10)

November 22, 2009 P0.88 P0.90
December 31, 2009 0.98 0.93

Assuming that the forward contract is to hedge a committment to purchase machinery being
manufactured to Bongga's specifications. At December 31, 2009, what amount of foreign currency
transaction gain (loss) should Bongga include in profit or loss from this forward contract?
a. P11,250 b. P0 c. P18,750 d. P37,500
35. Which of the following statements is false?
a. Supporting services relate to the expenses incurred in providing the organization's social service
activities.
b. Contributed services and facilities are recognized both as expenses and revenue.
c. On the statement of activities for a private not for profit performing arts center, expenses should be
deducted from unrestricted revenue only.
d. An agency fund is used to account for assets held by a non profit organization as a custodian. The
assets are disbursed only as instructed by their owner.

36. The GREAT 4 has branches in key cities nationwide. Merchandise shipped to branches are billed at
25% above cost and are inventoried by the branches at billed price. Fixed assets of branches are carried
in the books of the Home Office. All collections made by the branch are deposited in the bank account
which only the Home Office can draw against each branch. However, maintains an imprest fund of
P4,000 which is reimbursed periodically for expenses. There are certain expenses through which are
being paid by the Home Office and subsequent charged against the branch. Presented below is a
summary of the branch office current account for CPAR branch.

CPAR Branch
Jan1 62,820 180,640 Remittance
Shipment to branch 128,000
Advertising and Promo 6,400
Depreciation 2,400
Reimbursement of Exp 36,600

Additional Information:

The beginning inventory of this branch was P31,500 and the branch reported sales of P192,690 of
which P1,250 was proved to be uncollectible. The branch inventory at December 31, 2010 was P22750.
The true net income of the branch to be reported is

a. P9260 c. P37,890
b. P10,540 d. P36,640

37. Which of the following statements is incorrect?

a. In the construction of building by contract, Advances to Contractor account may be debited when
billings are received.
b. In the construction of building by contract, Construction in progress account is credited to
recognized the Building account.
c. Issued purchase order for the office equipment requires only memo entry in RAOCO
d. The agency enters the obligation fot bank charges in RAOFE, Cash in Bank- LCCA account is
credited in the regular agency books.

38.Light of Jesus operates a branch in Cagayan de Oro City. Selected accounts taken from December
31, 2010 financial statements of Light of Jesus and its branch follows:

Home Office Branch

Sales P6,900,000 P3,765,000
Shipments to Branch 1,750,000
Shipments from home office 2,187,500
Inventory, January 1 800,000 120,000
Inventory, December 31 640,000 250,000
Purchases 6,800,000 1,000,000
Allowance for overvaluation before adjustment 452,500
Expenses 356,000 250,000

The ending inventory of the branch includes P120,000 purchased from outside suppliesrs
The consolidated net income is :
a. P1,791,500 b. P2,220,000 c. P2,218,000 d. P2,244,000

39. During August, Ivan incurred the following costs on Job 109 for the manufacture of 200 motors:

Original copst accumulation:

Direct materials 660
Direct labor 800
Factory overhead (150% of DL) 1200

Direct costs of reworking 10 units

Direct materials 100
Direct labor 160

The rework costs were attributable to the exacting specifications of Job 109 and the full rework costs
were charged to this specific job.
a. 15.80 b. 14.60 c. 14.00 d. 13.30

40. On January 1, 2009, Amor Company purchased 80% of the outstanding shares of Eros Corporation
at a cost of P1,400,000. On that date, Eros Corporation had P600,000 of capital stock and P1,000,000
of retained earnings. For 2009, Amor Company had income of P600,000 from its own operations and
paid dividends of P200,000. For 2009, Eros Corporation reported net income of P300,000 and paid
dividends of P100,000. All of the assets and liabilities of Eros Corporation had book values
approximately equal to their respective market values. On April 1, 2009, Eros sold equipment with a
book value of P60,000 to Amor Company for P120,000. The gain on the dale is included in the income
of Eros Corporation indicated above. The equipment is expected to have a useful life of five years from
the date of the sale.

How much is the non-controlling interest in net income?

a. P49,800 b. P50,400 c. P69,000 d. P52,800

41. Paul Company had the following inventories at the beginning and of March 2009:

3/1/2009 3/31/2009
Direct Materials 36,000 30,000
Work in Processing 18,000 12,000
Finished goods 54,000 72,000

The following additional manufacturing cost data were available for the month of March 2009:
Direct Material purchased 84,000
Direct Labor Payroll 60,000
Direct labor rate per hour 7.50
Factory overhead rate per direct labor hour 10.00
The cost of goods manufactured for March 2009 was
a. 212,000 b. 218,000 c. 230,000 d. 236,000

42. Bulls own 70 % of Wizards Company's outstanding common stock. Wizards, in turm, owns 20%
investment on Bobcats Corporation. During 2010, Bulls earned a net income of P320,600 from its own
operations while Wizards sufferred a loss of P60,000 excluding its share in the earnings of affilliates, if
any. Bobcats reported a net income of P43,500. Wizards declared dividends of P25,000 from its
accumulated profits in previous years. The consolidated net income for the year 2010 is:

a. P284,690 b. P267,190 c. P261,100 d. P269,300

43. On December 1, 2009, 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 rate
are as follows:

Date Spot Rate Forward Rate (3/31/10)

December 1, 2009 P45.00 P45.50
December 31, 2009 46.00 46.50
January 30, 2010 45.60 45.30
Marchy 31, 2010 45.10

How much is the forex gain or loss to be reported from this forward contract in 2010?
a. P250,000 b. P350,000 c. P 300,000 d. P225,000

44.Y hospital, Not for profit hospital affilliated with a religious group, reported the following
information for the year ended December 31,2010:

Gross Patient service rendered P2,400,000

Bad debts expense 50,000
Contractual adjustment 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, 2010 is
a. P2,250,000 b. P2,110,000 c. P1,960,000 d. P1,910,000

45. On January 1, 2008, Star Construction Company entered into an agreement with KC Company to
construct a studio house. At that time, Star Construction Company estimated that it would take three
years and would cost them P7.2m to complete the project. The contract price is P9.2M. During 2008,
Star Construction Company incurred P2,392,000 in construction costs but due to rising materials and
labor costs, the outcome of the contract cannot be estimated reliably in 2008. However, as of the end of
2008, Engr. Stanford was certain that the total costs of the project will not exceed P9.2M. KC Company
was billed 25% of the contract price in 2008.

The profit that should be recognized in 2008 is:

a. P664,444 b. P(P92,000) c. P0 d. P2.3M

46. Which of the following statements is incorrect?

a. Tax remittance advice is recorded by the agency by crediting SING

b. The gross payroll is advanced to a disbursing officer and is recorded by crediting Cash NT-MDS
c. Upon payment of the office equipment on account, Due to BIR account shall be credited for the
withholding tax.
d. The unused NCA is to be reverted to the Bureau of Treasury by crediting the Cash- NT-MDS
account.

47. Durian Company acquired 65% of the share capital of a foreign entity on August 31, 2009. The fair
value of the net assets of the foreign entity at that date was 8.24M yen. This value was 2.64M higher
than the carrying value 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 Durian is Philippine Peso. The financial year
end of the company is December 31, 2009. the exhange rates at August 31, 2009 and December 31,
2009 were Yen 2= Php 1 and Yen 1.25= Php 1, respectively. What figure for the fair value adjustment
should be included in the group financial statements for the year ended December 31,2009?

a. P4,284,800 b. P2678,000 c. P2,112,000 d. P 1,320,000

48. Partners P and A agreed to combine their business into partnership. The balance sheet of P and A
showed the following accounts:

P A
Book Value Agreed Value Book Value Agreed Value
Cash 5,000 5,000 7,000 7,000
Accounts Receivable 46,000 46,000 49,000 49,000
AFDA 3,000 4,000 4,000 5,000
Merchandise Inventory 90,000 108,000 72,000 75,000
Equipment 18,000 12,000 9,000 7,000
Accumulated Depreciation 3,600 900
Furniture's and Fixtures 12,000 9,000
Accumulated Depreciation 2,400
Accounts Payable 54,000 54,000 36,000 36,000

Capitals of P and A in the partnership are P125,000 and P100,000, respectively, the excess over the net
assets transferred to the partnership is goodwill.

Which of the following statement is true?

a. The total goodwill of P is 6,000
b. The total goodwill of A is 3,000
c. The capital of the partnership is P219,000
d. The assets of the partnership is P309,000

49. J, K and L formed a joint venture in 2010 and agreed to divide profits equally. K is designated to
act as the manager. The venture is terminated on December 31, 2010 even though there is still unsold
merchandise. On this date, K's trial balance shows the following account balances before profit or loss
distribution.

Debit Credit
Joint venture cash P45,000
Joint venture P9,000
J, Capital 8,000
L, Capital 9,000

K receives P7,000 for his share in the venture profit. Furthermore, he agrees to be charged for the
unsold merchandise as of December 31, 2010. Determine which of the following is correct.

a. Cost of unsold merchandise charged to K is P7,000

b. Net profit of the venture is P9,000
c. Amount due to K in the final settlement is P14,000
d. Total income earned by J is P15,000

50. BBB sales DVD on installment basis. On August 15, 2010, a new DVD was sold to Mary Rose
with a list price P275,000. BBB gave its customers a 20% trade discount on sales. The DVD cost was
P165,000. It granted Mary Rose an allowance of P 85,000 for her old DVD as trade in, the current
value of which was estimated to be P81,700. The balance was payable as follows: a down payment of
P35,000 and the balance to be paid in 20 monthly installment starting September 1, 2010. On April 1,
2011, Mary Rose defaulted payment of March 1, 2011 installment. The new car was repossessed; its
value to the seller is P40,000 ( use two decimal places for the gross profit percentage).

The total realized gross profit on Installment Sales in 2011 is:

a. 2,386 c. 13,123
b. 32, 617 d. 37,899