Professional Documents
Culture Documents
INSTRUCTIONS: Select the best answer for each of the following questions. ALL questions are compulsory and
MUST be attempted. Mark only one answer for each item on the answer sheet provided. Strictly NO ERASURES
ALLOWED. Erasures will render your examination answer sheet INVALID. Use PENCIL NO. 2 only. GOODLUCK!
2. The estimated amount available for free assets in a 8. Under cash priority program, when all of the priorities
Statement of Affairs for a business enterprise are paid, any remaining cash distribution is
undergoing bankruptcy liquidation is equal to the a. allocated to the partners based on their respective
assets profit or loss ratios.
a. Current fair value less carrying amounts b. allocated to the partners based on the balances in
b. Carrying amounts less current fair values their capital accounts after allocation of losses.
c. Carrying amounts plus gain or less loss on c. allocated to the partners based on their pre-
realization computed priorities.
d. Carrying amounts plus loss or less gain on d. allocated to the partners based on the relative
realization values of their capital balances.
3. As suggested by Article 1787 of the Philippine Civil 9. Under the cost recovery method,
Code and relevant PFRSs, the net contributions (assets a. the initial collections on the sale are treated as
and related liabilities assumed by the partnership) of recovery of the inventory sold. Thus, no gross
the partners to the partnership are measured at profit or interest income is recognized until total
a. fair value collections from the sale equals the cost of
b. cost inventory sold.
c. discretionary amount determined by partners b. the initial collections on the sale are treated as
d. any of these recovery of the inventory sold. Thus, no gross
profit is recognized until total collections from the
sale equals the cost of inventory sold.
4. On November 1, 2014, Klaus Co. obtained franchise c. A or B
rights from “The Originals” Co. The initial franchise fee d. None of the above.
included consideration for inventory and equipment to
be delivered to Klaus. All of the necessary preparations 10. Under PAS 11 – Construction Contracts, the primary
were completed, and Klaus Co. started operations, on issue in accounting for construction contracts is
January 31, 2015. The inventory and equipment were a. the allocation of contract revenue to the
delivered to Klaus on December 1, 2014. How would accounting periods in which construction work is
“The originals” Co. recognize revenue for the supply of performed.
inventory and equipment? b. the allocation of contract costs to the accounting
a. recognize in full on November 1, 2014 periods in which construction work is performed.
b. recognize in full on December 1, 2014 c. the determination of percentage of completion.
c. recognize in full on January 31, 2015 d. A and B.
d. deferred and amortize over the franchise term e. All of the choices.
starting January 31, 2015
11. PAS 11 – Construction Contracts provides that any
5. An advance cash distribution plan is prepared expected loss on the construction contract is
a. Each time cash is distributed to partners in an a. recognized as an expense immediately.
installment liquidation b. recognized as an expense immediately as an
b. Each time a partnership asset is sold in an adjustment to the revenue already recognized.
installment liquidation c. recognized as an expense immediately adjunct to
c. To determine the order and amount of cash each the costs of construction already recognized.
partner will receive as it becomes available for d. deferred and amortized over the remaining
distribution construction period.
d. None of these
12. Which of the following appears on the statement of
6. The interest of the withdrawing, retiring, or deceased financial position of a contractor who is applying PAS
partner shall be adjusted for which of the following? 11 – Construction Contracts?
I. His share of any profit or loss up to the date of his a. Construction in progress as current asset.
withdrawal, retirement or death, if he withdraws, b. Progress billings as current liability.
retires or dies during the year c. Amount of due from (due to) customers for
II. His share of any revaluation gains or losses as at contract work.
the date of his withdrawal, retirement, or death d. Any of the choices.
13. The realization of income on installment sales II. initial services required by the franchise agreement
transactions involves are substantially performed.
a. Recognition of the difference between the cash III. no other material conditions or obligations exist.
collected on installment sales and the cash
expenses incurred a. I, II and III c. I and II only
b. Deferring the net income related to installment b. II and III only d. I and III only
sales and recognizing the income as cash is
collected 20. If franchise rights are repossessed and the franchisor
c. Deferring gross profit while recognizing operating refunds the consideration received,
or financial expenses in the period incurred I. the original franchise sale is canceled. “Gain or
d. Deferring gross profit and all additional expenses loss” from cancellation may arise after
related to installment sales until cash is collected derecognition of account balances associated with
the franchise cancelled.
14. In selecting an accounting method for a newly II. the transaction shall not be regarded as a sale
contracted long-term construction project, the principal cancellation. However, impairment loss may arise
factor to be considered should be from forfeiture of collectibles.
a. The terms of payment a. I only c. I or II
b. The nature of the contractor’s technical facilities b. II only d. I and II
used in construction
c. The method commonly used by the contractor for 21. Which of the following is an inventory account of a
other long-term construction contracts manufacturer but not of a merchandiser?
d. The degree to which a reliable estimate of the a. Cost of goods manufactured
costs to complete and extent of progress toward b. Merchandise Inventory
completion is practicable c. Work in process inventory
d. Direct labor
15. SMDC Construction Company’s project extend over a. Cost of goods sold
several years and collection of receivables is b. Manufacturing overhead applied
reasonably certain. Each project has a contract that c. Direct materials used
specifies a price and the rights and obligations of all d. Finished goods inventory
parties. Both the contractor and the customer are
expected to fulfill their contractual
a. Materials inventory
obligations on each project. Reliable
b. Direct labor
estimates can be made of the extent of
c. Manufacturing overhead
progress and costs to complete each
d. Selling expenses
project. The method that SMDC must
22. Cost of goods manufactured is used to compute
use to account for construction revenue is
a. Installment sales method
23. Which of the following is a period cost?
b. Percentage- of- completion method
c. Completed –contract method
24. Job order costing would be an appropriate system to
d. Cost recovery method
account for the manufacture of
16. One of the more popular input measures used to a. Aircraft
25. b. Matches A
determine the progress toward completion in the
percentage- of-completion method is c. Zippers
a. Revenue-percentage basis d. Cardboard boxes
b. Cost-percentage basis written order sent to inform the purchasing
c. Progress completion basis department of a need for materials is called a
d. Cost –to- cost basis a. Purchase order
26. b. Purchase requisition U
17. The theoretical support for using the percentage- of- c. Receiving report n
completion method of accounting for long-term d. Materials requisition form d
construction projects is that it e
a. Is more conservative than the cost recovery r a periodic inventory system, the purchase of
method materials is recorded in an account entitled
b. Reports a lower net income figure than the cost a. Cost of Goods Sold
recovery method 27. b. Purchases
c. More closely conforms to the cost principle c. Materials inventory
d. Produces a realistic matching of expenses with d. Work in Process Inventory
revenues The total of the materials subsidiary ledger inventory cards
must be equal to the amount in the following account
18. It is the one-off payment made by the franchisee to
a. Cost of Goods Sold
the franchisor to obtain the franchise right. 28. b. Purchases
a. Initial franchise fee
c. Materials Inventory
b. Continuing franchise fee
d. Work in Process Inventory
c. Fixer’s fee
Which of the following is usually prepared daily by
d. Any of the choices
employees for each job worked on?
19. There is substantial performance when: a. Job time tickets
I. the franchisor has no remaining obligation or intent b. Time card
to refund any cash received or forgive any unpaid c. Punch card
notes or receivables. d. Cost control card
29. Under a perpetual inventory system, the purchase of b. CLAIRE, P1,161,200; DAISY, P418,000; & ELSIE,
materials is recorded in an account entitled P246,000
a. Cost of Goods Sold c. CLAIRE, P1,987,500; DAISY, P189,000; & ELSIE,
30. b. Purchases P217,500
c. Materials inventory d. CLAIRE, P1,095,120; DAISY, P547,560; & ELSIE,
d. Work in process inventory P182,520
Factory worker fringe benefit costs are usually charged to
a. Work in process Inventory On January 1, 2015, FRIDA and GLACE formed a
b. Direct labor partnership by contributing cash of P405,000 and
c. Administrative expenses P270,000, respectively. On February 1 2015, Partner
d. Factory overhead FRIDA contributed an additional P135,000 cash to the
The following condensed balance sheet is prepared for
partnership and on August 1, 2014 Partner FRIDA made a
QUIEL and ROGER, who share profits and losses in the permanent withdrawal of P67,500. On May 1, 2015,
ratio of 60:40, respectively:
Partner GLACE contributed machinery with a fair market
Other assets P 405,000 Accounts P108,000 value of P90,000 and a net book value of P75,000 when
payable
contributed. On November 1, 2015 Partner GLACE
Quiel, loan 18,000 Quiel, capital 175,500 contributed an additional P45,000 cash to the partnership.
Roger, capital 139,500
Both partners withdrew one-fourth of their salary
Total P 423,000 Total P 423,000 allowances in 2015.
31. The partners have decided to liquidate the partnership. The partnership reported a net income of P257,400 in
If the other assets are sold for P346,500, what amount 2014 and the profit and loss agreement are as follows:
of the available cash should be distributed to QUIEL? a. Interest at 6% is allowed on average capital
a. P136,000 c. P122,400 balances;
b. P156,000 d. P195,000 b. Salaries of P2,700 per month to each partner;
c. Bonus to FRIDA of 10% of net income after interest,
salaries, and bonus; and
On January 1, 2014, the partners SELYA, TESSA, and d. Balance to be divided in the ratio of 6:4 to FRIDA
URSULA, who share profits and losses in the ratio of 5:3:2, and GLACE, respectively.
respectively, decided to liquidate their partnership. On this
date the partnership condensed balance sheet was as 34. Determine how the net income will be allocated to the
follows: partners:
a. FRIDA, P160,000 and GLACE, P126,000
Cash P 45,000 Liabilities P 54,000 b. FRIDA, P 180,000 and GLACE, P106,000
Other assets 225,000 Selya, capital 72,000 c. FRIDA, P170,000 and GLACE, P116,000
Tess, capital 81,000 d. FRIDA, P153,000 and GLACE, P104,400
Ursula, capital 63,000
Total P 270,000 Total P270,000
HAIDEE and ISABEL are partners sharing profits and losses
in the ratio of 60% and 40%, respectively. The partnership
On January 15, 2014, the first cash sale of other assets balance sheet at August 30, 2014 follows:
with a carrying amount of P135,000 realized P108,000.
Safe installment payments were made on the same date. Cash P 12,150 Accounts payable P 13,500
32. How much cash should be distributed to each partner? Other assets 119,700 Haidee, Loan 5,850
SELYA TESSA URSULA Isabel, Loan 9,000 Haidee, capital 81,000
a. P15,000 P51,000 P44,000 Isabel, capital 40,500
b. P40,000 P45,000 P35,000 Total P 140,850 Total P140,850
c. P55,000 P33,000 P22,000
d. P13,500 P45,900 P39,600
At this date, JOSIE was admitted as a partner for a
consideration of P43,875 cash for a 40% interest in capital
CLAIRE, DAISY, and ELSIE formed the CDE Partnership on and in profits.
August 1, 2015, with the following assets, measured at fair 35. Assume JOSIE is admitted by purchase of 40% each
market values, contributed by each partner: of the original partners’ interest, determine how the
CLAIRE DAISY ELSIE P43,875 will be apportioned to HAIDEE and ISABEL
Cash P 324,000 P108,000 P129,600 a. HAIDEE, P32,850 and ISABEL, P15,900
Accounts b. HAIDEE, P32,450 and ISABEL, P16,300
receivable 73,080 - 91,800 c. HAIDEE, P29,565 and ISABEL, P14,310
Plant, Property, & d. HAIDEE, P32,950 and ISABEL, P15,800
Equipment (PPE) 1,620,000 340,200 -
PRINCESS COMPANY filed a voluntary bankruptcy P1,176,000. Operating expenses (includes losses on
petition on August 15, 2013 and the statement of repossession) total to 75% of the realized gross profit.
affairs reflect the following amounts: 39. What is the net income for the year ended December
BOOK ESTIMATED 31, 2015?
CARRYING CURRENT a. P329,142 c. P 543,984
VALUE VALUE b. P546,000 d. P 279,918
Liabilities 320,000
The Batangas Corporation operates a branch in Lipa City. Common stock 64,000
The Home Office ships merchandise to the branch at 125% Additional paid-in capital 256,000
of its cost. Selected information from the December 31, Retained earnings 320,000
2015 trial balance are as follows:
Home Office Branch Office 53. To have a goodwill of P 120,000, the number of shares
Books Books to be issued by Carl Company should be
Sales P600,000 P300,000 a. 30,000 shares c. 29,000 shares
Shipments to branch 200,000 b. 30,400 shares d. 35,000 shares
Purchases 350,000
Shipments from Home
Office 250,000 On August 1, 2014, Blite Company paid P850,000 for all
Inventory, January 1 100.000 40,000 the net assets of Ong Enterprises in a transaction properly
Allowance for Overvaluation recorded as a purchase. The recorded assets and liabilities
of branch Inventory 58,000 of Ong Enterprises on August 1, 2014, follow:
Expenses 120,000 50,000 Cash P 80,000
Inventory 240,000
Inventory at December 31, 2015: Property and equipment, net 480,000
Home Office P30,000 Liabilities (180,000)
Branch Office 60,000
On August 1, 2014 it was determined that the inventory of
50. The combined net income of the home office and the Ong had a fair market value of P190,000, and the property
branch after adjustment is: and equipment (net) had a fair market value of P560,000.
a. P326,000 c. P500,000 54. What is the amount of goodwill resulting from the
b. P496,000 d. P280,000 business combination?
a. P 0 c. P200,000
b. P 20,000 d. P230,000
Quad Corporation purchases all of the net assets of
Chrome, Inc., for P320,000. Immediately prior to the
combination, Chrome’s net assets were carried on the 55. Stain Corporation is an 80%-owned subsidiary of Paint
books at P180,000, and Chrome had retained earnings of Corporation. During 2014 Stain sold merchandise that
P24,000. The fair value of Chrome’s net assets at the date cost P96,000 to Paint for P128,000. Paint's ending
of combination is P248,000. Quad Corporation had inventory at December 31, 2014 contained unrealized
retained earnings of P40,000 and no goodwill immediately profit of P6,400 from the intercompany sales. During
prior to the combination 2015 Stain sold merchandise that cost P112,000 to
51. Immediately after the combination, the combined Paint for P152,000. One-half of this remained unsold
company reports goodwill and retained earnings of: by Paint at December 31, 2015 For 2015 Paint's
Goodwill Retained Earnings separate income was P200,000 and Stain's reported
a. P 0 P 40,000 net income was P152,000.
b. P 0 P 64,000
c. P 72,000 P 40,000 The consolidated net income for 2015 will be:
d. P 72,000 P 64,000 a. P302,000 c. P310,720
b. P338,400 d. P274,500
The Carl Company will issue P10 par value common stock
for the net assets of PBA Company. The fair market value 56. P Company acquired a 90% interest in S Company in
per share of Carl’s common stock is P40. The following is 2013 at a time when S Company's book values and fair
the list of accounts of PBA Company on the date of the values were equal to one another. On January 1, 2015,
acquisition. S sold a machine with a P24,000 book value to P
Book Value Fair Market Value Company for P48,000. P depreciates the machine over
Current assets P280,000 P 320,000 10 years using the straight line method. Separate
Plant assets (net) 680,000 incomes for P and S for 2015 are as follows:
1,280,000 P Co. S. Co.
Liabilities 320,000 Sales P960,000 P560,000
Common stock 64,000 Gain on sale of 24,000
Additional paid-in capital machinery
256,000 Cost of goods sold (400,000) (152,000)
Retained earnings 320,000 Depreciation expense (240, 000) (72,000)
52. To have an income from acquisition of P120,000, the Other expenses (96,000) (240,000)
number of shares to be issued by Carl Company should Separate incomes P224,000 P120,000
be”
a. 30,000 shares c. 29,000 shares The consolidated net income for 2015 is:
b. 30,400 shares d. 35,000 shares a. P344,000 c. P310,400
b. P322,400 d. P312,560
The Carl Company will issue P10 par value common stock
for the net assets of PBA Company. The fair market value
per share of Carl’s common stock is P40. The following is RICH Corporation paid P1,125,000 for an 80% interest in
the list of accounts of PBA Company on the date of the HARD Corporation on January 1, 2015 at a price P37,500
acquisition. in excess of underlying book value. The excess was
Book Value Fair Market Value allocated P15,000 to undervalued equipment with a ten-
Current assets P280,000 P 320,000 year remaining useful life and P22,500 to goodwill which
Plant assets (net) 680,000 1,280,000 was not impaired during the year. During 2015, HARD
Corporation paid dividend of P60,000 to RICH Corporation. 60. In Aleck’s income statement, the amount that should
The income statements of RICH and HARD for 2015 are be included as a foreign exchange loss
given below: a. P 0 c. P 6,000
RICH HARD b. P21,000 d. P27,000
Sales P2,500,000 P1,000,000
Cost of sales (1,250,000) (500,000) On April 8, 2013, CALAMBA CORPORATION purchased
Depreciation merchandise from an unaffiliated foreign company for
expense (250,000) (150,000) 10,000 units of the foreign company’s local currency.
Other expense (500,000) (225,000) CALAMBA paid the bill in full on March 1, 2015 when the
Net income P500,000 P125,000 spot rate was P0.45. The spot rate was P0.60 on April 8,
2013 and was P0.55 on December 31, 2014.
61. For the year ended December 31, 2014, CALAMBA
57. Consolidated net income for 2015 is
should report a transaction gain of
a. P632,125 c. P623,125
a. P1,500 c. P1,000
b. P263,125 d. P632,215 b. P 500 d. P 0
P Corporation acquired 70% of the voting common On December 1, 2014, a Philippine firm purchased a
stock of S Company at a time when S Company’s book speculative hedge to buy 30,000 foreign currency when
values and fair values were equal. Separate incomes the spot rate was P1.10 and a 60 day forward rate was
of P Corporation and S Company for 2015 are as P1.12. The spot rate at December 31 (the company’s year-
follows: end was P1.25 and a 30-day forward rate was P1.13.
P Corporation S Company When the speculative hedge was exercised on January 31,
Sales 633,600 350,400 2015 the spot rate was P1.11 and a 30 day forward rate,
Cost of Goods Sold 384,000 192,000 P1.12.
Operating expenses 115,200 96,000 62. The journal entry to record this hedge would include a
Separate income from debit to Contract Receivable in the amount of
own operations 134,400 62,400 a. P33,600 c. P33,000
b. P 600 d. P 0
Intercompany sales from P to S for 2014 and 2015 are
summarized as follows: 63. The amount of foreign exchange gain/loss that would
Cost Selling Unsold appear on the income statements of the Philippine
Price at year- company resulting from this speculative hedge for the
end years ended 2014 and 2015 are
Intercompany sales a. 2014 = P300 loss; 2015 = 600 loss
– 2014 240,000 374,400 30% b. 2014 = P300 gain; 2015 = 600 gain
Intercompany sales c. 2014 = P300 loss; 2015 = 600 gain
– 2015 168,000 264,000 40% d. 2014 = P300 gain; 2015= 600 loss