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PRACTICAL ACCOUNTING 2

1. Katy Perry developed an interesting idea for marketing sailboats in Death Valley. She interested Lady Gaga
in joining her in a partnership. Following the information you have collected relative to their original contribution.

Lady Gaga contributed P 30,000 cash, a track of land, and delivery equipment. Katy Perry contributed P 60,000
cash. After giving special consideration to the tax bases of the assets contributed, the relative usefulness of the
assets to the partnership versus the problems of finding buyers for the assets and contributing cash, and other
such factors, the partners agreed that Katy Perrys contribution was equal to 40 percent of the partnerships
tangible assets, measured in terms of the fair value of the assets to the partnership. However, since marketing idea
originated with Katy Perry, it was agreed that she should receive credit for 50 percent of the recorded capital.
Recent sales of land similar to that contributed by Lady Gaga suggest a market value of P 40,000. Likewise, recent
sales of delivery equipment similar to that contributed by Lady Gaga suggest P 40,000 as the market value of the
equipment. These sales, of course, were not entirely representative of the particular assets contributed by Lady
Gaga and therefore may be a better indicator of their relative values than their absolute values. In reflecting on
their venture, the partners agree that it is a rather risky affair in respect to anticipated profits. Hopefully, however,
they will be able to build good customer relations over the long run and establish a permanent business with an
attractive long-run rate of return.

Under the most appropriate method, given the circumstances, the entry to record the formation of the
partnership must be:
a. Cash P 90,000
Delivery equipment 40,000
Land 40,000
Perry, capital 60,000
Gaga, capital 110,000

c. Cash P 90,000
Delivery equipment 40,000
Land 40,000
Perry, capital 85,000
Gaga, capital 85,000

b. Cash P 90,000
Delivery equipment 40,000
Land 40,000
Goodwill 50,000
Perry, capital 110,000
Gaga, capital 110,000
d. Cash P 90,000
Delivery equipment 40,000
Land 40,000
Perry, capital 102,000
Gaga, capital 68,000


2. The statement of financial position as of July 31, 2012, for the business owned by Katniss Everdeen, shows
the following assets and liabilities:

Cash P
50,000
Furniture & Fixtures P 164,000
Accounts receivable
134,000
Accounts payable 28,800
Merchandise inventory
220,000


It is estimated that 5% of the receivables will prove uncollectible. The cash balance includes a 1,000 investment
shares classified as fair value through profit and loss recorded at its cost of P 8,000. The shares last sold on the
market were at P 21.50 per share. Merchandise inventory includes obsolete items costing P 20,000 that will
probably realized only P 4,000. Depreciation has never been recorded; however, the furniture and fixtures are two
years old, have estimated total life of 10 years and would cost P 240,000 if purchased new. Prepaid items amount
to P 7,000. Peeta Mellark is to be admitted as a partner upon investing P 200,000 cash and P 100,000 merchandise.

How much capital is to be credited to Katniss Everdeen upon formation of the partnership?
a. P 539,200 b. P 606,200 c. P 565,000 d. P 613,000

3. Partners Daniel, Katerina, Nathan, and Johanna, share profits in the ratio of 80:60:30:30, respectively.
Their partnership agreement provides that in the event of the death of a partner, the firm shall continue until the
end of the fiscal period. Profits shall continue until the end of the fiscal period. Profits shall be considered to have
been earned proportionately during this period, and the deceased partners capital shall be adjusted by the proper
share of the profit or loss until the date of death. From that date until the date of settlement with the estate there
shall be added interest of 6% computed on the adjusted capital. The remaining partners shall continue to share
profits in the old ratio. Payment to the estate shall be made within one year from the date of the partners death.



Partner Johanna died on November 16. On December 31, the end of the six-month period, account balances on
the partnership books before the income summary account is closed are as follows:

Cash P 15,000 Notes payable P 34,000
Accounts receivable 140,000 Accounts payable 141,000
Inventories 190,000 Daniel, capital 84,000
Machinery & Equipment (net) 90,000 Katerina, capital 75,000
Store furniture and fixtures (net) 33,000 Nathan, capital 48,000
Johanna, capital 45,000
Income summary
(7/1 - 12/31)

45,000
P 468,000 P 468,000

The income summary account is closed on December 31. On this date, Nathan decides to retire. Daniel and
Katerina agree to pay the balance in Nathans capital account after distribution of profit, less 20%, and issue a
partnership 60-day, 6% note to Nathan in settlement. What amount of note payable must be issued to Nathan?
a. P 43,985.22 b. P 44,038.23 c. P 54,750 d. P 55,047.79


Use the following information for the next two items

De Lima, of De Lima and Henares, partners sharing profits in the ratio of 60% and 40% wants to retire. The partners
agree that the fixed assets are undervalued by P 35,000 and that De Limas share of this increase shall be recorded
and creditable to her capital account. Since the working capital is only P 70,000, it is decided that De Lima shall
receive only one-third of her adjusted capital credit in cash. For the remainder, she accepts securities, which have
been carried as other assets at their book value and market value of P 12,000 and a six-month note payable. The
statement of financial statement, which then prepared, appears as follows:
Current assets P 53,000 Current liabilities P 52,000
Other assets 3,000 Henares, capital 50,000
Fixed assets 46,000
P 102,000 P 102,000

4. Current liabilities before De Limas retirement must be:
a. P 52,000 b. P 80,000 c. P 10,000 d. P 42,000

5. Other assets before De Limas retirement must be:
a. P 3,000 b. P 12,000 c. P 15,000 d. P -0-

6. Emily, Daniel and Victoria have capital balances of P120,000, P200,000 and P72,000, respectively and they
share profits in the respective ratio of 4:2:1. Daniel received P104,000 as a result of the liquidation of the
partnership. Loss on asset realization is
a. P 236,000 b. P 336,000 c. P 288,000 d. P 264,000

7. THE IMMORTALS Store accounts for its sales on the installment basis. At the beginning of 2012, ledger
accounts include the following balances: Installment contracts receivable, 2010 - P 30,000; Installment contracts
receivable, 2011 - P 96,000; Deferred gross profit, 2010 - P 12,600; Deferred gross profit, 2011 - P 36,000.

At the end of 2012, account balances before adjustment for realized gross profit on installment sales are:

Installment contracts receivable, 2010 - P 0; Installment contracts receivable, 2011 - P 24,000; Installment
contracts receivable, 2012 - P 130,000; Deferred gross profit, 2010 - P 12,600; Deferred gross profit, 2011 - P
34,350; Deferred gross profit, 2012 - P 60,000.

Installment sales in 2012 are made at 25% above cost of merchandise sold. During 2012 upon default in payment
by the customer, the company repossessed the merchandise with an estimated market value of P 2,000. The sales
was in 2011 for P 10,800, and P 6,400 had been collected prior to repossession.

Compute the gain or (loss) on repossession assuming profit is recognized when sale is made
a. P -0- b. P (750) c. P (1,520) d. P (2,400)




Use the following information for the next two items

Walang Hanggan Corporation has been using the cash method to account for income since its first year of
operations in 2011. All sales are made on credit with notes receivable given by the customers. The statement of
comprehensive income for 2011 and 2012 included the following amounts:

2011 2012
Revenues collection on principal P 32,000 P 50,000
Revenues interest 3,600 5,500
Cost of goods purchased * 45,200 52,020

* Includes increase in inventory of goods on hand of P 2,000 in 2011 and P 8,000 in 2012
The balances due on the notes at the end of each year were as follows:

2011 2012
Notes receivable 2011 P 62,000 P 36,000
Notes receivable 2012 60,000
Discount on notes receivable 2011 7,167 5,579
Discount on notes receivable 2012 8,043

(Round-off gross profit rate in two decimal percentage and round of balances in nearest peso)

8. Under installment method, how much is the realized gross profit in 2011?
a. P 14,164 b. P 16,080 c. P 17,764 d. P 19,680

9. Under installment method, how much is the amount recognized in profit and loss 2012?
a. P 12,267 b. P 21,615 c. P 23,329 d. P 28,829

10. On January 1, 2013, Casio Realty Company sold property carried in inventory at a cost of P840,000 for
P1,400,000 . A 10% down payment was made and the balance payable in 4 equal installments of P363,625,
inclusive of 12% annual interest, payable semi-annually every June 30 and December 31.

Under installment method, how much is the total realized gross profit in 2013?
a. P 293,332.60 b. P 346,900 c. P 308,000 d. P 237,332.60

11. SPAIN, Inc., agrees to transfer television sets to Gasol Bros. on a consignment basis. The consignee is to
sell a set at 40% above cost exclusive of freight and is to receive a 10% commission on sales price. The consignor
agrees to reimburse the consignee for all expenses related to the consignment. The agreement also calls for an
advance payment by the consignee of 30% per set based on selling price; the said advance is to be deducted as
settlement is made for each set sold. The consignee is to provide an account sales quarterly and is to make cash
remittance for the amount owed at that time. The following consignment sales activities occurred during the
October 1 to December 31 of current year:

Sets shipped 100; Unit cost each set P 10,000; Freight charges on the shipment paid by the consignor P
75,000; The consignee made advance payments on the sets received; Advertising cost paid by the consignee
P 50,000

The consignee sold 80 sets for cash; expenses of delivery and installation were P 25,000. After notifying the
consignor with the total sets sold for the period, the consignee returned 10 sets representing a model that could
not be sold and paid freight charges of P 8,000 on the return. The net income to be reported by the consignor as a
result of the above is
a. P 65,000 b. P 73,000 c. P 125,000 d. P 57,500

12. On June 1, 2012 SME USA acquired 35% of the equity of CHI and UK for P 58,000 and P 37,000,
respectively. SME USA shares joint control, with other venturers, over the strategic financial and operating
decisions of entities CHI and UK. Transaction costs of 5% of purchase price of the shares were incurred by USA.







On December 31, 2012, entities CHI and UK declared and paid cash dividends of P 15,000 and P 24,000,
respectively. Also, for the year ended December 31, 2012, entity CHI recognized a net loss of P 42,000; while entity
UK recognized a net profit of P 18,000.

Published price quotations do not exist for shares of entities CHI and UK. Using appropriate valuation techniques,
SME USA determined the fair value of its investments in entities CHI and UK at December 31, 2012 as P 65,000 and
P 49,000, respectively. Costs to sell are estimated at 9% of the fair value of the investments. SME USA does not
prepare consolidated statements because they do not have any subsidiaries.

Assuming early adoption of PFRS 11, what is the investment balance of SME USA at the end of the year in entity UK
using equity model?
a. P 26,775 b. P 34,125 c. P 38,850 d. P 42,525

13. Agency MMM received a progress billing for the construction of a building as follows:

Progress billings: 70% x P10,000,000P 7,000,000
Less: Recoupment of advances made (70% x P1,500,000) 1,050,000
Net billingsP 5,950,000

The entry to record the above billings:
a. Construction in progress Agency Assets5,950,000
Accounts payable5,950,000
b. Construction in progress Agency Assets7,000,000
Accounts payable 5,950,000
Advances to Contractors 1,050,000
c. Buildings5,950,000
Accounts payable5,950,000
d. Buildings7,000,000
Accounts payable5,950,000
Advances to Contractors1,050,000
14. Bonifacio contractors had a 3-year construction contract in 2012 for P900,000. The company uses the
percentage-of-completion method for financial statement purposes. Income to be recognized each year is based
on the ratio of cost incurred to total estimated cost to complete the contract. Data on this contract follows:

Accounts receivable construction contract billingsP 30,000
Construction in progressP 93,750
Less: Amounts billed 84,375
10% retention 9,375
Net income recognized in 2012 (before tax) 15,000

Bonifacio Contractors maintains a separate bank account for each construction contract. Bank deposits to this
contract amounted to P50,000.

What was the estimated total income before tax on this contract?
a. P 45,000 b. P 94,000 c. P 135,000 d. P 144,000

15. Party Construction Co. enters into a contract on January 2, 2012 to construct a 20-storey office building
for P400 million (M). During the construction period, many change orders are made to the original contract. The
following schedule summarizes these changes made in 2012:





Cost incurred in
2012
Estimated cost
to complete
Contract Price
Basic Contract 80,000,000 280,000,000 400,000,000
Change order # 1 500,000 500,000 1,250,000
Change order # 2 - 500,000 -
Change order # 3 1,000,000 1,000,000 Still to be negotiated at
least cost
Change order # 4 1,250,000 - 1,000,000

Determine the gross profit to be recognized during the year under the cost to cost percentage of completion
method. (Round off percentage of completion rate at one decimal percentage)
a. P 9,015,000 b. P 8,561,000 c. P 8,966,500 d. P 8,800,000

16. On January 1, 2012 a real estate company, SMCI, has entered into a long term specifically negotiated
construction contract to construct a building on a piece of land owned by SMCI and after construction is complete
, to deliver the entire property to a customer. This is a situation common in the wholesale market when
constructing a shopping mall, than in the retail market. SMCI applies the percentage of completion method to
account for contract revenues and expenses. The relative percentage of cost (POC) incurred is considered a reliable
method for measuring the progress of the contract. Additional information were as follows: (M=million)
Total cost of land P 2M
Estimated total cost of construction 8M
Estimated total cost of contract 10M
Agreed purchase price 11M

Construction has commenced and at the reporting date (12/31/12), total construction cost incurred amount to
P2M. If the contract is considered to be a multiple element contract, and that the legal title of land will pass to the
buyer after construction of the building is complete, what is the amount gross amount due from customer
recognized in the financial statements of SMCI assuming fair value of the land is P2.5M?
a. P 4.25M b. P 4.13M c. P 2.25M d. P 2.13M

17. On July 1, 2013, Pinoy Company signed an agreement to operate as franchisee of International Company
for a franchise fee of P800,000. Of this amount, P300,000 was paid upon signing of the agreement and the
balance is payable in five semi-annual payments of P100,000 each beginning December 31, 2013. The notes are
non-interest bearing but the market rate of interest is 12%. The agreement provides that the down payment is
non-refundable and no future services are required of the franchisor as of December 31, 2013. (Use 2 decimal
places for present value factor). On December 31, 2013, International Company should record total income related
with franchise of :
a. P 446,260 b. P 721,000 c. P 800,000 d. P 746,260

18. On October 1, 2012, Devon Company entered into franchise agreement with Mr. Gonzales. The
agreement required an initial fee payment of P200,000 plus four P100,000 payments due every three months, the
first payment due December 31, 2012. The interest rate implicit is 12%. The initial deposit is refundable until
substantial performance has been completed. On December 31, 2012, all services required have been substantially
completed with a total cost of P250,000. How much is the net income related with the franchise, on December 31,
2012?
(Round off PV factor into three decimal places)
a. P 132,851 b. P 321,700 c. P 332,851 d. P 377,520

19. Mercedes Inc. is insolvent and its statement of affairs show: Estimated gain on realization of assets,
P2,000,000; Estimated loss on realization of assets, 2,560,000; Additional assets, P1,280,000; Additional liabilities,
P960,000; Capital Stock, P12,000,000; Deficit, P11,200,000. The pro-rata payment to stockholders on the peso is:
a. P 0.70 b. P 0.43 c. P 0.30 d. P 0.57

Use the following information for the next two items

Craft Factory manufactures small tables in its Processing Department. Direct materials are added at the initiation
of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly
throughout the process. Inspection occurs at the end of the process. Spoiled units generally constitute 5% of the
good units. Data for December 2012 are as follows:




Work in process, beginning (materials-100% complete,
Conversion costs-75% complete) 10,000 units
Started 40,000 units
Completed and transferred o 38,400 units
Work in process, end (materials-100% complete,
Conversion costs-65% complete) 8,000 units
COST DATA
Work in process, beginning
Direct materials P50,000 Conversion costs-P30,000
Direct materials added, P100,000
Conversion cost added, P140,000

(Round off unit costs to two decimal places)

20. The cost allocated to abnormal spoilage using weighted average method is
a. P -0- b. P 7,360 c. P 11,088 d. P 16,400

21. The total cost of units transferred out is
a. P 277,200 b. P 245,760 c. P 266,112 d. P 253,440

22. During the year 2012 goods billed at P840,000 were shipped to the branch at 125% of cost. The account
Allowance in Branch Inventory has a balance of P242,000 before adjustment. The beginning inventory of the
branch from home office at cost is P370,000; the beginning inventory of the branch from outsider is P35,000;
purchases from outsider is P220,000. Determine the cost of goods available for sale of the branch per branch
record.
a. P 1,297,000 b. P 1,465,000 c. P 1,539,000 d. P 1,767,500

Use the following information for the next two items:

Trial balance for the home office and the branch of Terry Company show the following accounts before
adjustments on December 31, 2012. The home office policy of billing the branch for merchandise is 20% above
cost.

Home Office Branch
Allowance for overvaluation 60,000
Shipments to branch 240,000
Purchases (outsiders) 75,000
Shipments from home office 270,000
Merchandise Inventory, 12/01/12 100,000

The branch Merchandise Inventory on December 31, 2012 of P 50,000 includes purchases from outsiders of P
20,000.

23. The working paper entry to eliminate profit in the beginning inventory includes debit to
a. Allowance for overvaluation, P 48,000
b. Branch income, P 5,000
c. Merchandise Inventory (12/1/2012), P 12,000
d. Allowance for overvaluation, P 12,000

24. The entry on the books of the home office to recognize mark-up includes credit to
a. Allowance for overvaluation, P 5,000
b. Branch income summary, P 55,000
c. Branch income summary, P 5,000
d. Branch income summary, P 52,000

25. The Home office in Mandaluyong shipped merchandise costing P 80,000 to Makati branch and paid for
the freight charges of P 600. The home office bills the branch at 125% of cost. Makati branch was subsequently
instructed to transfer one-half of the merchandise to Bulacan branch wherein Bulacan paid for P 200 frieght. If
shipment was made directly from Mandaluyong to Bulacan, the freight cost would have been P 400.




By how much will Makati branch charge the Home Office account?
a. P -0- b. P 50,300 c. P 50,600 d. P 51,300

26. The statement of financial position of B.o.B. Company as of December 31, 2013 is as follows:

Assets Liabilities and Shareholders Equity
Cash P 175,000 Current liabilities P 250,000
Accounts receivable 250,000 Mortgage payable 450,000
Inventories 725,000 Ordinary share capital 200,000
Property, plant and equipment 950,000 Share premium 400,000
Accumulated profits 800,000
P 2,100,000 P 2,100,000

On December 31, 2013 the Taylor Swift Inc. bought all of the outstanding shares of B.o.B. Company for P 1,800,000
cash. On the date of acquisition, the fair market value of B.o.B.s inventories was P 675,000, while the fair value of
B.o.B.s property, plant equipment was P 1,100,000. The fair value of all other assets and liabilities of B.o.B. were
equal to their book values. In addition, not included above were costs in-process research and development of
B.o.B Company amounting to P 100,000.

Goodwill amounted to:
a. P 400,000 b. P 300,000 c. P 200,000 d. P -0-

27. Bruno Mars Company acquired Billboard Companys net assets by issuing its own P 14 par value ordinary
shares totaling 50,000 shares at market price of P 14.55. Bruno Mars Company had the following expenditures
incurred:

Finders fee paid P 50,000
Pre-acquisition audit fee, 30% was paid 40,000
General administrative costs 15,000
Doc stamp paid on issuance for the combination 3,500
Legal fees for the combination paid 32,000
Audit fees for SEC registration of share issue 46,000
SEC registration for the share issue paid 10,000
Share issuance costs paid (inclusive of taxes paid) 10,000
Other indirect costs paid 16,000

The total amount debited to expense should be
a. P 153,000 b. P 156,500 c. P 195,000 d. P 191,500

28. Condensed Statement of Financial Position of Dolce Inc. and Gabbana Inc. as of 12/31/2011 were as
follows:

Dolce Gabbana
Current assets P 275,000 P 65,000
Noncurrent assets 625,000 425,000
Total assets 900,000 490,000

Liabilities 65,000 35,000
Ordinary shares, P23 Par 549,700 296,700
Share Premium 35,300 28,300
Accumulated Profits (losses) 250,000 130,000

On January 1, 2012, Dolce Inc. issued 30,000 shares with market value of P25/share for the assets and liabilities of
Gabbana Inc. Dolce Inc. also paid P125,000 cash. The book value reflects the fair value of the assets and liabilities,
except that the non-current assets of Gabbana Inc. have fair value of P630,000 and the noncurrent assets of Dolce
Inc. are overstated by P30,000. Contingent consideration, which is determinable, is equal to P15,000. Dolce paid
for the share issuance costs only amounting to P74,000 and incurred other acquisition costs amounting to P19,000.

As a result of acquiring the net assets of Gabbana Inc., compute for the total liabilities in the books of Dolce.
a. P 100,000 b. P 115,000 c. P 134,000 d. P 65,000


29. Diego Val Co. merged with Mackenzie Bourg Corp. on June 30, 2012. In exchange for the net assets at fair
market value of Diego Val Co. amounting to P2,785,800, Mackenzie Bourg Corp. issued 68,000 ordinary shares at
P36 par value, then going at a market price of P41 per share. Relevant data on shareholders equity immediately
before the combination show:

Mackenziee Diego
Ordinary shares P 8,790,000 P 2,030,000
Share Premium 3,834,000 782,000
Accumulated Profits (losses) (1,516,000) 495,000

Out of pocket costs of the combinations were as follows:

Legal fees for the contract of business combination P 174,700
Audit fee for SEC registration of share issue 198,400
Printing costs of share certificates 144,900
Brokers fee 135,000
CPAs fee for pre-acquisition audit 161,000
Other direct cost of acquisition 90,400
General and allocated expenses 115,300
Listing fees in issuing new shares 172,000

Included as part of the agreement is the additional cash consideration of P163,000 in the event Diegos share price
will reach P32 per share by year-end.

At acquisition date, the share price is P27.50, and increased by P4.8 by December 31, 2012.

At acquisition date, there was only a low probability of reaching the target share price, so the fair value of the
additional consideration was determined at P74,000.

What is the amount of expense to be recognized in the statement of comprehensive income for the year ended
December 31, 2012?
a. P 940,700 b. P 851,700 c. P 765,400 d. P 676,400

30. The Voice Companys shareholders equity as of December 31, 2012 is P406,000.

On January 1, 2013, The Voice Company acquires 30% of The X Factor Companys ordinary shares for P30,000 cash
and by issuing its own shares with a fair value of P75,000.

The Voice Company acquired significant influence over The X Factor Company as a result of the share acquisition.
After four months, The Voice Company purchases another 60% of The X factor ordinary shares for a cash payment
of P219,000. On this date, The X Factor reports identifiable assets with carrying amount of P360,000 and fair value
of P640,000 and its liabilities with book value and a fair value of p180,000.

At acquisition date, net loss reported by The X Factor for the four-month ended amounted to P50,000. The fair
value of the 10% non-controlling interest is P72,000. Non-controlling interest is valued using proportionate basis.

The Voice Company also paid the following: P5,000 for legal fees, P4,000 for finders fee, P4,300 for accountants
fee, P3,600 for audit fee for SEC registration of shares issued and P1,100 for printing of shares certificates.

Immediately after the business combinations, what is the consolidated total equity of The Voice Company and
subsidiary (The X Factor Company)?
a. P 513,500 b. P 553,000 c. P 579,500 d. P 599,000

Use the following information for the next two items

On January 2, 2011, Keith Urban Corporation purchased 70% of the ordinary shares of Mimi Company for P
4,675,000. At that date, Mimi Company had P 4,887,500 of ordinary shares outstanding and accumulated profits of
P 1,572,500. Mimis equipment with a remaining life of 5 years had a book value of P 2,380,000 and a fair value of
P 2,550,000. Mimis remaining assets had a book value equal to their fair values. All intangible assets except
goodwill are expected to have remaining lives of 10 years. Non-controlling interest shall be measured at fair value.



The income and dividend figures for both Keith Urban and Mimi Company are as follows:
Income Dividends
Keith Urban Corporation: 2011 P 1,572,500 P 425,000
2012 1,785,000 510,000
Income Dividends
Mimi Company: 2011 P 340,000 P 55,000
2012 569,500 127,500

Keith Urbans income shown does not include any dividend income from Mimi. Keith Urbans accumulated profits
balance at the date of acquisition was P 5,958,500.

31. On December 31, 2012, determine the consolidated accumulated profits attributable to parent.
a. P 8,821,300 b. P 8,970,050 c. P 8,993,850 d. P 9,017,650

32. Assume that Mimi has outstanding 6% P 100 par value cumulative preference shares with an aggregate
value of P 1,000,000 that are classified as equity and are held by non-controlling interests. What is the
income attributable to parent on December 31, 2011
a. P 1,744,700 b. P 1,716,500 c. P 1,731,700 d. P 1,721,500

33. Hartwell Company distributes the service department overhead costs to producing departments and the
following information for the month of January is presented as follows:
Maintenance Utilities
Overhead costs incurred P18,700 P 9,000
Services provided to:
Maintenance department - 10%
Utilities department 20% -
Producing department A 40% 30%
Producing department B 40% 60%

Hartwell Company distributes service department overhead costs based on the reciprocal method, what would be
the formula to determine the total maintenance costs?
a. M = P18,700 + .10U
b. M = P 9,000 + .20U
c. M = P18,700 + .30U +.40A + .40B
d. M = P27,700 + .40A + .40B

34. In analyzing the job-order cost sheets, the records disclosed that the compositions of the work-in-process
inventory on June 1, 2012 were as follows:
Direct materials used................................... P 3,960
Direct labor (900 hours)................................ 4,500
Factory overhead applied................................ 2,250
P 10,710

The following manufacturing activity occurred during the month of June 2012:

Purchased direct materials costing P 60,000
Direct labor worked 9,900 hours at P 5 per hour

Factory overhead of P 2.50 per direct labor hour was applied to production.
At the end of June 2012, the following information was gathered in connection with the inventories:



Inventory of work-in-process:
Direct materials used..........................P 12,960
Direct labor (1,500 hours)..................... 7,500
Factory overhead applied....................... 3,750
P 24,210
Inventory of direct materials................P 51,000
Compute the cost of goods manufactured:
a. P 142,560 b. P 118,350 c. P 131,850 d. P 108,600
35. Agency NYT had the following expenses for the month of April 2012
Internet (EWT 2%; GMP 5%) P50,000
PLDT (EWT 2%; GMP 5%) P50,000
Water from Maynilad (EWT 0%; GMP 5%) P120,000
Repair of Government Vehicle (EWT 2%; GMP 5%) P30,000
Meralco (EWT 2%; GMP 5%) P300,000
What is the total amount of EWT (under BIR Form No. 1601-E)?
a. P 24,553 b. P 24,053 c. P 7,769 d. P 7.679

36. Faith and Hope, a private not-for-profit voluntary health and welfare organization, received the following
contribution in 2011:
I. P25,000 from donors who stipulated that the money not be spent until 2012
II. P60,000 from donors who stipulated that the contributions be used for the acquisition of equipment,
none of which was acquired in 2011.
Which of the above events increased temporarily restricted net assets for the year ending December 31, 2011?
a. I only b. II only c. Both I and II d. Neither I nor II

37. A government agency ordered an office equipment for P350,000 through procurement services of DBM
on May 15, 2012. The equipment was delivered to the government agency on June 15, 2012. The asset has a useful
life of 5 years. Determine the depreciable cost of the equipment as of the January 1, 2016, respectively.
a. P 124,550 b. P 129,500 c. P 89,250 d. P 94,500

38. On November 1, 2011, Galaxy Philippines took delivery from a Thailand firm of inventory costing 225,000
bhat. Payment is due on January 30, 2012 Concurrently, Galaxy Philippines paid P2,025 cash to acquire a 90-day
call option for 225,000 Thailand bhat.
11/1/2011 12/31/2011 1/30/2012
Spot rate (market rate) P 1.20 P 1.22 P 1.23
Strike price (exercise price) 1.20 1.20 1.20
Fair value of call option P 2,025 P 4,950 P 6,750
What is the intrinsic value of the option on December 31, 2011?
a. P 4,500 b. P 4,950 c. P 450 d. P -0-

39. Makati Company buys goods from Tokyo Company of Japan, worth 2.5 million yen. The prevailing
exchange rate is P0.1302136/Yen. Makati Company settles the account 60 days later when the exchange rate is
going at P0.118376/Yen. What is the forex gain or loss of Tokyo?
a. P 29,594 gain b. P 29,594 loss c. 2.5 million Yen d. P -0-












40. One Direction Inc. acquires a 20% ownership interest in The Wanted Co. (a service company) on January
1, 2013 for P 3.5 million(M) cash. The Wanted has no liabilities or contingent liabilities at that date. The
following shows The Wanted's statement of financial position at January 1, 2013: (amounts in thousands)

Carrying
Amount
Fair
Values
Cash and receivables P 2,000 P 2,000
Land 6,000 8,000
P 8,000

Issued Equity: 1M ordinary shares P 5,000
Accumulated Profits 3,000
P 8,000

During the year ended December 31, 2013, The Wanted reports a profit of P 6M but does not pay any dividends. In
addition, the fair value of The Wanted's land increases by P 3M to P 11M at year-end of 2013. However, the
amount recognized by The Wanted in respect of the land remains unchanged at P 6M. The Wanted's Cash and
Receivables line item was stated at P 8M while Issued Equity was unchanged at its statement of financial position
at year-end of 2013. No other movement on the equity of The Wanted.

On January 1, 2014, One Direction acquires a further 60% ownership interest in The Wanted for P 22M cash,
thereby obtaining control. Before obtaining control, One Direction does not have significant influence over
Investee, and accounts for its initial 20% investment at fair value with changes in value recognized as a component
of other comprehensive income. The Wanted's ordinary shares have a quoted market price at December 31, 2013
and at January 1, 2014 of P 30 per share. Throughout the period January 1, 2013 to January 1, 2014 (before the
60% additional investment), One Direction's issued equity was P 30M. One Direction's only asset apart from its
investment in The Wanted is cash amounting to P 26.5M.

Assuming NCI is measured on proportionate basis, determine the amount of gain(loss) recognized as a result of
obtaining the control.
a. P 2,500,000 c. P -0-, since share price did not change
b. P -0-, since it is eliminated at conso level d. P -0-

* * * END OF EXAMINATION * * *