Practical Accounting 2

Problem 1. The following data were taken from the Statement of Affairs of ABC Company:
Assets pledged for fully secured liabilities P125,000
Assets pledged for partially secured liabilities 90,000
Free assets 87,000
Fully secured liabilities 100,000
Partially secured liabilities 110,000
Unsecured liabilities without priority 90,000
Unsecured liabilities with priority 13,000
Which of the following is correct?
Types of Liabilities Estimated amount to be paid
a. Fully secured liabilities P125,000
b. Partially secured liabilities 110,000
c. Unsecured liabilities with priority 11,700
d. Unsecured liabilities without priority 81,000

Problem 2. D, E and 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 2008 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, 2008 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. P6,900 (credit)

Problem 3. During the year 2008, I has been the manager of a joint venture with G and H. It was agreed
that on the completion of the joint venture, I will receive a fee of 12% of the venture gain after the
deduction of the fee as an expense. The venture is terminated on November 30, 2008. On this date, Is
trial balance contains the following account balances.
Debit Credit
Joint venture P8,400
G, capital 2,900
H, capital P700
The net profit after the deduction of the fee has been agreed to be divided as follows: 25% to G, 40% to H
and 35% to I. Which of the following is not correct?
a. The net profit of the venture after the fee to I is P7,500
b. The fee of I is P900
c. Total income earned by H is P2,300
d. Cash settlement received by G is P4,775
Problem 4. J, K and L formed a joint venture in 2008 and agreed to divide profits equally. K is designated
to act as the manager. The venture is terminated on December 31, 2008 even though there is still unsold
merchandise. On this date, Ks 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, 2008. 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

Problem 5. On December 1, 2008, M company made a credit sale to N company. The amount of sale was
200,000 Korean won. M will collect the account on January 01, 2009. On December 1, the spot rate was 25
Korean won for one Philippine peso. Also on December 1, M entered into a futures contract to sell 200,000
Korean won on January 01, 2009 at a forward rate of 50 Korean won for one Philippine peso. If the spot rate
and forward rate for one Philippine peso on December 31, 2008 is 40 Korean won, how much is the foreign
exchange gain or loss on hedging instrument forward contract?
a. P3,000 gain b. P3,000 loss c. P1,000 gain d. P1,000 loss

Problem 6. O company purchased merchandise for 150,000 pounds from a vendor in London on
November 01, 2008. Payment in British pounds was due on January 30, 2009. On the same date, O entered
into a 90 day futures contract to buy 150,000 pounds from a bank. Exchange rate for pound on different
dates are as follows:
Nov. 1 Dec. 31 Jan. 31
Spot rate P71.0 P73.0 P72.2
30 day futures 72.0 71.9 73.2
60 day futures 71.8 72.8 72.6
90 day futures 70.9 72.9 73.1
How much is the net forex gain or loss on January 30, 2009?
a. P165,000 loss b. P165,000 gain c. P150,000 loss d. P150,000 gain
Problem 7. On November 1, 2008, P company sold goods on account to a Thai corporation for 5,000 Baht.
The billing date is December 1, 2008 and payment is due on January 30, 2009. Exchange rates were as
follows:
BID rate OFFER rate
Nov. 01, 2008 P38 P36
Dec. 01, 2008 39 38
Dec 31, 2008 42 40
Jan. 30, 2009 41 39
How much is the forex gain or loss to be recognized on December 31, 2008?
a. P15,000 gain b. P10,000 gain c. P10,000 loss d. P20,000 gain

Problem 8. On December 1, Q company took merchandise worth 10,000 Swiss francs. Payment is due on
January 30, 2009. On the same date, Q paid P5,000 cash to acquire a 60 day call option for 10,000 Swiss
francs.
Spot Rate Strike Price Fair value of Option Forward Rate
12/01/08 P23 P23 P 5,000 P24
12/31/08 27 23 8,000 26
01/30/09 25 23 10,000 25
How much is the forex gain or loss upon exercising the call option? (Assume the option was exercised on
December 31, 2008)
a. P5,000 loss b. P32,000 gain c. P48,000 loss d. P35,000 gain

Problem 9. On October 1, 2008, R corporation purchased goods from a U.S. based corporation worth
$2,500. Payment is due in 120 days on January 30, 2009. In view of the sale, R corporation enters into a
forward contract to buy $2,500 from Philippine National Bank (PNB) in 120 days. The relevant exchange
rates are as follows:
10/01/08 12/31/08 01/30/09
Spot Rate P43 P47 P50
Forward Rate 44 46 50
Which of the following is correct?
a. Forward Contract Receivable on Dec. 31, 2008 is P110,000
b. Net forex loss on settlement date is P2,500
c. Forex gain on the forward contract on the transaction date is P5,000
d. Forex loss on the purchase transaction on the Balance Sheet date is P10,000
Problem 10. On November 1, S company entered into a firm commitment to acquire a machinery.
Delivery and passage of title would be on February 28, 2009 at the price of HK$2,000. On the same date,
to hedge against unfavorable changes in the exchange rate, S entered into a 120 day forward contract
with China bank for HK$2,000. Exchange rate were as follows:

Spot Rate Forward Rate

Nov. 01, 2008 P26 P24
Dec. 31, 2008 28 26
Feb. 28, 2008 29 29
How much is the forex gain or loss recognized by the S company on the firm commitment?
a. P6,000 gain b. P10,000 loss c. P6,000 loss d. P10,000 gain

Problem 11. The following are taken from the records of T Company, a foreign subsidiary in New Zealand.
NZ dollar
Total Assets 12/31/08 146,000
Total Liabilities 12/31/08 45,000
Common Stock 12/31/08 60,000
Retained Earnings 01/01/08 29,000
Net Income 2008 15,000
Dividends paid 12/31/08 3,000

Exchange rates:
Current rate P10
Historical rate 11
Weighted Average Rate 12

The peso balance of retained earnings on December 31, 2007 is P325,000.

What amount of Cumulative Translation Adjustment is to be reported in the Consolidated Balance Sheet on
December 31, 2008?
a. P119,000 debit b. P119,000 credit c. P125,000 debit d. P125,000 credit

Problem 12. The approved appropriation of Department U for 2008 is P15,000,000. Eighty five percent of
this appropriation was released by the Department of Budget and Management (DBM) accompanied by
Notice of Cash allocation (NCA). 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 incorrect
a. Department U records the receipt of NCA by debiting an amount equivalent to P12,750,000
b. The receipt of the allotment is recorded by means of a memorandum entry
 c. At the end of the year, Subsidy Income from National Government would be credited by P6,967,500
d. None of the above

Problem 13. Bank charges per bank statement, P1,500

Interest expense upon receipt of Bill, P2,000
Based on the given information, which of the following is not correct?
a. Entry to record the bank charges in the regular agency books would include a credit to Cash NT
MDS
b. Receipt of bill for interest is entered in the RAOFE
c. Payment of interest expense would include a credit to Cash NT MDS
d. Agency enters the obligation for bank charges in the RAOFE

Problem 14. Which of the following would be included in an entry to record the remittance of income
taxes to the Bureau of Treasury (BTR) collected by the Bureau of Internal Revenue (BIR)? The BIR has no
authority to use the collections.
a. Debit to Cash Collecting officer
b. Debit to Cash NT MDS
c. Credit to Cash Collecting officer
d. Credit to Cash NT MDS

Problem 15. Agency V collected cash of P50,000 for services rendered. The collection was deposited to
the Bank of the Philippine Islands (BPI). What is the entry to record the deposit?
a. Debit, Cash in Bank LCCA and Credit, Cash Disbursing officer for P50,000
b. Debit, Cash - NT - MDS and Credit, Cash Collecting officer for P50,000
c. Debit, Cash in Bank LCCA and Credit, Cash Collecting officer for P50,000
d. Debit, Cash NT MDS and Credit, Cash Disbursing officer for P50,000

Problem 16. During 2008, Agency W transferred cash of P1,000 to Agency X for a land beautification
project. Subsequently, Agency W received a report from Agency X about the project. Which of the following
is incorrect?
a. The obligation of P1,000 is entered in the RAOCO
b. Source Agency debits Due from NGA upon transfer of cash
c. Receiving Agency credits Cash NT MDS upon receipt of cash
d. Source Agency credits Cash NT MDS upon transfer of cash

Problem 17. Y hospital, a Not for Profit hospital affiliated with a religious group, reported the following
information for the year ended December 31, 2008:
Gross patient service revenue P2,400,000
Bad debts expense 50,000
Contractual adjustments 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, 2008 is
a. P2,250,000 b. P2,110,000 c. P1,960,000 d. P1,910,000

Problem 18. During 2008, Z Hospital purchased medicines for hospital use totaling P1,000,000. Included
in the P1,000,000 was an invoice of P100,000 that was canceled in 2008 by the vendor because the
vendor wished to donate this medicine to Z. The donation should be recorded as
a. An increase of P100,000 to Patient Service Revenue
b. An increase of P100,000 to Other Non - Operating Revenue
c. An increase of P100,000 to Other Operating Revenue
d. A decrease of P100,000 to Other Non Operating Revenue

Problem 19. AA Hospital had the following cash receipts for the year ended December 31, 2008:
Collections of Receivables P500,000
Contribution for an establishment of 100,000
term endowment
Tuition from nursing school 200,000
Interest received from investment in 35,000
permanent endowments
Dividends received from investment in 40,000
term endowments
 Payment of supporting expenses 150,000
Payment of program expenses 215,000
How much is the net cash provided by operating activities?
a. P335,000 b.P510,000 c. P410,000 d. P435,000

Problem 20. D, T and M Partnership became insolvent on December 31, 2008 and is to be liquidated. D, T
and M has the following balances respectively, P65,000, (P30,000), (P4,000). After paying their personal
liabilities, D has still P10,000 while T has P15,000 of their personal assets. However, M has still unpaid
personal liabilities amounting to P40,000 and his personal assets amounted only to P30,000. The partners
share profits and losses equally. How much is the maximum amount that D can expect to receive from the
partnership?
a. P31,000 b. P61,000 c. P35,000 d. P46,000

Problem 21. The following Balance Sheet for the partnership of C, I and G were taken from the books on
October 1, 2008.
Assets Liabilities and Capital
Cash P100,000 Liabilities P200,000
Other Assets 400,000 C, Capital 120,000
I, Capital 95,000
_________ G, Capital 85,000
Total Assets 500,000 Total Liabilities and Capital 500,000

The partners agreed to distribute profits as follows:

1. Annual salaries to C and I of P5,000 each
2. Annual interest of 5% on beginning capital
3. Bonus of 15% to C based on income after salaries, interest and bonus
4. Remaining profit: 25% to C, 35% to I and 40% to G
The partnership began its operations on Oct. 1, 2008 and net income as of Dec. 31, 2008 is P69,500.
Which of the following is true?
a. The bonus to C is P5,804
b. Net Income after salaries, interest and bonus is P38,696
c. Is total share in the net income is P21,688
d. Gs share on the profit after salaries, interest and bonus is P13,543

Problem 22. The partnership of Y,E and S provides for 3 : 3: 4 sharing in profits and losses respectively. S
is retiring from the partnership and by mutual agreement the assets are to be adjusted to their fair values
which is P30,000 higher than their carrying amount. Y and E agree that the partnership will pay P87,000 to
S for his partnership interest, exclusive of his loan which is to be paid in full separately. Before the
retirement of S, Total Assets, S loan, Y capital, E capital and S capital has the following balances
respectively: P200,000, P20,000, P50,000, P60,000 and P70,000. Which of the following is not correct?
a. If partial goodwill is recorded, total amount paid to S including his loan is P107,000
b. If no goodwill is recorded, the balance of Ys capital after Ss retirement is P56,500
c. If partial goodwill is recorded, total assets after retirement is P123,000
d. If no goodwill is recorded, the share of E in the excess payment to S is P2,500

Problem 23. C and D shares profits and losses equally. E is to be admitted as a partner by contributing
cash to the firm. The capital balances of C and D are both P30,000 before the admission of E. E invests
P25,000 for a one third interest in the firm. Which of the following is incorrect upon admission of the new
partner?
a. If total agreed capitalization is P90,000, goodwill to new partner is P5,000
b. If total agreed capitalization is P85,000, no goodwill or bonus will be recorded
c. If total agreed capitalization is P75,000, withdrawal of P10,000 from the old partners is necessary
d. If total agreed capitalization is P90,000, no bonus would be recorded

Problem 24. The accounts of the partnership of R, S and T at the end of its fiscal year on November 30,
2008 are as follows:
Cash P103,750 Loan from S P 20,000
Other Non cash assets 707,500 R, Capital (30%) 266,250
Loan to R 15,000 S, Capital (50%) 136,250
Liabilities 262,500 T, Capital (20%) 141,250
If in the first distribution, S received P50,000, which of the following is incorrect?
a. Total amount distributed to partners is P336,250
b. Total amount paid to creditors is P262,500
c. Total amount realized from the noncash assets is P598,750
d. R received an amount equal to P187,500
Problem 25. VG Construction Company has consistently used the percentage of completion method of
recognizing income. During 2007, VG entered into a fixed price contract to construct an office building at
P15,000,000. Information relating to the contract are as follows:
Dec. 31, 2007 Dec. 31, 2008
Percentage of Completion 20% 60%
Estimated costs of completion P11,250,000 P12,000,000
Income recognized 750,000 1,050,000
Contract costs incurred during 2008 were
a. P4,800,000 b. P7,200,000 c. P4,950,000 d. P4,500,000

Problem 26. M Construction company began operations on January 2008. During the year, the company
entered into a contract with G company to construct a manufacturing facility. At that time, M estimate that
it would take 10 years to complete the facility at a total cost of P3,000,000. The total contract price for the
construction of the facility is P5,000,000. During the year, the company incurred P850,000 in construction
costs related to the project. The estimated cost to complete the contract is P2,550,000. G company was
billed 30% and paid 27% of the contract price. Using the percentage of completion method, how much is
the excess of Construction in Progress over Contract billings or Contract billings over Construction in
Progress?
a. P250,000 current asset c. P100,000 current asset
b. P250,000 current liability d. P100,000 current liability
Problem 27. T restaurant sold a fastfood restaurant franchise to I. The sale agreement, signed on January
2008 called for a P100,000 down payment plus two P50,000 annual payments representing the value of
initial franchise services rendered by T restaurant. In addition, the agreement required the franchisee to
pay 8% of its gross revenues to the franchisor. The restaurant opened early in 2008 and its sales for the
year amounted to P750,000. Assuming a 12% interest rate is appropriate, Ts 2008 total revenue will be
(PV of annuity of P1 at 12% for two periods is 1.6901)
a. P84,505 b. P244,505 c. P254,646 d. P266,646

Problem 28. LL Incorporated which began operating on January 2008 appropriately uses the installment
method of accounting. The following information pertains to LLs operations in 2008.
Installment sales P600,000
Regular sales 800,000
Cost of Installment sales 270,000
Cost of Regular sales 440,000
Operating expenses 200,000
Collections on installment sales 150,000
Collections on regular sales 200,000
How much is the Realized Gross Profit in 2008?
a. P690,000 b. P242,500 c. P82,500 d. P442,500

Problem 29. HH company began operating at 2006 and using the installment method of accounting,
presented the following data for its installment sales:
Down payment is 30%
Installment sales: P600,000 in 2006; P762,500 in 2007; P981,250 in 2008
Mark up on cost is 25%
Collections after down payment,: 25% in the year of sale, 30% in the year after and 45% in the third
year
Which of the following is true?
a. IAR at the end of 2007 is P400,313
b. DGP for 2007 sales at the end of 2008 is P80,063
c. RGP from 2006 and 2007 sales at 2008 is P85,838
d. Total Unrealized Gross Profit at the end of 2008 is P151,069
Problem 30. DD Company uses a Raw and In process (RIP) account and charges all conversion cost to
Cost of Goods Sold (CGS). At the end of each month, all inventories are counted, their conversion cost
components are estimated and inventory account balances are adjusted. Raw material cost is backflushed
form RIP to finish goods. The following information is for the month of July:
Beginning balance of RIP account P 50,000
Beginning balance of Finished Goods account, including 78,000
P12,500 of conversion cost
Raw materials received on credit 700,000
Ending balance of RIP account 60,000
Ending balance of Finished Goods account, including 75,000
P10,000 of conversion cost
How much is the material cost of the units completed?
a. P690,500 b. P693,000 c. P690,000 d. P700,000

Problem 31. EE company produces chemical H and I. The processing also yields by product X, another
chemical. The joint costs of processing is reduced by the NRV of X. Joint costs for the month of May were
P2,900,000. Below are additional data:
Product Units Market Value
H 1,000 P5,000,000
I 2,000 2,500,000
X 500 500,000
An additional P120,000 were spent to complete the processing of X. The company uses the NRV method of
allocating joint costs. How much is the amount of joint cost allocated to I?
a. P1,260,000 b. P840,000 c. P1,680,000 d. P1,600,000
Problem 32. MM company produces joint products A and B together with by product C. A is sold at split
off but B and C undergo additional processing. Production data pertaining to these products for year ended
December 31, 2008 are as follows:
A B C Total
Joint Costs P1,200,000
Separable costs P435,000 P56,000 P 491,000
Production in pounds 100,000 150,000 40,000 290,000
Sales price per pound P5 P9 P2.5
There are no beginning or ending inventories. No materials are spoiled in production. Joint costs are
allocated to joint products to achieve the same gross profit rate for each joint product. Net revenue from
by product is deducted from joint production costs of the main product. How much is the share of B in the
joint cost?
a. P843,658 b. P747,520 c. P430,000 d. P726,000

Problem 33. RR company makes two products Y and Z. They are initially processed from the same
materials and then after split off, further processed separately. Additional information is as follows:
Y Z Total
Final sales value P40,500 P49,500 P90,000
Sales value at split off 33,000 47,000 80,000
Cost beyond split off 9,000 11,000 20,000
Joint cost prior to split off 15,000
Using the Net Realizable Value approach, how much is the joint cost assigned to Y and Z?
a. P6,000 and P9,000 c. P6,188 and P8,813
b. P6,750 and P8,250 d. P7,500 and P7,500

Problem 34. W company has overapplied overhead of P60,000 for the year. Before disposition of
overapplied overhead, selected year end balances from Ws accounting records were
Sales P1,000,000
Cost of Goods Sold 750,000
Direct Materials Inventory 50,000
Work in Process Inventory 180,000
Finished Goods Inventory 270,000
Under Ws accounting system, over or under applied overhead is allocated to appropriate inventories and
CGS based on year end balances. In its year end income statement, W should report CGS of
a. P712,500 b. P714,000 c. P730,000 d. P787,500

Problem 35. N Machine shop manufactures lifting equipment. One order from O company for 3000 lifting
equipment showed the following costs per unit; materials P3.5; labor P2; FOH applied at 150% of direct
labor cost (125% in cases in which any defective unit costs are to be charged to a specific order or a 25%
allowance for reworking defective units). Final inspection showed that 250 units were not properly
produced. Correction of each defective unit requires P.35 for materials, P.40 for labor and FOH at the
appropriate rate. Assuming the defective units are the result of an internal failure how much is the unit
cost for each unit manufactured?
a. P8.10 b. P8.61 c. P8.50 d. P8.00

Problem 36. GD uses a job order system. Per company records, the total charges to Work in Process in
June 2008 were as follows:
Direct Materials P210,000
Direct Labor 180,000
Factory Overhead 153,000
No jobs were in process at the beginning of the month. During the month, Work in Process in the amount of
P478,000 were charged to Finished Goods. On June 30, 2008, the only job remaining was Job no. 101 with
direct labor cost of P12,000. How much is the cost Direct Materials charged to Job 101?
a. P53,000 b. P42,800 c. P52,800 d. P54,800

Problem 37. ZZ Company produces wooden chairs. Three percent of normal input is expected to be
spoiled in the process. Inspection occurs at the end of the process and rejected units are disposed of as
scrap with no cost recovery. In a recent period, the following data were obtained.
Units
Total Units Started 1,000,000
Defective units rejected 50,000
Cost
Materials P 75,000
 Conversion 43,000
Total 118,000
How much is the cost for the units transferred to Finished Goods during this 24 hour period, assuming no
ending Work In Process?
a. P112,100 b. P114,460 c. P115,640 d. P118,000

Problem 38. Vex, general manager of AB corporation, provided the following information for transactions
that occurred during March. The corporation uses JIT costing system.
a. Raw materials purchased and requisitioned for product were P84,000
b. Direct Labor costs of P78,000 were incurred
c. Actual factory overhead costs amounted to P250,000
d. Applied conversion costs totaled P340,000.This included P78,000 of direct labor
e. All units were completed
How much is the balance in Finished Goods account in March 31?
a. P412,000 debit c. P424,000 debit
b. P412,000 credit d. P424,000 credit

Problem 39. GH company produces a small standard component in a process operation. There is a quality
control check at the end of processing. Items which fail this check are sold off as scrap for P3 per unit, the
expected rate of rejection is 15%. Normal loss is not given a cost except that whatever scrap value it has is
credited to the process account. The cost/value of the abnormal loss, net of scrap, is written off to the
profit/loss account. Data for October are as follows:
Units Cost
Materials input 1,500 P14,500
Conversion Cost 1,475
Output to finished goods 1,200
How much is the cost for the units transferred to Finished Goods?
a. P15,975 b. P15,300 c. P15,075 d. P14,400
Problem 40. UR company uses a FIFO process costing system. The company had 10,000 units that were
40% percent incomplete as to conversion costs at the beginning of the month. The company started
30,000 units this period and had 9,000 units in ending Work In Process inventory that were 50% complete
as to conversion costs. What are the equivalent units for conversion costs?
a. 35,500 b. 31,500 c. 29,500 d. 25,500

Problem 41. Baby corporation issues 35,000 shares of previously unissued P15 par value common stock
with a fair market value of P40 per share for net assets of Daddy corporation. Baby pays the following out
of pocket costs related to the business combination.
Registering and issuing securities P 5,000
CPA and legal fees 40,000
Salaries of Babys employees assigned to the 13,000
implementation of the merger
Cost of closing duplicate facilities 19,000
Cost of shareholders meeting to vote on the merger 25,000
Printing fees of stock certificates 3,000
Finders fee 24,000
How much is the amount charged to profit and loss for the period?
a. P64,000 b. P57,000 c. P65,000 d. P60,000

Problem 42. Home office EE shipped merchandise costing P94,200 to XX branch and paid for the freight
charges of P15,000. XX branch was subsequently instructed to transfer the merchandise to YY branch
wherein XX branch paid P12,000 freight. If the shipment was made directly from EE to YY, the freight cost
would have been P22,500. Which of the following is incorrect?
a. Upon transfer of merchandise by XX to YY, XX debits Home office account by P121,200
b. Upon transfer of merchandise by EE to XX, EE debits Investment in Branch XX account by P109,200
c. Upon transfer of merchandise by XX to YY, EE debits Investment in Branch XX account by P116,700
d. Upon receipt of merchandise by YY from XX, YY credits Home office account by P116,700

Problem 43. BG corporation maintains a branch in Pampanga. Selected account balances taken from the
books of the Home office and its branch as of December 31, 2008 are as follows:

Home Office Pampanga branch

Sales P1,200,000 P540,000
Inventory, January 1 350,000 157,500
Purchases 500,000
 Shipments to branch 315,000
Shipments from Home Office 346,500
Inventory, December 31 80,000 122,100
Expenses 113,000 89,000
In 2007, the Home office billed its branch at 120% of cost which was higher by 5% than the previous year.
All of the units in the beginning inventory of the branch were acquired from the home office in 2007. The
combined net income of the Home office and the branch is
a. P732,793 b. P747,750 c. P743,750 d. P738,500

Problem 44. On January 1, 2008, DC corporation purchased interest in GM company. (95% ownership,
P1,400,000 cost of investment). On this date, the book values and fair values of GM were as follows:
Book Value Fair Value
Cash P 400,000 P400,000
Accounts receivable 500,000 450,000
Inventory 825,000 900,000
Property, Plant and Equipment(net) 1,050,000 950,000
Current Liabilities 315,000 300,000
Non current Liabilities 720,000 800,000
Common Stock 500,000
Additional Paid in Capital 100,000
Retained Earnings 1,140,000
If DCs total assets in its separate books is P10,000,000, how much is total consolidated assets on date of
acquisition?
a. P12,700,000 b. P12,820,000 c. P11,300,000 d. P11,420,000

Problem 45. Q company owns 80% of the stock of R corporation and 50% of S corporation. During 2008,
Q sold inventories purchased in 2007 from outsiders at P500,000 to R for P600,000. R then sold the
inventories to S for P750,000. Prior to December 31, 2008, S sold P450,000 of the inventories to a non
affiliate for P510,000 and held the remaining units at December 31, 2008. What amount should be
reported in the Dec. 31, 2008 Consolidated balance sheet as inventory?
a. P0 b. P200,000 c P300,000 d. P500,000
Problem 46. On July 31, 2008, YES Corporation issued 150,000 shares of its P22 par value common stock
in exchange for the P4.3 million net identifiable assets of YUP Company. The market value of YESs
common stock on July 31 was P25 per share. YES paid a fee of P200,000 to the consultant who arranged
the acquisition. Costs of issuing the securities amounted to P90,000. Additional costs were incurred directly
attributable to the acquisition. Income from acquisition of P200,000 was involved in the purchase. How
much is the cost of acquisition?
a. P4,100,000 b. P3,950,000 c. P4,040,000 d. P4,500,000

Problem 47. On April 1, 2008, the AA Company established an agency in Bulacan, sending its
merchandise samples costing P82,500 and a working fund of P65,000 to be maintained on the imprest
basis. During the month of April, the agency transmitted to the home office sales orders that cost at
P468,750. However, the home office was able to fill-up only 80% of the orders. Total cash of P250,000 was
collected from the customers. A home office disbursement chargeable to the sales agency includes the
acquisition of equipment for Bulacan, P180,000 to be depreciated at 10% per annum. The agency paid
expenses of P43,700 and received replenishment thereof from the home office. The agency samples are
good until February 28, 2009. It was estimated that the gross profit on goods shipped to bill agency sales
orders averages 25%. Net income (loss) for the month ended April 30, 2008 is
a. (P19,200) b. P72,300 c. (P2,700) d. P55,800

Problem 48. On January 01, 2008, P Company acquired 75% interest in S Company for P4,700,000 cash.
The shareholders equity of S at the time of acquisition is P5,200,000. The excess of cost over book value
of interest acquired is allocated to the following: Inventories P350,000 (sold in 2008), Building P250,000 ( 4
year remaining life), Goodwill P200,000 (not amortized). During 2008, S company reported Net income of
P800,000 and paid dividends of P200,000. Retained earnings of parent on January 1,2008 is P1,000,000,
Common stock is P2,000,000 and additional paid in capital is P500,000. Net income from own operations
and dividends paid by P during 2008 are P950,000 and P400,000 respectively. Determine the consolidated
Retained earnings as of December 31, 2008:
a. P1,737,500 b. P1,587,500 c. P1,840,625 d. P1,690,625
Problem 49. EFG Corporations shipments to and from its Quezon City branch are billed at 125% of cost.
On December 31, 2008, QC branch reported the following data at billed price: Inventory January 1,
P56,250; shipments received from home office, P1,156,250; shipments returned P156,250; and Inventory
December 31, P306,250. What is the balance of the allowance for over- valuation of branch inventory on
December 31 before adjustments?
a. P150,000 b. P211,250 c. P231,250 d. P242,500

Problem 50. UVW Corporation and its branch in Manila maintain their respective books of accounts. At
close of books on December 31, 2008, Manila branch account in the home office books showed a balance
of P142,500. The interoffice accounts were in agreement at the beginning of the year. For purposes of
reconciling the interoffice accounts, the following were ascertained:
a. Merchandise billed at P50,000 was shipped by the home office to the branch on December
27. The goods were in transit as of the end of the year and the branch did not recognize the
transfer in its books.
b. The branch collected a home office account receivable of P35,000 but such transaction is
not known to the home office.
c. The home office recorded in error the branch net income at P119,000. It should have been
P191,000.
d. The home office is charged P83,000 by the branch due to returned merchandise to home
office on December 28 which was in transit as of December 31.
e. Home office credit memo for P5,400 is recorded twice by the branch.
Determine the balance in the home office books of the branch account before adjustments as of December
31,2008:
a. P166,500 b. P111,100 c. P221,900 d. P142,500

ANSWERS:
1. D 8. B 15. C 22. C 29. D
2. B 9. D 16. C 23. B 30. C
3. C 10. B 17. B 24. C 31. B
4. C 11. C 18. C 25. C 32. D
5. D 12. C 19. C 26. B 33. B
6. B 13. A 20. D 27. C 34. A
7. A 14. C 21. C 28. D 35. C
36. B
37. C
38. C
39. D
40. C
41. B
42. C
43. B
44. C
45. B
46. A
47. B
48. A
49. B
50. D