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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!

1. The partnership agreement between Ken and Avery a. I only c. I or II

stipulates that Ken is to receive a 20% bonus on b. II only d. I and II
profits, with residual profit and loss to be apportioned
in the ratio 3:2, respectively. Which partner has a
greater advantage when the partnership has a profit 7. State the proper order of partnership liquidation.
and hen it incurred a loss? I. Outside creditors
a. Profit Ken; Loss Avery II. Owners interests
b. Profit Avery; Loss Avery III. Inside creditors
c. Profit Ken; Loss Ken a. I, II, III c. II, I, III
d. Profit Avery; Loss Ken b. III, I, II d. I, III, II

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.

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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 contractors 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 Companys 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. Fixers 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

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29. Under a perpetual inventory system, the purchase of a. CLAIRE, P1,045,080; DAISY, P376,200; & ELSIE,
materials is recorded in an account entitled P221,400
a. Cost of Goods Sold b. CLAIRE, P1,161,200; DAISY, P418,000; & ELSIE,
30. b. Purchases P246,000
c. Materials inventory c. CLAIRE, P1,987,500; DAISY, P189,000; & ELSIE,
d. Work in process inventory P217,500
Factory worker fringe benefit costs are usually charged to d. CLAIRE, P1,095,120; DAISY, P547,560; & ELSIE,
a. Work in process Inventory
b. Direct labor
c. Administrative expenses On January 1, 2015, FRIDA and GLACE formed a
d. Factory overhead partnership by contributing cash of P405,000 and
The following condensed balance sheet is prepared for
P270,000, respectively. On February 1 2015, Partner
QUIEL and ROGER, who share profits and losses in the FRIDA contributed an additional P135,000 cash to the
ratio of 60:40, respectively:
partnership and on August 1, 2014 Partner FRIDA made a
Other assets P 405,000 Accounts P108,000 permanent withdrawal of P67,500. On May 1, 2015,
Partner GLACE contributed machinery with a fair market
Quiel, loan 18,000 Quiel, capital 175,500 value of P90,000 and a net book value of P75,000 when
Roger, capital 139,500
contributed. On November 1, 2015 Partner GLACE
Total P 423,000 Total P 423,000 contributed an additional P45,000 cash to the partnership.
Both partners withdrew one-fourth of their salary
31. The partners have decided to liquidate the partnership. allowances in 2015.
If the other assets are sold for P346,500, what amount
of the available cash should be distributed to QUIEL? The partnership reported a net income of P257,400 in
a. P136,000 c. P122,400 2014 and the profit and loss agreement are as follows:
b. P156,000 d. P195,000 a. Interest at 6% is allowed on average capital
b. Salaries of P2,700 per month to each partner;
On January 1, 2014, the partners SELYA, TESSA, and c. Bonus to FRIDA of 10% of net income after interest,
URSULA, who share profits and losses in the ratio of 5:3:2, salaries, and bonus; and
respectively, decided to liquidate their partnership. On this d. Balance to be divided in the ratio of 6:4 to FRIDA
date the partnership condensed balance sheet was as and GLACE, respectively.
34. Determine how the net income will be allocated to the
Cash P 45,000 Liabilities P 54,000 partners:
Other assets 225,000 Selya, capital 72,000 a. FRIDA, P160,000 and GLACE, P126,000
Tess, capital 81,000 b. FRIDA, P 180,000 and GLACE, P106,000
Ursula, capital 63,000 c. FRIDA, P170,000 and GLACE, P116,000
Total P 270,000 Total P270,000 d. FRIDA, P153,000 and GLACE, P104,400

On January 15, 2014, the first cash sale of other assets HAIDEE and ISABEL are partners sharing profits and losses
with a carrying amount of P135,000 realized P108,000. in the ratio of 60% and 40%, respectively. The partnership
Safe installment payments were made on the same date. balance sheet at August 30, 2014 follows:
32. How much cash should be distributed to each partner?
SELYA TESSA URSULA Cash P 12,150 Accounts payable P 13,500
a. P15,000 P51,000 P44,000 Other assets 119,700 Haidee, Loan 5,850
b. P40,000 P45,000 P35,000 Isabel, Loan 9,000 Haidee, capital 81,000
c. P55,000 P33,000 P22,000 Isabel, capital 40,500
d. P13,500 P45,900 P39,600 Total P 140,850 Total P140,850

CLAIRE, DAISY, and ELSIE formed the CDE Partnership on At this date, JOSIE was admitted as a partner for a
August 1, 2015, with the following assets, measured at fair consideration of P43,875 cash for a 40% interest in capital
market values, contributed by each partner: and in profits.
CLAIRE DAISY ELSIE 35. Assume JOSIE is admitted by purchase of 40% each
of the original partners interest, determine how the
Cash P 324,000 P108,000 P129,600
P43,875 will be apportioned to HAIDEE and ISABEL
a. HAIDEE, P32,850 and ISABEL, P15,900
receivable 73,080 - 91,800
b. HAIDEE, P32,450 and ISABEL, P16,300
Plant, Property, &
c. HAIDEE, P29,565 and ISABEL, P14,310
Equipment (PPE) 1,620,000 340,200 -
d. HAIDEE, P32,950 and ISABEL, P15,800
A part of CLAIREs cash contribution, P216,000, comes
from personal borrowings. Also, the PPE of CLAIRE and
DAISY are mortgaged with the bank for P972,000 and
P72,000, respectively. The partnership is to assume
responsibility for these PPE mortgages. The partners have
agreed to share profits and losses on a 5:2:3 ratio, to
CLAIRE, DAISY, and ELSIE, respectively.
33. What is the capital balance for each partner at the
opening of business on August 1, 2015?

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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
CARRYING CURRENT a. P329,142 c. P 543,984
VALUE VALUE b. P546,000 d. P 279,918

Pledged with fully secured P 150,000

creditors P 185,000 BEIGE STALKS CORPORATION, which began operations on
Pledged with partially January 1, 2014, appropriately uses the installment
secured creditors 60,000 method of accounting for revenues. The following
Free Assets 160,000 information is available for the years ended December 31,
P 450,000
P 405,000 2014 and 2015:
2014 2015
P 35,000
Liabilities with priority Cost of installment sales P 960,000 P1,920,000
Fully secured creditors GP realized on sales made in
Partially secured creditors 2014 144,000 86,400
Unsecured creditors 2015 - 192,000
P 535,000
GPR based on cost 30% 40%
40. What is the ending balance of installments receivable
36. How much cash will be available to pay the unsecured
at December 31, 2015?
non-priority claims?
a. P2,265,600 c. P1,632,000
a. P240,000 c. P160,000
b. P1,704,000 d. P1,176,000
b. P180,000 d. P125,000

On January 1, 2014, MAXX SERVICES, INC. signed an

The following data were taken from the statement of
agreement authorizing LALLA COMPANY to operate as a
franchisee over a 20-year period for an initial franchise fee
Assets pledged for fully secured liabilities
of P137,500 received when the agreement was signed.
(current fair value, P75,000) P 90,000
LALLA commenced operations on July 1, 2014, at which
Assets pledged for partially secured
date all of the initial services required of MAXX SERVICES
liabilities (current fair value P52,000) 74,000
had been performed. The agreement also provides that
Free assets (current fair value , P40,000) 70,000
LALLA must pay annually to MAXX a continuing franchise
Unsecured liabilities with priority 7,000
fee equal to 5% of the revenue from the franchise. LALLA
Fully secured liabilities 30,000
COMPANYs franchise revenue for 2014 was P1,100,000.
Partially secured liabilities 60,000
41. For th e year ended December 31, 2014, how much
Unsecured liabilities without priority 112,000
should MAXX SERVICES record as revenue from
franchise fees with respect to the LALLA account?
37. The amount that will be paid to creditors with priority
a. P192,500 c. P123,750
b. P137,500 d. P 60,500
a. P7,000 c. P7,500
b. P6,000 d. P6,200
GREAT DANE, INC., franchisor, entered into a franchise
agreement with PITBULL COMPANY, franchisee, on July 1,
SILVER PLATTER COMPANY which began operations on
2015. The total franchise fees agreed upon is P550,000, of
January 2, 2014, appropriately uses the installment
which P50,000 is payable upon signing and the balance is
method of revenue recognition. The following information
to be covered by a note payable in four equal annual
pertains to the companys operations for 2014 and 2015
installments. The direct franchise cost incurred was
2014 2015
P325,000. Indirect franchise expenses of P31,250 was also
Sales P 307,200 P460,800
paid. The relevant interest rate is 12% and the note is
Collections from
reasonably assured of collection. The agreement also
2014 sales 102,400 51,200
provides for the payment of continuing franchise fees at
2015 sales 0 153,600
4% of the franchisees gross sales. The franchise outlet
Accounts written off from
commences its operations on December 1, 2015 and had a
2014 sales 25,600 76,800
gross sales of P250,000 for the month.
2015 sales 0 153,600
42. Assuming the notes are interest-bearing, how much
Gross profit rates 40% 30%
net income will be reported for 2015?
a. P198,750 c. P 233,750
38. What amount should SILVER PLATTER COMPANY report
b. P 77,550 d. P 73,750
as deferred gross profit in its December 31, 2015
balance sheet?
a. P 76,800 c. P 114,688 On January 2, 2015, QUICKBUILD ERECTORS
b. P102,400 d. P 66,560 entered into contract to construct two projects. The
following data relate to the construction activities.
Project A Project B
BROWN DERBY COMPANY began operations on June 1,
Contract price P945,000 P675,000
2015. The following information are extracted from its
Cost incurred during 2015 540,000 630,000
records at year-end. Cost of installment sales, P2,991,424;
Estimated costs to complete 270,000 157,500
Cost of Regular Sales, P1,680,000. Mark-up on installment
Billings to customer 337,500 607,500
sales is 40% of cost while regular sales is 33-1/3% based
on sales. At the end of 2015, the balance of Installment
accounts receivable is P2,520,000; Accounts receivable is

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43. What amount of gross profit should Assuming that the branch ending inventory acquired from
QUICKBUILD ERECTORS report in its 2015 other vendors (OV) is P73,125
income statement under the following
46. What is the net income (loss) of the branch insofar as
methods? the home office is concerned?
Percentage of Zero Profit a. P534,000 c. P315,000
Completion Method Method b. P681,750 d. (P147,750)
a. P 0 P (90,000)
b. P (112,500) P (22,500)
c. P ( 22,500) P 0 Teardrops Commercial Corp. maintains a branch in Iloilo
d. P ( 22,500) P(112,500) City. Selected balances taken from the books of Teardrops
and its Bacolod City branch as of December 31, 2015 are
as follows:
44. BEST - EVER CONSTRUCTION, INC . recognizes Home Office Branch
construction revenue and costs using the percentage of Office
completion method. During 2014, a single long-term Merchandise Inventory,
project was begun which continued through 2015. Jan 1 P 12,000 P 8,000
Information on the project follows: Purchases 150,000 30,000
2014 2015 Shipments from Home
Accounts receivable P350,000 P1,050,000 Office 93,750
Incurred costs during year 367,500 672,000 Shipments to Branch 75,000
Construction in progress 427,000 1,274,000 Branch Inventory
Billings on contract 350,000 1,470,000 Allowance 19,750
The construction accounts are at amounts t0-date. Sales 115,000 176,500
Merchandise Inventory,
What is the gross profit recognized from this long-term Dec 31 14,000 10,350
2014 2015 P4,350 of the branch's ending inventory came from
a. P 77,000 P 798,000 purchases from suppliers other than the home office.
b. 77,000 350,000
c. 59,500 448,000 47. As far as the home office is concerned, the cost of
d. 59,500 175,000 sales of the branch was:
a. P 97,120 c. P121,400
b. P102,850 d. P131,850
CIGNAL ERECTORS began operations on January 2,
2015. During the year, the company entered into a
contract with TEAM Company to construct a During the year 2015 the Bacolod Corporation bills its Iloilo
manufacturing facility. At that time CIGNAL estimated branch at 140% of cost. Goods billed at P346,500 were
that it would take five years to complete the facility at shipped to the branch. The account Allowance for
a cost of P3,937,500. The total contract price for the overvaluation has a balance of P122,400 before
construction of the facility is P5,468,750. During the adjustment. The beginning inventory of the branch from
year, the company incurred P962,500 in construction the home office at cost is P93,600; the beginning inventory
costs related to the construction project. The of the branch from outsiders is P15,200, purchases from
estimated cost to complete the contract is P2,730.000 outsiders is P130,500.
TEAM was billed and paid 30% of the contract price 48. Cost of goods available for sale of the Iloilo Branch in
subject to a 10% retention. 2015 is
a. P486,800 c. P609,200
45. Using the percentage of completion method, how much b. P623,240 d. P463,500
is the excess of Construction in Progress over Contract
Billings or Contract Billings over Construction in
Progress? GHI Company bills its Bulacan Branch for merchandise
a. P273,437 (current liability) shipments at 125% of cost. As of cut-off date, December
b. P273,437 (current asset) 31, 2015, the following data were available:
c. P437,500 (current asset) Mdse. Fr Home Mdse.
d. P437,500 (current liability) Office(at billed Purchased
prices) from Outsiders
Presented below are items taken from the unadjusted trial Merchandise,
balances of NCR Company and its Manila Branch on December 1 P300,000 P120,000 P420,000
December 31, 2015: Additions to
Home Office Branch stock during
Books Books December 450,000 360,000 810,000
Shipment to branch P2,250,000 Merchandise,
AFOVOBI 749,250 December 31 420,000 150,000 570,000
Shipment from HO P2,925,000
Purchases (from OV) 1,084,500 The branch returned P15,000 worth of merchandise to the
MI, January 1 921,375 Home Office acquired at billed price.
MI, December 31 365,625 49. The amount of the allowance for overvaluation account
Sales 4,800,000 that was realized as income in view of branch sales for
Expenses 382,500 the month of December was:
a. P63,000 c. P87,500
b. b. P66,000 d. P84,000

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Current assets P280,000 P 320,000

Plant assets (net) 680,000 1,280,000
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, Chromes 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 Chromes 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 Carls 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
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 Carls 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-

Page 6 of 8 AFAR


year remaining useful life and P22,500 to goodwill which

was not impaired during the year. During 2015, HARD 60. In Alecks income statement, the amount that should
Corporation paid dividend of P60,000 to RICH Corporation. be included as a foreign exchange loss
The income statements of RICH and HARD for 2015 are a. P 0 c. P 6,000
given below: b. P21,000 d. P27,000
Sales P2,500,000 P1,000,000 On April 8, 2013, CALAMBA CORPORATION purchased
Cost of sales (1,250,000) (500,000) merchandise from an unaffiliated foreign company for
Depreciation 10,000 units of the foreign companys local currency.
expense (250,000) (150,000) CALAMBA paid the bill in full on March 1, 2015 when the
Other expense (500,000) (225,000) spot rate was P0.45. The spot rate was P0.60 on April 8,
Net income P500,000 P125,000 2013 and was P0.55 on December 31, 2014.
61. For the year ended December 31, 2014, CALAMBA
should report a transaction gain of
57. Consolidated net income for 2015 is a. P1,500 c. P1,000
a. P632,125 c. P623,125 b. P 500 d. P 0
b. P263,125 d. P632,215
On December 1, 2014, a Philippine firm purchased a
P Corporation acquired 70% of the voting common speculative hedge to buy 30,000 foreign currency when
stock of S Company at a time when S Companys book the spot rate was P1.10 and a 60 day forward rate was
values and fair values were equal. Separate incomes P1.12. The spot rate at December 31 (the companys year-
of P Corporation and S Company for 2015 are as end was P1.25 and a 30-day forward rate was P1.13.
follows: When the speculative hedge was exercised on January 31,
P Corporation S Company 2015 the spot rate was P1.11 and a 30 day forward rate,
Sales 633,600 350,400 P1.12.
Cost of Goods Sold 384,000 192,000 62. The journal entry to record this hedge would include a
Operating expenses 115,200 96,000 debit to Contract Receivable in the amount of
Separate income from a. P33,600 c. P33,000
own operations 134,400 62,400 b. P 600 d. P 0

Intercompany sales from P to S for 2014 and 2015 are 63. The amount of foreign exchange gain/loss that would
summarized as follows: appear on the income statements of the Philippine
Cost Selling Unsold company resulting from this speculative hedge for the
Price at year- years ended 2014 and 2015 are
end a. 2014 = P300 loss; 2015 = 600 loss
Intercompany sales b. 2014 = P300 gain; 2015 = 600 gain
2014 240,000 374,400 30% c. 2014 = P300 loss; 2015 = 600 gain
Intercompany sales d. 2014 = P300 gain; 2015= 600 loss
2015 168,000 264,000 40%

58. The 2015 consolidated income statement will show From the following data, question 16 to 18 should be
cost of goods sold of answered.
a. P 310,080 c. P 384,000 Opening inventory 4,000 units
b. P 576,000 d. P 192,000 Percentage of Value
Materials 100% P1,992
On September 1, 2015 Junjun Company received an order Labor 50% 1,074
for equipment form a foreign customer for FC 300,000 Overhead 50% 846
when the Philippine peso equivalent was P96,000. Junjun Put in process 20,000 units
shipped the equipment on October 15, 2015, and billed the Materials value P12,000
customer for FC 300,000 when the Phil. Peso equivalent Labor 9,984
was P100,000. Junjun received the customers remittance Overhead is 100% of labor cost
in full on November 16, 2015, and sold the FC 300,000 for Units completed and transferred 21,000 units
P105,000. Units in process at the end 3,000 units
59. In its income statement for the year ended December Materials 100%
31, 2015, Junjun should report a foreign exchange Labor and overhead 60%
gain of 64. The equivalent production for material is
a. P5,000 c. P9,000 Under Average Under FIFO
b. P4,000 d. No gain no loss a. 24,000 20,000

Alecks Corporation had the following foreign currency

b. 20,000 21,000
transactions during 2015 c. 20,000 24,000
a. Merchandise was purchased from foreign supplier on d. 21,000 20,000
January 20, 2015 for the Peso equivalent of P90,000.
The invoice was paid on March 20, 2015 at the Phil.
Peso equivalent of P96,000. Sangley, Inc. manufactures a product which goes
b. On July 1, 2015, Alecks borrowed the Philippine peso
equivalent of P500,000 evidenced by a note that was through three consecutive processes, Process 1, Process
payable in the lenders local currency on July 1, 2015. 2, and Process 3. Data for the month of September,
On December 31, 2015, the Phil. Peso equivalent of 2006 are as follows:
the principal amount and accrued interest were PROCESS1 PROCESS2 PROCESS3
P520,000 and P26,000 respectively. Interest on the Work in
note is 10% per annum.

Page 7 of 8 AFAR


Process, beg. P8,000 P13,000 P2,000 a. P1,245,000 c. P1,335,000

Materials added 20,000 4,000 5,000 b. P1,290,000 d. P1,380,000
Conversion 10,000 10,000 16,000
costs The following information relates to Job No. 2468, which is
Closing work in being carried out by Flexy Co. to meet a customers order.
process 6,000 9,000 4,000 Dept. A Dept. B
Direct materials used P5,000 P3,000
65. What was the value of the output transferred from Direct labor hours 400 200
Process 3 to the finished goods warehouse for the employed
month of September? Direct labor rate per hour P4.00 P5.00
a. P63,000 c. P67,000 Overhead rate per DL hour P4.00 P4.00
b. P65,000 d. P69,000 Adm. and other overhead 20% of full production
Lego Plastics, Inc. has two joint products, ABBA and ADDA, Profit markup 25% of selling price
and uses the net realizable value method of allocating joint
costs. The total joint costs for the year 2000 amounted to 69. The selling price to the customer of Job 2468 is:
P300,000. During the year, additional processing costs a. P16,250 c. P17,333
after split-off were P160,000 for ABBA and P240,000 for b. P20,800 d. P19,500
ADDA. Lego produced 16,000 units of ABBA and 8,000
units of ADDA during the year. The selling price for ABBA is Rumors Company applied factory overhead as follows:
P20.00 and for ADDA is P50.00. Department Factory Overhead Rate
66. The portion of joint costs allocated to ADDA during the Fabricating P7.75 per Machine hour
year is Spreading 15.10 per Machine hour
a. P175,000 c. P180,000 Gossiping 2.125 per Machine hour
b. P225,000 d. P150,000
Actual machine hours are: 19,000 hours for fabricating;
Lee Company produces two products in a single operation, 27,500 hours for spreading and 5,500 hours for gossiping.
Bex and Rom. Joint production cost for June, 2014 were
P30,000. During the month, further processing costs 70. If the actual factory overhead cost for the period is
beyond the split-off point needed to convert the products P574,375, how much is over (under) applied factory
into salable form were P25,000 and P35,000 for 1,600 overhead?
units of Bex and 800 units of Rom, respectively. Bex sells a. (P11,875.00) c. (P 187.50)
for P50 per unit and Rom sells for P100 per unit. Lee uses b. (P23,562.50) d. (P76,125.00)
the net realizable method for allocating joint product costs.
67. For June, 2014, the joint cost allocated to product Bex
a. P20,000 c. P13,500
b. P16,500 d. P10,000

The accounting records for 2014 of Wagner Music Co.

showed the following:
Decrease in raw materials inventory P 45,000
Decrease in finished goods inventory 150,000
Raw materials purchased 1,290,000
Direct labor payroll 600,000
Factory overhead 900,000
Freight-out 135,000
68. The cost of raw materials used for the period
- end -

amounted to

Page 8 of 8 AFAR