UNIVERSITY OF MINDANAO COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

GENERAL REVIEW balances, and residual profit or loss is divided equally. Partnership profit before interest was
P 4,000. By what amount should Zinc’s capital account change for the year?
PARTNERSHIP ACCOUNTING (8 items) a. P 1,000 decrease c. P 2,000 increase
b. P 11,000 decrease d. P 12,000 increase
1. Which of the following is not a characteristic of most partnerships?
a. Limited liability c. Limited life 7. Partnership A has an existing capital of P 70,000. Two partners currently own the partnership
b. Mutual agency d. Ease of formation and split profits 50/50. A new partner is to be admitted and will contribute net assets with a
fair value of P 90,000. For no goodwill or bonus to be recognized, what is the interest in the
2. Which of the following is not a characteristic of the proprietary theory that influences partnership granted the new partner?
accounting for partnerships? a. 33.33% b. 50.00% c. 56.25% d. 75.00%
a. Partners’ salaries are viewed as a distribution of income rather than a component of
net income 8. Ranken purchases 50% of Lark’s capital interest in the K and L partnership for P 22,000. If the
b. A partnership is not viewed as a separate entity, distinct, taxable entity capital balances of Kim and Lark are P 40,000 and P 30,000, respectively, Ranken’s capital
c. A partnership is characterized by limited liability balance following the purchase is
d. Changes in the ownership structure of the partnership result in the dissolution of the a. P 15,000 b. P 20,000 c. P 22,000 d. P 35,000
partnership
Sammy and Michael are partners of SM Partnership sharing profits and losses equally. They
3. Which of the following statements is correct with respect to a limited partnership? decided to terminate the partnership when their capital balances are: Sammy, P 750,000; Michael,
a. A limited partner may not be an unsecured creditor of the limited partnership P 500,000. At this time, the partnership owes Michael P 200,000, as evidenced by a promissory
b. A general partner may not also be limited partner at the same time note. Upon liquidation, cash of P 300,000 becomes available for distribution to the partners. In
c. A general partner may be a secured creditor of the limited partnership the final cash distribution, what would be the respective share of the partners?
d. A limited partnership can be formed with limited liability for all partners
9. Sammy
4. Mary admits Jane as a partner in the business. Balance sheet accounts of Mary just before the a. P 150,000 b. P 175,000 c. P 200,000 d. P 275,000
admission of Jane show: Cash, P 26,000, Accounts receivable, P 120,000, Merchandise
inventory, P 180,000, and Accounts payable, P 62,000. It was agreed that for purposes of 10. Michael
establishing Mary’s interest, the following adjustments be made: 1. An allowance for doubtful a. P 25,000 b. P 100,000 c. P 125,000 d. P 150,000
accounts of 3% of accounts receivable is to be established; 2. Merchandise inventory is to be
adjusted upward by P 25,000; and 3. Prepaid expenses of P 3,600 and accrued liabilities of P 11. An advantage of the partnership as a form of business organization would be
4,000 are to be recognized. If Jane is to invest sufficient cash to obtain 2/5 interest in the a. Partners do not pay income taxes on their share in partnership income
partnership, how much would Jane contribute to the new partnership? b. A partnership is bound by the act of the partners
a. P 95,000 b. P 113,980 c. P 176,000 d. P 190,000 c. A partnership is created by mere agreements of the partners
d. A partnership may be terminated by the death or withdrawal of a partner
5. If a partnership has net income of P 44,000 and Partner X is to be allocated bonus of 10% of
income after the bonus. What is the amount of bonus Partner X will receive? 12. When property other than cash is invested in a partnership, at what amount should the non-
a. P 3,000 b. P 3,300 c. P 4,000 d. P 4,400 cash property be credited to the contributing partner’s capital account?
a. Fair value at the date of contribution
6. During 2016, Young and Zinc maintained average capital balances in their partnership of P b. Contributing partner’s original cost
160,000 and P 100,000, respectively. The partners receive 10% interest on average capital c. Assessed valuation for property tax purposes
d. Contributing partner’s tax basis

ADVANCED FINANCIAL ACCOUNTING & REPORTING CEDRIC IAN CARLO E. PETALCORIN, CPA, MBA 1
UNIVERSITY OF MINDANAO COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

13. Partnership capital and drawings accounts are similar to the corporate 19. A On July 1, 2011, Alviar, Brosas and Camus formed a joint venture for the sale of merchandise.
a. Paid-in capital, retained earnings, and dividend accounts Alviar was designated as the managing participant. Profits or losses are to be divided as
b. Retained earnings account follows: Alviar, 50%; Brosas, 25%; and Camus, 25%. On October 1, 2011, though the joint
c. Paid-in capital and retained earnings accounts venture is still uncompleted, the participants agreed to recognize profit or loss on the venture
d. Preferred and common stock accounts to date. The cost of inventory on hand is determined at P 25,000. The Joint Venture account
has a debit balance of P 15,000 before distribution of profit and loss. No separate set of books
14. On May 1, 2016, Cobb and Mott formed a partnership and agreed to share profits and losses is maintained for the joint venture and the participants record in their individual books all
in the ratio of 3:7, respectively. Cobb contributed a parcel of land that cost him P 10,000. Mott venture transactions. The joint venture profit (loss) on October 1, 2011 is:
contributed P 40,000 cash. The land was sold for P 18,000 on May 1, 2016, immediately after a. P 10,000 b. P 25,000 c. P (15,000) d. None
formation of the partnership. What amount should be recorded in Cobb’s capital account on
formation of the partnership? 20. Ranto and Santo formed a joint venture to acquire and sell a special type of merchandise
a. P 10,000 b. P 15,000 c. P 17,400 d. P 18,000 Ranto is to manage the venture and to furnish the capital. The participants are to share equally
any gain or loss on the joint venture. On April 1, 2011, Santo sent Ranto P 10,000 cash, which
15. Partners AA and BB have profit and loss agreement with the following provisions: salaries of was all used to purchase merchandise. Ranto paid freight of P 240 on the merchandise
P 30,000 and P 45,000 for AA and BB respectively; a bonus to AA of 10% of net income after purchased. On April 27, one half of the merchandise was sold for P 7,200 cash. Ranto paid the
salaries and bonus; and interest of 10% on average capital balances of P 20,000 and P 35,000 cost of delivering merchandise to customers which amounted to P 260. No further
for AA and BB, respectively. One-third of any remaining profits will be allocated to AA and the transactions occurred until the end of the month. The profit (loss) of the venture for the
balance to BB. If the partnership had net income of P 102,500, how much should be allocated month of April, 2011 is:
to Partner AA? a. P 1,820 b. P 1,950 c. P (1,700) d. None
a. P 41,000 b. P 41,167 c. P 44,250 d. P 47,500
21. It is a joint arrangement whereby the parties that have joint control of the arrangement have
16. Red and White formed a partnership in 2016. The partnership agreement provides for annual rights to the assets, and obligations for the liabilities, relating to the arrangement.
salary allowances of P 55,000 for Red and P 45,000 for White. The partners share profits a. Joint control c. Joint undertaking
equally and losses in a 60/40 ratio. The partnership had earnings of P 80,000 for 2016 before b. Joint operation d. Joint venture
any allowance to partners. What amount of these earnings should be credited to White’s
capital account? 22. It is a party to a joint operation that has joint control of that joint operation
a. P 35,000 b. P 36,000 c. P 37,000 d. P 40,000 a. Joint controller c. Joint undertaker
b. Joint operator d. Joint venturer
JOINT ARRANGEMENT (4 items)
23. On January 2, GOKU Company purchased a 30 percent interest in GOHAN Company for P
17. It is an arrangement of which two or more parties have joint control 250,000 such interest gives GOKU Company the joint control over GOHAN Company. On this
a. Joint arrangement c. Joint operation date, the book value of GOHAN’s stockholders’ equity was P 500,000. The carrying amounts
b. Joint undertaking d. Joint venture of GOHAN’s identifiable net assets approximated fair values, except for land, whose fair value
exceeded its carrying amount by P 200,000. GOHAN’s reported net income of P 100,000 and
18. It is the contractually agreed sharing of control of an arrangement, which exists only when paid no dividends. GOKU accounts for this investment using the equity method. In its
decisions about the relevant activities require the unanimous consent of the parties sharing December 31 balance sheet, what amount should GOKU report for this investment?
control a. P 210,000 b. P 220,000 c. P 270,000 d. P 280,000
a. Joint control c. Joint operation
b. Joint undertaking d. Joint venture

ADVANCED FINANCIAL ACCOUNTING & REPORTING CEDRIC IAN CARLO E. PETALCORIN, CPA, MBA 2
UNIVERSITY OF MINDANAO COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

24. VEGETA Company purchases 40% of BULMA Company on January 1 for P 500,000 that carry 20% above cost. The inventories of supplies at the branch were as follows: January 1 – P
voting rights at a general meeting of shareholders of BULMA Company. VEGETA Company and 90,000; December 31 – P 108,000. On December 31, 2016, the home office holds inventories
TRUNKS Company immediately agreed to share control (wherein unanimous consent is of P 160,500, which includes P 10,500 held on consignment. Both locations use the periodic
needed to all the parties involved) over BULMA Company. BULMA reports assets on that date inventory method. How much inventories should be reported in the combined balance sheet
of P 1,400,000 with liabilities of P 500,000. One building with a seven-year life is undervalued as of December 31, 2016?
on BULMA’s books by P 140,000. Also BULMA’s book value for its trademark (10-year life) is a. P 210,000 b. P 240,000 c. P 270,000 d. P 300,000
undervalued by P 210,000. During the year, Basket reports net income of P 90,000, while
paying dividends of P 30,000. What is the Investment in BULMA Company balance (equity 29. The combined statements may be used to present the results of operations of
method) in VEGETA’s financial records as of December 31? Entities under Commonly controlled entities
a. P 504,000 b. P 507,600 c. P 513,900 d. P 516,000 common management
a. NO YES
HOME OFFICE, BRANCH, AGENCY ACCOUNTING (4 items) b. YES NO
c. NO NO
25. The home office bills its branch for merchandise transfers at a price in excess of cost. In the d. YES YES
home office separate financial statements, the allowance for unrealized profit in branch
inventory account would appear in the financial statements of the home office as At the end of 2016, the branch reported an inventory of P 15,625. The home office bills this branch
a. An operating expense of the current period at 125% of cost. During 2017, goods costing P 300,000 were shipped to the branch. The account
b. Deduction from the cost of goods sold “allowance for overvaluation of branch inventory” after adjustment, shows a balance of P 16,250
c. Addition to the cost of goods sold at the end of the year.
d. Deduction from the investment in branch account
30. What was the amount of inventory at January 1, 2017 at cost?
26. Early last year, a Manila-based company established a branch in Iloilo City. It shipped a. P 12,500 b. P 15,625 c. P 19,531 d. P 28,125
merchandise and billed the branch for P 300,000 prior to opening. For the year, it made
additional shipments at billed price of P 120,000. Within the year, the branch shipped back P 31. What was the amount of ending inventory at billed price?
7,500 inventory and got credit memo for the said return. On the last working day of the year, a. P 65,000 b. P 81,250 c. P 247,500 d. P 309,375
an inventory count was made. Ending inventory of P 185,000 was established consisting of
purchases from outsiders at P 20,000, with the balance coming from the home office 32. What was the amount of allowance for overvaluation before adjustment?
shipments at billed price of 20% above cost. The total purchases of the branch from outsiders a. P 20,000 b. P 20,312 c. P 61,875 d. P 78,125
amounted to P 72,500. What is the total goods available for sale by the branch at cost?
a. P 416,250 b. P 422,500 c. P 435,250 d. P 485,000 BUSINESS COMBINATIONS AND CONSOLIDATED FINANCIAL STATEMENTS (12 items)

27. The Neneng Corp. established its San Pedro branch in March 2016. During the first year of
operations, the home office shipped to the branch merchandise which had cost of P 120,000.
Three-fourths of these merchandise was sold by the branch for P 141,000. Operating expenses
of the branch amounted to P 27,000. How much net income will the branch report if
merchandise is billed by the home office to the branch at 25% above cost?
a. P 800 b. P 1,200 c. P 1,500 d. P 8,000
28. The Chivas Regal owns the Royal Crown in Quezon City and a branch in Davao City. During
2016, the home office shipped to the branch supplies costing P 120,000 at a billed price of
33. A business combination may be legally structured as a merger, a consolidation, an investment
in stock, or a direct acquisition of assets. Which of the following describes a business
combination that is legally structured as a merger?
a. The surviving company is one of the two combining companies
b. The surviving company is neither of the two combining companies
c. An investor-investee relationship is established
d. A parent-subsidiary relationship is established

ADVANCED FINANCIAL ACCOUNTING & REPORTING CEDRIC IAN CARLO E. PETALCORIN, CPA, MBA 3
UNIVERSITY OF MINDANAO COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

34. Pilipinas Co. acquired all of the assets and liabilities of Saba Co. for cash in a legal merger. statement of financial position shows share capital of P 100,000, a revaluation reserve of P
Which one of the following would not be recognized by Pilipinas on its books in recording the 300,000, and retained earnings of P 1,400,000. Under IFRS 3, Business Combinations, what
business combination? figure in respect of goodwill should now be carried in Lamp’s consolidated statement of
a. Accounts receivable c. Intangible asset – Patent financial position?
b. Investment in Saba Co. d. Accounts payable a. P 1,470,000 c. P 160,000
b. P 1,260,000 d. P 700,000
35. A “group” for consolidation purposes is
a. A parent and all its subsidiaries 40. On July 1, 2016, the Magna Co. acquired 100% of the Natural Co. for a consideration
b. An entity that has one or more subsidiaries transferred of P 160,000,000. At the acquisition date, the carrying amount of Natural’s net
c. An entity, including an unincorporated entity such as partnership that is controlled assets was P 100,000,000. At the acquisition date, a provisional fair value of P 120,000,000
by another entity was attributed to the net assets. An additional valuation received on May 31, 2017 increased
d. An entity that obtains control over entities or businesses this provisional fair value to P 135,000,000 and on July 30, 2017, this fair value was finalized
at P 140,000,000. What amount should Magna present for goodwill in its statement of
36. It is that portion of the profit or loss and net assets of a subsidiary attributable to equity financial position at December 31, 2017, according to IFRS 3, Business Combination?
interest that are not owned directly or indirectly through subsidiaries by the parent a. P 25,000,000 c. P 40,000,000
a. Non-controlling interest c. Residual interest b. P 20,000,000 d. P 60,000,000
b. Controlling interest d. Subsidiary interest
41. The Gem Corp. acquired 100% of the Koala Co. for a consideration transferred of P
37. On August 31, 2016, Wood Corp. issued 100,000 shares of its P 20 par value common stock 112,000,000. At the acquisition date, the carrying amount of Koala’s net assets was P
for the net assets of Pine, Inc., in a business combination accounted for by the acquisition 100,000,000 and their fair value was P 120,000,000. How should the difference between the
method. the market value of Wood’s common stock on August 31 was P 36 per share. Wood consideration transferred and the net assets acquired be presented in Gem’s financial
paid a fee of P 160,000 to the consultant who arranged this acquisition. Cost of registering statements, according to IFRS 3, Business Combination?
and issuing the equity securities amounted to P 80,000. No goodwill was involved in the a. Gain on bargain purchase of P 8,000,000 recognized
purchase. What amount should Wood capitalize as the cost of acquiring Pine’s net assets? b. Gain on bargain purchase of P 8,000,000 deducted from other intangible assets
a. P 3,600,000 c. P 3,680,000 c. Gain on bargain purchase of P 8,000,000 recognized in profit or loss
b. P 3,760,000 d. P 3,840,000 d. Goodwill of P 12,000,000 as an intangible asset

38. 100% of the equity share capital of the Roman Co. was acquired by the Sweet Co. on July 30,
2016. Sweet Co. issued 500,000 new P 1 ordinary shares which had a fair value of P 8 each at
the acquisition date. In addition, the acquisition resulted in Sweet incurring fees payable to
external advisers of P 200,000 and share issue costs of P 180,000. In accordance with IFRS 3,
Business Combinations, goodwill at the acquisition date is measured by subtracting the
identifiable assets acquired and the liabilities assumed from
a. P 4,000,000 c. P 4,180,000
b. P 4,200,000 d. P 4,380,000
39. The Lamp Co. acquired a 70% interest in the Ohau Co. for P 1,960,000 when the fair value of
Ohau’s identifiable assets and liabilities was P 700,000 and elected to measure the non-
controlling interest at its share of the identifiable net assets. Annual impairment reviews of
goodwill have not resulted in any impairment losses being recognized. Oahu’s current
42. During 2016, Pard Corp. sold goods to its 80%-owned subsidiary, Seed Corp. At December 31,
2016, one-half of these goods were included in Seed’s ending inventory. Reported 2016 selling
expenses were P 1,100,000 and P 400,000 for Pard and Seed, respectively. Pard’s selling
expenses included P 50,000 in freight-out cost for goods sold to Seed. What amount of selling
expenses should be reported in Pard’s 2016 consolidated income statement?
a. P 1,500,000 c. P 1,480,000
b. P 1,475,000 d. P 1,450,000
43. Porch Co. owns a 90% interest in the Screen Co. Porch sold Screen a milling machine on
January 1, 2016 for P 50,000 when the book value of the machine on Porch’s books was P
40,000. Porch financed the sale with Screen signing a 3-year, 8% interest, level payment,
monthly payment loan for the entire P 50,000. The machine will be sued for 10 years and

ADVANCED FINANCIAL ACCOUNTING & REPORTING CEDRIC IAN CARLO E. PETALCORIN, CPA, MBA 4
UNIVERSITY OF MINDANAO COLLEGE OF ACCOUNTING EDUCATION
depreciated using the straight-line method. The gain on the machine sale will appear in the
consolidated income statement
a. Never c. In the year of sale
b. Spread over 3 years d. Spread over 10 years
44. Enron Co. owns a 100% interest in the common stock of the Diets Co. On January 1, 2016,
Enron sold Diets a fixed asset that Diets will use over a 5-year period. The asset was sold at P
5,000 profit. In the consolidated statements, this profit will
a. Not be recorded
b. Be recognized over 5 years
c. Be recognized when the asset is resold to outsider parties at the end of its period of
use
d. Be recognized in the year of sale
45. Port Inc. owns 100% of Salem, Inc. On January 1, 2016, Port sold Salem delivery equipment at
a gain. Port had owned the equipment for 2 years and used a 5-year straight line depreciation
rate with no residual value. Salem is using a 3-year straight line depreciation rate with no
residual value for the equipment. In the consolidated income statement, Salem’s recorded
depreciation expense on the equipment for 2016 will be decreased by
a. 20% of the gain on sale c. 33 1/3% of the gain on sale
b. 50% of the gain on sale d. 100% of the gain on sale
46. Madonna Co. has a 75% interest in Jemo, Inc., which is recorded on a cost basis. For the fiscal
year ended June 30, 2016, the following data were taken from the respective books: Net
income of Madonna Co. was P 125,000 while net income of Jemo, Inc. was P 45,000. There
was an intercompany interest on bonds in the amount of P 5,700. Jemo, Inc. declared and paid
dividend in the amount of P 9,000. The consolidated net income attributable to the controlling
interest for the fiscal year was:
a. P 158,975 b. P 147,725 c. P 163,250 d. P 152,000
47. Which of the following statements is NOT a key feature of the acquisition method?
a. Goodwill is measured as the consideration transferred plus the amount of any non-
controlling interest, plus the fair value of any previously held equity interest in the
acquire, less the fair value of the identifiable net assets acquired
b. The measurement of acquired identifiable assets at fair value
c. Cost of the business combination is measured at the fair value of the net assets
received from the acquire
d. An acquirer being identified for each business combination
48. Which of the following statements is NOT in accordance with IFRS 3, Business Combinations?
ADVANCED FINANCIAL ACCOUNTING & REPORTING
COMPETENCY APPRAISAL COURSE
a. An entity shall account for each business combination by applying the acquisition
method
b. For each business combination, one of the combining entities shall be identified as
the acquirer
c. The acquirer is required to recognize, separate from goodwill, the identifiable assets
acquired, the liabilities assumed and any non-controlling interest in the acquire
d. The acquirer shall measure the identifiable assets acquired and the liabilities assumed
at their acquisition date agreed values
49. Which of the following statements is consistent with the principle of control as defined by
IFRS 10, Consolidated Financial Statements?
a. The investor must be exposed to a return from the investee
b. The investor has the ability to use its power over the investee to affect the investor’s
returns from the investee
c. If two or more investors have existing rights to direct different relevant activities, no
investor can have control over the investee
d. An investor’s power over an investee relates to their ability to determine the amount
of returns received from the investee
50. IFRS 10, Consolidated Financial Statements set out how to determine whether one entity has
control over another entity. Which of the following statements is in accordance with the IFRS
10 requirements and guidance for control to exist over another entity?
a. The investor must have greater than 50% of the voting rights in the other entity
b. The investor must be the only party that receives variable returns from the investee
c. The investor must have existing rights that give it the current ability to direct relevant
activities
d. The investor must be represented on the board of directors or governing body of the
other entity
51. On January 1, 2016, Dragons Corp. acquired the net assets of Blue Marlins Corp. in a business
combination. At that date, the property, plant, and equipment of Blue Marlins had a book
value of P 21,000,000 and a fair value of P 22,500,000. These assets were originally acquired
at a cost of P 30,000,000 but would presently cost P 12,000,000. Using the acquisition method,
what amount should the combined entity report its property, plant, and equipment account?
a. P 36,000,000 c. P 30,000,000
b. P 22,500,000 d. P 21,000,000
52. Star Co. has properly treated as expense, P 200,000 of research and development costs that
resulted in a patent. When Victory Co. acquired Star Co., it was determined that the patent
had a fair value of P 500,000. Which of the following statements is true?
CEDRIC IAN CARLO E. PETALCORIN, CPA, MBA 5
UNIVERSITY OF MINDANAO COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

a. On the books of Victory Co., the patent should be recorded at P 200,000 because that FOREIGN CURRENCY TRANSACTIONS, HEDGING FOREIGN EXCHANGE RISK, AND FOREX
was the cost to produce it TRANSLATIONS (7 items)
b. The cost of the patent on the books of Victory Co. should be P 500,000
c. The cost of the patent on the books of Victory Co. should be the same as on the books 57. On October 1, 2016, Mild Co., purchased machinery from a foreign company with payment
of Star Co. due on April 1, 2017. If Mild’s 2016 operating income included no foreign currency transaction
d. The cost of the patent on the books of Victory Co. should be represented by the legal gain or loss, the transaction could have been
costs involved in the patent process a. Resulted in an extraordinary gain
b. Been denominated in Philippine pesos
The Dub Co. had these accounts at the time it was acquired by Bush Co.: c. Cause a foreign currency transaction gain to be reported as a contra-account against
Cash 36,000 machinery
Accounts receivable 457,000 d. Caused a foreign currency translation gain to be reported in other comprehensive
Inventories 120,000 income
Property, plant and equipment 696,400
Liabilities 350,800 58. On October 1, 2016, Velee Co. contracted to purchase foreign goods requiring payment in
local currency units (LCU) one month after the receipt of the goods at Velee’s factory. Title to
Bush paid P 1,400,000 for 100% of the stock of Dub Co. It was determined that fair market values the goods passed on December 15, 2016. The goods were still in transit on December 31,
of inventories and property, plant and equipment were P 133,000 and P 900,000, respectively. 2016. Exchange rates were one peso to 22 LCUs, 20 LCUs, and 21 LCUs on October 1,
December 15, and December 31, 2016, respectively. Velee should account for the exchange
53. The net assets (excluding goodwill, if any) recorded in the books of the acquiring company rate fluctuation in 2016 as
was: a. An ordinary loss included in net income
a. P 1,400,000 c. P 1,175,200 b. An ordinary gain included in net income
b. P 1,309,000 d. P 958,200 c. An extraordinary gain
d. An extraordinary loss
54. Compared with the unadjusted values recorded in the books of Dub Co., this transaction
resulted to: On December 12, 2016, INGRAM Company entered into three forward exchange contract to
a. P 224,800 more than recorded owners’ equity purchase 100,000 FC (foreign currency) in 90 days. The relevant exchange rates are as follows:
b. P 666,200 more than recorded owners’ equity Spot Rate Forward Rate (for 3/12/2017)
c. P 441,400 more than recorded owner’s equity November 30, 2016 P 0.87 P 0.89
d. P 224,800 less than recorded owner’s equity December 12, 2016 P 0.88 P 0.90
December 31, 2016 P 0.92 P 0.93
55. Assuming Bush Co. paid P 1,000,000 for the net assets of Dub Co., the excess of fair market
value over cost was: 59. INGRAM entered into the first forward contract to hedge a purchase of inventory in November
a. P 152,614 b. P 175,200 c. P 162,200 d. P 157,334 2016, payable in March 2017. At December 31, 2016, what amount of foreign currency
transaction gain from this forward contract should INGRAM include in net income?
56. Pong Co. owns 70% of Simm Co.’s outstanding common stock. Pong’s liabilities total P a. Zero b. P 3,000 c. P 5,000 d. P 10,000
450,000, and Simm’s liabilities total P 200,000. Included in Simm’s financial statements is a P
100,000 note payable to Pong. What amount of total liabilities should be reported in the 60. At December 31, 2016, what amount of foreign currency transaction loss should INGRAM
consolidated financial statements? include in income from the revaluation of the Accounts Payable of 100,000 FC incurred as a
a. P 520,000 b. P 550,000 c. P 590,000 d. P 650,000 result of the purchase of inventory at November 30, 2016 payable in March 2017?
a. Zero b. P 3,000 c. P 4,000 d. P 5,000

ADVANCED FINANCIAL ACCOUNTING & REPORTING CEDRIC IAN CARLO E. PETALCORIN, CPA, MBA 6
UNIVERSITY OF MINDANAO COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

61. INGRAM entered into the second forward contract to hedge a commitment to purchase 65. Patents are on the books of a Thai subsidiary of a Filipino firm at a value of 50,000 baht. The
equipment being manufactured to INGRAM’s specifications. The expected delivery date is patents were acquired in 2013 when the exchange rate was 1 baht = P 1.50. The Thai
March 2017, at which time settlement is due to the manufacturer. The hedge qualifies as a subsidiary was acquired by the Filipino firm in 2010 when the exchange rate was 1 baht = P
fair value hedge. At December 31, 2017. What amount of foreign currency transaction gain 1.40. The exchange rate on December 31, 2014, the date of the most current balance sheet,
from this forward contract should INGRAM include in net income? is 1 baht = P 1.55. The average rate of exchange for 2014 is P 1.53. What exchange rate will be
a. Zero b. P 3,000 c. P 5,000 d. P 10,000 used to remeasure patents for the consolidated statements dated December 31, 2014?
a. P 1.40 b. P 1.50 c. P 1.53 d. P 1.55
62. INGRAM entered into the third forward contract for speculation. At December 31, 2016, what
amount of foreign currency transaction gain from this forward contract should INGRAM 66. An entity purchases plant from a foreign suppler for 3 million baht on January 31, 2011, when
include in net income? the exchange rate was 2 baht = P 1. At the entity’s year-end of March 31, 2011, the amount
a. Zero b. P 3,000 c. P 5,000 d. P 10,000 has not been paid. The closing rate was 1.5 baht = P 1. The entity’s functional currency is the
peso. Which of the following statements is correct?
Happ, Inc. agreed to purchase merchandise from a British vendor on November 30, 2013. The a. Cost of plant P 2 million, exchange loss P .5 million, trade payable P 1.5 million.
goods will arrive on January 31, 2014 and payment of 100,000 British pounds is due February 28, b. Cost of plant P 1.5 million, exchange loss P .6 million, trade payable P 2 million
2014. On November 30, 2013, Happ signed an agreement with a foreign exchange broker to buy c. Cost of plant P 1.5 million, exchange loss P .5 million, trade payable P 2 million
100,000 British pounds on February 28, 2014. Exchange rates to purchase 1 British pound are as d. Cost of plant P 2 million, exchange loss P .5 million, trade payable P 2 million
follows:
11/30/13 12/31/13 01/31/13 02/28/14 The CASTILLANES Company acquired a foreign subsidiary on August 15, 2014. Goodwill arising on
Spot P 1.65 P 1.62 P 1.59 P 1.57 the acquisition was Nt Dollar 175,000. Consolidated financial statements are prepared at the year-
30 Day P 1.64 P 1.59 P 1.60 P 1.59 end of December 31, 2014 requiring the translation of all foreign operations’ results into the
60 Day P 1.63 P 1.56 P 1.58 P 1.58 presentation currency of peso. The following rates of exchanges have been identified:

63. Because of this commitment hedge, Happ, Inc. will record the merchandise at what value Rate at August 15, 2014 Nt Dollar 1.321 = P 1
when it arrives in January? Rate at December 31, 2014 Nt Dollar 1.298 = P 1
a. P 165,000 b. P 164,000 c. P 160,000 d. P 159,000 Average rate for the year ended Nt Dollar 1.302 = P 1
Average rate for the period from August 15 to December 31 Nt Dollar 1.292 = P 1
Pile, Inc. purchased merchandise for 500,000 FC from a foreign vendor on November 30, 2015.
Payment in foreign currency is due January 31, 2016. On the same day, Pile signed an agreement 67. According to PAS 21, at what amount should the goodwill be measured in the consolidated
with a foreign exchange broker to buy 500,000 FC on January 31, 2014. Exchange rates to purchase statement of financial position?
1 FC are as follows: a. P 134,409 b. P 135,449 c. P 134,823 d. P 312,449
Nov. 30, 2015 Dec. 31, 2015 Jan. 31, 2016
Spot P 1.49 P 1.45 P 1.44 The IVAN Company acquired the MARK Company, a foreign subsidiary on September 10, 2014.
30 Day P 1.48 P 1.43 P 1.43 The fair value of the assets of MARK was the same as their carrying amount expect for land where
60 Day P 1.46 P 1.41 P 1.42 the fair value was Nt dollar 50,000 greater than carrying amount. This fair value adjustment has
not been recognized in the separate financial statements of MARK. Consolidated financial
64. What will be the year-end adjustment to the accounts payable, included in the journal entry statements are prepared at the year-end of December 31, 2014 requiring the translation of all
record on November 30, 2015? foreign operation’s results into the presentation currency of peso. The following rates of exchange
a. P 20,000 debit c. P 20,000 credit have been identified:
b. P 30,000 debit d. Zero
Rate at September 10, 2014 Nt Dollar 1.62 = P 1

ADVANCED FINANCIAL ACCOUNTING & REPORTING CEDRIC IAN CARLO E. PETALCORIN, CPA, MBA 7
UNIVERSITY OF MINDANAO COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

Rate at December 31, 2014 Nt Dollar 1.56 = P 1 a. P 2,250 over c. P 2,250 under
Average rate for the year ended Nt Dollar 1.60 = P 1 b. P 15,000 over d. P 15,000 under
Average rate for the period from September 10 to December 31 Nt Dollar 1.58 = P 1
74. During the current accounting period, a manufacturing company purchased P 70,000 of raw
68. According to PAS 21, what fair value adjustment is required to the carrying amount of land materials, of which P 50,000 of direct materials and P 5,000 of indirect materials were used in
in the consolidated statement of financial position? production. The company also incurred P 45,000 of total labor costs and P 20,000 of other
a. P 30,864 b. P 32,051 c. P 31,250 d. P 31,646 factory overhead costs. An analysis of the work-in-process control account revealed P 40,000
of direct labor costs. Based upon the above information, what is the total amount
69. An entity will primarily generate and expend cash in one primary economic environment. accumulated in the factory overhead control account?
According to IAS 21, The Effects of Changes in Foreign Exchange Rates, the correct term for a. P 25,000 b. P 30,000 c. P 45,000 d. P 50,000
the currency of this primary economic environment is
a. Presentation currency c. Reporting currency 75. Kew Co. had 3,000 units in work in process at April 1 that were 60% complete as to conversion
b. Functional currency d. Foreign currency cost. During April, 10,000 units were completed. At April 30, the 4,000 units in work in process
were 40% complete as to conversion cost. Direct materials are added at the beginning of the
70. According to IAS 21, The Effects of Changes in Foreign Exchange Rates, at which rate should process. How many units were started during April?
an entity’s non-current assets be translated when its functional currency figures are being a. 9,000 b. 9,800 c. 10,000 d. 11,000
translated into different presentation currency?
a. The historical rate c. The closing rate 76. Expo Co. uses a FIFO process costing system and had beginning work-in process inventory of
b. The average rate d. The spot exchange rate 5,000 units that were 40% complete as to conversion. Expo started and completed 42,000
units this period and had ending work-in-process inventory of 12,000 units. How many units
COST ACCOUNTING (10 items) were started this process?
a. 54,000 b. 59,000 c. 42,000 d. 47,000
71. The following selected information pertains to Top Gun Manufacturing, Inc.: direct materials
of P 625,000, indirect materials of P 125,000, direct labor of P 750,000, indirect labor of P 77. On October 1, Yankee Co. had 20,000 units of work in process in Department 1. They were
112,500 and factory overhead (not including indirect materials and indirect labor) of P 100% complete as to materials costs and 20% complete as to conversion costs. During
375,000. Compute conversion costs October, 160,000 units were started in Department 1, and 170,000 units were completed and
a. P 1,375,000 c. P 1,362,500 transferred to Department 2. Work in process on October 31 was 100% complete as to
b. P 2,500,000 d. P 2,737,500 materials costs and 40% complete as to conversion costs. By what amount would the
equivalent units for conversion costs for the month of October differ if the FIFO method were
72. Childers Co. manufactures widgets. During the fiscal year just ended, the company incurred used instead of the weighted average method?
prime costs of P 1,500,000 and conversion costs of P 1,800,000. Overhead is applied at the a. 20,000 decrease c. . 16,000 decrease
rate of 200% of direct labor cost. How much of the above costs represent direct materials b. 6,000 decrease d. 4,000 decrease
cost?
a. P 1,500,000 c. P 300,000 78. The Grinding Department of Gilingan Manufacturing Corp. had the following information for
b. P 900,000 d. P 600,000 the month of May: Work-in-Process, May 1, 80,000 units; Work-in-Process, May 31, 120,000
units, and started in process during the month of May, 600,000 units. The total cost of
73. The Waitkins Co. estimated Department A’s overhead at P 255,000 for the period based on an production for the month amounted to P 2,344,000 and the cost of beginning work-in-process
estimated volume of 100,000 direct labor hours. At the end of the period, the factory was P 280,000. Beginning work-in-process is 70% complete; while the ending work-in-process
overhead control account for Department A had a balance of P 265,500; actual direct labor is 80% complete. Assuming FIFO costing method was used, how many equivalent production
hours were 105,000. What was the over or under applied overhead for the period? units were completed in May?

ADVANCED FINANCIAL ACCOUNTING & REPORTING CEDRIC IAN CARLO E. PETALCORIN, CPA, MBA 8
UNIVERSITY OF MINDANAO COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

a. 680,000 b. 640,000 c. 600,000 d. 560,000 a. P 75,000 b. P 45,000 c. P 27,000 d. P 67,500

79. Cheeta Co. has materials cost in the June 1 Raw and In Process (RIP) of P 10,000 materials 85. Generally, individual departmental rates rather than a plant-wide rate for applying overhead
received during the month of June of P 205,000 and materials cost in the June 30 Raw and In would be used if
Process (RIP) of P 12,500. What would be the amount to be backflushed from RIP to Finished a. A company wants to adopt a standard cost system
Goods at the end of June? b. A company’s manufacturing operations are all highly automated
a. P 215,000 b. P 202,500 c. P 207,500 d. P 217,500 c. Manufacturing overhead is the largest cost component of its product cost
d. The manufactured products differ in the resources consumed from the individual
80. Atlas Co. has 10 workstations where work in process is held, 100 average units in work-in- departments in the plant
process per station, an average cost of a unit in work in process of P 75, and annual inventory
carrying cost of 20%. If Atlas plans a 50% reduction in work-in-process levels, what would be 86. Units of production is an appropriate overhead allocation base when
the expected annual savings in carrying costs? a. Several well-differentiated products are manufactured
a. P 37,500 b. P 15,000 c. P 30,000 d. P 7,500 b. Direct labor costs are low
c. Direct materials costs are large relative to direct labor costs incurred
81. The method used for the allocation of joint costs to products is important d. Only one product is manufactured
a. Only in the minds of accountants
b. Because profits will be affected when ending inventories change from the beginning 87. An accounting system that collects financial and operating data on the basis of the underlying
of the period nature and extent of the cost drivers is
c. Because its validity for justifying prices before regulatory authorities is unquestioned a. Activity based costing c. Delivery cycle time costing
d. Because profit margins differ when the relative sales value method is used b. Target costing d. Variable costing

82. Lego Plastic, Inc. has two joint products, Abba and Adda, and uses the net realizable value
method of allocating joint costs. The total joint costs for May amounted to P 300,000. During
the month, additional processing costs after split-off were P 160,000 for Abba and P 240,000
for Adda. Lego produced 16,000 units of Abba and 8,000 units of Adda during the month. The
sales value of Abba is P 500 per unit and for Adda is P 1,000 per unit. The portion of joint costs
allocated to Adda during the month is:
a. P 175,000 b. P 180,000 c. P 225,000 d. P 150,000
83. Products of relatively small total value that are produced simultaneously from a common
manufacturing process with products of greater value and quantity are
a. Scrap b. By-product c. Waste d. Abnormal spoilage
84. Joie Co. manufactures two joint products (Ralin and Stalin). Joie produced 12,000 units of Ralin
with an after split-off sales value of P 45,000. However, if Ralin were to be processed further,
additional cost of P 6,000 will be incurred but the sales value will increase to P 60,000. Joie
produced 6,000 units of Stalin with an after split-off sales value of P 30,000. However, if Stalin
were to be further processed, additional cost of P 3,000 will be incurred but the sale value will
go up to P 36,000. Under the relative sales value at split-off approach, the allocation to Ralin
from total product cost is P 27,000. What is the total product cost?
88. Multiple or departmental manufacturing overhead rates are considered preferable to a single
or plant-wide overhead when
a. Manufacturing is limited to a single product flowing through identical departments in
a fixed sequence
b. Various products are manufactured that do not pass through the same departments
or use the same manufacturing techniques
c. Individual cost drivers cannot accurately be determined with respect to cause and
effect relationships
d. The single or plant-wide rate is related to several identified cost drivers
89. Which of the following is true concerning standard costs?
a. Standard costs are estimates of costs attainable only under the most ideal conditions,
but rarely practicable
b. Standard costs are difficult to use with a process costing system
c. If properly used, standard can help motivate employees
d. Unfavorable variances, material in amount, should be investigated, but large
favorable variances need not be investigated
90. Which of the following is a purpose of standard costing?

ADVANCED FINANCIAL ACCOUNTING & REPORTING CEDRIC IAN CARLO E. PETALCORIN, CPA, MBA 9
UNIVERSITY OF MINDANAO COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

a. Determine breakeven production level Liabilities not liquidated:

b. Control costs Accounts payable 278,000
c. Eliminate the need for subjective decisions by management Notes payable 234,000
d. Allocate cost with more accuracy Salaries payable 40,000
Taxes payable 18,000
CORPORATE LIQUIDATION (4 items) Bank loan 188,000

DWITE Co. has been undergoing liquidation since January 1. As of March 31, its condensed During the six-month period ending December 31, 2016, the trustee sold the investment in equity
statement of realization and liquidation is presented below: security for P 26,000; sold all inventories on account for P 150,000, and paid off P 26,000 of the
bank loan and all liabilities with priorities (salaries and taxes) as well as P 7,500 for estate
Assets: administration expense
Assets to be realized 2,062,500
Assets acquired 1,125,000 92. How much is the net gain or (loss) on realization and liquidation as of December 31, 2016?
Assets realized 1,800,000 a. P 17,900 b. P (17,900) c. P 167,900 d. P (167,900)
Assets not realized 2,062,500
93. How much is the estate deficit end as of December 31, 2016?
Liabilities a. P (173,600) b. P (191,500) c. P (341,500) d. P (674,000)
Liabilities liquidated 2,812,500
Liabilities not liquidated 2,550,000 94. How much is the ending cash balance on December 31, 2016?
Liabilities to be liquidated 3,375,000 a. P 46,500 b. P 112,000 c. P 158,500 d. P 196,500
Liabilities assumed 2,437,500
During the six-month period ending June 30, 2017, the trustee realized P 210,000 for accounts
Revenues and Expenses receivable; sold land for P 88,000; sold equipment for P 40,000; then paid the balance of bank loan
Supplementary charges 4,687,500 and half of the notes payable; Administration fee of P 6,000 was paid.
Supplementary credits 4,200,000
95. How much is the net gain or (loss) on realization and liquidation as of June 30, 2017?
91. The net gain (loss) for the three-month period ending March 31 is a. P 44,000 b. P (44,000) c. P 106,000 d. P (106,000)
a. P 250,000 b. P (325,000) c. P 425,000 d. P 637,500
96. How much is the estate deficit end as of June 30, 2017?
The JDUD Corporation Company had a bad financial condition caused by deficiency of liquid asset. a. P (85,500) b. P (191,500) c. P (235,500) d. P (385,500)
On June 30, 2016, the following information was available:
Cash 112,000 97. How much is the ending cash balance as of June 30, 2017?
Assets not realized: a. P 99,500 b. P 105,500 c. P 143,500 d. P 249,500
Accounts receivable 80,000
Inventory 160,000 98. During corporate liquidation, which of the following types of creditors will always receive full
Investment in equity security 26,400 settlements of his claims?
Land 98,000 a. Unsecured creditors with priority c. Partially secured creditors
Building 60,000 b. Unsecured creditors with priority d. Fully secured creditors
Equipment 48,000

ADVANCED FINANCIAL ACCOUNTING & REPORTING CEDRIC IAN CARLO E. PETALCORIN, CPA, MBA 10
UNIVERSITY OF MINDANAO COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

INSURANCE CONTRACTS & SERVICE CONCESSION ARRANGEMENTS (2 items) a. Its accounting policies for insurance contracts and related assets, liabilities, income
and expenses
99. Under IFRS 4, Insurance Contracts, an insurer is not allowed to introduce the following b. The effect of changes in assumptions used to measure insurance assets and insurance
accounting practices, except: liabilities, showing separately the effect of each change that has a material effect on
a. Measuring insurance liabilities on an undiscounted basis the financial statements
b. Using non-uniform accounting policies for the insurance liabilities of subsidiaries c. The reconciliation of changes in insurance liabilities, reinsurance assets, and, if any,
c. Measuring contractual rights to future investment management fees at an amount related deferred acquisition costs
that exceeds their fair value as implied by a comparison with current fees charged by d. The comparative information that relates to annual periods beginning January 1,
other market participants for similar services 2005.
d. Re-measuring designated insurance liabilities consistently in each period to reflect
current market interest rates 104. According to IFRIC 12, Service Concession Arrangement, the infrastructure asset shall be
100. IFRS 4, Insurance Contracts, exempts an insurer temporarily from some requirements of recognized by the operator as
other IFRSs in selecting accounting policies for insurance contracts for a. Property, plant and equipment c. Financial asset
a. Liability adequacy test b. Intangible asset d. Either financial asset or intangible asset
b. Considering the impairment of its reinsurance assets
c. Reinsurance contracts that it holds 105. It is a type of service concession arrangement whereby the operator receives a right to
d. Reviewing an insurance liability from its Statement of Financial Position when it is charge for use of a public sector asset that it constructs or upgrades and then must operate
extinguished and maintain for a specified period of time
a. Property, plant and equipment c. Financial asset
101. Discretionary participation feature is a contractual right to receive additional benefits that b. Intangible asset d. Either financial asset or intangible asset
are contractually based on the following, except:
a. Separate and not related to guaranteed benefits 106. It is an arrangement whereby a government or other public sector body contracts with a
b. The profit or loss of the company, fund and other entity that issues the contract private operator to develop or upgrade, operate and maintain the grantor’s infrastructure
c. The performance of a specified pool of contracts or a specified type of contract assets, such as roads, bridges, tunnels, airport, etc.
d. Realized and/or unrealized investment returns on a specified pool of assets held by a. Service concession c. Government grant
the issuer b. Government assistance d. Loan

102. IFRS 4, Insurance Contracts, provides discretionary participation features in insurance
contracts recognized separately from the guaranteed elements, where the issuer of such
contract:
a. Shall classify that feature as either a liability or a separate component of equity
b. Shall classify that feature as an intermediate category that is neither liability nor
equity
c. Shall classify the entire discretionary participation feature as a liability
d. Shall classify the entire discretionary participation feature as a separate component
of equity
107. Under a financial asset model of service concession arrangement, the operator has an
unconditional right to receive cash if the grantor contractually guarantees to pay the operator
a. Specified or determinable amounts
b. The shortfall between amounts received from users of the public service and
specified or determinable amounts
c. Either specified/determinable amounts or the shortfall between amounts received
from users of public service and specified/determinable amounts
d. Neither specified/determinable amounts nor the shortfall between amounts received
from users of public service and specified/determinable amounts

103. According to IFRS 4, Insurance Contracts, an insurer shall disclose the following 108. A feature of service concession arrangement is the public service nature of the obligation
information that identifies and explains the amounts in its financial statements arising from undertaken by the operator. Which of the following is one of the other common features
insurance contracts, except: under IFRIC 12, Service Concession Arrangement?

ADVANCED FINANCIAL ACCOUNTING & REPORTING CEDRIC IAN CARLO E. PETALCORIN, CPA, MBA 11
UNIVERSITY OF MINDANAO COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

a. The party that grants the service concession arrangement is a public sector, like GOVERNMENT ACCOUNTING (2 items)
government body
b. The party that grants the service concession arrangement is a public sector or a 114. Under the Government Accounting Manual issued by the Commission on Audit, which of
private sector entity to which the responsibility for the service has been devolved the following transactions will require journal entry in the accounting book of a national
c. The grantor is responsible for at least some of the management of the infrastructure government agency or unit?
and related services a. Receipt of national budget allotment from Department of Budget and Management
d. The contract sets the initial prices to be levied by the grantor and regulates price b. Entering into a contract with a supplier for incurrence of obligation to acquire
revisions over the period of the service arrangement government supplies or equipment
c. Receipt of notice of cash allocation from Department of Budget and Management
UPDATES ON SPECIAL CONCERNS (5 items) d. Receipt of appropriation from Department of Budget and Management based on the
General Appropriation Act
109. Industry 4.0 or commonly referred to as the fourth industrial revolution is the current
trend of automation and data exchange in manufacturing technologies. Which of the 115. Which government office is responsible for the design, preparation and approval of
following are included in this current trend? accounting system of government agencies?
a. Mechanization, water power, steam power a. Bureau of Internal Revenue c. Commission on Audit
b. Mass production, assembly line, electricity b. Department of Budget and Management d. Department of Finance
c. Computer and automation
d. Cyber physical systems 116. Which government body prepares the annual financial statements of the national
government, local government, government agencies and government owned or controlled
110. Which of the following are challenges to the implementation of Industry 4.0? corporations?
a. Need to maintain the integrity of production processes a. Bureau of Treasury
b. Lack of adequate skill-sets to expedite the march towards fourth industrial b. Chief accountant of each government agency
revolution c. Commission on Audit
c. Insufficient qualification of employees d. Department of Budget and Management
d. All of the above
117. The agency of government which plays a pivotal role in the cash operations of the national
111. The following industries are affected by Industry 4.0, except? government
a. Machine safety c. Product lifecycles a. Bureau of Internal Revenue
b. Industry value-chain d. All of the above are affected b. Department of Budget and Management
c. Bureau of Treasury
112. What phase are we currently in terms of Industrialization? d. Commission on Audit
a. Second b. Third c. Fourth d. Fifth
118. Pursuant to the Philippine Constitution, no money shall be paid out of the Treasury except
113. A period in which one or more technologies is replaced by another technology in a short in pursuance of
amount of time a. An appropriation made by law c. An allotment
a. Technological Era c. Technological Paradigm Shift b. President’s directive d. Program
b. Technological Revolution d. Technological Change
119. The process of analyzing, classifying, summarizing and communicating all transactions
involving the receipt and disposition of government funds and property and interpreting the
results thereof is

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UNIVERSITY OF MINDANAO COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

a. Financial accounting c. Budgetary accounting is conditional upon the university raising matching funds within the next 12 months. The
b. Government accounting d. Obligation accounting university administrators estimate that they have a 50% chance of raising the additional
money. How should this donation be accounted for?
120. It is a systematic recording, classifying, summarizing governmental transactions in terms a. As a temporarily restricted support
of money and other resources consistent with accounting and budgetary law b. As unrestricted support
a. Local government c. National government c. As a refundable advance
b. Government budgeting d. Government accounting d. As a memorandum entry reported in the footnotes

121. The review and approval of the national budget by the Congress of the Philippines and 126. Environs, a community foundation incurred P 10,000 in management and general
the formulation of an appropriate bill expenses during 2017. In Environs’ statement of activities for the year ended December 31,
a. Authorization c. Preparation 2017, the P 10,000 should be reported as:
b. Execution d. Accountability a. A direct reduction of unrestricted net assets
b. Part of supporting services expenses
ACCOUNTING FOR NOT-FOR-PROFIT ORGANIZATIONS (2 items) c. Part of program services expenses
d. A contra-account to offset revenue and support
122. In June, Park Hospital purchased medicines from Jove Pharmaceuticals Co. at a cost of P
2,000. However, Jove notified Park that the invoice was being cancelled, and the medicines REVENUE RECOGNITION (10 items)
were being donated to Park. Park should record this donation of medicine as
a. A memorandum entry only These data pertain to installment sales of HASTUR’s store
b. Other operating revenue of P 2,000
c. A P 2,000 credit to operating expenses Down payment: 20%
d. A P 2,000 credit to non-operating expenses Installment Sales: P 545,000 in Year 1; P 785,000 in Year 2; P 968,000 in Year 3
Mark-up on cost: 35%
123. In 2017, Wells Hospital received an unrestricted bequest of common stock with a fair Collections after down payment: 40% in the year of sale; 35% in the year after, and 25% in the
market value of P 50,000 on the date of receipt of the stock. The testator had paid P 20,000 third year
for this stock in 2015. Wells should record this bequest as
a. Nonoperating revenue of P 50,000 127. The realized gross profit for Year 1 is
b. Nonoperating revenue of P 30,000 a. P 109,357 b. P 73,474 c. P 99,190 d. P 114,825
c. Nonoperating revenue of P 20,000
d. A memorandum entry only 128. The unrealized gross profit for installment sales made during Year 2, as at the end of
Year 2 is:
124. During the year, the board of trustees of Burr Private University designated P 100,000 a. P 97,689 b. P 131,880 c. P 141,112 d. P 114,063
from its current funds for college scholarships. Also in that year, the university received a
bequest of P 200,000 from an estate of a benefactor who specified that the bequest was to 129. The Installment Accounts Receivable account balance, as at the end of Year 3 is:
be used for hiring teachers to tutor handicapped students. None of the bequest has been a. P 652,722 b. P 621,640 c. P 602,991 d. P 685,359
spent. What amount should be accounted for as a restricted net assets?
a. Zero b. P 100,000 c. P 200,000 d. P 300,000 130. The total unrealized gross profit, as at the end of Year 3, is
a. P 211,047 b. P 161,166 c. P 198,574 d. P 217,574
125. A successful alumnus of a private university has recently donated P 1,000,000 to that
university for the purpose of funding a “center for the study of sports ethics.” This donation

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UNIVERSITY OF MINDANAO COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

On March 1, 2016, the GABRIEL Company sold machine for P 155,000. The machine costs P 135. What portion of the contract price is recognized as income in 2016?
100,000. The customer is allowed a trade-in allowance of P 50,000 for an old machine. A down a. P 700,000 b. P 250,000 c. P 191,200 d. P 526,800
payment of P 45,000 was made and the balance is to be paid in 12 monthly installments of P 5,000
each payable at the end of each month beginning March 31. 136. What is the total collection in 2016?
a. P 333,200 b. P 392,000 c. P 532,000 d. P 473,200
The old machine is estimated to have a resale value of P 70,000 after incurring a reconditioning
cost of P 7,500. The seller expects a 20% profit from the sale of used machine; commission is 5%. On January 1, 2020, DMC accepted a long-term construction contract to build a bridge with a total
contract price of P 20,000,000. For the three years ended December 31, 2020, 2021, and 2022,
131. What is the fair market value of the machine received? the following data were provided by DMC, Inc.
a. P 70,000 b. P 62,500 c. P 48,500 d. P 45,000 12/31/2020 12/31/2021 12/31/2022
Cumulative construction cost at year-end 3,000,000 7,000,000 12,000,000
132. What is the gross profit rate? Estimated cost to complete at year-end 12,000,000 15,000,000 4,000,000
a. 30% b. 30.33% c. 35.48% d. 40%
The outcome of the construction contract can be estimated reliably.
133. What is the correct adjusted entry to record the installment sales?
a. Cash 45,000 137. What is the realized gross profit (loss) to be recognized by DMC as of December 31, 2021?
Trade-in 50,000 a. P (3,000,000) b. P (2,000,000) c. P 1,000,000 d. P 5,000,000
Installment Contracts Receivable 60,000
Installment Sales 155,000 138. What is the realized gross profit (loss) to be recognized by DMC for the year ended
b. Cash 45,000 December 31, 2022?
Trade-in 45,000 a. P 1,000,000 b. P (3,000,000) c. P 5,000,000 d. P 2,000,000
Installment Contracts Receivable 60,000
Installment Sales 150,000 On January 1, 2016, MARK entered into a franchise agreement with MARIAN, Inc. to sell M&M’s
c. Cash 45,000 products. The agreement provides of an initial franchise fee of P 30,000,000, payable as follows:
Installment Contracts Receivable 110,000 P 18,000,000 cash to be paid upon signing of the contract, and the balance in five equal annual
Installment Sales 155,000 payments every December 31 starting 2016. MARK signs 12% interest bearing note for the
d. No Entry balance. The agreement further provides that the franchisor will assist the franchisee in locating
the business site, designing and supervising the construction of the building, and training of
JAVALE, Inc. works on a contract in March 2016 to construct a commercial building. During 2016, management and employees. The agreement also provides that the franchisee must pay a
JAVALE uses the cost to cost method. At December 31, 2016, the balance of certain accounts were: continuing franchise fees equal to 10% of its monthly gross sales.
Excess of Construction in Progress over billings – P 140,000 due from customer; and Progress
Billings – P 560,000 of which is 1/5 of the contract price. At December 31, 2016, the estimated On June 30, 2016, the franchisor completed the initial services required by the contract at a cost
future costs to complete the project total P 1,350,000. Of the amount billed 70% were paid in 2016 of P 8,000,000, of which 25% was indirect. The franchisee commenced business operations on July
subject to retention provision of 15%, payable with the final bill after the acceptance of entire 5, 2014. The gross sales reported by the franchisee to the franchisor are: July sales P 150,000;
completed project. A mobilization fee of 5% of the contract price (deductible from the final bill) is August sales P 180,000; September sales P 270,000; October sales P 200,000; November sales P
payable in 10 days after the contract signing. 580,000; and December sales P 720,000.

134. What is the cost incurred to date in 2016? 139. Compute for the net income earned during the year 2016, assuming the collectability of
a. P 1,800,000 b. P 1,350,000 c. P 450,000 d. P 700,000 the note is reasonably assured
a. P 14,530,000 b. P 15,970,000 c. P 23,650,000 d. P 24,210,000

ADVANCED FINANCIAL ACCOUNTING & REPORTING CEDRIC IAN CARLO E. PETALCORIN, CPA, MBA 14
UNIVERSITY OF MINDANAO COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

140. Compute for the net income earned during the year 2016, assuming the collectability of c. Such other costs that are specifically chargeable to the customer under the terms of
the note is not reasonably assured the contract
a. P 14,530,000 b. P 15,970,000 c. P 23,650,000 d. P 24,210,000 d. General administration costs for which reimbursement is not specified in the contract

On January 1, 2014 SUKARAP COMPANY sells a franchise to Mr. Budots for an initial franchise fee
of P 4,000,000. Upon signing the contract on the same day, Mr. Budots paid 50% of the said
amount and the balance shall be paid in 5 annual equal installments starting December 31, 2014.
Mr. Budots issued an interest-bearing note for the said balance with interest rate of 10%. (Assume
that the cost of initial franchise fee amounted to P 3,000,000)
141. How much is the franchise revenue if the franchiser has substantially performed all the
services required by the initial franchise fee, the down payment is non-refundable and the
collection of the note is reasonably assured?
a. P 400,000 b. P 2,000,000 c. P 4,000,000 d. P 4,400,000
146. The measurement of contract revenue is affected by a variety of uncertainties that
depend on the outcome of future events. Which statement is incorrect?
a. A contractor and a customer may agree on variations and claims that increase or
decrease contract revenue subsequently
b. The amount of revenue agreed in a fixed price contract may increase as a result of
cost escalation clause
c. The amount of revenue may increase as a result of penalties arising from delays
caused by the contractor in the completion of the contract
d. When a fixed price contract involves a fixed price per unit of output, contract revenue
increases as the number of units is increased

142. How much is the realized gross profit in the initial franchise if the down payment is non-
refundable, the collectability of the note is not reasonably assured and the franchiser has
performed all the services required?
a. P 600,000 P 2,000,000 c. P 4,000,000 d. P 4,400,000
143. Under the installment sales method
a. Revenue, costs, and gross profit are recognized proportionately to the cash that is
received from the sale of the product
b. Gross profit is deferred proportionately to cash uncollected from sale of the product,
but total revenue and costs are recognized at the point of sale
c. Gross profit is not recognized until the amount of cash received exceeds the cost of
the item sold
d. Revenues and costs are recognized proportionately to the cash received from the sale
of the product, but gross profit is deferred until all the cash is received
144. The installment method of recognizing profit for accounting purposes is acceptable if
a. Collections in the year of sale do not exceed 30% of the total sales price
b. An unrealized profit account is credited
c. Collection of the sales price is not reasonably assured
d. The method is consistently used for all sales of similar merchandise
147. Continuing franchise fees should be recorded by the franchisor
a. As revenue when earned and receivable from the franchisee
b. As revenue when received
c. In accordance with the accounting procedures specified in the franchise agreement
d. As revenue only after the balance of the initial franchise fee has been collected
148. Occasionally, a franchise agreement grants the franchisee the right to make future
bargain purchases of equipment or supplies. When recording the initial franchise fee, the
franchisor should
a. Increase revenue recognized from the initial franchise fee by the amount of the
expected future purchases
b. Record a portion of the initial franchise fee as unearned revenue which will increase
the selling price when the franchisee subsequently makes the bargain purchases
c. Defer recognition of any revenue from the initial franchise fee until the bargain
purchases are made
d. None of these

145. Contract costs of a construction contract comprise all of the following, except:
a. Costs that directly relate to the specific contract
b. Costs that are attributable to contract activity in general and can be allocated to the
contract

ADVANCED FINANCIAL ACCOUNTING & REPORTING CEDRIC IAN CARLO E. PETALCORIN, CPA, MBA 15