CPA Review School of the Philippines

Manila

FINAL PREBO ARD EXAMINATION Sunday, April 22, 2012

PRACTICAL, ACCOUNTING II 3:30pm to 6:30pm

SETA
MULTIPLE CHOICE: MARK FULLY with Pencil No. 2 the letter of your choice on the answer sheet
provided. Make the mark DARK but do not use too much pressure. ERASURES ARE STRICTLY NOT
ALLOWED.

/r) The following expenditures were made by G Corp. a society for protection of the environment:
Sa. Printing of annual report 36,000 J
B. Cost of an audit performed by CPA firm 9,000
C. Unsolicited merchandise sent to encourage contributions 75,000 ^

What amount should be classified as fund raising costs in the society’s activity statement?
a. 75,000 f 111,000
b. 0 d. 84,000

0 In February 2012, Mrs. Chen donated P 200,000 cash to her organization, with the stipulation
tnat the income generated from this gift is to be paid to Mrs. Chen during her lifetime. The
conditions of this donation are that, after Mrs. Chen dies, the principal can be used by the
organization for any purpose voted on by church elders. The church received interest of P16,000
on the P200.000 for the year ended Jan. 31, 2013, and the interest was remitted to Mrs. Chen. IN
the organization’s February 28, 2013 financial statements:

j&. The gift and its terms should be disclosed only in notes to the financial statements
b. P184,000 should be reported under support and revenue in the activity statement
c. P16,000 should be reported under support and revenue in the activity statement
d. P200.000 should be reported as deferred support in the balance sheet

3. UST hospital received an unrestricted bequest of P500.000 in 2012. This bequest should be
recorded as:

a. A direct credit of P500.000 to the fund balance

X Non operating revenue of P500.000
c. Other operating revenue of P500.000
d. Memo entry only

Q Agency X issued a bill for rent of office space to JA O holdings, P1,000,000. The agency is
Authorized as per special provision in the GAA to use receipts from rentals for their operations. The
entry on the agency books to record the foregoing transactions would be:

^ Cash Collecting Office 1,000,000

Rent Income 1,000,000

b. Accounts Receivable 1,000,000

Rent Income 1,000,000

c. Accounts Receivable 1,000,000

Due to Btr 1,000,000

d. Cash Collecting Office 1,000,000

Due to Btr 1,000,000

5. Agency Y issued a check to Non government Organization for fund assistance amounting to
P500,000. The entry to record this transaction in Agency Y would be:

a. Memo entry - RAOMO

jd. Due from NGO 500,000

Cash National Treasury 500,000

c. Other receivable 500,000

Cash National Treasury 500,000
 Page 2

6. Acme Company produced 500 units with a P50 unfavorable labor rate variance. The labor use
variance was P180 favorable. Actual labor cost was P17,870. The standard wage rate was P9.
Actual hours were „ . » t>h v

a. 1,520 / <6^ '•\i^ 0 ' 4 * iM lb v

£ Jb. 1-980 ! U,V v ^ : A t / ^
c. 2,000
d. 2,020

7. Barron Company has standard variable costs as follows: ^ ^ A' f : fc06v

Materials, 3 pounds at P4.00 per pound P12.00 "> a , y i.j . ^ -
Labor, 2 ty>urs at P10.00 per hour 20.00 < .•. o . ; n m ^
Variable overhead, P7.50 per labor hour 15.00 ^
P47.00
i
During September, Barron produced 5,000 units, using 9,640 labor hours at a total wage of
P94.670 and inPrring P78.600 in variable overhead. The variable overhead efficiency variance
is
a. P6.300 unfavorable
b. P3.600 unfavorable
c /i. P2.700 favorable
d. P3,300 favorable

8. CPAR Company has developed standard overhead costs based on a capacity of 180,000
machine hours as follows:

Standard costs per

unit: ft
:\U,w»X 3 * V u u
Variable portion 2 hours @ P3 = P 6 ^ : UMfl)* 3 r. 4*o.iirt / '

Fixed portion 2 hours @ P5 = JI0 , ,lUot)/£ ; v

g, : ' qob, 0 4T6 / ' •
™ J y i '
During September, 85,000 units were scheduled for production, but only 80,000 units were
actually produced. The following data relate to September:

Actual machine hours used were 165,000.

Actual overhead inPrred totaled P1,378,000 (P518.000 variable plus P860.000 fixed).

All inventories are carried at standard cost.

The variable, overheac^efficiency^variance for September was; The fixed overhead spending
variance for September was
variince was' ^ "
A
P15,000 U ; P40.000 F C. P38.000 U ; P40.000 F
B. P38.000 F ; P60.000 F D. P23.000 U ; P100,000 U

I) TOYOTA has provided the following information for transaction that occurred during August,
f t his division uses JIT costing system.

Raw materials were purchased at the cost of P679.000

Direct labor costs of P539.000 were incurred
- Actual Factory overhead incurred amounted to P1,575,000
- All units were completed and sold
c Assuming the balance of the MIP account end is 97,000 DR and Conversion cost P14.000 DR, the
applied conversion cost is:

a. 1,561,000 t . 2,128,000
b. 2,100,000 yd. 1,575,000
 \
V H
10. The cost of goods sold is: . V
/ 2,682,000 c. 2,876,000
V b. 2,240,000 d. 2,793,000

11. CHRIS manufactures A, B and C from a joint process. The following information is available:

A B c Total
Units produced 24,000 ? ? 48,000
SV at SO ? ? P100,000 P400.000
Joint Costs P96.000 ? ? P240.000
SV if processed P220.000 P180,000 P120,000 P520.000
•further
Additional costs P36.000 P28.000 P20.000 P84.000
if processed |V{,nrJ is v .m In . <
ttd
further

Assuming that the joint costs are allocated using the relative salft vali ir at snlit off approach, what
was the sales value at split off of product A and B, respectively?
a. 132,000 and 168,000 / 160,000 and 140,000
t ■ b. 196,000 and 168,000 d. 200,000 and 100,000

12. Brian manufactures a product that give rise to a by-product called LIM. The only costs
associated with LIM are selling costs of P5 for each unit sold. Brian accounts for LIM sales first by
deducting its separable costs from such sales, and then by deducting this net amount from the
COGS of the major product. This year, 5,000 units of LIM were sold at P20

If Brian changes its method of accounting for LIM sales by showing the net amount as additional
sales revenue, Brian’s gross profit would:

a. Increase byP15,000 c. Increase by P20.000

o b. Decrease by P15,000 not affected

13. IRAM Company produces three products with the following production and cost information:

Model A Model B Model C

Units produced 2,000 6,000 12,000
Direct labor hours (total) 4,000 2,000 4,000
Number of setups ifc,cvt 100 150 250
Number of shipments 200 225 275
, Engineering change orders 15 10 5

Overhead costs include setups P90.000; shipping costs P140.000; and engineering costs
P180,000. What would be the per unit overhead cost for Model A if direct labor hours were the
allocation base? -----------
■

a. P20.50
b. P41.00
/ . P82.00
d. Some other number

14. IRVIN Company produces two products in a single factory. The following production and cost
information has been determined:

Model 1 Model 2
Units produced 1,000 200
Material moves (total) 100 40
Testing time (total) 250 . 125 V'O**
Direct labor hours per unit 1 5 ,JC/<rir®

The controller has determined total overhead to be P480.000. P140,000 relates to material
moves; P150,000 relates to testing; the remainder is related to labor time.

If IRVIN usgafdjrect labor t^urs to allocate overhead to each model, what would overhead per unit
be for Model 2? ^
a rP l5 i0 3
D b. P400.00
c. P950.00
/ P 1 , 200.00
 Page 4

15. IRISH Company uses activity-based costing. Tl^e company produces two products: computers
and PDA's. The annual production and sales volume of computers is 8,000 units and of PDA’s is
6,000 units. There are three activity cost pools with the following expected activities and estimated
total costs:

Activity {Estimated Expected Expected

Cost Pool Cost Activity Activity
computers PDA's Total
Activity 1 ' P20.000 100 400 500
Activity 2 , P37.000 800 200 1,000
Activity 3 P91.200 800 3,000 3,800

Using ABC, the cost per unit of computers is approximately:

t a. p2.40 /■ P 6.60
b. P3.90 d. P10.59

Process
The following information is available for Hazel Company for April:

Started this month 80.000 units

Beginning W IP r|,iou -
(40% complete) 7,500 units
Normal spoilage (discrete) £s.on>
1,100 units
Abnormal spoilage 900 units
Ending W IP |.lub l.lol
(70% complete) 13.000 units
Transferred out 72,500 units

Beginning Work in Process Costs:

Material P10,400
Conversion 13,800
Current Costs:
Material P120,000
Conversion 350,000

All materials are added at the start of production and the inspection point is at the end of the
process.

What are equivalent units of production for material using FIFO and the equivalent units of
production for conversion costs using weighted average? *
/ 80,000 and 83,600
b. 79,100 and 82,700
c. 78,900 and 82,500
d. 87,500 and 81,600

16. Pedro Company uses process costing in accounting for its production departme nt, which uses
two raw materials. Material Alpha is placed at the beginning of the process. Inspection is at the
85% completion stage. Material Bravo is then added to the good units. Normal spoilage units
amountio 5 % jjr good output. The company records contain the following information for April: ~
Started'during the period 20,000 units
Material A ^ P26.800
Material B e*\4 ^,ir> P22.500
Direct labor cost |0 ( ^a0 P75.115
Factory overhead , . P93.950
Transferred to finished goods 1 14,000 Y t'l-
Work in Process (95% complete), April 30 4,000

D How much were Material cost per equivalent unit for A and B, respectively?
a. P1.40; P1.36 c. P1.34; P1.06
b. P1.40; P1.06 / P1.34; P1.25
 Page 5

The following information is available for Mathis Company for the current year:

Beginning Work in Process Costs of Beginning Work in Process:

(75% complete) 14,500 units Material P25.100
Started 75,000 units Conversion 50,000
Ending Work in Process Current Costs:
(60% complete) 16,000 units Material P 120,000
Abnormal spoilage 2,500 units Conversion 300,000
Normal spoilage 5,000 units c
(continuous) U'OOT)
Transferred out 66,000 units Ik. Mb
U / ffT O ^ t

All materials are added at the start of production.

What is the cost assigned to normal spoilage using weighted average?
I . Mb
a. P31,000
b. P15,500
c. P30.850
d. None of the responses are correct

18. IVONNE Company manufactures product K in. a two stage production cycle in Dept. A and B.
Materials are added at the ..beginning., of the-pr-e^gJn-Deptr-B^JVONNE used the weighted
average method. Conversion^costs.f^r'Dept. B werC50% complet^as to the 12.000 units in the,
beginning work in process and 75%-complete as tn ^ ^ PSjO Q ajnits in the ending work in process.
'247CT00 units were completed imd'transferred out of'D'^tTiB during February 2012. An analysis of
the costs relating to work in process and production activity in Dept. B for Feb 2012 is as follows:

COST
Transferred in Materials Conversion
W IP Feb 1 24,000 5,000 2.000

_jk
Costs added during 58,000 11,000 ,

-o
o
o
o
■fo

v)
February

The total cost per equivalent unit transferred out for F EB 2012 of product X rounded tcj^he nearest
centavo: M<wo

J6. 2.78 , d. 2.85 1] ,otro

U to W
19. The following are transactions of Thomas Company, which uses a perpetual inventory system:

a. Purchased raw material on account, P56.700.

b. Requisitioned raw material for production as follows: direct material-80
percent of purchases: indirect material-15 percent of purchases.
c. Direct labor wages of P33,100 are accrued as are indirect labor wages of
P12,500.
d. Overhead incurred and paid for is P66.900.
e. Overhead is applied to production based on 110 percent of direct labor cost.
f. Goods costing P97.600 were completed during the period.
g. Goods costing P51,320 were sold on account for P77.600.

What is the. entry to record the requisition of raw materials?

a. Work in Process 53,865

Raw Materials Inventory 53,865

J&. Work in Process Inventory 45,360

Manufacturing Overhead Control 8,505
Raw Material Inventory 53,865

c. Work in Process Inventory 45,360

Manufacturing Overhead Control 8,505
Raw Material Inventory 45,360
Manufacturing Overhead applied 8,505

d. Direct Materials 45,360

Manufacturing Overhead Control 8,505
Raw Material Inventory 53,865
 Page 6

20. The following information pertains to Sigma Company for September:

Direct Material Direct Labor Overhead

Job #323 P3.200 P4.500 ?
Job #325 ? I-Stft) 5,000 ?
Job #401 5,670 P5.550
' \
Sigma Company applies overhead for Job #323 at 140 percent of direct labor cost and at 150
percent of direct labor cost for Jobs #325 and #401. The total cost of Jobs #323 and #325
identical. t
Assume that Jobs #323 and #401 are incomplete at the end of September. What is the balance in
Work in Process. Inventory at that time?
a. P18.920
C b. P22.620
/ P28.920
d. P30.120

USH Company operates its factory on. a. two shift basis and pays a late shift.differential of
5 V 1RISH also pays a premium of. 50% for overtime vyoik. Since IRISH manufactures only for
sfock, the cost system provides for uniform direct'labor hourly charges for production done without
regard to shift worked or work done on an overtime basis. Overtime and late shift differentials are
included in IRISH's factory overhead application rate. The August 2012 payroll for production
workers is as follows:

Wages at base direct labor rate 650,000

Shift differentials 50,000
Overtime premiums 20,000

For the month of August, what amount of direct laBbr should IRISH charge to work in process?
C /a. 720,000 c. 650,000
b. 700,000 d. 670,000

(2^. Goodtimes Company acquired 75% of Easy Company's common stock for P510,000 cash. At
that date, Easy reports identifiable assets with a book value of Pl,040,000 and a fair value of
P I,280,000, and it has liabilities with a book value and fair value of P716,000. How much is
the goodwill or (gain on acquisition) arising on consolidation if nortcontrolling interest is
measured at fair value and that control premium of P30,000 is included in the purchase price
ft
A. P106,000 X P116,000 C. P(87,000) . D. P57,000

23. ABC Corp. issued 120,000 shares of P25 par common stock for all outstanding stock of XYZ in
a business combination consummated on July 1, 2012. ABC common stock was selling at P40
per share at the time of the consummation of the combination. X Y Z’a net assets is P3.8 million
at book value. Out of pocket costs of the combination were as follows:

Legal fees:
For the business combination P12,000
For Sec registration 14,500
Sec registration costs 18,200
Printing costs of stcok certificates 9,400
Finders fee 27,000
CPA audit fees for SE C registration 19,000

If the combination is treated as acquisition method, what is the total amount of the cost of
investment?
ft jt. 4,853,500 c. 4,800,000
b. 4,839,000 d. 4,872,500

Q . Assuming that ABC Corp is an SM E, what is the total amount of the cost of investment?
jk. 4,853,500 c. 4,800,000
b. 4,839,000 d. 4,872,500
25. On March 1, 2012, Steve Co. Paid P620.000 for all common stock of John Corp. In a
transaction properly accounted under purchase method. The recorded assets and liabilities
of John Corp. On May 1, 2012 are:

Cash P60.000
Inventory ' 180,000
Property, plant and equipment 320,000
(net of accumulated depreciation P220.000)
Goodwill 100,000
Liabilities _____________________ ____________________________(120.000)
Net Assets P540.000

On March 1, 2012, John’s inventory had a fair value of P150,000 and the property and
equipment (net) had a fair value of P380.000. What is the amount of goodwill resulting from
the business combination?
/ . 150,000 c. 50,000
b. 120,000 d. 20,000 . .

26. P Corp acquired 70% of the voting common stock of S Co. at the time when S Co.’s book
values and fair values were equal. Separate income of P and S Co. for 2012 are as follows:
P Corp S Co.
Sales 700.000 400.000
COGS 400,000 - ira, -<n s 200,000
O PEX 120,000 100,000
Separate Income 180,000 100,000
Intercompany sales from P to S for 2011 and 2012 are summarized as follows:
Sel ing Unsold at year end
Cost Price
Intercompany sales 250,000 390,000 40%
-2011
Intercompany sales 175,000 275,000 50%
-2012
The consolidated income statement will show CO G S of:
a. 350,000 c. 340,000 '
b. 419,000 jn. 319,000

27. On Jan. 1, 2010 P Corp. purchased 80% of the outstanding shares of S Corp. by paying
P320.000 with an allocated excess of 20,000 attributable entirely to undervalued equipment
with remaining life of 10 years. On Jan1, 2012, S Co had P150,000 of capital stock and
P300.000 of retained earnings. Also on the same date, P Corp. had P1,000,000 of capital
stock and P700.000 of retained earnings
During the year, P sold merchandise to S for P60.000 and in turn, purchased P40.000 from
S. Intercompany sales of merchandise were made at the following gross profit rates:
Sales made by P 25% based on cost
Sales made by S 20%
On Dec. 31, 2012, 30% of all intercompany sales remains in the ending inventory of the
purchasing affiliate.
The beginning inventory of P includes P2.500 worth of merchandise acquired from S on
which S reported a profit of P1,000.. While, the beginning inventory of S also includes
P3.000 of merchandise acquired from at 35% mark up. v

The net income from own operations and dividends for 2012 using the cost method were as
follows:
Nl DIVIDENDS .
P 100,000 60,000
S 30,000 10,000
The NCINIS for 2012 should be
5,320 c. 5,160
 Page 8

28. On December 1, 2012, the Dustine Company established an agency in Las Pinas, sending
a its merchandise samples costing P15,750 and a working fund of P9.000 to be maintained
" on the imprest basis. During the month of December, the agency transmitted to the home
office sales orders which were billed at P64.380 of which 20,400 was collected. A home
office disbursement chargeable to the sales agency is the acquisition of furniture and
fixtures for Las Pinas, P25.000 to be depreciated at 24% per annum. The agency paid
expenses of P3,815 and received replenishment thereof from 'the home office. On
December 31, 2012, the agency samples were valued at P10,075. It was estimated that
the gross profit on goods shipped to bill agency sales orders average 25% of cost.

How much is the net income of the agency for the month ended December 31, 2012?
A. P 2,886 c. P 3,386
b. P 12,876 d. P (2,614)

^ . The Hom’e Office in Makati shipped merchandise costing P80,000 to Manila branch and
paid for the freight charges of P600. The home office bills the branch at 125% of cost.
Manila branch was subsequently instructed to transfer one-half of the merchandise to
Quezon City branch wherein Quezon City branch paid for P200 freight. If the shipment was
made directly from Makati to Quezon City, the freight cost would have been P400. By how
^ much will Manila Branch charge the Home Office account?

A. 50,300 % 50,600 C. P51.300 D. P50.500

0 A home office ships inventory to its branch at 125% of cost. The required balance of the
deferred profit account is 78,750. During the year, the home office sent merchandise to the
branch costing P784.000. At the start of the year, the branch’s balance sheet shows
P315,000 of inventory on hand that was acquired from the home office.

By what amount is the CO GS overstated?

a. 259,000 p. 196,000
b. 78,750 d. 180,250

31. NICA’s lechon manok, franchiser, entered into franchise agreement with NICO, franchisee,
ON March 31, 2011. The total franchise fee is P500.000 of which P100.000 is payable upon
signing and the balance if four equal annual installments. The down paymennsn^fundable
in the event the franchiser fails to render services angjjione thus far had been rendered.
^ When NICO prepares its financial statements on March 3T, 2011,'tfie~unearned franchise
fee revenue to be reported is: ' ‘

a. 0 c. 400,000
b. 100,000 500,000

32. On March 31, 2011, C received from X P550.000 representing franchise fee. Franchise
services were immediately started by C and these were completed on Oct 31, 2011 at a
cost of P330.000. Further the franchisor is entitled to a 5% fee on gross sales payable
within the first ten days of the following month.

The following year, the franchisee yielded gross sales of P9,000,000. C ’s earned franchisee
fee for year 2012:
D a. 550,000 c. 1,000,000
b. 670,000 jA. 450,000

33. On July 1, 20012, XYZ Construction Corp. contracted to build an office building for ABC,
Inc. for a total contract price of P975.000.
2012 2013 2014
Contract cost incurred to date P 75,000 P 600,000 P 1,050,000
Estimated costs to complete the contract 675,000 400,000
Billings to ABC, Inc. < 150,000 550,000 275,000
id f • #y »
How much is the Construction in Progress account balance at December 31, 2013, using
the percentage of completion method?
a. P 900,000 Jz . P575.000 c. P825.000 d. P350.000
 Page 9

34. JU LIU S., uses the percentage of completion method. In May 2010, the company began
work on a project that has a contract price of P5.000.000. At the end of 2011 a summary of
the company's cost data follows:
n f- f s /•
2010
Cost incurred to date P1,125,000 P3,825,000
Estimated cost to complete 3.375.000 1.275.000
Total estimated cost P4.500.000 P5,100,00 v
\vs,cn (ijrO 'frO
In its income statement for the year 2011, the company would recognize a gross profit(loss) of
a. (P100,000) c. (P200.000)
b. P125,000 /(P2 2 5 .0 0 0 )

35. A, B and C decided to dissolve their partnership on May 31, 2012. On this date their capital

A P150,000 40%
B P180,000 30%
C 60,000 30%

The net income from Jan. 1 to May 31, 2012 was P132,000. Also on May 31, 2012, the partnership
cash and liabilities, respectively, were P120,000 and P270.000. For A to receive P165,600 in full
settlement of his interest in the partnership, how much must be realized from the sale of the
partnership’s non cash assets?

ft 579.000 c. 189,000
£ 633.000 d. 243,000

IRAM, CHLOE and MIMI are partners with capital balances on June 30, 2012, of P90.000;
P90.000 and P60.000 respectively. Profits are share equally. MIMI withdraws from the
partnership. The partners agree that MIMI is to take certain furniture and fixture at their
second hand value of P3.600, and a note for the balance of her interest. The furniture and
fixture are carried on the books as fully depreciated. What is the entry would be made to
with MIMI?

a. MIMI, capital 60,000

Notes payable 60,000

MIMI, capital 60,000

Furniture and fixture 3,600
Notes payable 52,800
IRAM, capital 1,800
CHLOE, capital 1,800
D
c. MIMI, capital 61,200
Furniture and fixture 3,600
Notes payable 19,200
*
d. MIMI, capital 61,200
IRAM, capital 1,200
CHLOE, capital 1,200
MIMI, capital 1,200
Notes payable 57,600
 Page 10

37. A and B wish to acquire the partnership interest of their partner C on July 10, 2012.
Partnership assets are to be used to acquire C's partnership interest. The balance sheet for
the ABC Partnership on that date shows the following
Cash P 74,000 Liabilities P 45,000
Receivables, net 36,000 A, capital 120,000
Equipment.net 135,000 B, capital ^ 60,000
Goodwill 30.000 C, capital 50.000
. P 275.000 P.375,QflQ

A, B and C share earnings in the ratio of 3:2:1, respectively. C wants to retire from the partnership.
If C is paid P54,000 and the bonus method is used, what is the capital account balance of A and B
after the retirement of C ? ,
a. A P117,600; B, P 58,400 flO <6 a fo
b. A P120,000; B, P 60,000 Jj- V Cl-0 4
c. A P117,600; B, P 60,000 77
d. A, P122.400; B, P 61,600

/38. BRIAN, PAUL and C R IS decided to form a partnership^ B R IA jjJs* to invest cash of P150.000
and a machinery originally costing PSOjOOO but has a m arkifvalue of P45.000: P A U Lfe to invest
cash amounting to P120,000. W hi|e'CRIS, )>vhose family js. engaged in computer"dealership, is to
inves^ thr^>£omput^rjunjt? with a regular price., of P30,000 eacb but which cost their family’s
business'P20,000 for each unit. Partners agree to share profits according to their capital
contribution. The capital balances of BRIAN, PAUL and C R IS respectively upon formation are:
a. 230,000 /120,000 / 60,000 c. 195,000 /120,000 / 30,000 J
p . 195,000 / 120,000 / 90,000 V d. 230,000 / 120,000 / 90,000

39. On August 1, 2012, PAUL Corp. sold a pice of land costing P1,350,000 at a gross margin of 66
2/3% above cost.JThgJayyer paid a 20% down payment and made four installments of P90.000
each during the^ame yeap Using the installment method of accounting, how much is the realized
gross profit in Z0T2?“
a. 180,000 c. 486,000
/b. 324,000 d. 216,000

40. MOBY Company which began operation on Jan. 1, 2012, appropriately uses the installment
sales method of accounting. The following data are available for 2012
Installment Accounts Receivable 12/31/12 600,000 t4 k
DGP, 12/31/12 (before recognition of RG P) 420,000
G PR on sale 40%

The cash collection during the year amounted to:

a. 300,000 c. 600,000
/ . 450,000 d. 432,000

41 The following information pertains to the sale of real estate by GARDEN G RO VE on Dec.
1 31,2012
Sales Price:
Down payment 900,000
Mortgage _______8.100.000
Total 9,000,000
Cost of Real estate 6.000.000
Profit from sale 3,000,000

The mortgage is payable in nine annual installments of P900.000 beginning Dec. 31, 2013
plus interest of 10%. The Dec. 31, 2013 installment was paid as schedule, together with
^ interest of 810,000. The company uses the cost recovery method to account for the sale.

The unrecovered cost of the real estate as of Dec 31, 2013 should be:
a. 3,390,000 c. 5,100,000
p . 4,200,000 d. 4,290,000
 Page 11

On January 1, 2011 entities A and B each acquired 30 per cent of the ordinary shares
thatxarry voting rights at a general meeting of shareholders of entity Z for P300,000.(9) Entities A
and B immediately agreed to share control over entity Z.
For the year ended Dec. 31, 2011 entity Z recognized a profit of P400.000. On Dec. 30 2011 entity
Z declared and paid a dividend of P150,000 for the year 20X1. At Dec. 31, 2011the fair value of
each venturers' investment in entity Z is P425.000. However, there is no\published price quotation
for entity Z.
On Dec. 31, 2011 entity A sells goods for P60.000 to entity Z. At Dec. 31, 2011 the goods
purchased from entity A were in entity Z's inventories (ie they .hadnot been soid by entity Z). Entity
A sells goods at a 50 per cent mark-up on cost. Entities A af^b^acfcounTfor jointly controlled
entities using the equity method.
The amount of investment to be recognized by entity A should be: (W
ft X 375,000 c. 425,000
b. 369,000 d. 300,000 ^

43. The books of the three Venturers contain the following account balances:
Account with P books O Books N Books
P 15,000 Dr -15.000 Dr
O 9,000 Cr . 9,000 Cr
N 6,000 Cr . 6,000 Cr
Final settlement of the JV will require payments as follows:
A. N pays 6,000 to P and O pays 9,000 to P '
B. P pays O 9,000 and P pays N 6,000
/C. O pays N 6,000 and N pays P 6,000
D. No payments should made.

(4^. Tsup-Tsup Corporation filed a bankruptcy petition on January 2009. On March 1, 2009, the
trustee provided the following information about the corporation’s financial affairs:

Assets Book value Realizable Value

Cash P40.000 P40.000
Accounts receivable-net 200,000 150,000 Y
Inventories 300,000 140,000
Plant assets-net 500.000 560,000 - Y l0
Total Assets P1,040,000
Liabilities
f t 't t
Liabilities for priority claims P160,000
Accounts payable-unsecured 300,000 J
Notes payable, secured by Uv
Accounts receivable 200,000 ' (IV
Mortgage payable, secured by all
Plant assets 440.000 * 300 - It 0
Total Liabilities P1.100,000
The amount expected to be available for unsecured claims without priority
6 a. P300.000 p . P140,000
b. 580,000 d. 310,000

45. On June 15, 2012, Alonzo Company purchased merchandise worth 100,000 Swiss Francs from
its Swiss supplier within 30 days under an open account arrangement. Alonzo issued a 30-day 6%
note payable in Swiss Francs. On July 15, 2012 Aubrey paid the note in full. The following
information on spot rates (P/SF) are provided:
Buying Selling looto^
June 15, 2012 P 24.03 P 24.15
July 15, 2012 24.10 24.22
Compute (1) Aubrey’s foreign exchange gain (loss) for the transaction and (2) the amount paid to
the Swiss supplier on July 15, 2012
a. (1) (P 5,040) (2) P 2,415,015
/ . (1) (P 7,000) (2) P 2,434,110
c. (1) P 12,075 (2) P 2,422,050
d. (1) (P 19,110) (2) P 2.427.075
 rage

46. On Nov. 2, 2012, NICO entered into firm commitment with Japane to acquire an
aquipment, delivery and passage of title on March 31, 2013 at a price of ^375 vep.JDnn the ^ame
date, to hedge against unfavorablechangts in exchange rate of the yen. NlCO entered into a ‘160
day forward contract with BPI f^r4^375 yen^The relevant exchange rate were as follows:
' ' ' 1. ■
11/2/12 12/31/12 3/31/13
Spot rate 37 38 35
Forward rate 40 33 35

How much is the amount debited to the equipment account on the date of:
a. 200,000 ; 11/2/12 c. 185,000; 11/2/12
b. 200,000; 2/31/13 /T 175,000 ; 3/31/13

47. On Dec. 31, 2012 a foreign subsidiary in HK submitted the following balance sheet stated in
foreign Currency:
Total Assets HK$ 140,000W -l 4 I . I W . M
Total liabilities 28,000 x .K t ; a U ,(Tini
Common stock 70,000 x - m .m
Retained Earnings 42,000 'M oioitv)
The exchange rate are:
Current rate P8.75
Historical rate 8.10
Weighted average rate 8.50
Assuming that the retained earnings of the subsidiary in Dec 31, 2012 translated to peso is
P270.000. What amount of cumulative translation adjustment is to be reported in the consolidated
balance sheet on Dec. 31, 2012?
h ^a. 143,000 c. 136,000
b. 134,000 d. 128,000

^ . Pedro of Alabang paid P480.000 for a 40% interest in G U ER ER O Company of Taiwan on

January 1, 2011, when G U ER ERO 's net asset totaled 750,000 NT Dollar and the exchange
rate for NT Dollar was P1.60. A summary of changes in G U ER ER O 's net assets during
2011 were as follows:
NT Dollar Exchange Rates
Net assets, January 1 750,000 ’ 1.60
Net income for 2011 150,000 1.55
Dividends paid for 2011 50,000 1.54
Pedro anticipated a strengthening of the Philippine peso against the NT Dollar during the last half
of 2011, and it borrowed 300,000 NT Dollar from a Taiwanese bank for one year at 10% interest on
July 1, 2011 to hedge its net investment in G U ER ER O Company. The loan was made when the
exchange rate for NT Dollar was P1.55. The loan was denominated in NT dollar and the current
exchange rate at December 31, 2011 was P1.50. The other comprehensive income - translation
adjustment in 2011 is:
G A. P47.200 p . P32.200 C. P17.200 D. P0

^ On Nov. 1, 2012, Cars took delivery from US firm of inventory costing US100.000.
Payments is due on January 30, 2013. Concurrently, Cars paid P900 cash to acquire a 90
day call option for US100,000.

Nov. 1, 2012 Dec. 31, 2012 Jan. 30, 2013

Spot rate 1.2 1.22 1.23
Strike price 1.2 ? ?
FV of call option ? 2,200 ?

What is the net FO R EX gain (loss) to be recognized by Cars on Dec. 31, 20! 2 should be:
a. 700 net loss c. 1,300 net loss
ft
j6 . 1,300 net gain d. 2,000 net gain
 rag e 10

pp. M Company sold merchandise for 111,200 rupees to a customer in India on November 02,
2011. Collection in India rupees was due on January 31, 2012. Dec. 31, 2011, to hqdge this
foreign currency exposure, M Company entered into a futures contract to sell 111,200
rupees to a bank for delivery on January 31, 2012. Exchange rates for rupees on different
dates are as follows:

Nov. 2 Dec. 31 Jan. 31

Strike price P81.8 P81.8 P81.8
Bid spot rate 81.9 80.7 80.1
Offer spot rate 81.7 80.5 80.3
30-day futures 82.3 80.4 83.9
60-day futures 81.8 80.3 82.6
90-day futures 80.6 81.6 83.4
120-day futures 80.1 81.4 82.8

What was the net impact in M Company’s income in 2011 as a result of this hedging activity?

A P22.240 gain b. P111,200 loss c. P33,360 gain d. P133,440 loss

EN D