iCARE Final Preboard Examination

Advanced Financial Accounting & Reporting

Use the following information for questions 1 and 2

Penny Company owns an 80% controlling interest in the Money Company. Money
regularly sells merchandise to Penny, which then sold to outside parties. The gross
profit on all such sales is 40%. On January 1, 2024, Penny sold land and a building to
Money. The value of the parcel is 20% to land, and 80% to structures. The pertinent
data are the following:

Penny Money
Internally generated net income, 2024 P 1,560,000 P 750,000
Internally generated net income, 2025 10,320,000 705,000
Intercompany merchandise sales, 2024 300,000
Intercompany merchandise sales, 2025 360,000
Intercompany inventory, December 31, 2024 45,000
Intercompany inventory, December 31, 2025 60,000
Cost of real estate sold on January 1, 2024 1,800,000
Sales price of real estate on January 1, 2024 2,400,000
Depreciable life of building 20 years

1. For 2024, what is the consolidated comprehensive income attributable to

controlling interest?

A. P 1,569,600
B. P 1,575,000
C. P 1,875,000
D. P 1,597,500

2. Using the data in number 2, for 2025, what is consolidated comprehensive

income attributable to controlling interest?

A. P 1,603,200
B. P 1,629,000
C. P 1,360,000
D. P 1,630,200

Use the following information for question 3

Selected information from the separate and consolidated income statements of People
Corporation and its subsidiary, Society Company for the year ended December 31,
2025 are as follows:

People Corp. Society Co. Consolidated

Sales P 600,000 P 420,000 P 924,000
Cost of Goods Sold 450,000 330,000 693,000
Gross Profit P 150,000 P 90,000 P 231,000

During 2025, People Corporation sold goods to Society Company at the same mark-up
on cost that People uses for all sales. At December 31, 2025, Society had not paid all of
these goods and still held 37.5% of them in inventory.

3. What is the original cost of goods in Society’s inventory acquired from People
Corp.?

A. P 36,000
B. P 27,000
C. P 9,000
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 D. P 18,000

Use the following information for question 4

Selected data for two subsidiaries of Rock Corp. taken from December 31, 2025 pre-
closing trial balances are as follows:

S1 Co. S2 Co.
Debit Credit

Shipments to S1 - 450,000

Shipments to S2 600,000 -
Intercompany inventory profit on total
shipments - 150,000
Additional Data relating to the December 31,2025
inventory are as follows

Inventory acquired from outside parties 525,000 750,000

Inventory acquired from S2 180,000

4. At December 31,2025 the inventory reported on the combined statement of

financial position of the two subsidiaries should be:

A. P 1,275,000
B. P 1.305,000
C. P 1,410,000
D. P 1,455,000

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Use the following information for question 6
On July 1, 2025, Baliwag Company purchased 80% of the outstanding shares of Bicol
Company at a cost of P4,000,000. On that date, Bicol had P2,500,000 of capital stock
and P3,500,000 of retained earnings. For 2025, Baliwag had income of P1,400,000
from its separate operations and paid dividends of P750,000. For 2025, Bicol reported
income of P325,000 and paid dividends of P150,000. All the assets and liabilities of
Bicol have book values equal to their respective fair market values. Assume income
was earned evenly throughout the year except for the intercompany transaction on
October 1. On October 1, 2025, Baliwag purchased a machinery from Bicol for
P500,000. The book value of the machinery on that date was P600,000. The loss of
P100,000 is reflected in the income of Bicol indicated above. The machinery is expected
to have a useful life of 5 years from the date of sale.

5. In the December 31, 2025 consolidated balance sheet, how much is the
consolidated net income attributable to the parent company?

A. 1,606,000
B. 2,326,000
C. 2,366,000
D. 2,406,000

Partner’s Hernie and Bhert engaged into a business together and shares profits and
losses 5:6. Total assets after formation is P1,500,000. Bhert’s capital before formation is
P450,000. It is agreed by both that all of their liabilities will be assumed by the
partnership and only the following are not reflected as fair value in Bhert’s books:
Bhert’s equipment should be valued to a quarter of its historical cost. Equipment’s
carrying amount is P250,000 and its accumulated depreciation is P50,000. Bhert’s
accounts payable is also understated by P18,500. After adjustments, Hernie’s capital is
twice as much as Bhert’s capital. The liabilities that was carried forward to the
partnership books for Bhert is P375,000. Hernie’s contribution is cash and a building.

6. How much is the total assets of Hernie after formation?

A. 768,500
B. 513,000
C. 868,500
D. 631,500

Net assets for Breitling, Suunto, IWC before formation are P135,000, P165,000,
P251,000 respectively. The partners agreed that certain assets and liabilities had to be
adjusted. Breitling’s note payable bearing an interest of 12% should be included in the
partnership books, the note is P15,000 and other assets are undervalued by P24,000.
The interest is personally paid by Breitling. Suunto’s prepaid expenses should be
P5,000 less than what it is stated in his financial statements. IWC’s liabilities were
understated by P14,500.

7. How much is the capital of Breitling after formation?

A. 142,200
B. 174,000
C. 144,000
D. 127,800

Baume and Mercier’s total assets before partnership formation is P800,000 and
Mercier’s assets is P450,000. Total liabilities before partnership formation is P400,000
and Baume’s liabilities is P175,000. They decided to become partners on January 1,
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2025. They agreed of the following adjustments on that date: some of Baume’s assets
are understated by P15,000 and there is a note payable that he wants to settle outside
of the partnership agreement which is still included in his books amounting to P13,000.
On the other hand, Mercier’s accounts receivable has an overvalued allowance for bad
debts by P12,000. During the year Baume withdrew P17,000 on March 21 and made an
investment of P35,000 on August 8, while Mercier made an investment of P55,000 on
April 8 and made another investment of P12,500 on November 14. For the year, the
partnership had a credit balance in their income summary account of P450,000. The tax
rate during the year is 32%. They also agreed that their net income or loss should be
distributed as follows: 8% interest in the beginning capital and the remainder will be
shared in the ratio 2:3 for Mercier and Baume respectively. Their net income or net loss
incurred evenly during the year.

8. How much is the ending capital of Mercier on December 31, 2025?

A. 489,380
B. 463,460
C. 486,120
D. 504,760

The partners decided to liquidate due to irreconcilable differences. The partners’ interest
before liquidation are as follows: P9,000, P8,500, P13,600 for A, B, and C respectively.
The following loan balances are also stated in their statement of financial position: loan
from A in the amount of P1,600, receivable from B in the amount of P 2,500, and loan to
C in the amount of P1,350. P32,800 of the non-cash assets are sold. Partner A
absorbed P1,050 of the liquidation expenses upon liquidation. Beginning cash is P8,500
and owing to outside creditors is P43,150. Cash withheld for anticipated liquidation
expenses are P10,800. Partner C received P3,300 on the 1 st installment of liquidation.

9. How much is the gain or loss on realization of the non-cash assets?

A. (17,200)
B. 17,200
C. (19,450)
D. 19,450

The capital balances of partners X and Y before admission of Z are P50,000 and
P55,000 respectively. Z invested a certain amount for 25% interest in the partnership.
As a result of his admission he received a bonus of P3,750.

10. How much did Z invested for his 25% interest in the partnership?

A. 40,000
B. 30,000
C. 35,000
D. 25,000

On January 1, 2030, KKK consigned 300 units of gaming keyboards to SSS Each
keyboard costs P400 and is sold at 50% above cost. After selling 200 keyboards, the
remaining 200 units were repaired for some defects for P4,000. Because of this, SSS
increased the selling price by P60. At the end of the month, SSS remitted P129,960
after deducting 15% commission, and reimbursable expenses of P1700 delivery
expense and the P4,000 repair of the 100 units.
11. How many consigned units were sold?
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 a. 200
b. 300
c. 260
d. 140

12. In accounting for consignment sales, sales revenue and the related cost of goods
sold should be recognized by the
a. Consignor when the goods are shipped to the consignee
b. Consignor when notification is received that the consignee has sold the
goods
c. Consignee when cash is received from the customer
d. Consignor when the goods are shipped to the third party

13. Revenue is recognized for sold consignment goods when:

a. The goods are sold by the consignee to the final customers
b. The consignee receives the goods
c. When the consignment contract has been signed by both parties
d. When the consignment contract has been agreed upon

On December 1, 2030, JJJ Co. sent 10 units of plasma television sets on consignment
which cost P200,000 to CCC Co, JJJ’s dealer in Davao. JJJ paid freight and insurance
of P10,000 for the consigned goods. CCC Co. is entitled to reimbursement of expenses
related to the consigned goods and 5% commission on sales. By the end of 2030, 4
units were sold, 1 was returned and 5 remained with CCC Co. The returned unit was
shipped back to JJJ for P1,000 which CCC Co. paid.
14. How much cost of goods sold should JJJ recognize for 2030.

a. 100,000
b. 85,000
c. 86,000
d. 105,000

15. The following is the priority sequence in which liquidation proceeds will be
distributed for a partnership:
a. Partnership drawings, partnership liabilities, partnership loans, partnership
capital balances
b. Partnership liabilities, partnership loans, partnership capital balances
c. Partnership liabilities, partnership loans, partnership drawings, partnership
capital balances
d. Partnership liabilities, partnership capital balances, partnership loans.

16. Which of the following describes a partnership lump-sum liquidation?

a. Keeping the partnership assets and liabilities separate from the partners’
personal assets and liabilities
b. The sale of all noncash assets and payments of liabilities before a single
distribution to partners
c. A series of interim distributions to partners while the sale of noncash
assets and the payment of liabilities is occurring
d. The combining of partner’s capital account with loans to/from the
partnership

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 17. Which of the following statements is not true in relation to joint control?
a. Each party must have an equal interest for joint control to exist
b. Joint control exists only where there is contractually agreed sharing of
control
c. Entities over which a party has joint control are accounted for in
accordance with PFRS 11 Joint Arrangements
d. Joint control requires the unanimous consent of the parties sharing control

18. It is a separate identifiable financial structure, including separate legal entities or

entities recognized by statute, regardless of whether those entities have legal
personality.
a. Separate vehicle
b. Party to a joint arrangement
c. Joint operator
d. Joint venture

On January 1, 2029 entities CCC and DDD each acquired 30 percent of the ordinary
shares that carry voting rights at a general meeting of shareholders of entity ZZZ for
P3,000,000. Entities CCC and DDD immediately agreed to share control over entity
ZZZ. For the year ended December 31, 2029, entity ZZZ recognized a profit of
P5,000,000. On December 30, 2029 entity ZZZ declared and paid a dividend of
P1,500,000 for the year 2029. At December 31, 2029, the fair value of each venturer’s
investments in entity ZZZ is P5,450,000. However, there is no published price quotation
for entity ZZZ. In 2029, entity CCC purchased goods for P1,000,000 from entity ZZZ. At
December 31, 2029, P800,000 of the goods purchased were in entity CCC’s
inventories. Entity ZZZ sells goods at a 50 per cent mark-up on cost.

19. Under IFRS 11, how much is the share of CCC in unrealized gross profit ?
a. P160,000
b. P400,000
c. P120,000
d. P80,000

20. Under IFRS 11, what is the income of entity CCC from the joint venture?
a. P1,260,000
b. P1,420,000
c. P1,500,000
d. P1,580,000
QQQ and YYY established joint arrangement OPO (OPO) using a separate vehicle, but
the legal form of the separate vehicle does not confer separation between the parties
and the separate vehicle itself. That is, QQQ and YYY have rights to the assets and
obligations for the liabilities of OPO. Neither the contractual terms nor the other facts
and circumstances indicate otherwise. Accordingly, QQQ and YYY account for their
rights to assets and their obligations for liabilities relating to OPO in accordance with
IFRS 11.

QQQ and YYY each own 50% of the outstanding shares of OPO. However, the
contractual terms of the joint arrangement state that QQQ has the rights to all of Ship
No. 1 and the obligation to pay all the third-party debt in OPO. QQQ and YYY have
rights to all other assets in OPO, and obligations for all other liabilities in OPO in
proportion to their equity interests (i.e. 50%). OPO’s balance sheet is as follows:
Assets Liabilities and Capital
Cash P 80,000,000 Debt P 350,000,000
Ship No. 1 310,000,000 Employee Benefit Plan Obligation 160,000,000
Ship No. 2 330,000,000 Equity 210,000,000
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Total P720,000,000 Total P720,000,000

21. Under IFRS 11, how much will QQQ record its share in assets of OPO?
a. P360M
b. P720M
c. P555M
d. P515M

22. Under IFRS 11, how much will QQQ show in its own balance sheet, to account
for its rights and obligations in OPO?
a. P85M
b. P95M
c. P100M
d. P105M

23. DDD Corporation is a 90% owned subsidiary of KKK Corporation acquired

several years ago at book value equal to fair value. For the years 2031 and 2032,
KKK and DDD report the following:
2031 2032
KKK’s separate income……… ….P300,000 P400,000
DDD’s net income………………….. 80,000 60,000

The only intercompany transaction between KKK and DDD during 2031 and 2032
was the January 1, 2031 sale of land. The land had a book value of P20,000 and was
sold intercompany for P30,000, its appraised value at the time of sale. If the land was
sold by KKK to DDD (downstream sales) and that DDD still owns the land at
December 31, 2032, compute the Profit Attributable to Equity Holders of Parent for
2031 and 2032:

2031 2032
a. P363,000 P454,000
b. P362,000 P454,000
c. P372,000 P460,000
d. P362,000 P460,000

24. MMM Inc., a calendar-year corporation, acquires 70% of WWW Company on

September 1, 2031 and an additional 10% on April 1, 2032. Total annual
amortization of P6,000 relates to the first acquisition. WWW reports the following
figures for 2032:
Revenues………………………………….. P500,000
Expenses…………………………………… 400,000
Retained earnings, 1/1/2032……… 300,000
Dividends paid…………………………… 50,000
Common stock………………………….. 200,000

Without regard for this investment, MMM earns P300,000 in net income during 2032.
All net income is earned evenly throughout the year. What is the controlling interest in
the consolidated net income for 2032?

a. 371,500 b. 372,850 c. 373,300 d. 394,000

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25. Partners JJ, SS and XX share profits and losses in the ratio of 5:3:2. At the end
of a very unprofitable year, they decided to liquidate the firm. The partner's
capital account balances at this time are as follows:
JJ P165,000
SS 186,750
XX 112,500

The liabilities accumulate to P225,000, including a loan of P75,000 from JJ. The
cash balance is P45,000. All the partners are personally solvent. The partners plan
to sell the assets in installment.

If SS received P27,000 from the first distribution of cash, how much did XX
receive at that time?
A. P15,000 C. P9,000
B. P6,000 D. P16,500

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Problem 26: The following data were available in the statement of affairs of Bagsak
Corporation:

Shareholders' equity 198,000

Loss on realization of assets 247,500
Estimated administrative costs that have not
been entered in the accounting records 24,750
Unsecured liabilities with priority 55,000
Unsecured liabilities without priority 495,000

What is the expected recovery percentage of unsecured non-priority creditors?

a. 80% c. 60%
b. 85% d. 75%

Problem 27: How much is the total free assets?

a. P420,750 c. P475,750
b. P500,500 d. P748,000

Problem 28: In a statement of affairs, assets pledged for partially secured creditors are:
a. Included with assets pledged for fully secured creditors
b. Offset against partially secured liabilities
c. Included with free assets
d. Disregarded

Problem 28: The estimated gain or losses upon liquidation in the statement of affairs is
equal to:
a. Book value of assets less book value of liabilities
b. Estimated realizable value of assets less book value of liabilities
c. Book value of assets less estimated realizable value of assets
d. Estimated realizable value of assets less the amount assigned to secured creditors

Problem 29: COVID Company is bankrupt and has undergone corporate liquidation.
Presented below is its statement of financial position before the start of liquidation:

Cash 300,000 Accounts Payable 100,000

Machinery 500,000 Salaries Payable 200,000
Building 1,200,000 Income tax Payable 300,000
Loan Payable
400,000
Mortgage payable 500,000
Contributed capital 800,000
Deficit (300,000)

• Liquidation expenses amounting to P600,000 were paid.

• The loan payable is secured by the machinery with fair value of P300,000.
• The mortgage payable is secured by the fair value of the building.
• At the end of liquidation, the holder of loan payable received P340,000.

What is the amount received by the holder of accounts payable at the end of
liquidation?
a. 85,000
b. 15,000
c. 40,000
d. 60,000

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Problem 30: Paul Constructions has entered into a contract beginning January 1, 2020,
to build a pool. It has been estimated that the pool will cost P300,000, and will take
three years to construct. The pool will be billed to the purchasing at P450,000. The
following data pertain to the construction period.

2020 2021 2022

Cost to date 135,000 210,000 300,000
Estimated cost to 165,000 90,000 0
complete
Progress billing to date 135,000 275,000 450,000
Cash collected to date 120,000 250,000 450,000

During 2020, Costs incurred include P15,000 standard materials stored at the site to be
used in 2022 to complete the project. Using the percentage of completion method, The
CIP net of Progress billing is:
a. 27,500 current liability c. 17,500 current asset
b. 32,500 current asset d. 102,500 current liability

Problem 31: Boy Corp. entered into a construction agreement in 2020 that called for a
contract price of 48M. At the beginning of 2021, a change order increased the initial
contract price by P2,400,000. The company uses the percentage of completion method
for completing the project.

2020 2021
Estimated cost to 24,600,000 10,800,00
complete
Cost incurred current 24,600,000 43,200,000
year

What is the gross profit (loss) should Boy Corp recognize in 2021?
a. (3,600,000) c. (1,200,000)
b. (2,400,000) d. (4,800,000)

Problem 32: DMCI Corp. entered into a contract to construct 50 condominium units for a
price of P42,000,000. Information below was provided by the corporation:
2028 2029 2030
Costs incurred 9450000 17915000 11635000
Estimated cost to 25550000 14735000 -
complete
Units finished 15 20 15

Using the output measures, how much is the RGP in 2029?

a. (1,990,000)
b. (100,000)
c. (2,000,000)
d. (70,000)

Problem 33: It is an entity’s right to consideration in exchange for the goods or services
that the entity has transferred to a customer when the right is unconditional.
a. Contract asset c. Contract liability
b. Receivable d. Current asset

Problem 34: When it is probable that total contract costs will exceed total contract
revenue, how shall the long-term contractor account for the difference?
a. The expected loss shall be recognized as an expense immediately.
b. The expected profit shall be recognized as a profit immediately.
c. The expected loss shall be recognized as an expense taking into account the
percentage of completion as of the end of the period.

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d. The expected loss shall be recognized as a profit taking into account the percentage
of completion as of the end of the period.

Problem 35: The home office transfers inventory to its branch at 20% of billed price.
During the year, inventory costing the home office P320,000 was transferred to the
branch. At year end, the home office adjusted its Deferred Profit account by P82,800.
The branch year end balance sheet shows P19,200 of inventory acquired from the
home office.
What is the branch beginning inventory at its actual cost.
a. 88,000 c. 33,200
b. 26,560 d. 16,000

Problem 36: XX has two branches to which merchandise is transferred at cost plus 20%
, plus freight charges. On November 30, 2020, XX shipped merchandise that cost
P297,000 to its Davao Branch, and the P10,800 shipping charges were paid by XX. On
December 15, 2020, the Cebu branch encountered an inventory shortage, and the
Davao branch shipped the merchandise to Cebu branch at a freight cost of P8,640 paid
by Davao branch. Shipping charges from the Home office to Cebu branch would have
been P9,450. XX will record the P297,000 shipment to Davao branch, together with the
freight charge of P10,800 with an entry of:
a. Debit freight in P10,800 c. Credit shipment from home office
P297,000
b. Debit Unrealized profit in branch inventory P59,400 d. Debit Inventory in Davao
branch of P307,800

Problem 37: Makati Garment Company operates a branch in Bacolod City. At the end of
the year, the branch account in the books of the home office at Makati shows a balance
of P600,000. The following information is ascertained:

• The branch made a profit of P40,400 for the month of December but the home
office erroneously recorded it as P44,720.
• The branch has not received the cash in the amount of P100,000 sent by home
office on December 31. This was charged to General Expense account by the
home office.
• The home office has billed the branch the amount of P150,000 for merchandise,
which was in transit on December 31.
• Supplied of P18,000 was retuned by the branch to the home office but the home
office has not yet reflected in its records the receipt of the supplies.
• A home office accounts receivable for P42,000 was collected by the branch. Said
collection was not reported to the home office by the branch.

What is the unadjusted balance of the Home Office account of Bacolod branch:
A. 427,680 B. 569,680 C. 385,680 D. 469,680

Problem 38: If the home office receives debit memo from the branch, the home office
shall record it in its separate statement of financial position by
a. Increasing the investment in branch account
b. Decreasing the investment in branch account
c. Debiting the investment in branch account
d. Disclosure

Problem 39: If the branch receives credit memo from the home office, the branch shall
record it in its separate statement of financial position by
a. Increasing the home office account
b. Crediting the home office account
c. Debiting the home office account
d. Disclosure

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Problem 40: The following information is available for Talmidge Company for the current
year:

Beginning Work in Process Costs of Beginning Work in Process:

(75% 14,500 units Material P25,100
complete)
Started 75,000 units Conversion 50,000
Ending Work in Process Current Costs:
(60% 16,000 units Material P120,000
complete)
Abnormal 2,500 units Conversion 300,000
spoilage
Normal spoilage 5,000 units
(continuous)
Transferred out 66,000 units

All materials are added at the start of production. (Use five decimal places for unit cost)

Problem 41: What is the cost assigned to normal spoilage using weighted average?
a. P31,000
b. P15,500
c. P30,850
d. None of the choices

Problem 42: What is the cost of units transferred out using FIFO?
a. P415,241
b. P409,107
c. P441,742
d. P409,388

Problem 43: What is the cost of work in process ending inventory using weighted
average?
a. P70,496
b. P70,270
c. P66,373
d. P85,993

Problem 44: What is the abnormal lost units using FIFO?

a. P14,384
b. P15,442
c. P15,496
d. P13,437

Problem 45: Material is added at the beginning of a process in a process costing

system. The beginning Work in Process Inventory for the process was 30 percent
complete as to conversion costs. Using the FIFO method of costing, the number of
equivalent units of material for the process during this period is equal to the
a. beginning inventory this period for the process
b. units started and completed this period plus the units in ending Work in Process
Inventory
c. units started this period in the process plus the beginning Work in Process Inventory.
d. units started and completed this period in the process.

Problem 46: Jacob decides to contribute P2,000,000 to his alma mater, De La Salle
University agrees to pay Jacob fixed amount every month for the next years in
exchange for the donation. Jacob’s donation would be accounted for in the
a. Endowment Fund
b. Restricted Current Fund
c. Annuity Fund
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d. Agency Fund

Problem 47: A contribution made in 20x9 to voluntary health and welfare organization
which is restricted to usage to celebrate the millennium in the year 20x0, is recorded as
a credit to:
a. Revenue—permanently restricted
b. Revenue—unrestricted
c. Contributions
d. Revenue—temporarily restricted

Problem 48: The approved appropriation of Agency XY for 2020 was P4,000,000, 80%
of this appropriation was allotted by DBM accompanied by Notice of Cash Allocation
90% of the allotment. During the year, the amount of obligation incurred was equivalent
to 80% of the Notice of Cash Allocation but only 70% of these obligations were paid by
checks.

What is the entry to record the incurrence of obligation?

a. No entry, Posting to appropriate Registries of Budget, Utilization and Disbursements
(RBUD)
b. No entry, Posting to appropriate Obligation Request and Status (ORS)
c. No entry, Posting to appropriate Registry of Allotments, Obligations and
Disbursements (RAOD)
d. No entry, Posting to appropriate Registries of Appropriations and Allotments
(RAPAL)

Problem 49: The Bureau of Treasury received P60,000 cash remittance from
Department of Agrarian Reform (DAR) from its miscellaneous income.

What is the journal entry of the Bureau of Treasury in its accounting books to record the
receipt of cash remittance from the income of a national government agency?
A. Debit Cash in Bank, Local Bank P60,000 and Credit Cash-Treasury/Agency Deposit,
Regular P60,000.
B. Debit Cash in Bank, Local Bank P60,000 and Credit Miscellaneous Income of DA
P60,000.
C. Debit Cash in Bank, Local Bank P60,000 and Credit Savings of DA, Regular
P60,000.
D. Debit Cash in Bank, Local Bank P60,000 and Credit Cash-Collecting Officer, DA
P60,000.

Problem 50: On December 31, 2018, the Department of Finance billed its lessee on one
of its buildings in the amount of P10,000. On January 31, 2019, the Department of
Finance collected all of the accounts receivable. On February 28, 2019, the Department
of Finance remitted the entire collected amount to the Bureau of Treasury. What is the
journal entry to record the remittance by the Department of Finance to the Bureau of
Treasury?

A. Debit – Accounts Receivable P10,000 and Credit – Rent Income P10,000

B. Debit – Accounts Receivable P10,000 and Credit – Retained Earnings P10,000
C. Debit – Cash Collecting Officers P10,000 and Credit – Accounts Receivable
P10,000
D. Debit – Cash – Treasury/Agency Deposit, Regular – P10,000 and
Credit Cash – Collecting Officer – P10,000

51. If the under or over applied factory overhead is immaterial, it shall be closed to
A. Finished goods and cost of goods sold proportionately
B. Raw materials, work in process, finished goods, and cost of goods sold
proportionately
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 C. Cost of goods sold only
D. Work in process, finished goods and cost of goods proportionately

52. When using normal costing, the total production cost of a job is composed of:
A. Estimated costs of direct material, direct labor, manufacturing overhead.
B. Direct material, direct labor, and applied manufacturing overhead.
C. Estimated costs of direct material, direct labor, manufacturing overhead.
D. Estimated costs of direct material, direct labor, and actual manufacturing
overhead.

53. Under PFRS 3 Business Combinations, which of the following statements is correct
in accounting for directly attributable costs incurred in relation to acquisition?
A. Transaction costs, similarly to the treatment under PFRS 9, are capitalized and
considered as part of consideration transferred in computing the goodwill or gain
arising from the acquisition.
B. Transaction costs, other than those directly related to the issuance of equity and
debt instruments, are expensed immediately.
C. Bond issue costs measured using the fair value option are not expensed
immediately and amortized over the term of the bond using the effective interest
rate method.
D. Share issue costs are a deduction from the par value of the shares issued.

54. Which of the following is not a requirement of control under PFRS 10 Consolidated
Financial Statements?
A. The power to direct relevant activities that significantly affect the investee's return
B. Exposure to variable returns from involvement with investee
C. Ability to use power over investee to affect amount of returns
D. Ownership of at least majority of the outstanding shares that carry voting rights

55. When translating a foreign branch's financial statements to the presentation currency
of the home office and the operations of the foreign branch is not integral to the
operations of the home office,
A. Income and expense accounts for the current year are generally translated using
the average rate for the year.
B. Nonmonetary assets and liabilities are translated using the historical rate.
C. Adjustment arising from the translation is recognized in current year profit or loss.
D. Retained earnings are translated using the closing rate.

56. Which of the following statements concerning the different types of hedging
transactions is incorrect?
A. In hedging transaction designated as cash flow hedge, unrealized holding gain or
loss on hedged item will be recognized in other comprehensive income with
reclassifications adjustment to profit or loss if realized.
B. In hedging transaction designated as fair value hedge, unrealized holding gain or
loss on hedged item will be recognized in profit or loss.
C. In hedging transaction which is undesignated, unrealized holding gain or loss on
hedging instrument will be recognized in profit or loss.
D. In hedging transaction designated as hedge of net investment in foreign
operation, unrealized holding gains or losses on hedging instrument which is
considered effective portion will be recognized in other comprehensive income
with reclassification adjustment to profit or loss if realized.

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57. Under PFRS 15, Revenue from Contracts with Customers, an entity recognizes
revenue from contract with customers when or as the entity satisfies the
performance obligation. Any of the following criteria is considered satisfaction by an
entity of performance obligation over time, except
A. The customer simultaneously receives and consumes all of the benefits provided
by the entity as the entry performs.
B. The entity’s performance creates or enhances an asset that the customer
controls as the asset is created.
C. The entity’s performance does not create an asset with an alternative use to
entity and the entity has an enforceable right to payment for performance
completed to date.
D. The entity has already transferred the control, title, and risk/ rewards of
ownership of the asset to the customers upon delivery of the asset.

58. Sales-based royalties are:

A. recognized as revenue once the related performance obligation to which the
royalty has been allocated was satisfied
B. recognized as revenue when the related sales occur
C. recognized as revenue when A or B occurs, whichever comes later
D. recognized as revenue when A or B occurs, whichever comes first

59. The split-off point can best be defined as

A. the point at which a secondary product is recovered in the course of
manufacturing a primary product.
B. the point at which you can get more of one product and less of another product.
C. the point in the production process where no further processing is needed.
D. the point at which joint products become separate and identifiable.

60. Which method of accounting recognizes byproducts in the financial statements at

the time their production is completed?
A. production method
B. gross margin method
C. market value method
D. sales method

Prayer Corporation purchased a 10% interest in Sign Company on January 1, 2017 as

an investment at fair value through other comprehensive income for a price of
P120,000.

On January 1, 2021, Prayer Corporation purchased 7,000 additional shares of Sign

Company from existing stockholders for P945,000, which is the fair value, increasing
Prayer's interest to 80%. Sign Company had the following statement of financial position
immediately prior to Prayer's acquisition on January 1, 2021:

Assets Liabilities and Equity

Current Assets P 495,000 Liabilities P 195,000
Buildings (net) 420,000 Common stock, P30 par 300,000
Equipment (net) 300,000 Retained earnings 720,000
Total assets P1,215,000 Total liabilities and equity P1,215,000

On the date of that Prayer acquired control over Sign, Prayer determines that the
equipment of Sign was understated by P150,000 and had a 5-year remaining life. All
other book values approximate fair values.

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61. On January 1, 2021 consolidated statement of financial position, what is the amount
of goodwill to be reported?
A. P45,000
B. P75,000
C. P120,000
D. P180,000

Condensed Statement of Financial Position for Play and Station Corporations at

December 31, 2020, as follows (in thousands)
Play Station
Current assets P 585 P 270
Noncurrent assets 2,565 1,980
Total assets P 3,150 P 2,250

Current liabilities P 225 P 270

Capital stock, P15 2,250 900
Additional paid-in capital 225 630
Retained earnings 450 450
Total equities P 3,150 P 2,250

On January 2, 2021, Play issues 150,000 shares of its stock with a market value of P30
per share for the net assets of Station Corporation. Because of the acquisition, Station
Company was dissolved. The book values reflect fair values, except a noncurrent asset
of Play, which have a fair value of P1,800,000, and the current assets of Station, which
have a fair value of P500,000. Play pays P75,000 for costs of registering and issuing
securities issued and P115,000 for other acquisition costs related to combination.

62. What is the result of the business combination?

A. P2,470,000 goodwill
B. P2,290,000 goodwill
C. P2,470,000 gain
D. P2,290,000 gain

63. How much is the total assets of Play Corporation immediately after acquisition?
A. P7,910,000
B. P7,730,000
C. P5,440,000
D. P5,260,000

Nezuko Company employs normal costing for its production. The following data are
provided during the current year:
Net purchases of raw materials during the year P1,000,000
Total labor cost during the year 1,600,000
Depreciation of factory assets during the year 200,000
Utilities on the factory during the year 600,000

Beginning Ending
Raw materials inventory P400,000 P600,000
Work in process inventory 1,000,000 400,000
Finished goods inventory 1,200,000 600,000

• The entity uses a single

account for its direct material and indirect materials. 75% of the raw materials
requisitioned is direct.

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 • The overhead application
rate is 80% of direct labor costs. For the current year, overhead applied is 70% of
total labor costs.

64. What is the total manufacturing cost during the current year?
A. P3,120,000
B. P3,000,000
C. P3,280,000
D. P3,480,000

65. What is the cost of goods manufactured during the current year?
A. P4,080,000
B. P3,720,000
C. P3,880,000
D. P3,600,000

66. What is the over or under application of overhead?

A. P120,000 over application
B. P280,000 under application
C. P80,000 under application
D. P320,000 over application

Hopeful Corp. manufactures special respirators to the exacting specification of

customers. During August 2021, Job 234 for the production of 40,500 units were
completed at the following costs per unit:
Direct material P120
Direct labor 40
Factory overhead 160
applied

Final inspection of Job 234 disclosed 900 defective units and 450 spoiled units. The
defective units were reworked at a total cost of P108,000, and the spoiled units were
sold for P27,000.

67. What is the cost of good units produced on Job 234?

A. P13,095,000
B. P13,041,000
C. P12,960,000
D. P12,879,000

68. What is the unit cost of the good units produced on Job 234?
A. P320
B. P326.29
C. P325.62
D. P322.67

69. If the cost associated with rework and spoiled are considered as normal to
production. What is the unit cost of good units of Job 234?
A. P320
B. P326.29
C. P325.62
D. P322.67

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Pares Company, a local company, bought raw materials as ingredients in its products
from Filet Mignon Corporation, a US company, for 35,000 US Dollars in 2021. Pertinent
exchange rates relating to this transaction are as follows:
Bid Rate Ask Rate
Receipt of order P47.10 P47.20
Date of shipment 47.25 47.45
Balance sheet date 49.50 49.60
Settlement date 49.45 49.50

70. What is the foreign exchange gain or loss of Pares Company for 2021?
A. P78,750 loss
B. P75,250 loss
C. P78,750 gain
D. P75,250 gain

71. What is the value of the inventory, assuming it’s not yet sold, as of settlement date?
A. P1,652,000
B. P1,660,750
C. P1,732,000
D. P1,653,750

On December 1, 2021, Brewmaster, an exporter of Philippine coffee beans, sold coffee

beans on account to an American firm at a price of $6,500 under terms n/90. In order to
hedge the foreign currency risk exposure, Brewmaster enters into a forward contract to
sell $6,500 to a local bank on March 1, 2022. The following direct exchange rates were
obtained:
Dec. 1, 2021 Dec. 31, 2021 Mar. 1, 2022
Spot rate P55.51 P53.47 P55.44
30 day forward rate 48.44 42.41 46.45
60 day forward rate 53.50 51.45 56.53
90 day forward rate 52.45 50.50 48.46

72. How much is the foreign exchange gain or loss to be recognized for 2021 related
to the derivative/hedging instrument?
A. P6,500 gain
B. P6,500 loss
C. P13,260 gain
D. P13,260 loss

LP Chemicals produces Chemical A and B from a process and incident to their

production recovers a by-product, product X. the net realizable value of the by-product,
product X is recognized as inventory at the split-off point. For the month of October, the
joint costs of processing amounted to P1,152,000. Additional information is shown
below:

Product Production Market

value
Chemical 550,000 P900,000
A
Chemical 825,000 600,000
B
Product X 275,000 126,000

An additional processing costs of P54,000 was spent to complete the processing of

product X.

Page 18 of 20
 73. Using the market value method of allocating joint production costs, what would
be the amount of joint costs allocated to Chemical B?
A. 432,000
B. 460,800
C. 648,000
D. 691,200

Moonbucks Coffee, Inc. operates and franchises coffee shops. On January 1, 2018, the
entity entered into a franchise agreement with a franchisee for a non-refundable initial
franchise fee of P8,000,000 payable upon signing of contract and on-going payment of
royalties, based on 5% of franchisee’s sales.

The contract provides that Moonbucks Coffee, Inc. render the following obligations to
the franchisee:
(1) Construction of the coffee shop and delivery of coffee shop equipment;
(2) Supplies of 100,000 units of coffee beans and other supplies; and
(3) Allowing the franchisee to use the Moonbucks Coffee, Inc.’s trademark and
tradename for a period of 10 years.

The stand-alone selling prices of the above are P5,000,000, P3,000,000, and
P2,000,000, respectively. Moonbucks Coffee determines that each obligation under the
contract with franchisee are distinct, and therefore, need to be accounted for as a
separate performance obligation.

As of July 1, 2018, Moonbucks has already completed the construction of the shop and
has delivered the coffee shop equipment. However, only 40,000 units of coffee beans
and other supplies have been delivered to the franchisee and eventually consumed by
the coffee shop customers as of December 31, 2018. For the year ended 2018, the
franchisee reported sales revenue of P1,000,000.

74. How much total revenue shall be reported by Moonbucks Coffee, Inc. for the year
ended December 31, 2018?
A. 4,930,000
B. 5,120,000
C. 5,170,000
D. 5,820,000

The EFG Corporation manufactures electrical meters. For October, there were no
beginning inventories of materials. EFG uses a just in time system and backflush
costing with three trigger points for making entries to record their manufacturing
process. EFG’s October standard costs per meter are direct materials, P150 and
conversion costs, P120. The following data pertains to October operations:
Cost of material purchased P825,000
Conversion costs incurred P660,000
Number of finished units 5,250
Number of units sold 5,000

75. What are the balances of MIP inventory and finished goods inventory accounts at
the end of October?
A. P825,000 and P67,500, respectively.
B. P825,000 and P1,417,500, respectively.
C. P37,500 and P67,500, respectively.
D. P37,500 and P1,417,500, respectively.

- END –

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 Advanced Financial Accounting & Reporting
Answer Key

1-5: AABCC
5-10: CCABB
11-15: CBABB
16-20: BAADB
21-25: DABBB
26-30: BCBCC
*#28 in the answer key -numbering is repeated

31-35: BCCAB
36-40: CDBC
41-45: DDABB
46-50: CDBAD
51-55: CBBDA
56-60: ADCDA
61-65: DBBAB
66-70: CBCAB
71-75: BAACC

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