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1. Katy Perry developed an interesting idea for marketing sailboats in Death Valley.

She interested Lady Gaga in joining her in a


partnership. Following the information you have collected relative to their original contribution.
Lady Gaga contributed P 30,000 cash, a track of land, and delivery equipment. Katy Perry contributed P 60,000 cash. After giving
special consideration to the tax bases of the assets contributed, the relative usefulness of the assets to the partnership versus the
problems of finding buyers for the assets and contributing cash, and other such factors, the partners agreed that Katy Perrys
contribution was equal to 40 percent of the partnerships tangible assets, measured in terms of the fair value of the assets to the
partnership. However, since marketing idea originated with Katy Perry, it was agreed that she should receive credit for 50 percent of
the recorded capital. Recent sales of land similar to that contributed by Lady Gaga suggest a market value of P 40,000. Likewise,
recent sales of delivery equipment similar to that contributed by Lady Gaga suggest P 40,000 as the market value of the equipment.
These sales, of course, were not entirely representative of the particular assets contributed by Lady Gaga and therefore may be a
better indicator of their relative values than their absolute values. In reflecting on their venture, the partners agree that it is a rather
risky affair in respect to anticipated profits. Hopefully, however, they will be able to build good customer relations over the long run and
establish a permanent business with an attractive long-run rate of return. Under the most appropriate method, given the
circumstances, the entry to record the formation of the partnership must be:
a. Cash
Delivery equipment
Land
Perry, capital
Gaga, capital

P 90,000
40,000
40,000

b. Cash
Delivery equipment
Land
Goodwill
Perry, capital
Gaga, capital

P 90,000
40,000
40,000
50,000

c. Cash
Delivery equipment
Land

P 90,000
40,000
40,000
Perry, capital
85,000
Gaga, capital
85,000

d. Cash
Delivery equipment
Land

P 90,000
40,000
40,000
Perry, capital
102,000
Gaga, capital
68,000

60,000
110,000

110,000
110,000

2. The statement of financial position as of July 31, 2012, for the business owned by Katniss Everdeen, shows the following assets and
liabilities:
Cash
P 50,000
Furniture & Fixture
P 164,000
Accounts receivable
134,000
Accounts payable
28,800
Merchandise inventory
220,000
It is estimated that 5% of the receivables will prove uncollectible. The cash balance includes a 1,000 investment shares classified as
fair value through profit and loss recorded at its cost of P 8,000. The shares last sold on the market were at P 21.50 per share.
Merchandise inventory includes obsolete items costing P 20,000 that will probably realized only P 4,000. Depreciation has never been
recorded; however, the furniture and fixtures are two years old, have estimated total life of 10 years and would cost P 240,000 if
purchased new. Prepaid items amount to P 7,000. Peeta Mellark is to be admitted as a partner upon investing P 200,000 cash and P
100,000 merchandise. How much capital is to be credited to Katniss Everdeen upon formation of the partnership?
a. P 539,200

b. P 606,200

c. P 565,000

d. P 613,000

3. Partners Daniel, Katerina, Nathan, and Johanna, share profits in the ratio of 80:60:30:30, respectively. Their partnership agreement
provides that in the event of the death of a partner, the firm shall continue until the end of the fiscal period. Profits shall continue until
the end of the fiscal period. Profits shall be considered to have been earned proportionately during this period, and the deceased
partners capital shall be adjusted by the proper share of the profit or loss until the date of death. From that date until the date of
settlement with the estate there shall be added interest of 6% computed on the adjusted capital. The remaining partners shall continue
to share profits in the old ratio. Payment to the estate shall be made within one year from the date of the partners death. Partner
Johanna died on November 16. On December 31, the end of the six-month period, account balances on the partnership books before
the income summary account is closed are as follows:
Cash
P 15,000
Notes payable
P 34,000
Accounts receivable
140,000
Accounts payable
141,000
Inventories
190,000
Daniel, capital
84,000
Machinery & Equipment (net)
90,000
Katerina, capital
75,000
Store furniture and fixtures (net)
33,000
Nathan, capital
48,000
468,000
Johanna, capital
45,000
Income summary (7/1 - 12/31)
45,000
468,000
The income summary account is closed on December 31. On this date, Nathan decides to retire. Daniel and Katerina agree to pay the
balance in Nathans capital account after distribution of profit, less 20%, and issue a partnership 60-day, 6% note to Nathan in
settlement. What amount of note payable must be issued to Nathan?
a. P 43,985.22

b. P 44,038.23

c. P 54,750

d. P 55,047.79

Use the following information for the next two items: De Lima, of De Lima and Henares, partners sharing profits in the ratio of 60% and
40% wants to retire. The partners agree that the fixed assets are undervalued by P 35,000 and that De Limas share of this increase
shall be recorded and creditable to her capital account. Since the working capital is only P 70,000, it is decided that De Lima shall
receive only one-third of her adjusted capital credit in cash. For the remainder, she accepts securities, which have been carried as
other assets at their book value and market value of P 12,000 and a six-month note payable. The statement of financial statement,
which then prepared, appears as follows:
Current assets
P 53,000
Current liabilities
P 52,000
Other assets
3,000
Henares, capital
50,000
Fixed assets
46,000
P 102,000
P 102,000

4. Current liabilities before De Limas retirement must be:


a. P 52,000
b. P 80,000

c. P 10,000

5. Other assets before De Limas retirement must be:


a. P 3,000
b. P 12,000

c. P 15,000

d. P 42,000
d. P -0-

6. Emily, Daniel and Victoria have capital balances of P120,000, P200,000 and P72,000, respectively and they share profits in the
respective ratio of 4:2:1. Daniel received P104,000 as a result of the liquidation of the partnership. Loss on asset realization is
a. P 236,000

b. P 336,000

c. P 288,000

d. P 264,000

7. THE IMMORTALS Store accounts for its sales on the installment basis. At the beginning of 2012, ledger accounts include the
following balances: Installment contracts receivable, 2010 - P 30,000; Installment contracts receivable, 2011 - P 96,000; Deferred
gross profit, 2010 - P 12,600; Deferred gross profit, 2011 - P 36,000.
At the end of 2012, account balances before adjustment for realized gross profit on installment sales are: Installment contracts
receivable, 2010 - P 0; Installment contracts receivable, 2011 - P 24,000; Installment contracts receivable, 2012 - P 130,000; Deferred
gross profit, 2010 - P 12,600; Deferred gross profit, 2011 - P 34,350; Deferred gross profit, 2012 - P 60,000. Installment sales in 2012
are made at 25% above cost of merchandise sold. During 2012 upon default in payment by the customer, the company repossessed
the merchandise with an estimated market value of P 2,000. The sales was in 2011 for P 10,800, and P 6,400 had been collected prior
to repossession. Compute the gain or (loss) on repossession assuming profit is recognized when sale is made
a. P -0b. P (750)
c. P (1,520)
d. P (2,400)
Use the following information for the next two items: Walang Hanggan Corporation has been using the cash method to account for
income since its first year of operations in 2011. All sales are made on credit with notes receivable given by the customers. The
statement of comprehensive income for 2011 and 2012 included the following amounts:
2011
2012
Revenues collection on principal
P 32,000
P 50,000
Revenues interest
3,600
5,500
Cost of goods purchased *
45,200
52,020
* Includes increase in inventory of goods on hand of P 2,000 in 2011 and P 8,000 in 2012 The balances due on the notes at the end of
each year were as follows:
2011
2012
Notes receivable 2011
P 62,000
P 36,000
Notes receivable 2012
60,000
Discount on notes receivable 2011
7,167
5,579
Discount on notes receivable 2012
8,043
(Round-off gross profit rate in two decimal percentage and round of balances in nearest peso)
8. Under installment method, how much is the realized gross profit in 2011?
a. P 14,164
b. P 16,080
c. P 17,764

d. P 19,680

9. Under installment method, how much is the amount recognized in profit and loss 2012?
a. P 12,267
b. P 21,615
c. P 23,329

d. P 28,829

10. On January 1, 2013, Casio Realty Company sold property carried in inventory at a cost of P840,000 for P1,400,000 . A 10% down
payment was made and the balance payable in 4 equal installments of P363,625, inclusive of 12% annual interest, payable semiannually every June 30 and December 31. Under installment method, how much is the total realized gross profit in 2013?
a. P 293,332.60
b. P 346,900
c. P 308,000
d. P 237,332.60
11. SPAIN, Inc., agrees to transfer television sets to Gasol Bros. on a consignment basis. The consignee is to sell a set at 40% above
cost exclusive of freight and is to receive a 10% commission on sales price. The consignor agrees to reimburse the consignee for all
expenses related to the consignment. The agreement also calls for an advance payment by the consignee of 30% per set based on
selling price; the said advance is to be deducted as settlement is made for each set sold. The consignee is to provide an account sales
quarterly and is to make cash remittance for the amount owed at that time. The following consignment sales activities occurred during
the October 1 to December 31 of current year:
Sets shipped 100; Unit cost each set P 10,000; Freight charges on the shipment paid by the consignor P 75,000; The consignee
made advance payments on the sets received; Advertising cost paid by the consignee P 50,000 The consignee sold 80 sets for cash;
expenses of delivery and installation were P 25,000. After notifying the consignor with the total sets sold for the period, the consignee
returned 10 sets representing a model that could not be sold and paid freight charges of P 8,000 on the return. The net income to be
reported by the consignor as a result of the above is
a. P 65,000
b. P 73,000
c. P 125,000
d. P 57,500
12. On June 1, 2012 SME USA acquired 35% of the equity of CHI and UK for P 58,000 and P 37,000, respectively. SME USA shares
joint control, with other venturers, over the strategic financial and operating decisions of entities CHI and UK. Transaction costs of 5%
of purchase price of the shares were incurred by USA.
On December 31, 2012, entities CHI and UK declared and paid cash dividends of P 15,000 and P 24,000, respectively. Also, for the
year ended December 31, 2012, entity CHI recognized a net loss of P 42,000; while entity UK recognized a net profit of P 18,000.
Published price quotations do not exist for shares of entities CHI and UK. Using appropriate valuation techniques, SME USA
determined the fair value of its investments in entities CHI and UK at December 31, 2012 as P 65,000 and P 49,000, respectively.
Costs to sell are estimated at 9% of the fair value of the investments. SME USA does not prepare consolidated statements because
they do not have any subsidiaries. Assuming early adoption of PFRS 11, what is the investment balance of SME USA at the end of the
year in entity UK using equity model?

a. P 26,775

b. P 34,125

c. P 38,850

d. P 42,525

13. Agency MMM received a progress billing for the construction of a building as follows:
Progress billings: 70% x P10,000,000
P 7,000,000
Less: Recoupment of advances made (70% x P1,500,000)
1,050,000
Net billings
P 5,950,000
The entry to record the above billings:
a. Construction in progress Agency Assets
5,950,000
Accounts payable
5,950,000
b. Construction in progress Agency Assets
Accounts payable
Advances to Contractors

7,000,000

c. Buildings
Accounts payable

5,950,000

d. Buildings
Accounts payable
Advances to Contractors

7,000,000

5,950,000
1,050,000
5,950,000
5,950,000
1,050,000

14. Bonifacio contractors had a 3-year construction contract in 2012 for P900,000. The company uses the percentage-of-completion
method for financial statement purposes. Income to be recognized each year is based on the ratio of cost incurred to total estimated
cost to complete the contract. Data on this contract follows:
Accounts receivable construction contract billings
P 30,000
Construction in progress
P 93,750
Less: Amounts billed
84,375
10% retention
9,375
Net income recognized in 2012 (before tax)
15,000
Bonifacio Contractors maintains a separate bank account for each construction contract. Bank deposits to this contract amounted to
P50,000. What was the estimated total income before tax on this contract?
a. P 45,000
b. P 94,000
c. P 135,000
d. P 144,000
15. Party Construction Co. enters into a contract on January 2, 2012 to construct a 20-storey office building for P400 million (M).
During the construction period, many change orders are made to the original contract. The following schedule summarizes these
changes made in 2012:
Cost incurred in 2012
Estimated cost to complete
Contract Price
Basic Contract
80,000,000
280,000,000
400,000,000
Change order # 1
500,000
500,000
1,250,000
Change order # 2
500,000
Change order # 3
1,000,000
1,000,000
Still to be negotiated at least cost
Change order # 4
1,250,000
1,000,000
Determine the gross profit to be recognized during the year under the cost to cost percentage of completion method. (Round off
percentage of completion rate at one decimal percentage)
a. P 9,015,000
b. P 8,561,000
c. P 8,966,500
d. P 8,800,000
16. On January 1, 2012 a real estate company, SMCI, has entered into a long term specifically negotiated construction contract to
construct a building on a piece of land owned by SMCI and after construction is complete , to deliver the entire property to a customer.
This is a situation common in the wholesale market when constructing a shopping mall, than in the retail market. SMCI applies the
percentage of completion method to account for contract revenues and expenses. The relative percentage of cost (POC) incurred is
considered a reliable method for measuring the progress of the contract. Additional information were as follows: (M=million)
Total cost of land
P 2M
Agreed purchase price 11M
Estimated total cost of construction
8M
Estimated total cost of contract
10M
Construction has commenced and at the reporting date (12/31/12), total construction cost incurred amount to P2M. If the contract is
considered to be a multiple element contract, and that the legal title of land will pass to the buyer after construction of the building is
complete, what is the amount gross amount due from customer recognized in the financial statements of SMCI assuming fair value of
the land is P2.5M?
a. P 4.25M
b. P 4.13M
c. P 2.25M
d. P 2.13M
17. On July 1, 2013, Pinoy Company signed an agreement to operate as franchisee of International Company for a franchise fee of
P800,000. Of this amount, P300,000 was paid upon signing of the agreement and the balance is payable in five semi-annual payments
of P100,000 each beginning December 31, 2013. The notes are non-interest bearing but the market rate of interest is 12%. The
agreement provides that the down payment is non-refundable and no future services are required of the franchisor as of December 31,
2013. (Use 2 decimal places for present value factor). On December 31, 2013, International Company should record total income
related with franchise of :
a. P 446,260
b. P 721,000
c. P 800,000
d. P 746,260
18. On October 1, 2012, Devon Company entered into franchise agreement with Mr. Gonzales. The agreement required an initial fee
payment of P200,000 plus four P100,000 payments due every three months, the first payment due December 31, 2012. The interest
rate implicit is 12%. The initial deposit is refundable until substantial performance has been completed. On December 31, 2012, all
services required have been substantially completed with a total cost of P250,000. How much is the net income related with the
franchise, on December 31, 2012?

(Round off PV factor into three decimal places)


a. P 132,851
b. P 321,700
c. P 332,851
d. P 377,520
19. Mercedes Inc. is insolvent and its statement of affairs show: Estimated gain on realization of assets, P2,000,000; Estimated loss on
realization of assets, 2,560,000; Additional assets, P1,280,000; Additional liabilities, P960,000; Capital Stock, P12,000,000; Deficit,
P11,200,000. The pro-rata payment to stockholders on the peso is:
a. P 0.70
b. P 0.43
c. P 0.30
d. P 0.57
Use the following information for the next two items: Craft Factory manufactures small tables in its Processing Department. Direct
materials are added at the initiation of the production cycle and must be bundled in single kits for each unit. Conversion costs are
incurred evenly throughout the process. Inspection occurs at the end of the process. Spoiled units generally constitute 5% of the good
units. Data for December 2012 are as follows:
Work in process, beg (materials-100% complete, Conversion costs-75% complete)
10,000 units
Started
40,000 units
Completed and transferred
38,400 units
Work in process, end (materials-100% complete, Conversion costs-65% complete)
8,000 units
COST DATA: Work in process, beginning
Direct materials P50,000
Direct materials added, P100,000
Conversion costs-P30,000
Conversion cost added, P140,000
(Round off unit costs to two decimal places)
20. The cost allocated to abnormal spoilage using weighted average method is
a. P -0b. P 7,360
c. P 11,088

d. P 16,400

21. The total cost of units transferred out is


a. P 277,200
b. P 245,760

d. P 253,440

c. P 266,112

22. During the year 2012 goods billed at P840,000 were shipped to the branch at 125% of cost. The account Allowance in Branch
Inventory has a balance of P242,000 before adjustment. The beginning inventory of the branch from home office at cost is P370,000;
the beginning inventory of the branch from outsider is P35,000; purchases from outsider is P220,000. Determine the cost of goods
available for sale of the branch per branch record.
a. P 1,297,000
b. P 1,465,000
c. P 1,539,000
d. P 1,767,500
Use the following information for the next two items: Trial balance for the home office and the branch of Terry Company show the
following accounts before adjustments on December 31, 2012. The home office policy of billing the branch for merchandise is 20%
above cost.
Home Office
Branch
Allowance for overvaluation
60,000
Shipments to branch
240,000
Purchases (outsiders)
75,000
Shipments from home office
270,000
Merchandise Inventory, 12/01/12
100,000
The branch Merchandise Inventory on December 31, 2012 of P 50,000 includes purchases from outsiders of P 20,000.
23. The working paper entry to eliminate profit in the beginning inventory includes debit to
a. Allowance for overvaluation
P48,000
c. Merch. Inventory (12/1/12)
b. Branch Income
P5,000
d. Allowance for overvaluation

P12,000
P12,000

24. The entry on the books of the home office to recognize mark-up includes credit to
a. Allowance for overvaluation
P5,000
c. Branch Income summary
b. Branch Income summary
P55,000
d. Branch Income summary

P5,000
P52,000

25. The Home office in Mandaluyong shipped merchandise costing P 80,000 to Makati branch and paid for the freight
charges of P 600. The home office bills the branch at 125% of cost. Makati branch was subsequently instructed to transfer one-half
of the merchandise to Bulacan branch wherein Bulacan paid for P 200 frieght. If shipment was made directly from Mandaluyong to
Bulacan, the freight cost would have been P 400. By how much will Makati branch charge the Home Office account?
a. P -0b. P 50,300
c. P 50,600
d. P 51,300
26. The statement of financial position of B.o.B. Company as of December 31, 2013 is as follows:
Assets
Liabilities and Shareholders Equity
Cash
P 175,000
Current liabilities
P 250,000
A/R
250,000
Mortgage payable
450,000
Inventories
725,000
Ordinary share capital
200,000
PPE
950,000
Share premium
400,000
Accumulated profits
800,000
P 2,100,000
P 2,100,000
On December 31, 2013 the Taylor Swift Inc. bought all of the outstanding shares of B.o.B. Company for P 1,800,000 cash. On the date
of acquisition, the fair market value of B.o.B.s inventories was P 675,000, while the fair value of B.o.B.s property, plant equipment was
P 1,100,000. The fair value of all other assets and liabilities of B.o.B. were equal to their book values. In addition, not included above
were costs in-process research and development of B.o.B Company amounting to P 100,000. Goodwill amounted to:
a. P 400,000
b. P 300,000
c. P 200,000
d. P -027. Bruno Mars Company acquired Billboard Companys net assets by issuing its own P 14 par value ordinary shares totaling 50,000
shares at market price of P 14.55. Bruno Mars Company had the following expenditures incurred:

Finders fee paid


Pre-acquisition audit fee, 30% was paid
General administrative costs
Doc stamp paid on issuance for the combination
Legal fees for the combination paid

P 50,000
40,000
15,000
3,500
32,000

Audit fees for SEC registration of share issue


SEC registration for the share issue paid
Share issuance costs paid (inclusive of taxes paid)
Other indirect costs paid

The total amount debited to expense should be


a. P 153,000
b. P 156,500

c. P 195,000

P46,000
10,000
10,000
16,000

d. P 191,500

28. Condensed Statement of Financial Position of Dolce Inc. and Gabbana Inc. as of 12/31/2011 were as follows:
Dolce
Gabbana
Current assets
P 275,000
P 65,000
Noncurrent assets
625,000
425,000
Total assets
900,000
490,000
Liabilities
Ordinary shares, P23 Par
Share Premium
Accumulated Profits (losses)

65,000
549,700
35,300
250,000

35,000
296,700
28,300
130,000

On January 1, 2012, Dolce Inc. issued 30,000 shares with market value of P25/share for the assets and liabilities of Gabbana Inc.
Dolce Inc. also paid P125,000 cash. The book value reflects the fair value of the assets and liabilities, except that the non-current
assets of Gabbana Inc. have fair value of P630,000 and the noncurrent assets of Dolce Inc. are overstated by P30,000. Contingent
consideration, which is determinable, is equal to P15,000. Dolce paid for the share issuance costs only amounting to P74,000 and
incurred other acquisition costs amounting to P19,000. As a result of acquiring the net assets of Gabbana Inc., compute for the total
liabilities in the books of Dolce.
a. P 100,000
b. P 115,000
c. P 134,000
d. P 65,000
29. Diego Val Co. merged with Mackenzie Bourg Corp. on June 30, 2012. In exchange for the net assets at fair market value of Diego
Val Co. amounting to P2,785,800, Mackenzie Bourg Corp. issued 68,000 ordinary shares at P36 par value, then going at a market
price of P41 per share. Relevant data on shareholders equity immediately before the combination show:
Mackenziee
Diego
Ordinary shares
P 8,790,000
P 2,030,000
Share Premium
3,834,000
782,000
Accumulated Profits (losses) (1,516,000)
495,000
Out of pocket costs of the combinations were as follows:
Legal fees for the contract of business combination P 174,700
Audit fee for SEC registration of share issue
198,400
Printing costs of share certificates
144,900
Brokers fee
135,000

CPAs fee for pre-acquisition audit


Other direct cost of acquisition
General and allocated expenses
Listing fees in issuing new shares

161,000
90,400
115,300
172,000

Included as part of the agreement is the additional cash consideration of P163,000 in the event Diegos share price will reach P32 per
share by year-end. At acquisition date, the share price is P27.50, and increased by P4.8 by December 31, 2012. At acquisition date,
there was
a. P 940,700
b. P 851,700
c. P 765,400
d. P 676,400
only a
low probability of reaching the target share price, so the fair value of the additional consideration was determined at P74,000. What is
the amount of expense to be recognized in the statement of comprehensive income for the year ended December 31, 2012?
30. The Voice Companys shareholders equity as of December 31, 2012 is P406,000.
On January 1, 2013, The Voice Company acquires 30% of The X Factor Companys ordinary shares for P30,000 cash and by issuing
its own shares with a fair value of P75,000. The Voice Company acquired significant influence over The X Factor Company as a result
of the share acquisition. After four months, The Voice Company purchases another 60% of The X factor ordinary shares for a cash
payment of P219,000.
On this date, The X Factor reports identifiable assets with carrying amount of P360,000 and fair value of P640,000 and its liabilities
with book value and a fair value of p180,000. At acquisition date, net loss reported by The X Factor for the four-month ended
amounted to P50,000. The fair value of the 10% non-controlling interest is P72,000. Non-controlling interest is valued using
proportionate basis.
The Voice Company also paid the following: P5,000 for legal fees, P4,000 for finders fee, P4,300 for accountants fee, P3,600 for audit
fee for SEC registration of shares issued and P1,100 for printing of shares certificates. Immediately after the business combinations,
what is the consolidated total equity of The Voice Company and subsidiary (The X Factor Company)?
a. P 513,500
b. P 553,000
c. P 579,500
d. P 599,000
Use the following information for the next two items: On January 2, 2011, Keith Urban Corporation purchased 70% of the ordinary
shares of Mimi Company for P 4,675,000. At that date, Mimi Company had P 4,887,500 of ordinary shares outstanding and
accumulated profits of P 1,572,500. Mimis equipment with a remaining life of 5 years had a book value of P 2,380,000 and a fair value
of P 2,550,000. Mimis remaining assets had a book value equal to their fair values. All intangible assets except goodwill are expected
to have remaining lives of 10 years. Non-controlling interest shall be measured at fair value. The income and dividend
figures for both Keith Urban and Mimi Company are as follows:
Income
Dividends
Keith Urban
2011
P 1,572,500
P 425,000

Corporation:

2012

Mimi Company:

2011
2012

1,785,000
Income
P 340,000
569,500

510,000
Dividends
P 55,000
127,500

Keith Urbans income shown does not include any dividend income from Mimi. Keith Urbans accumulated profits balance at the date
of acquisition was P 5,958,500.
31. On December 31, 2012, determine the consolidated accumulated profits attributable to parent.
a. P 8,821,300
b. P 8,970,050
c. P 8,993,850

d. P 9,017,650

32. Assume that Mimi has outstanding 6% P 100 par value cumulative preference shares with an aggregate value of P 1,000,000 that
are classified as equity and are held by non-controlling interests. What is the income attributable to parent on December 31, 2011
a. P 1,744,700
b. P 1,716,500
c. P 1,731,700
d. P 1,721,500
33. Hartwell Company distributes the service department overhead costs to producing departments and the following information for
the month of January is presented as follows:
Maintenance
Utilities
Overhead costs incurred
P18,700
P 9,000
Services provided to:
Maintenance department
10%
Utilities department
20%
Producing department A
40%
30%
Producing department B
40%
60%
Hartwell Company distributes service department overhead costs based on the reciprocal method, what would be the formula to
determine the total maintenance costs?
a. M = P18,700 + .10U
c. M = P18,700 + .30U +.40A + .40B
b. M = P 9,000 + .20U
d. M = P27,700 + .40A + .40B
34. In analyzing the job-order cost sheets, the records disclosed that the compositions of the work-in-process inventory on June 1,
2012 were as follows:
Direct materials used
P 3,960
Direct labor (900 hours)
4,500
Factory overhead applied
2,250
P 10,710
The following manufacturing activity occurred during the month of June 2012:
Purchased direct materials costing P 60,000
Direct labor worked 9,900 hours at P 5 per hour
Factory overhead of P 2.50 per direct labor hour was applied to production.
At the end of June 2012, the following information was gathered in connection with the inventories:
Inventory of work-in-process: Direct materials used
P 12,960
Direct labor (1,500 hours)
7,500
Factory overhead applied
3,750
P 24,210
Inventory of direct materials P 51,000
Compute the cost of goods manufactured:
a. P 142,560
b. P 118,350
c. P 131,850
d. P 108,600
35. Agency NYT had the following expenses for the month of April 2012
Internet (EWT 2%; GMP 5%) P50,000
PLDT (EWT 2%; GMP 5%) P50,000
Water from Maynilad (EWT 0%; GMP 5%) P120,000
Repair of Government Vehicle (EWT 2%; GMP 5%) P30,000
Meralco (EWT 2%; GMP 5%) P300,000
What is the total amount of EWT (under BIR Form No. 1601-E)?
a. P 24,553
b. P 24,053
c. P 7,769

d. P
7.679
36. Faith and Hope, a private not-for-profit voluntary health and welfare organization, received the following contribution in 2011:
I. P25,000 from donors who stipulated that the money not be spent until 2012
II. P60,000 from donors who stipulated that the contributions be used for the acquisition of equipment, none of which was
acquired in 2011.
Which of the above events increased temporarily restricted net assets for the year ending December 31, 2011?
a. I only
b. II only
c. Both I and II
d. Neither I nor II
37. A government agency ordered an office equipment for P350,000 through procurement services of DBM on May 15, 2012. The
equipment was delivered to the government agency on June 15, 2012. The asset has a useful life of 5 years. Determine the
depreciable cost of the equipment as of the January 1, 2016, respectively.
a. P 124,550
b. P 129,500
c. P 89,250
d. P 94,500
38. On November 1, 2011, Galaxy Philippines took delivery from a Thailand firm of inventory costing 225,000 baht. Payment is due on
January 30, 2012 Concurrently, Galaxy Philippines paid P2,025 cash to acquire a 90-day call option for 225,000 Thailand baht.
Spot rate (market rate)

11/1/2011
P 1.20

12/31/2011
P 1.22

1/30/2012
P 1.23

Strike price (exercise price)


Fair value of call option

1.20
P 2,025

What is the intrinsic value of the option on December 31, 2011?


a. P 4,500
b. P 4,950

1.20
P 4,950
c. P 450

1.20
P 6,750
d. P -0-

39. Makati Company buys goods from Tokyo Company of Japan, worth 2.5 million yen. The prevailing exchange rate is
P0.1302136/Yen. Makati Company settles the account 60 days later when the exchange rate is going at P0.118376/Yen. What is the
forex gain or loss of Tokyo?
a. P 29,594 gain
b. P 29,594 loss
c. 2.5 million Yen
d. P -040. One Direction Inc. acquires a 20% ownership interest in The Wanted Co. (a service company) on January 1, 2013 for P 3.5
million(M) cash. The Wanted has no liabilities or contingent liabilities at that date. The following shows The Wanted's statement of
financial position at January 1, 2013: (amounts in thousands)
Carrying Amount
Fair Values
Cash and receivables
P 2,000
P 2,000
Land
6,000
8,000
P 8,000
Issued Equity: 1M ordinary shares
P 5,000
Accumulated Profits
3,000
P 8,000
During the year ended December 31, 2013, The Wanted reports a profit of P 6M but does not pay any dividends. In addition, the fair
value of The Wanted's land increases by P 3M to P 11M at year-end of 2013. However, the amount recognized by The Wanted in
respect of the land remains unchanged at P 6M. The Wanted's Cash and Receivables line item was stated at P 8M while Issued Equity
was unchanged at its statement of financial position at year-end of 2013. No other movement on the equity of The Wanted.
On January 1, 2014, One Direction acquires a further 60% ownership interest in The Wanted for P 22M cash, thereby obtaining
control. Before obtaining control, One Direction does not have significant influence over Investee, and accounts for its initial 20%
investment at fair value with changes in value recognized as a component of other comprehensive income. The Wanted's ordinary
shares have a quoted market price at December 31, 2013 and at January 1, 2014 of P 30 per share. Throughout the period January 1,
2013 to January 1, 2014 (before the 60% additional investment), One Direction's issued equity was P 30M. One Direction's only asset
apart from its investment in The Wanted is cash amounting to P 26.5M.
Assuming NCI is measured on proportionate basis, determine the amount of gain(loss) recognized as a result of obtaining the control.
a. P 2,500,000
c. P -0-, since share price did not change
b. P -0-, since it is eliminated at conso level
d. P -0-

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