CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila
PREWEEK LECTURE
ADVANCED FINANCIAL ACCOUNTING AND REPORTING 1.
Numbers 1 and 2
A, B and C decided to form ABC Partnership. It was agreed that A will contribute an equipment with
assessed value of P200,000 with historical cost of P1.600,000 and accumulated depreciation of
P1,200,000.
A day after the partnership formation, the equipment was sold for P600,000.
B will contribute a land and building with carrying amount of P2,400,000 and fair value of P3,000,000.
The land and building are subject to a mortgage payable amounting to P600,000 to be assumed by the
partnership. The partners agreed tha:B will have 60% capital interest in the partnership. The partners
also agreed that C will contribute sufficient cash to the partnership.
1. What is the total agreed capitalization of the ABC Partnership?
A. 3,000,000
B. 4,000,000
C. 5,000,000
D. 6,000,000
2.What is the cash to be contributed by C in the ABC Partnership?
A. 1,000,000
B. 1,200,000
C. 1,400,000
D. 1,600,000
Number 3
On January 1, 2018, A, B and C formed ABC Partnership with original capital contribution of P600,000,
P1,000,000 and P400,000. A is appointed as managing partner.
During 2018, A, B and C made additional investments of P1,000,000, P400,000 and P600,000,
respectively. At the end of 2018, A, B and C made drawings of P400,000, P200,000 and P800,000,
respectively. At the end of 2018, the partnership had a credit balance in the income summary account
of P2,100,000. The profit or loss agreement of the partners is as follows
10% interest on original capital contribution of the partners.
Quarterly salary of P80,000 and P20,000 for A and B, respectively
Bonus to A equivalent to 20% of Net Income after interest and salary to all partners.
Remainder is to be distributed equally among the partners.
3. What is A's share in partnership profit for 2018?
A. 380,000
B. 680,000
C. 1,080,000
D. 400,000
Numbers 4
On December 31, 2018, the Statement of Financial Position of ABC Partnership provided the following
data with profit or loss ratio of 5:1:4.
Current Assets 3,000,000
Noncurrent Assets 4,000,000
Total Liabilities 1,000,000
A, Capital 2,200,000
B, Capital 2,400,000
C, Capital 1,400,000
On January 1, 2019, D is admitted to the partnership by investing P 1,000,000 to the partnership for
10% capital interest. The total agreed capitalization of the new partnership is P6,000,000
4. What is the capital balance of C after the admission of D to the partnership?
A. 1,160,000
B. 1,640,000
C. 1,000,000
D. 1,560,000
Numbers 5
On December 31, 2018, the Statement of Financial Position of ABC Partnership with profit or loss ratio
of 6:1:3 of partners A, B and C respectively, revealed the following data
Cash 2,000,000
Receivable from A 1,000,000
Other noncash assets 4,000,000

Other Liabilities 4,000,000

Payable to B 2,000,000
Payable to C 200,000
A, Capital 1,400,000
B, Capital (1,300,000)
C, Capital 700,000
On January 1, 2019, the partners decided to liquidate the partnership. All partners are legally declared
to be personally insolvent. The other noncash assets were sold for P3,000,000. Liquidation expenses
amounting to P200,000 were incurred.
5. How much cash was received by B at the end of partnership liquidation?
A. 500,000
B. 300,000
C. 580,000
D. 540,000

Numbers 6 and 7
On December 31, 2018, the Statement of Financial Position of ABC Partnership with profit or loss ratio
of 5:3:2 of respective partners A, B and C. showed the following information:
Cash 3,200,000
Noncash assets 2,800,000
Total Liabilities 4,000,000
A, Capital 200,000
B, Capital 1,000,000
C, Capital 800,000
On January 1, 2019, the partners decided to liquidate the partnership in installment. All partners are
legally declared to be personally insolvent.
As of January 31, 2019, the following transactions occurred:
Noncash assets with a carrying amount P2,000,000 were sold at a gain of P200,000.
Liquidation expenses for the month of January amounting to P100,000 were paid.
It is estimated that liquidation expenses amounting to P300,000 will be incurred for the month of
February, 2019
20% of the liabilities to third persons were settled
Available cash was distributed to the partners.
6. What is the amount of cash received by partner C on January 31, 2019?
A. 520,000
B. 480,000
C. 600,000
D. 700,000
7. What is the amount of total cash withheld on January 31, 2019?
A. 1,100,000
B. 3,200,000
C, 3,500,000
D. 3,400,000
Number 8
At the date of partnership formation of ABC partnership, the amount credited to A's capital is less than
the fair market value of the property he contributed. Which of the following is the most valid reason?
A. The property contributed by A is impaired.
B. The property contributed by A has been subjected to positive asset revaluation.
C. Bonus has been given by partner A to the other partners.
D. Goodwill arising from partnership formation has been recognized.
Numbers 9 and 10
AAA Company is bankrupt and has undergone corporate liquidation. Presented below is its statement
of financial position before the start of liquidation:
Cash 300,000
Machinery 500,000
Building1,200,000
Accounts Payable 100,000
Salaries Payable 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 building (fair value equal its book value)
At the end of liquidation, the holder of loan payable received P340,000
9. 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
10. What is the amount of net free assets available at the end of liquidation?
A. 80,000
B. 40,000
C. 120,000
D. 200,000
Number 11
In every corporate liquidation, which of the following creditors will always fully recover their claims from
a liquidating corporation?
A. Unsecured creditors with priority
B. Unsecured creditors without priority
C. Partially secured creditors
D. Fully secured creditors
Number 12
It refers to the term used when the total shareholders' equity has a negative balance.
A Deficit
B. Deficiency
C. Surplus
D. Insufficiency
Numbers 13 and 14
Entity A and Entity B incorporated Entity C to manufacture a microchip to be used by the incorporating
entities as component for their final products of cellular phones and tablets
The contractual agreement of the incorporating entities provided that the decisions on relevant activities
of Entity C will require the unanimous consent of both entities
Entity A and Entity B have rights to the assets, and obligations for the liabilities, relating to the
arrangement. The ordinary shares of Entity C will be owned by Entity A and Entity B in the ratio of
60:40.
At the end of first operation of Entity C, the financial statements provided the following data:
Inventory 2,000,000
Land 6,000,000
Building 10,000,000
Accounts payable 4,000,000
Note payable 2,000,000
Loan payable 8,000,000
Share capital 2,000,000
Retained earnings 2,000,000
Sales revenue 10,000,000
The contractual agreement of Entity A and Entity B also provided for the following concerning the assets
and liabilities of Entity C:
Entity A owns the land and incurs the loan payable of Entity C.
Entity B owns the building and incurs the note payable of Entity C.
The other assets and liabilities are owned or owed by Entity A and Entity B on the basis of their capital
interest in Entity C.
The sales revenue of Entity C includes sales to Entity A and Entity B in the amount of P2,000,000 and
P4 000 000 respectively. As of the end of the first year, Entity A and Entity B were able to resell 30%
and 60% of the inventory coming from Entity C to third persons.
13. What is the amount of total assets to be reported by Entity A concerning its interest in Entity C?
A. 10,800,000
B. 6,000,000
C. 7,200,000
D. 10,000,000
14. What is the amount of sales revenue to be reported by Entity A concerning its interest in Entity C?
A. 4,600,000
B. 4,200,000
C. 6,000,000
D. 5,000,000
Number 15
Federal Land and SMDC establish a joint arrangerlent in an incorporated entity, Star Inc. The assets
and liabilities of Star Inc, will be in the name of the said established entity. The activities of the
arrangement will be decided by its own board of directors. The tights of Federal Land and SMDC are
limited only to the net assets of Star Inc. How shall SMDC account for its investment in Star Inc.?
A. It shall be accounted for using proportionate consolidation.
B. It shall be accounted for as joint venture.
C. It shall be accounted for as joint operation.
D. It shall be accounted for investment in trading securities.
Page 5
Numbers 16 and 17
On January 1, 2018 Entity A, a public entity, and Entity B, a public entity, incorporated Entity C by
investing P6,000,000 and P4,000,000 for capital interest ratio of 60:40. The contractual agreement of
theincorporating entities provided that the decisions on relevant activities of Entity C will require the
unanimous consent of both entities. Entity A and Entity B will have rights to the net assets of Entity C.
The financial statements of Entity C provided the following data for 2018:
Entity C reported net income of P2,000,000 for 2018 and paid cash dividends of P800,000 on December
31, 2018.
During 2018, Entity C sold inventory to Entity A with gross profit of P100,000. Eighty percent of those
inventories were resold by Entity A to third persons during 2018 and the remainder was resold to third
persons during 2019.
On July 1, 2018. Entity C sold a machinery to Entity B at a loss of P40.000. At the time of sale, the
machinery has remaining useful life of 2 years

16. What is the investment income to be reported by Entity A for the year ended December 31, 2018?
A. 1,206,000
B. 1,212,000
C. 1,188,000
D. 1,194,000
17. What is the balance of Investment in Entity C to be reported by Entity B on December 31, 2018?
A. 4,492,000
B. 4,482,000
C. 4,476,000
D. 4,496,000
Numbers 18 and 19
On January 1, 2018, an entity sold a car to a customer at a price of P400,000 with a production cost of
P300,000. It is the entity's policy to employ installment method to recognize gross profit from installment
sales.
At the time of sale, the entity received cash amounting to 25% of the selling price and old car with trade-
in allowance of P50,000. The said old car has fair value of P150,000. The customer issued a 5-year
note for the balance to be payable in equal annual installments every December 31 starting 2018. The
note payable is interest bearing with 10% rate due on the remaining balance of the note.
The customer was able to pay the first annual installment and corresponding interest due. However,
after the payment of the second interest due, the customer defaulted on the second annual installment
which resulted to the repossession of the car sold with appraised value of PI10,000. On December 31,
2019, the repossessed car was resold for P140,000 after reconditioning cost of P10,000.
18. What is the entity's realized gross profit for the year ended December 31, 2018?
A. 50,000
B. 120,000
C. 108,000
D. 128,000
19. What is the loss on repossession for the year ended December 31, 2019?
A. 30,000
B. 20,000
C. 10,000
D. 40,000
Number 20
If the sale transaction provides for periodic installments over an extended period of time and the
collectability of the sales price cannot he reasonably estimated, what method of revenue recognition is
the most appropriate?
A. Cost recovery method
B. Accrual basis
C. Installment method
D. Cash basis

Numbers 21 and 22
On January 1, 2018, an entity granted a franchise agreement to a franchisee. The contract provided
that the franchisee shall pay an initial franchise fee of P500,000 and on-going payment of royalties
equivalent to 8% of the sales of the franchisee.
On January I, 2018, the franchisee paid downpayment of P200,000 and issued a 3-year noninterest
bearing note for the balance payable in three equal annual installments starting December 31,2018.
The note has present value of P240, 183 with effective interest rate of 12%
On June 30, 2018, the entity completed the performance obligation of the franchise at a cost of
P352,146. Aside from that, the entity incurred indirect cost of P22,009.
The franchisee started operation on July 1, 2018 and reported sales revenue amounting to P50,000 for
the year ended December 31. 2018. The franchisee paid the first installment on its due date
21. If the collection of the note receivable is reasonably assured, what is the gross profit to be
recognized by the entity for the year ended December 31, 2018 im velation to the initial franchise fee?
A. 66,028
B. 44,014
C. 22,009
D. 88,037
22. If the collection of the note receivable is reusonably assured, whiat is the net income to be reported
by the entity for the year ended December 31,2018
A. 98,850
B. 94,850
C. 70,028
D. 92,037
Number 23
Under IFRS 15, in which of the folowing instances shall an entity recognize revenue through satisfaction
of performance obligation at a point in time instead of satisfaction of performance obligation over time?
A. The customer simultaneously receives and corsunes the benefits provided by the entity's
performance as the entity performs.
B. The entity's performance creates or enhances an asset thet the customer controis as the asset is
created or enhanced.
C. The entity's performance does not create an asset with an altermative use to the entity and the entity
has an enforceable right to payment for performance completed to date.
D The entity has transferred the legal tile, control and physical possession of the asset at a specific
date.
Numbers 24, 25 and 26
On January 1, 2018, BBB Company started the construction of a building at a fixed contract price of
P2.000,000. On the same date, the customer paid a mobilization fee equal to 5% of contract price that
will be deductible from the first billing. The outcome of construction contract cannot be estimated reliably
During 2018, the entity billed the customer equivalent to 30% of the contract price. During 2019, the
entity billed again the customer amounting to 20% of the contract price. During 2020, the entity billed
again the customer amounting to 40% of the contract price. The remaining billing was made at the year
of completion of the project. The entity provided the following data concerning the direct costs related
to the said project:

The entity made collection from the customer at the end of 2018, 2019 and 2020, in the amount of
P240,000, 900,000, 360,000, respectively.
Cumulative costs incurred at year-end
2018 720,000
2019 1,600,000
2020 1,740,000
Remaining estimated costs to complete at year-end
2018 1,680,000
2019 500,000
2020 100,000
24.What is the realized gross profit for the year ended December 31, 2019?
A. 100,000
B. 400,000
С. 300,000
D. 0
25. What is the excess of construction in progress over progress billings or excess of progress billings
over construction in progress on December 31,2020?
A. 60,000 excess billings
B. 160,000 excess billings
C. 40,000 excess construction in progress
D. 100,000 excess construction in progress
26. What is the balance of accounts receivable on December 31, 2020?
A. 300,000
B. 200,000
C. 240,000
D. 100,000
Number 27
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 recognised as an expense immediately.
B. The expected profit shall be recognized as a profit immediately
C. The expected loss shall be recognised as an expense taking into account the percentage of
completion as of the end of the period.
D. The expected loss shall be recognized as a profit taking into account the percemtage of
completion as of the end of the period.

Number 28
When the outcome of a construction contract cannot be estimated reliably, what accounting method
shall be used by the long-term constructor for the recognition of construction revenue and construction
cost?
A. Percentage of completion method
B. Cost recovery method
C. Installment method
D. Accrual basis
Number 29 and 30
Siargao Company set up a branch in a province. The entity and its branch provided the following data
for the second year of branch operation:
Home Office Branch
Sales revenue to outside 2,000,000 1,000,000
customer
Beginning inventory 100,000 60,000
Purchases from outside 800,000 200,000
supplier
Shipment to branch 400,000
Shipment from home office 500,000
Ending inventory 160,000 100,000
Operating expenses 300,000 80,000
 The home office to branch markup based on cost is 25% this year and last year
 20% of the beginning inventory of the branch came from outside supplier
 24% of the ending inventory of the branch came from last year’s shipment from the home office
while 50% of the ending inventory of the branch came from current year’s shipment from the
home office.
29. What is the net income reported by the branch in its separate income statement for the current
year?
A. 260,000
B. 248,000
C. 228,000
D. 190,000
30. What is the ending inventory to be reported by the entity in its combined statement of financial
position?
A. 256,000
B. 230,000
C. 260,000
D. 245,200
Number 31
What is the main reason for the difference between the branch’s net income reported by the branch
and the true branch’s income reported by the home office?
A. Because of overstatement of branch’s cost of sales for goods coming from outsiders
B. Because of overstatement of branch’s cost of sales for goods coming from home office
C. Because of overstatement of total goods available for sale coming from home office
D. Because of overstatement of branch’s ending inventory coming from home office
Number 32
Under IFRS 3, in a business combination achieved in stages, if the acquisition date fair value of the net
of the acquisition-date amounts of the identifiable assets acquired and the liabilities of the acquiree is
lower than the aggregate of the (1) acquisition date fair value of the consideration transferred by the
acquirer; (2) amount of non controlling interest measured at fair value or proportionate share; and (3)
acquisition date fair value of acquirer’s previously held equity interest in the acquire, the difference shall
be accounted for by the acquirer in its consolidated financial statement as
A. Goodwill classified as noncurrent asset not subject to amortization but subject to annual
impairment loss
B. Gain on bargain purchase to be recognized as part of profit or loss
C. Expense incurred
D. Deduction directly to retained earnings
Number 33 and 34
Entity A acquired the net assets of entity B by issuing 10,000 ordinary shares with par value of P20 and
bonds payable with face amount of P1,000,000. The bonds are classified as financial liability at
amortized cost.
At the time of acquisition, the ordinary shares are publicly quoted at P40 per share. On the other hand
the bonds payable are trading at 110.
Entity A paid P20,000 shares issuance costs and P40,000 bond issue costs. Entity A also paid P80,000
acquisition related costs and P60,000 indirect costs of business combination.
Before the date of acquisition, Entity A and Entity B reported the ff data:
Entity A Entity B
Current Assets 2,000,000 1,000,000
Noncurrent Assets 4,000,000 2,000,000
Current Liabilities 400,000 800,000
Noncurrent Liabilities 600,000 1,000,000
Ordinary shares 1,000,000 400,000
Share premium 2,400,000 600,000
Retained earnings 1,600,000 200,000
At the time of acquisition of the current assets of Entity A have fair value of P2,400,000 while the
noncurrent assets of Entity B have fair value of P2,600,000. On the same date, the current liabilities of
entity B have fair value of P1,200,000 while the non current liabilities of Entity A have fair value of
P1,000,000.
33. What is the goodwill or gain on bargain purchase arising from business combination?
A. 100,000 goodwill
B. 300,000 Gain on bargain purchase
C. 240,000 goodwill
D. 140,000 gain on bargain purchase
34. What is entity A’s amount of total liabilities after business combination
A. 4,480,000
B. 5,020,000
C. 4,640,000
D. 4,260,000
Number 35 and 36
On January 1,2018, Entity A acquired 30,000 out of 100,000 outstanding ordinary shares of entity B for
P90,000 or 30% interest. For the six months ended june 30,2018, entity B reported net income of
P40,000.
On July 1,2018, entity A acquired additional 60,000 ordinary shares of entity B or 60% interest at a
price of P4 per share or total cost of P240,000. Entity A paid P20,000 acquisition related costs and
P10,000 indirect costs of business combination.
The acquisition price per share of the additional shares clearly reflected the fair value of the existing
interest of entity A in entity B. It is the policy of entity A to initially measure the noncontrolling interest in
net assets of the acquire at fair value. The fair value of the noncontrolling interest in net assets of the
acquire is reliably measured at P50,000.
At the acquisition date, the net assets of entity B were reported at P400,000. An asset of entity B was
overvalued by P50,000 while one liability was overvalued by P30,000.
35. What is the gain on remeasurement of the existing Investment in entity B as a result of step
acquisition?
A. 18,000
B. 30,000
C. 24,000
D.12,000
36. What is the goodwill or gain on bargain purchase as a result of the business combination?
A. 18,000 goodwill
B. 20,000 gain on bargain purchase
C. 24,000 goodwill
D. 30,000 goodwill
Number 37 and 38
On January 1, 2018, entity A purchased 70% of outstanding ordinary shares of entity B at a price of
P420,000. The result of the business combination on the date of acquisition was 42,000 gain on
bargain purchase. On January 1,2018 entity A reported retained earnings of P4,000,000 while entity B
reported retained earnings of P400,000.
All the assets and liabilities of entity B are fairly valued except machinery which is undervalued by
P160,000 and inventory which is overvalued by P20,000. The said machinery has remaining useful life
of 4 years while 40% of the said inventory remained unsold at the end of 2018.
For the year ended December 31,2018, Entity A reported net income of P2,000,000 and declared
dividends of P300,000 in the separate financial statements while entity B reported net income of
P300,000 and declared dividends of P40,000 in the separate financial statements.
Entity A accounted the investment in entity B using cost method in the separate financial statements.
37. What is the noncontrolling interest net income on December 31,2018?
A. 90,000
B. 98,400
C. 69,600
D. 81,600
38. What is the consolidated net income attributable to parent shareholders for the year ended
December 31,2018?
A. 2,204,400
B. 2,324,400
C. 2,282,400
D. 2,190,400
Number 39 and 40
On January 1,2019, entity A acquired 60% of outstanding ordinary shares of entity B at a gain on
bargain purchase of P80,000. For the year ended December 31,2020, entity A and entity B reported
sales revenue of P4,000,000 and P2,000,000 in their respective separate income statements. At the
same year, Entity A and Entity B reported cost of goods sold of P2,400,000 and P1,400,000 in their
respective separate income statements.
During 2019, entity A sold inventory to entity B at a selling price of P560,000 with gross profit rate of
40% based on cost. On the other hand, entity B sold inventory to entity A at selling price of P800,000
with gross profit rate of 30% based on sales during 2020.
On December 31,2019, 25% of the goods coming from entity A remained in entity B’s inventory but all
were eventually sold to third persons during 2020. As of December 31,2020, 40% of the goods coming
from entity B were eventually sold to third persons.
For the year ended December 31,2020, entity A reported net income of P1,120,000 while entity B
reported net income of P400,000 and distributed dividends of P100,000. Entity A accounted for its
inventory in entity B using cost method in its separate financial statements.
39. What is the consolidated sales revenue for the year ended December 31, 2020?
A. 5,200,000
B. 4,640,000
C. 6,000,000
D. 5,440,000
40. What is the consolidated cost of goods sold for the year ended December 31,2020?
A. 3,800,000
B. 3,104,000
C. 2,896,000
D. 3,904,000
Numbers 41 and 42
On January 1,2019, entity A acquired 80% of outstanding ordinary shares of entity B at a gain on
bargain purchase of P360,000. The ff intercompany transactions occurred for between the two entities:
 On January 1, 2019, entity B sold a land to entity A with a cost of P2,000,000 at a selling price
of P2,200,000. The land was eventually sold by entity A to third persons during 2019.
 On January 1,2019, Entity A sold a white machinery to entity B with a cost of P400,000 and
accumulated depreciation of P80,000 at a selling of P360,000. The remaining life of machinery
from the date of sale was 16. The residual value of white machinery is immaterial.
 On July 1,2020, Entity B sold a black machinery to entity A at with a cost of P540,000 and
accumulated depreciation of P360,000 at a selling price of P120,000. The remaining life of the
machinery from the date of sale was 3. The residual value of black machinery is immaterial.
For the year ended December 31,2020, entity A reported net income of P1,600,000 while entity B
reported net income of P1,000,000 and distributed dividends of P300,000. Entity A accounted for its
inventory in Entity B using cost method in its separate financial statements.
41. What is the non controlling interest in net income for 2020?
A. 248,000
B. 210,000
C. 250,000
D. 208,000
42. What is the consolidated net income attributable to parent shareholders for 2020?
A. 2,412,500
B. 2,650,000
C. 2,197,500
D. 2,362,500
Numbers 43 and 44
On January 1,2020 entity A acquired 70% of outstanding ordinary shares of entity B at a price of
P1,000,000. Entity A incurred P200,000 cost related to acquisition. At acquisition date, the book value
of net assets of entity B is P2,500,000 but building with useful life of 10 years is overstated by P500,000.
For the year ended December 31,2020, entity B reported net income of P350,000 and declared
dividends in the amount of P100,000. The fair value of its investment in entity B is measured at
P1,700,000. On December 31,2020.
43. In the separate financial statement of entity A., the investment in entity shall be reported on
December 31,2020 at what amount under equity method?
A. 1,610,000
B. 1,410,000
C. 1,210,000
D. 1,200,000
44. In the separate financial statement of Entity A, what is its income in relation to investment in entity
B for the year ended December 31,2020 under equity method?
A. 280,000
B. 600,000
C. 100,000
D. 210,000
Number 45
Which of the following items will not affect the acquisition year’s consolidated net income in a
business combination?
A. Stock issuance cost
B. Direct cost of business combination
C. Gain on bargain purchase
D. Amortization of difference between fair value and book value of net assets of acquire
Number 46 and 47
Lastikman Company, a local company,bought raw materials as ingradients in its products from
Superman company, a US company, 35,000 US dollars in 2020, Pertinent exchange rates relating to
this transaction are as follows:
Buying Rate Selling 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
46. What is the foreign exchange gain or (loss) of Lastikman Company for 2020?
A. (78,750)
B. (75,250)
C. 78,750
D. 75,250
47. What is the value of the inventory, assuming it’s not yet sold, as of settlement date?
A. 1,652,000
B. 1,660,750
C. 1,732,500
D. 1,653,750
Numbers 48 and 49
Kline Company purchased inventory on November 30,2018 for 10,000 dollars payable March 1,2019.
On December 1,2018, the entity entered into a forward contract to purchase 10,000 dollars and to be
delivered on February 28,2019 to hedge the purchase of inventory on November 30,2018. The relevant
exchange rates are:
11/30/18 12/01/2018 12/31/2018 02/28/19 03/01/2019
Spot rate 45 46 50 51 55
Forward buying 90-days 44 43 42 41.5 45
Forward selling 90-days 47 48 42.5 44.5 46
Forward buying 60-days 50 51.5 48.5 54 50
Forward selling 60-days 52 53.5 51 55 51.5
Forward buying 30-days 55 50.1 49.5 56.5 47.5
Forward selling 30-days 54 51 52.5 53 56
48. What amount of foreign currency transaction gain from forward contract should be included in net
income for 2018?
A. 50,000
B. 40,000
C. 30,000
D. 0
49. What amount of foreign currency transaction loss should be included from the revaluation of
accounts payable for 2018?
A. 40,000
B. 50,000
C.10,000
D. 0
Numbers 50 and 51
On November 1, 2020, Entity A entered into a firm commitment with a Japanese Company for the
export dried mangoes with a contract price of 1,000 Yen. The goods will be delivered by Entity A on
January 30, 2021. On the same day, in order to protect itself from the risk of changes in fair value of
the firm commitment due to changes in underlying foreign currency, Entity A entered into a forward
contract with a bank for the sale of 1,000 Yen at the forward rate on November 1, 2020. IAS 39 provides
that hedge of foreign currency risk of a firm commitment may be accounted for as either fair value
hedge or cash flow hedge. Entity A selected to account for the hedge of the firm commitment using fair
value hedge. The following direct exchange rates are provided:
November December 31, 2020 January 30,
1,2020 2021
Buying spot rate
P10 P13 P12
Selling spot rate
P13 P15 P16
Forward buying 90-
days
P11 P14 P15
Forward selling 90-
days
P13 P16 P17
Forward buying 60- I
days
P14 P17 P16
Forward selling 60-
days
P15 P18 P14
Forward buying 30-
days
P11 P15 P12
Forward selling 30-
days
P13 P11 P14

50. What is the book value of firm commitment asset/(liability) on December 31, 2020?
A. 4,000 asset
B. 3,000 asset
C. 2,000 liability
D. 1,000 liability
51. What is the amount recognized as sales on January 30, 2021?
A. 14,000
B. 12,000
C. 13,000
D. 11,000
Numbers 52
On November 1, 2020, Entity A entered into a forward contract to buy $2,000 with a bank to the changes
in the value of USA Dollar. It will be delivered on January 31, 2021. The following direct exchange rates
are provided by the bank:
 11/01/2020 12/31/2020 01/31/2021

Buying spot P40 P37 P38

Selling spot P45 P50 P48

P38 P32 P35

Buying forward-30
days

P34 P41 P36

Selling forward-30
days

Buying forward-60 P43 P35 P46

days

Selling forward-60 P40 P41 P43

days

P42 P40 P38

Buying forward-90
days

Selling forward-90 P43 P40 P36

days

What is the foreign currency gain or (loss) for the year ended December 31, 2020?
A. 2,000 loss
B. 4,000 loss
C. 6,000 gain
D. 8,000 gain
Numbers 53 and 54
Entity A owns majority of the outstanding ordinary shares of Entity B which is operating in United States
of America wherein the functional currency is the USA $. However, the presentation currency of Entity
B is the Philippine Peso because that is the presentation currency of Entity A. For the year ended
December31, 2020, Entity B presented its Statement of Financial Position in its functional currency of
USA $:
Current assets $20,000 Current Liabilities $20,000
Noncurrent assets 80,000 Noncurrent Liabilities 40,000
Ordinary Share Capital 10,000
 Preference Share Capital 16,000

Retained Earnings 14,000

Total Assets $100,000 Total Liabilities and Shareholders $100,000

 B reported $2,000 net income during 2020 and declared dividends in the amount of $400 on
December 1, 2020.

 The translated amount of retained earnings on December 31, 2019 is P600,000.

The following direct exchange rates are provided:

January 1, 2019 P40
December 31, 2019 P43
December 1, 2020 P41
December 31, 2020 P45
Average rate 2020 P44

53. What is the translated retained earnings balance on December 31, 2020?
A. 600,000
B. 671,600
C. 688,000
D. 563,600
54. What is the cumulative translation credit that should to be presented in the statement of financial
position on December 31, 2020?
A. 88,400
B. 10,400
C. 53,600
D. 49,200
Number 55
Under IAS 21, foreign exchange differences arising from translating foreign currency denominated
transaction to functional currency shall be recognized in
A. Profit or loss
B. Other comprehensive income with reclassification adjustment
C. Retained earnings
D. Other comprehensive income without reclassification adjustment
Number 56
Unrealized holding gain or loss on intrinsic value (effective portion) of derivatives designated as cash
value hedge shall be recognized in
A. Profit or loss
B. Other comprehensive income with reclassification adjustment
C. Retained earnings
D. Other comprehensive income without reclassification adjustment

Number 57
CCC, a non-profit organization, received the following pledges
Unrestricted 500,000
Restricted for Acquisition of Equipment 375,000
All pledges are legally enforceable. However, CCC's experience indicates that 10% of all pledges may
prove to be uncollectible.
What amount should CCC report as pledges receivable, net of any required allowances?
A. 337,500
B. 450,000
C. 787,500
D. 875,000
Number 58
Doctor Hospital, a nonprofit hospital affiliated with RCF College, had the following cash receipts for
2020:
Patient service revenue 1,500,000
Contribution from donor to be invested indefinitely (endowment fund) 500,000
Tuition fees from nursing school 100,000
Dividends received from permanent investments 160,000
The dividends received are restricted by the donor for hospital building improvements. No
improvements were made during 2020.
In the hospital's statement of cash flows for 2020, what amount would be included in the net cash
provided (used) by operating activities?
A. 1,760,000
B. 1,600,000
C. 2,100,000
D. 1,500,000
Number 59
Department of Health (DOH) received Notice of Cash Allocation in the amount of P100,000 from
Department of Budget and Management. DOH made a total cash disbursements in the amount of
P95,000.
What is the journal entry to recognize reversion of unused Notice of Cash Allocation by DOH in its
books?
A. Debit Subsidy Income from National Government P5,000 and credit Cash-MDS, Regular P5,000.
B. Debit Retained Earnings of DFA P5,000 and credit Cash-MDS, Regular P5,000.
C. Debit Expenses of DFA P5,000 and credit Cash-MDS, Regular P5,000.
D. Debit Investment of DFA P5,000 and credit Cash-MDS, Regular P5,000.
Number 60
The Bureau of Treasury received P20,000 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 P20,000 and Credit Cash-Treasury/Agency Deposit, Regular
P20,000.
B. Debit Cash in Bank, Local Bank P20,000 and Credit Miscellaneous Income of DA P20,000
C. Debit Cash in Bank, Local Bank P20,000 and Credit Savings of DA, Regular P20,000
D. Debit Cash in Bank, Local Bank P20,000 and Credit Cash-Collecting Officer, DA P20,000.
Numbers 61 and 62
Bacolod Company recently set-up its standard costs for its direct labor. The entity sets the benchmark
at 2 direct labor hours per product at a standard rate of P100 per direct labor hour.
During the year, the entity manufactured 10 products using 30 direct labor hours at total direct labor
costs of P2,400 or P80 per direct labor hour.

61. What is the direct labor rate variance?

A. 600 favorable
B. 400 unfavorable
C. 200 favorable
D. 800 unfavorable
62. What is the direct labor efficiency variance?
A 400 favorable
B. 1,000 unfavorable
C. 600 unfavorable
D. 200 favorable
Number 63
Simple Company employs actual costing for its production. The entity provided the following data
concerning its production during the year:
Decrease in direct materials during the year 500,000
Labor cost during the year 400,000
Actual factory overhead during the year 300,000
Increase in work in process during the year 200,000
Decrease in finished goods during the year 100,000
What is the cost of goods manufactured during the year?
A. 1,200,000
B. 1,000,000
C. 1,400,000
D. 1,100,000
Number 64
If the under or over applied factory overhead is significant, it shall be closed to
A. Cost of goods sold only
B. Finished goods and cost of goods sold proportionately
C. Work in process, finished goods and cost of goods proportionately
D. Raw materials, work in process, finished goods, and cost of goods sold proportionately
Number 65
In job order costing, normal rework cost which is attributable to a specific job shall be
A. Expensed as incurred
B. Charged or capitalized to that particular job.
C. Closed to factory overhead account
D. Debited to work in process account.
Numbers 66 and 67
Tacloban Company is employing process costing regarding its production cycle.
Conversion costs are added uniformly during the production process while direct materials are added
at the start of production process.
The production data of the entity during the year are:
Beginning Work in Process Inventory 10,000 units (30% incomplete as to conversion costs)
Units started during the year
Ending Work in Process Inventory
30,000 units
5,000 units (75% incomplete as to conversion costs)
 There is no spoilage during the period.

 .The costs of beginning inventory consist of P103,000 costs of direct materials and P107,500
conversion costs.

 The total manufacturing costs consist of P240,000 costs of direct materials and P146,250
conversion costs.

66. What is the cost per unit of direct material under FIFO process costing?
A. 10
B. 9
C. 8
D. 7
67. What is the cost per unit of conversion cost under FIFO process costing?
A. 5
B. 9
C. 8
D. 7
Numbers 68, 69, and 70
JPG Company is employing process costing regarding its production cycle.
Conversion costs are added uniformly during the production process while direct materials are added
at the start of the process. Normal spoilage is l0% of units started during the year.
The entity is conducting inspection when the production process is at 45% of conversion cost. The
entity provided the following production data during the year:
Beginning Work in Process Inventory 20,000 units (40% incomplete as to conversion costs)
Units started during the year 80,000 units
Ending Work in Process Inventory 10,000 units (80% complete as to conversion costs)
Units completed during the period 76,000 units
80,000 units
68. What is the equivalent unit of production for direct material under average process costing?
A. 100,000
B. 82,300
C. 76,500
D. 86,000
69. What is the equivalent unit of production for conversion cost under average process costing?
A. 89,300
B. 90,300
C. 86,500
D. 92,300
70. What is the equivalent unit of production for conversion cost under FIFO costing?
A. 78,300
B. 82.500
C. 74,900
D. 77,300