PROBLEM 1

Following data pertain to Matiisin Company which sales appliances on an

installment basis:

2015 2016 2017

Installment sales P390,00 P420,000 P480,000
Cost of sales 237,900 243,600 288,000

From Sales Made in:

Installment accounts receivable balances 2015 2016 2017
January 1, 2017 P24,000 P300,000
December 31, 2017 - P60,000 P320,00

Repossessions on defaulted accounts were made during 2010, as follows:

From Sales Made in:
2016 2017
Account balances P10,000 P5,000
Net resale value of repossessed merchandise 4,500 3,500

1. The total realized gross profit in 2017 on the collections of 2015, 2016
and 2017 sales was:
A. P9,360 C. P96,600
B. P62,000 D. P167,960

2. The net gain (loss) on repossession on defaulted sales of 2016 and 2010
was:
A. P500 C. P800
B. (P800) D. (P1,300)

SOLUTION
QUESTION 1 (D)
2015: P24,000 −P0 = P24,000 collections × 39% P9,360
2016: P300,000 −P60,000 − P10,000 defaults = P230,000 × 43% 96,600
2017: P480,000 −P320,000 − P5,000 defaults = P155,000 × 40% 62,000
Realized gross profit on installment sales in 2017 P167,960

QUESTION 2 (B)

2016 2017
Net resale value of repossessed P4,500 P3,500
merchandise
Less: unrecovered cost:
Unpaid balance P10,000 P5,000
Less: DGP – 2016: P10,000
× 42% (4,200) P5,800
Less: DGP-2017: P5,000 ×
40% (2,000) 3,000
Net gain (loss) (P1,300) P500 (P800)

PROBLEM 2
Apo Supply Company is engaged in merchandising both at Home Office in Makati,
Metro Manila and a branch in Davao. Selected accounts in the trial balances
of the Home Office and the Branch at December 31, 2018 follow:

Debits Home Office Branch

Inventory, January 1, 2018 P23,000 P11,550
Davao Branch 58,300
Purchases 190,000 105,000
Freight-in from Home Office 5,500
Sundry expenses 52,000 28,000

Credits
Home office P58,300
Sales P155,000 140,000
Sales to Branch 110,000
Allowance for branch inventory, January 1, 1,000
2017.

Additional information:

 Davao branch receives all its merchandise from the Home Office. The
Home Office bills the goods at cost plus 10% mark-up. At December 31,
2018, a shipment with a billing value of P5,000 was in transit to the
Branch. Freight on this shipment was P250 which is to be treated as
part of inventory.
 December 31, 2018 inventories excluding the shipment in transit, are:
Home Office, at cost P30,000
Davao Branch, at billed value (excluding freight 10,400
of P520)

3. Net income of Davao Branch? (adjusted)

A. P10,470 C. P12,470
B. P11,470 D. P13,470

SOLUTION
QUESTION 3 (A)
Sales P140,000
Less: Cost of sale
Inventory, 1/1/18 P11,550
Purchases 105,000
Freight-in 5,500
Shipment in transit (P5,000 + 250) 5,250
Cost of goods sold available for sale P127,300
Less: inventory, 12/31/18, (P10,400 +P520 16,170 111,130
+P5,250)
Gross profit P28,870
Less: Expenses 28,000
Net income per branch books/ unadjusted P870
Add: overvaluation of cost of sales 9,600
Net income of Davao Branch, adjusted P10,470

PROBLEM 3
PSY Corporation owns 90% of the outstanding common shares of SGV Company. On
January 2, 2016, office equipment that had a carrying value to SGV Company
P480,000 and has a remaining life of 10 years was sold to PSY Corporation for
P400,000. On the other hand, last August 31, 2017, PSY Corporation sold a
second-hand delivery van to SGV Company at a gain of P30,000 (remaining life –
5 years)

Included in the January 1, 2107 inventory of PSY Company was merchandise

inventory worth P65,000 while SGV Company had P80,000 on its December 31, 2017.
These inventories came from inter-company sales and purchases. PSY Corporation
included a mark-up of 25% on cost while SGV Company charged a 30% mark-up on
sales.

Each of the two companies has net income in 2016 and 2017 as follow:

2016 2017
PSY Corporation P1,200,000 P1,500,000
SGV Company 900,000 1,000,000

4. What is the amount of consolidated net income attributable to controlling

interest in 2016?
A. P2,073,900 C. P2,041,350
B. P2,061,300 D. P2,057,250

5. What is the amount of consolidated net income attributable to controlling

interest in 2017?
A. P2,366,350 C. P2,398,350
B. P2,369,500 D. P2,377,600

SOLUTION
QUESTION 4 (D)
Net income of parent per books 2016 P1,200,000
Share from net income of subsidiary (per books)- 2016 (P900,000 ×
90%) 810,000
Upstream unrealized loss 2016 (P80,000 × 90%) 72,000
Upstream realized loss 2016 (P8,000 × 90%) (7,200)
Upstream unrealized loss from unsold goods from subsidiary
(P19,500 × 90%) (17,550)
Consolidated net income attributable to parent P2,057,250

QUESTION 5 (A)
Net income of parent per books, 2017 P1,500,000
Share from net income of subsidiary (per books)- 2017 (P1,000,000
× 90%) 900,000
Downstream unrealized gain 8/31,2017 (30,000)
Downstream realized gain 12/31/2017 2,000
Upstream realized loss 2017 (P8,000 × 90%) (7,200)
Upstream realized profit from beginning inventory of the
subsidiary (P19,500 × 90%) 17,550
Downstream unrealized loss from subsidiary ending inventory (16,000)
Consolidated net income attributable to parent P2,366,350
PROBLEM 4

BEBE Corporation has an EUP of 248,750 units. Beginning inventory units of

22,500, 40% incomplete; ending inventory units of 24,000 60% complete.
Conversion cost of beginning inventory of P9,800; current period conversion
costs of P2014,125. The company elects to use weighted average method.

6. What is the total units started in process?

A. P249,350 units C. 235,850 units
B. 258,350 units D. 234,350 units

QUESTION 6 (C)
Completed units 234,350*workback*
Ending inventory (24,000 × 60%) 14,400
Conversion WA EUP 248,750

Beginning inventory 22,500

Started units 235, 850 *workback*
Ending inventory (24,000)
Completed units 234,350

PROBLEM 5

Fred Corp. uses a job-order costing system. At the beginning of May, the
company had two jobs in process with the following costs:

Direct Material Direct Labor Factory overhead

Job #1 P20,400 P3,060 P1,530
Job #2 6,600 1,734 ?

Fred Corp pays its workers P8.50 per hour and applies factory overhead on a
direct labor hour basis.

During May, Fred Corp. employees worked on Job #3. At the end of the month,
P4,284 of factory overhead had been applied to this job. Total Work in Process
at the end of the month was P40,800 and all other job had a total cost of
P23,886.

7. What amount of direct material is included in Job #3?

A. P27,948 C. P8,346
B. P12,852 D. P4,062

QUESTION 7 (D)
Factory overhead Job #1 P1,530
Predetermined Overhead rate ÷ 8.5
Actual direct labor hours 180

Direct labor Job #1 P3,060

Actual direct labor hours ÷ 180
Direct labor rate P17

Total ending work-in process P40,800

Ending work-in process (Job #1&2) (23,886)
Ending work-in process Job #3 16,914
Ending conversion cost, Job #3
Applied overhead Job #3 P4,284
Predetermined OH rate ÷ 8.50
Actual direct labor hours 504hrs
Direct labor rate × P17
Direct labor cost P8,568
Applied overhead Job #3 4,284 (12,852)
Ending materials used P4,062

PROBLEM 6

Bancil, Absalon and Rodriguez are partners in THE BAR Partnership sharing
earnings in the ratio of 5:3:2 respectively. As of December 31, 2016, their
capital balance showed P95,000 for Bancil, P80,000 for and, P60,000 for
Rodriguez.

On January 1, 2017 the partnership admitted Goce as a new partner and according
to the partnership agreement, Goce will contribute P80,000 in cash to the
partnership and will also pay P10,000 for 15% of Absalon’s share and to change
the name of the partnership into “THE GAY BAR PARTNERSHIP”. Goce will share 20%
in the earnings while the ratio of the original partners will remain
proportionately the same as before Goce admission, the total capital of the
partnership will be P330,000 while Goce’ capital account will be P70,000.

8. The balance of Absalon’s capital account after the admission of Goce would
be:
A. P81,100 C. P74,600
B. P79,100 D. P72,600

QUESTION 8 (B)
Agreed capital P330,000
Less: Total contributed Capital
Total capital of old partner P235,000
Investment of new Partner 80,000 (315,000)
*Goodwill P15,000

Bancil Absalon Rodriguez Goce

Capital Bal. P95,000 P80,000 P60,000
Invst. of new partner P80,000
Purchased of interest from Absalon (12,000) 12,000
*Goodwill to old partner 7,500 4,500 3,000
Bonus to old partner 11,000 6,600 4,400 (22,000)
Capital Bal. after admission of P113,500 P79,100 P67,400 P70,000
Goce

PROBLEM 7

The accountant of PAZ Corp. prepared a statement of affairs. Total assets which
there are no claims or liens are expected to produce P2,100,000. Unsecured
claims of all classes totaled to P3,150,000. The following data are claims
deemed outstanding:

a) Accrued salaries, P45,000

b) Unrecorded not for P30,000, on which P1,800 of interest has accrued held
by Alex. Co.
c) A note for P90,000 secured by P120,000 receivable, estimated to be 60%
collectible by Reina Co.
d) A P45,000 note on which P900 interest has accrued held by Bernadette
Property with a book value of P30,000 and a market value of P54,000 is
pledged to guarantee payment of principal and interest.
e) Unpaid income taxes of P105,000.

9. What is the amount realized by partially secured creditors?

A. P31,800 C. P58,500
B. P74,700 D. P83,700

PROBLEM 8

BANCIL BUNGOGSALANA Corporation acquired 70% of JAVY MATONSASELDA Company’s

Common stock on December 31, 2016. Balance sheet data for the two companies
immediately following the acquisition follows:

Item BANCIL BUNGOGSALANA JAVY MATONSASELDA

Corp. Co.
Cash P44,000 P30,000
Accounts Receivable 110,000 45,000
Inventory 130,000 70,000
Land 80,000 25,000
Building equipment 500,000 400,000
Less: Accumulated Depreciation (223,000) (165,000)
Investment in DOMIG CUTE 150,500
Total Assets P791,500 P405,000
Accounts Payable P61,500 P28,000
Taxes Payable 95,000 37,000
Bonds Payable 280,000 200,000
Common stock 150,000 50,000
Retained Earnings 205,000 90,000
Total Liabilities and P791,000 405,000
Stockholder’s equity

AT the date of business combination, the book value of JAVY MATONSASELDA

Company’s net assets and liabilities approximated fair value except for
Inventory, which had a fair value of P85,000, and Land, which had a fair value
of P45,000. The fair value of the non-controlling interest was P64,500 on
December 31, 2016.

10. What amount of the total stockholder’s equity will be reported, on the
consolidated balance sheet immediately after business combination?
(noncontrolling interest is measured at proportionate share of the net assets
of the subsidiary)
A. P355,000 C. P419,500
B. P407,500 D. P495,000
 QUESTION 10 (B)
Consideration Given:
Investment in DOMING CUTE Co. P150,500
FV of the net asset of the Acquire
Cash P30,000
Accounts Receivable 45,000
Inventory 85,000
Land 45,000
Building and Equipment 400,000
Less: Accum. Depreciation (165,000)
Total Asset 440,000
Less: Liabilities
Accounts payable (28,000)
Bonds Payable (37,000)
P175,000
Multiplied by rate of ownership purchased 70% (122,500)
Partial Goodwill P28,000

Partial Goodwill P28,000

Divided by rate of ownership purchased 70%
Full Goodwill P40,000

Full Goodwill P40,000

Partial Goodwill (P28,000)
Goodwill attributable to NCI P12,000

Fair Value of NCI P64,500

Less:Partial Goodwill (12,000)
Value of the non-controlling interest (partial) P52,500

Fair Value of the net asset of DOMING P175,000

Multiplied by NCI ownership rate 30%
Value of the non-controlling interest (partial) P52,500

 The Equity accounts of the Acquire/Subsidiary will be eliminated in the

working paper eliminating entry.
 Only the Equity Account of the Parent Company will be reflected in the
consolidated Balance sheet accounts.

JOEY POGI Corp. Equity Accounts

Common stock P150,000
Retained earnings 205,000
Add:Non-controlling interest 52,500
Total consolidated stockholders equity P407,500