C

A statement of realization and liquidation has been prepared. Totals there from are as follows:
Assets to be realized
P80,000
Assets acquired
40,000
Assets realized
30,000
Assets not realized
90,000
Liabilities to be liquidated
80,000
Liabilities assumed
50,000
Liabilities liquidated
100,000
Liabilities not liquidated
30,000
Supplementary credits
110,000
Supplementary charges
98,000
The ending balances of capital stock and retained earnings are P100,000 and P18,000 respectively. How much was the ending
balance of cash?
a. P35,000
b. P45,000
c. P58,000
d. P59,000
The following data were presented in the statement of affairs for Burnout Company:
Unsecured Liabilities with priority
P160,000
Unsecured Liabilities without priority
1,440,000
Capital Stock
1,000,000
Retained Earnings (Deficit)
(424,000)
Loss on Realization of Assets
720,000
Estimated Liquidation/ Administrative expenses
72,000
The percentage of claims unsecured without priority creditors expect to receive on the liquidation of Burnout Company:
a. 100%
b. 95% c. 85%
d. 90%

A.

Zamboanga Company has been operating a branch in Ozamis. Shipments are billed to the branch at cost. The branch carries its own
account receivables, makes its own collections and pays its own expenses. The transactions for the year are given effect in the
account balances below:
Cash
P 8,500 Account Receivable P25,000
Home office current
35,000 Sales
147,000
Shipment from Home Office
135,000
Expenses
13,500
The branch inventory on December 31, 2005 is P18,500
C1. On January 1, 2006, the branch current account on the books of the home office should have a balance of
a. P25,000
b. P18,000
c. P52,000
d. P27,000
B2. On January 1, 2006, the shipment to branch account on the home office books should have an opening balance of
a. P135,000
b. P0
c. P16,500
d. P35,000

The following were taken from the books of Misamis Company and its branch. The balances are at December 31, 2005:
Home Office
Branch
Sales
P600,000
Expenses
200,000
Shipments from Home office
360,000
Allowance for overvaluation
P72,500
The branch acquires of its merchandise from the home office. The inventories of the branch at billed price are as follows: January 1,
P75,000, December 31, P84,000.
a1. The percentage of profit on cost that the home office uses to bill merchandise shipped to branch is
a. 20% b. 25% c. P120%
d. 25%
a2. The adjusted profit of the branch is
a. P107,500
b. P49,000

c. P58,500

d. P102,000

A partners withdrawal of assets from a partnership that is considered a permanent

reduction in the partners equity is debited to the partners;
a.
Drawing account
c.
Capital account
b.
Retained earnings account
d.
Loan receivable account

The admission of a new partner under the bonus method will result in

a. bonus to the old partners only

but not both
b. bonus to the new partner only

c. bonus either the new partner or the old partners,

d. none of the above

Which of the following results in the dissolution of a partnership?

a. The contribution of additional assets to the partnership by an existing partner.
b. The receipt of share in profit by an existing partner.
c. The withdrawal of a partner from a partnership
d. The winding up of the partnership and the distribution of remaining assets to the
partners.

Total partners equity will not change when a withdrawing partner

a. withdraws assets equal to his capital balance.
b. sells his interest to a new or remaining partner.
c. withdraws assets amounting to less than his capital balance.
d. withdraws assets amounting to greater than his capital balance.

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

If a partner is insolvent, his personal properties shall first be distributed

a. to partnership creditors
b. to the partners by way of additional contributions when the assets of the partnership
were insufficient to settle all obligations.
c. to separate creditors
d. to partnership and separate creditors in the ration of their loan exposures.

b
Mini is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus a bonus of 10% of net income after salaries
& bonus as a means of allocating profit
among the partners. Salaries traceable to the other partners are estimated to be P100,000.
What amount of income would be necessary so that Mini would consider the chances to be equal?
a.
P165,000
c.
P265,000
b.
P290,000
d.
P305,000
c
Pete and Rico share profits after the provision of annual salary allowances of P14,400
and P13,200 respectively in the ratio of 3:2.
However, if partnerships net income is
insufficient to provide for said allowances in full amount, the net income shall be divided equally
between the partners. In 2005, the following errors were discovered:
Depreciation for 2005 is understated by P2,100, and the inventory
on December 31, 2005
is overstated by P11,400. The partnership net income for 2005 was reported to be
P19,500.
The capital accounts of the partners should be increased (decreased) by:
a. Pete, P6,540; Rico, P(6,960)
b. Pete, P(6,540); Rico, P6,960
c. Pete, P(6,750); Rico, P(6,750)
d. Pete, P(6,960); Rico, P6,540

In a business combination, an acquirer's interest in the fair value of the net assets acquired exceed the consideration
transferred in the combination. Under IFRS 3 Business combination, the acquirer should (select one answer)

a. recognize the excess immediately in profit or loss

b. recognize the excess immediately in other comprehensive income
c. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize
any excess immediately in profit or loss
d. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize
any excess immediately in other comprehensive income
The following costs should be included in the consideration transferred in a business combination, according to IFRS 3 Business
Combinations
(1) Costs of maintaining an acquisitions department
(2) Fees paid to accountants to effect the combination
Costs (1)
Costs (2)
Costs (1)
Costs (2)
a.
No
No
c. Yes
Yes
b.
No
Yes
d. Yes
Yes
The following statements about an acquisition are true or false, according to IFRS 3 Business Combinations
(1) The acquirer should recognize the acquiree's contingent liabilities if certain conditions are met.
(2) The acquirer should recognize the acquiree's contingent assets if certain conditions are met.
(1)
(2)
(1)
(2)
a. False
False
c. True
False
b. False
True
d. True
True

Which of the following is NOT included in the cost of an acquired company?

a. Finder's fee for arranging the combination
b. Contingent consideration determinable at the consummation date of the combination
c. Costs of registering and issuing debt securities tot he shareholders of the combined entities.
d. None of the above.
Which of the following accounts would be subject to impairment when recorded in a combination?
a. Inventories
b. Goodwill
c. Patents
d. Equipment
Negative goodwill in a combination should be
a. Offset against goodwill of the acquiring company.
b. Credited to the acquiring company's Additional Paid-In Capital account.
c. Credited to the acquiring company's Profit or Loss account.
d. Credited to a Deferred Credit account.
A merger is a business combination in which
I an established company acquires all the voting ordinary share capital of one or more established companies, which
are then liquidated.
II a new company acquires all the voting ordinary share capital of two or more
established companies, which are then liquidated.
Which of the following is correct?
a. I only b. II only c. I and II d. neither I and II

S Company was acquired by P International on July 1, 2009. P exchanged 40,000 shares of

its P5 par stock, with a market value of P20 per share, for the net assets of S Company and S
Company is dissolved. P incurred the following costs as a result of this transaction:
Direct acquisition costs
P25,000
Indirect acquisition costs
30,000
Stock registration and issuance costs
10,000
The balance sheet of S Co. together with fair values on the day of the acquisition was as
follows:
Carrying value
Fair value
Cash
P 100,000
P100,000
Inventory
300,000
250,000
Equipment under capital lease (net)
200,000
220,000
Property, plant, and equipment:
Land
200,000
180,000

Buildings (net)
300,000
Current liabilities
Liability under capital lease
Bonds payable
Stockholders equity:
Common stock
Paid-in capital in excess of par
Retained earnings

250,000
P1,050,000
P
80,000
150,000
400,000

80,000
140,000
270,000

200,000
100,000
120,000
P1,050,000

Based on the above data:

1.1 The cost of combination __________800,000______________
1.2
The goodwill/gain arising from the business combination ______240,000

P pays 800 to purchase 80% of the shares of S. Fair value of 100% of Ss identifiable net
assets is 600.
1 If P elects to measure non-controlling interests as their proportionate interest in the
net assets of S 120, the consolidated financial statements show goodwill of
___120_____________.
2 If P elects to measure non-controlling interests at fair value and determines that fair
value to be 185, then goodwill of consolidated financial statements is
____385____________.
3 If P elects to measure non-controlling interests at fair value and determines that fair
value to be 110, then goodwill of consolidated financial statements is
____400____________.

On January 1, 2006, Parent company sold to its 80%-owned subsidiary, S Company, a machine
for P60,000. At that time, the machine had a net book value of P45,000. S Company
estimated the remaining useful life of the machine to be six years. Assume that in 2006, P
Company and S Company reported net income of P40,000 and P50,000 respectively, from
their own operation.
1.1 Non-Contolling interest in the subsidiary net income in 2006 ________________
P10,000
1.2 The consolidated net income (parent companys approach) _____________P67,500
1.3 The book value of the machinery on December 31, 2006 for consolidation purposes
____________P37,500
Parent company acquired 80% of the capital stock of S Company on January 1, 2005. On
January 5, 2007, equipment with a cost of P150,000 and accumulated depreciation (based
upon a five year life) of P90,000 was sold by the Parent to S Company for P100,000. The
2007 net income from own operation of the Parent and S Company were P75,000 and
P62,000, respectively .
C 2.1 Non-controlling interest in the subsidiary net income in 2006
a. P4,400
b. P8,400
c. P12,400
d. P4,800
D 2.2 The consolidated net income for 2007
a. P97,000
b. P108,600 c. P124,600
d. P104,600

A 2.3 For consolidation purposes, the equipment will have a book value on December 31,
2007 of
a. P30,000
b. P50,000 c. P60,000
d. P40,000
On January 1, 2003, ABC Co. purchase a computer with an expected life of five years.
On January 1, 2005, ABC Co. sold the computer to DEF Corp. and recorded the following entry:

Cash
39,000
Accumulated depreciation
16,000
Computer Equipment
Gain on sale of equipment

40,000
15,000

DEF Corp. holds 60% of the voting shares of ABC Co. ABC Co.and DEF Corp. reported income
from its own operations of P 45,000 and P 85,000, respectively. There is no change in the
estimated life of the equipment as a result of intercompany sale.
What is the consolidated net income? ______________P86,000

AA Corp. is 80% owned by BB Inc. On January 1, 1999, AA Corp. paid P 100,000 for a truck with an
expected life of ten years and no residual value. AA Corp sold the truck to BB, Inc. on January 1,
2005. During the preparation of consolidated working paper for 2005, the following working
paper entry was made to eliminate the effects of the intercompany truck sale:
Truck
48,000
Gain on sale of truck
12,000
Depreciation Expense
Accumulated Depreciation
What amount of
_______________P13,000

depreciation

expense

3,000
57,000
was

recorded

by BB

Inc.

during

2005?

Baxter Corporation master budget calls for the production of 5,000 units of product
monthly. The master budget includes indirect labor of P144,000 annually; Baxter
considers indirect labor to be a variable cost. During the month of April, 4,500 units
of product were produced, and indirect labor costs of P10,100 were incurred. A
performance report utilizing flexible budgeting would report a budget (controllable
variance for indirect labor:
a. P1,900 unfavorable
c. P1,900 favorable
b. 700 favorable
d. 1,000 unfavorable

Espiritu Construction Co. has used the cost-to-cost percentage of completion method
of recognizing revenue. Tony Espiritu assumed leadership of the business after the
recent death of his father, Howard. In reviewing the records, Espiritu finds the
following information regarding a recently completed building project for which the
total contract was P2,000,000.
Gross profit (loss)
Cost incurred

2005
P75,000
360,000

2006
P140,000
?

2007
P (20,000)
820,000

Espiritu wants to know how effectively the company operated during the last year 3
years on this project and, because the information is no complete, has asked for
answers to the following questions.
What was the total estimated gross profit on the project by the end of 2006?
a. P215,000
b. P358,333
c. P 195,000
d. Incomplete data
The Mindanao Sales Company employs the perpetual inventory basis in the accounting
for new cars. On August 15, 2007, a new car costing P247,500 and with a price of
P330,000 was sold to Carla. The company granted Carla an allowance of P127,500
on the trade-in of her old car, the current value of which was estimated to be
P122,550; the balance of P202,500 was payable as follows: P52,500 cash at the time
of purchase and twenty monthly payments of P7,500 starting September 1, 2007. (use
two decimal places for percentage)
The amount of realized gross profit on December 31, 2007 is:
a. P19,684.73
b. P41,766.93
c. P48,924.93

d. P56,082.93

EFG Inc., franchiser, entered into franchise agreement with HIJ Inc., franchise on July 1,
2007. The total franchisee fees agreed upon is P550,000, of which P50,000 is payable
upon signing and the balance to be covered by a non-interest bearing note payable in
four equal annual installments. It was agreed that the down payment is not
refundable, notwithstanding lack of substantial performance of services by franchiser.
The direct franchise cost incurred was P325,000. Indirect franchise expense of
P31,250 was also incurred. The management of HIJ has estimated that they can
borrow loan at the rate of 12%. The franchisee commenced its operations on July 31,
2007. When EFG prepares its financial statements on July 31, 2007, how much is the
net income to be reported? (Use two decimal places for the present value factor).
a. P73,750
b. P119,350
c. P77,550
d. P108,800

On November 15, 2009, Manila Company, a Philippine company ordered

merchandisefromaUScompanyfor20,000USdollars.Themerchandisewas
shippedandinvoicedonDecember10,2009.ManilaCompanypaidtheinvoice
onJanuary10,2010.ThespotrareforUSdollarsontherespectivedateswere:
November15,2009
P49.55
December10,2009
48.75
December31,2009
46.75
January10,2010
44.75

InManila'sDecember31,2009,incomestatement,whatistheforeignexchange
gain(loss)?
a.P9,600
c.P8,000
b.P4,000
d.P1,600

BulacanCorporationhadthefollowingforeigncurrencytransactionsduring2009.
First,itpurchasedmerchandisefromaforeignsupplieronJanuary20,2009,for
thePhilippinepesoequivalentofP90,000.TheinvoicewaspaidonMarch20,
2009, at the peso equivalent of P96,000. Second, on July 1, 2009 Bulacan
borrowedthepesoequivalentofP500,000evidencedbyanotethatwaspayable
inthelender'slocalcurrencyonJuly1,2011.OnDecember31,2009,thepeso
equivalents of the principal amount and accrued interest were P520,000 and
P26,000,respectively.Interestonthenoteis10%perannum.InBulacan's2009
incomestatement,whatamountshouldbeincludedasaforeignexchangeloss?
a.P0
c.P6,000
b.P21,000
d.P27,000

OnSeptember1,2009,CebuCorporationreceivedanorderforfurniturefroma
foreigncustomerfor300,000localcurrencyunits(LCU)whenthePhilippinepeso
equivalentwasP96,000.CebushippedthefurnitureonOctober15,2009,and
billedthecustomerfor300,000LCUwhenthePhilippinepesoequivalentwas
P100,000. Cebu received the customer's remittances in full on November 16,
2009,andsoldthe300,000LCUforP105,000.Initsstatementfortheyearended
December31,2009,Cebushouldreportaforeignexchangegainof?
a.P0
c.P5,000
b.P4,000
d.P9,000

ThefollowingdataappliestoDavaoCompany'ssaleof10,000foreigncurrency
unitsunderaforwardcontractdatedNovember1,2009,fordeliveryonJanuary
21,2010.
11/1/09
12/31/09
Spotrates
P80
P83
30dayforwardrate
79
82

90dayforwardrate

78

81

Davaoenteredintotheforwardcontracttospeculateintheforeigncurrenc.Inits
incomestatementfortheyearendedDecember31,2009,whatamountoflossshould
Davaoreportfromthisforwardcontract?
a.P400
c.P200
b.P300
d.P0

1. On November 1, S company entered into a firm commitment to acquire a

machinery. Delivery and passage of title would be on February 28, 2009 at the price
of HK$2,000. On the same date, to hedge against unfavourable changes in the
exchange rate, S entered into a 120 day forward contract with China bank for
HK$2,000. Exchange rate were as follows:

Spot Rate
Forward Rate
Nov. 01, 2008
P 26
P 24
Dec. 31, 2008
28
26
Feb. 28, 2009
29
29
How much is the forex gain or loss recognized by the S Company on the firm commitment?
a. P6,000 gain
b. P10,000 loss
c. P6,000 loss
d.
P10,000
gain
2. On October 1, 2011, Sweet Philippines took delivery from US firm of inventory
costing 285,000 dollars. Payment is due on January 30, 2012. Concurrently, Sweet
Philippines paid P3,925 cash to acquire an at-the-money call option for 285,000 US
Dollars. Strike price is P4.40

Market price
Fair value of call option

12/31/2011
P4.423
P7,050

1/30/2012
P4.427
?

The foreign exchange gain(loss) on hedging instrument due to the change in the effective portion
on December 31, 2012. If changes in the time value will be excluded from the assessment of
hedge effectiveness should be:
a. P1,140
b. P(1,140)
c. P(3,430)
d. P645
1. On November 19, 2011, RST Company, a Philippine company ordered merchandise
from Sweden Company for 31,800 Sweden kronor. The merchandise was delivered
on December 18, 2011. The voice was dated December 2, 2011, the shipping date
(FOB shipping point). RST Company paid the invoice on January 28, 2012. The spot
rates for Sweden kronor on the respective dates were:
November
December
December
December

19, 2011
2, 2011
18, 2011
31, 2011

P76.90
76.15
75.75
72.35

January 28, 2012

73.15

What is the reportable foreign exchange gain/ loss amount in RSTs 2011 income
statement?
a. P108, 120 gain b. P144, 690 gain c. P120, 840 gain
d. P25, 440 loss
2. On October 5, 2011, DEF Company sold goods on account to Malaysia Corporation
for 50,320 Ringgits. The date of invoice is October 29, 2011 and payment is due on
January 30, 2012. Exchange rates were as follows:
BID rate
OFFER rate
Oct. 05, 2011
P67.50
P69.20
Oct.29, 2011
68.70
66.80
Dec. 31, 2011
64.10
63.40
Jan. 30, 2012
62.40
65.50
What is the reportable foreign exchange gain/ loss amount in DEFs 2012 income
statement?
a. P85, 544 loss
b. P231, 472 loss
c. P105, 672 gain d.
P171, 088 loss
3. On December 1, 2009, A Corp. Received an order for equipment FOB shipping point
from S Co. the order is billed for $86,000, payable on January 31, 2010. The
equipment was shipped and invoiced to S Co. on December 12, 2009.
Buying
Selling
Dec. 1
51.45
51.60
Dec. 12
51.58
51.84
Dec. 31
51.72
51.96
Jan. 31, 2010
51.68
51.89
On the December 31, 2009 income statement of A Corp., how much is the FOREX
gain/(loss) to be reported on this transaction?
a. 12,040
b. 14,280
c. (10,320) d. (14,280)