CPA REVIEW SCHOOL OF THE PHILIPPINES

MANILA

ADVANCE FINANCIAL ACCOUNTING AND REPORTING (Practical Accounting II)

FINAL Pre-board Examination Sunday, April 16, 2016, 12:000 noon to 3:00 pm

Numbers 1 and 2

A business owned by C was short of cash and C decided to form a partnership with D and E. D
was able to contribute cash thrice the interest of C in the partnership while E was able to
contribute cash twice the interest of D in the partnership. The assets contributed by C were cash
P18,000, Accounts receivable P378,000 with allowance for doubtful accounts of P 12,000,
Inventory P840,000, and store equipment P300,000 with accumulated depreciation P30,000 but
with fair value of P250,000 and agreed value of P200,000.

C, D and E agreed that the allowance for doubtful accounts was inadequate and should be
P20,000. They also agreed that the fair value of the inventory is P920,000.

1. What is the cash contributed by D?

a. 4,488,000
b. 4,728,000
c. 2,424,000
d. 4,638,000

2. What is the total amount of assets of the partnership?

a. 7,880,000
b. 7,092,000
c. 14,960,000
d. 15,460,000

Numbers 3 and 4

X, Y and Z, a partnership formed on January 1, 2016 had the following initial investment:

X 500,000
Y 750,000
Z 1,125,000

The partnership agreement states that the profits and losses are to be shared equally by the
partners after consideration is made for the following:

* Salaries allowed to partners: P300,000 for X, P240,000 for Y, and P180,000 for Z
* Averages partner’s capital balances during the year shall be allowed 10%.
* On June 30, 2016, X invested additional P300, 000.
* Z withdrew P350, 000 from the partnership on September 30,2016.
* Share on the remaining partnership profit was P25,000 for each partner.

3. What is the total interest on average capital balances of the partners?

a. 243,750
b. 268,750
c. 288,125
d. 303,125

4. What is the partnership net profit at December 31, 2016 before salaries, interests and
partner’s share on the remainder?
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a. 998,750
b. 1,038,750
c. 1,058,125
d. 1,113,750

Numbers 5, 6, 7 and 8

On January 1, 2020, DMCI Inc. accepted a long-term construction contract to build a bridge with
a total contract price of P20,000,000. For the three years ended December 31, 2020, 2021, and
2022, the following data were provided by DMCI Inc.:

December December December

31,2020 31,2021 31,2022
Cumulative construction cost at year-end 3,000,000 7,000,000 12,000,000
Estimated cost to complete at year-end 12,000,000 15,000,000 4,000,000

The outcome of the construction contract can be estimated reliably.

5. What is the realized gross profit (loss) to be recognized by DMCI Inc. as of December
31, 2021?

a. (3,000,000)
b. (2,000,000)
c. 1,000,000
d. 5,000,000

6. What is the realized gross profit (loss) to be recognized by DMCI Inc. for the year ended
December 31, 2022?

a. 1,000,000
b. (3,000,000)
c. 5,000,000
d. 2,000,000

7. Which of the following statements is incorrect when the outcome of a construction

contract cannot be measured reliably?

a. Revenue shall be recognized only to the extent of contract costs incurred that it is
probable will be recoverable.
b. Contract costs shall be recognized as expense in the period in which they are
incurred.
c. An expected loss on the construction contract shall be recognized as an expense
immediately when it is probable that total contract costs will exceed total contract
revenue.
d. The entity shall use percentage of completion method for accounting for its
construction Contract.

8. IFRS 15 provides that an entity transfers control of a good or service over time, and
therefore satisfies a performance obligation and recognizes revenue over time, if one of
the following criteria is met, except

a. The customer has the significant risks and rewards related to the ownership of the
asset and the customer has accepted the asset.
b. The customer simultaneously receives and consumes the benefits provided by the
entity’s performance as the entity performs.
c. The entity’s performance creates or enhances an asset that the customer controls as
the asset is created or enhanced.
d. The entity’s performance does not create an asset with an alternative use to the entity
and the entity has an enforceable right to payment for performance completed to date.
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Numbers 9, 10, 11 and 12

On January 1, 2015, Engr Inc. entered into a contract to build a large office building for CPA
Inc. for a total contract price of P5,000,000. CPA Inc. will make annual payments to Engr
Inc. but the amount of these payments cannot exceed the direct costs incurred by Engr Inc.

The construction contract provided CPA inc. with a final inspection right to ensure compliance
with the contract terms prior to accepting the completed project.

It had been the accounting policy of Engr Inc. to use percentage of completion method to
compute construction revenue and gross profit.

On January 1, 2017, Engr Inc. implemented an accounting change from percentage of

completion method to zero profit or cost recovery method. The following data were provided by
Engr. Inc. for the years ended December 31, 2015, 2016 and 2017:

2015 2016 2017

Costs incurred each year 1,450,000 2,600,000 600,000
Estimated cost to complete at year-end 3,150,000 400,000 -
Progress billings each year 400,000 2,000,000 2,600,000
Progress payment received each year 275,000 2,100,000 2,625,000
Corporate income tax 30% 30% 30%

The costs incurred for each year are inclusive of the following actual marketing expense and
general administrative costs which are not reimbursable under the construction contracts:

2015 2016 2017

Marketing expense 70,000 200,000 120,000
General administrative each year 30,000 150,000 80,000

9. What is the net income to be reported by Engr Inc. for the year ended December 31,
2015?

a. 50,000
b. 150,000
c. 35,000
d. 105,000

10. What is the net income to be reported by Engr Inc. for the year ended December 31,
2016?

a. 150,000
b. 280,000
c. 100,000
d. 250,000

11. What is the construction in progress as of December 31, 2015?

a. 1,600,000
b. 1,500,000
c. 1,450,000
d. 1,550,000

12. What is the construction in progress net of progress billings as of December 31, 2016?

a. 2,100,000
b. 2,550,000
c. (1,950,000)
d. (2,000,000)
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Numbers 13, 14, 15, and 16

The following data were provided by the accountants of the Home Office and Branch for the
year ended December 31, 2016:

Home Office Book Branch Book

Net sales to outside customer 1,000,000 800,000
Beginning Inventory 300,000 140,000
Net purchases from outside supplier 800,000 250,000
Shipment to branch 400,000
Shipment from Home Office 500,000
Ending Inventory 100,000 200,000
Operating expenses 200,000 100,000

 The current corporate income tax rate is 30%.

 It is the policy of the company to use specific identification for inventory.

 For the year ended December 31, 2015, the Home Office bills its branch with a gross
profit rate of 40% based on cost.

 Half of the beginning inventory of the branch was acquired from outside suppliers.

 The ending inventory of the branch is broken down as follows:

o 60% from outside suppliers

o 26% from 2016 shipment from home office

o 14% from 2015 shipment from home office

13. What is the net income of the branch in its books for the year end December 31, 2016?

a. 77,000
b. 10,000
c. 7,000
d. 8,000

14. What is the cost of goods sold of the branch in the combined statements for the year
ended December 31, 2016?

a. 588,400
b. 690,000
c. 594,600
d. 589,600

15. What is the combined net income to be presented by the Home Office in the Statement of
Comprehensive Income for the year ended December 31, 2016?

a. 217,000
b. 218,120
c. 204,120
d. 219,800

16. What is the balance of the unrealized profit in branch inventory on December 31, 2016?

a. 16,000
b. 17,300
c. 15,600
d. 18,400
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17. VAIO Inc. operates a number of branches in the provinces. On December 31, 2016, its
Davao Branch showed a home office account balance of P54,700.

a. A P24,000 shipment, charged by Home Office to Davao Branch, was actually sent to
and retained by Cebu Branch.
b. A P30,000 shipment, intended and charged to Aklan Branch was shipped to Davao
Branch and retained by the latter.
c. A P4,000 emergency cash transfer from Cebu Branch was not taken up in the Home
Office Books.
d. Home Office collected a Davao Branch accounts receivable of P7,2000 and failed to
notify the branch.
e. Home Office was charged for P2,400 for merchandise returned by Davao Branch on
December 30. The merchandise was in transit.
f. Home Office erroneously recorded Davao’s branch net income for 2016 at P32,550.
The branch reported a net income of P25,350.

What is unadjusted balance of the Investment in Davao Branch account in the Home
Office book on December 31, 2016?

a. 51,100
b. 40,300
c. 54,700
d. 43,500

Numbers 18 and 19

A Corporation acquired an 80% interest in R Company on January 1, 2016 for P245,000. On this
date, the ordinary shares and retained earnings of the two companies were as follows:

A R
Ordinary shares 630,000 175,000
Retained earnings 280,000 35,000

The assets and liabilities of R were stated at fair value when A acquired its 80% interest and the
proportionate share in net identifiable assets was used to initially measure the non-controlling
interest. A used the cost method to account for its investment in R. Net income and dividends for
2016 for the affiliated companies were:

A R
Net income 105,000 31,500
Dividends declared 63,000 17,500
Dividends payable December 31, 2016 31,500 8,750

Year-end evaluation indicated P2,400 impairment in goodwill.

18. What is the amount of consolidated retained earnings attributable to controlling interest at
December31, 2016?

a. 408,280
b. 393,800
c. 331,280
d. 330,800

19. What is the consolidated net income attributable to controlling interest at December 31,
2016?
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a. 6,300
b. 113,800
c. 121,280
d. 114,280

Numbers 20, 21 and 22

A Co. acquired 60% of the outstanding ordinary shares of B Co. on January 2, 2015. A Co.
acquired the interest at book value which is the same as the fair value at the date of acquisition.
Income statements of A Co. and B Co. for 2016 are as follows:

A B
Net sales 218,750 87,500
Cost of goods sold 131,250 52,500
Gross profit 87,500 35,000
Operating expenses 26,250 13,125
Operating income 61,250 21,875
Dividend income 14,000 _________
Net Income 75,250 21,875

B Co. made sales to A Co. of P28,000 in 2015 and P42,000 in 2016.

A Co. reported inventory on December 31, 2015 amounting to P17,500 of which 20% comes
from B Co. and inventory on December 31, 2016 amounting to P21,000 of which 30% comes
from B Co.

A Co. uses 30% mark up on cost and B Co. uses 25% mark up on cost for their selling prices.

A Co. and B Co. declared and paid dividends in 2016 amounting to P21,000 and P17,500
respectively.

On January 1, 2016, B Co. had ordinary shares of P80,000, share premium of P30,000 and
retained earnings of P40,000.

20. What is the consolidated net income attributable to parent shareholders’ equity for the
year ended December 31, 2016?

a. 74,039
b. 77,539
c. 77,315
d. 78,211

21. What is the non-controlling interest net income for the year ended December 31, 2016?

a. 8,750
b. 8,974
c. 8,526
d. 8,470

22. What is the non-controlling interest net asset on December 31, 2016?

a. 61,526
b. 61,750
c. 61,974
d. 61,246
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Numbers 23 and 24

On January 2, 2015, PP Company purchased 70% of the shares of SS Company at book

value. On May 1, 2015, PP Company acquired a used machinery for P337,500 from SS
Company that was carried in the latter’s books at P270,000. The machinery has a
remaining life of 6 years.

On October 1, 2016, SS Company purchased an equipment that was already 30%

depreciated from PP Company for P570,000. The original cost of this equipment was
P900,000 and had a remaining life of 5 years.

Results of operations for the year 2016 are:

PP Company SS Company
Net income 945,000 165,000
Dividends paid 345,000 -

23. On the consolidated income statement in 2016, what is the consolidated net income
attributable to parent shareholders’ equity?

a. 1,125,375
b. 1,178,250
c. 1,131,375
d. 1,128,375

24. On the consolidated income statement in 2016, what is the non-controlling interest
net income?

a. 32,625
b. 66,600
c. 52,875
d. 75,675

Numbers 25 and 26

JJ Inc. granted a franchise to Fix Inc. to operate its registered business of barbershop. The
contract was signed on January 1, 2020 with initial franchise fee of P500,000 payable in
P200,000 cash and the balance in five equal semi-annual installments every June 30 and
December 31. The non-interest bearing promissory note has implicit rate of 10%.

The contract provided that Fix Inc. shall pay a contingent franchise fee equal to 5% of the
revenue from the barber shop.

Fix Inc. reported a revenue in the amount of P 100,000 during 2020. JJ Inc. has substantially
performed all the services required under the franchise contract.

25. What is the franchise revenue recognized by JJ Inc. for the year ended December 31,
2020?

a. 500,000
b. 459,769
c. 464,769
d. 432,447

26. What is the total income to be recognized by JJ Inc. for the year ended December 1,
2020?

a. 505,000
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b. 432,447
c. 455,120
d. 488,394

27. Which of the following statements is true in relation to consolidated financial

statements?

a. Non-controlling interest is presented in the consolidated statement of financial

position by means of a note to consolidated financial statements.
b. The intercompany profit in inventory transfer between affiliates is computed by
multiplying the inventory held by the buying affiliate by the gross profit rate
based on sales of the buying affiliate.
c. The income and expenses of a subsidiary are included in the consolidated
financial statements from the acquisition date.
d. Recognition of the realized profit in beginning inventory requires a working
paper debit to cost of goods sold.

28. Which of the following statements is true in relation to consolidated financial

statements?

a. When a subsidiary has borrowed cash from the parent company, the related
receivable and payable are eliminated in their own set of books in preparing a
consolidated statement of financial position.
b. In an acquisition-type business combination, the shareholders’ equity section of
a consolidated statement of financial position for a parent and its partially
owned subsidiary consists of the parent shareholders’ equity accounts only.
c. Parent company owns 75% of Subsidiary company. During 2016, Parent sold
goods with a 30% gross profit to Subsidiary. Subsidiary sold all of these goods in
2016. For 2016 consolidated financial statements, sales and cost of goods sold
should be reduced by 75% of the intercompany sales.
d. Amortization of excess affects the computation of non-controlling interest in net
assets and the non-controlling interest in profit.

29. Freemind University, a private not-for-profit university, had the following cash
inflows during the year ended June 30, 2016:

 P200,000 from students for tuition.

 P112,500 from a donor who stipulated that the money be invested
indefinitely.
 P70,000 from a donor who stipulated that the money be spent in accordance
with the wishes of Freemind’ s governing board.

On Freemind University’s statement of cash flows for the year ended June 30, 2016,
what amount of these cash flows should be reported as financing activities?

a. 70,000
b. 182,500
c. 270,000
d. 112,500

30. BLM Hospital provided the following account balances:

Employee and staff discount 25,000
Salary expense 15,000
Unrestricted gifts 70,000
Charity care 75,000
Amounts billed to patients 384,000
Third-party payors (Philhealth) 90,000
Revenue from drugstore 52,000
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What is the hospital’s net patient service revenue?

a. 321,000
b. 269,000
c. 246,000
d. 316,000

31. BHS University, a nonprofit university, received the following cash contributions
from donors during the current year:
Unrestricted contributions 250,000
Contributions restricted by donors for scholarship programs 100,000
Contributions from a donor who stipulated that the money be spent
in accordance to the wishes of the hospital’s board of trustees 75,000
Contributions restricted by donors for equipment acquisitions 125,000

The university spent P60,OOO of the donors’ contributions for scholarship programs
on financing scholars for the current year.

How much should be included in current funds unrestricted at year-end?

a. 350,000
b. 250,000
c. 400,000
d. 385,000

32. The agency signed a construction contract with AF Builders Corporation for the
construction of Building, P5,000,000. The agency paid 20% of the contact price.
After 6 months, the agency received its first billing from A Builders Corp., 90% of the
contact price. On the 7th month, the company paid the first billing less P1,000.000
withholding tax.

What will be the entry of the agency on its books upon receiving the first billing?

a. Building 4,500,000
Accounts payable 4,500,000
b. Accounts payable 4,500,000
Cash-NT-MDS 3,500,000
Due to BIR 1,000,000
c. Construction in progress 4,500,000
Accounts payable 4,500,000
d. Construction in progress 4,500,000
Advance to constructors 1,000,000
Accounts payable 3,500,000

33. What is the entry to record the collection of P1,000,000 corporate income tax by the
BIR in its books?

a. Cash-NT-MDS 1,000,000
Income tax-Corporation 1,000,000
b. Cash - Collecting officer 1,000,000
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Income tax - Corporation 1,000,000

c. Cash in bank - LCCA 1,00,000
Income tax-Corporation 1,000,000
d. Income tax-Corporation 1,000,000
Cash-Disbursing Officer 1,000,000

34. Which of the following would be included in an entry to record the remittance of
income taxes to the Bureau of Treasury (BTR) collected by the Bureau of Internal
Revenue (BIR)? The BIR has no authority to use the collections.

a. Debit to Cash — Collecting officer

b. Debit to Cash - NT - MDS
c. Credit to Cash — Collecting officer
d. Credit to Cash — NT — MDS

35. On January 1, 2016 Lucky Inc. paid P9,800 to acquire a put option. This is in relation
to the sale of merchandise worth $65,000. (Strike price P4.965).

January 1, 2016 March 31, 2016 June 20, 2016

Spot rate P4.934 P4.908 P4.75
Fair value of option P9,800 P11,400 P13,935

How much is the foreign currency gain (loss) on the intrinsiC portion on March
31,2016?

a. 1,690
b. (1,690)
c. 1,600
d. ( 90)

Numbers 36 and 37

SBC Company bought merchandise for €625,000 from a French company on

December 1, 2016. Payment in Euros was due on February 28, 2017. On the same
date, SBC entered into a 90-day futures contract to buy €625,000 from Metro bank.
Exchange rates for Euros on different dates are as follows:

December 1, December31, February 28,

2016 2016 2017
Spot rate 61.55 62.85 62.05
30-day future 62.45 62.65 63.35
60-day future 61.95 62.35 62.75
90-day future 60.75 62.75 63.55

36. What is the foreign exchange gain (loss) on the forward contract on February 28,
2017?

a. (500,000)
b. (187,500)
c. 187,500
d. 500,000

37. What is the foreign exchange gain (loss) on the hedging activity on December 31,
2016?

a. 187,500
b. 437,500
c. (187,500)
d. (437,500)
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38. On November 1, 2016, Word Inc. paid P45,000 to acquire call foreign exchange
option for HK$90,000. The option was acquired to hedge the 2016 anticipated
purchase of merchandise for HK$90,000. The option expired on March 31, 2017.
November 1, December 31, March 31,
2016 2016 2017
Spot rate P 3.46 P 3.40 P3.39
Fair value of option 45,000 50,500 75,000
Strike price 3.47 3.47 3.47

At what amount must the merchandise be presented on December 31, 2016?

a. 3,114,000
b. 3,123,000
c. 3,060,000
d. 0

Numbers 39, 40 and 41

Shown below is the trial balance on December 31, 2016 of KLM Company, an overseas
subsidiary of TUV Corporation of the Philippines located in the U.S.A.

Cash $11,000
Marketable securities at fair value 22,000
Accounts receivable (net) 25,000
Inventories, at cost January 1, 2016 15,000
Prepaid expenses 2,000
Property, plant and equipment 100,000
Intangible assets (net) 16,000
Other noncurrent assets 8,000
Dividends declared 10,000
Purchases 40,000
Doubtful accounts expense 1,000
Depreciation expense 5,000
Other selling expenses 3,000
General and administrative expenses 9,000
Accounts payable $16,000
Notes payable-trade 14,000
Notes payable 20,000
Accumulated depreciation 10,000
Share capital (par $5.00) 50,000
Share premium 20,000
Retained earnings, January 1, 2016 33,000
Sales 98,000
Inventories, December 31, 2016 6,000

 There was no foreign currency translation adjustment account at December 31,

2015.
 The peso equivalent of Retained Earnings at December 31, 2015 was P1,320,000.
 When KLM Company was incorporated and sold all of its shares above par value, the

exchange rate was $1.00 = P50.00. No additional shares and no retirement or

acquisition of treasury shares had been made.
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 The dividends were declared and paid on September 30, 2016.

 Sales, purchases and cash expenses had occurred evenly throughout the year.
 The dollar to peso exchange rate on December 31, 2015 was the same on January 1,
2016
 The relevant exchange rates needed for translation were as follows:

January 1,2016 $1.00 = P45.00 December 31,2016 $1.00 = P41.00

September 30, 2016 $1.00 = P43.00 Average rate for 2016 $1.00 = P44.00

39. How much is KLM Company’s net income?

a. 1,271,000
b. 1,364,000
c. 1,395,000
d. 1,333,000

40. How much is KLM Company’s cumulative translation adjustment gain or loss?

a. 854,000 gain
b. 424,000 loss
c. 424,000 gain
d. 854,000 loss

41. How much is KLM Company’s total shareholders’ equity?

a. 4,864,000
b. 6,184,000
c. 5,754,000
d. 5,330,000

Numbers 42, 43, 44 and 45

PDMN Co. used job order costing system. During the month of September, the company had
two jobs, Job08 and Job88. Total production for the month in units for Job88 was 8,500 and
for Job08 was 5,000.

At the end of August, JobO8 had a total cost still in process in the amount of P18,750 while
Job88 had total cost in process of P31,300. Total budgeted overhead of both jobs for the
month of September was P786,200.

It was estimated that Job88’s application of overhead will be based on 18,600 machine
hours while JobO8 will be based on 14,500 direct labor hours.

The following data were extracted from the job cost sheet of JobO8 and Job88 during the
month of September:

Job08 Job88
Direct materials cost 86,500 78,700
Direct labor hours 680 940
Machine hours 500 1,590
Labor rate 35 40

During the month, the actual overhead incurred for Job08 was P25,300 and at the end of
the month, JobO8’s overhead control account had a debit balance of P7,620. On the other
hand Job88’s actual overhead incurred was P31,200.

42. What is the overhead applied for iob88 during the month of September?
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a. 67,209
b. 20,680
c. 34,980
d. 26,527

43. What is the total cost of JobO8 at the end of September?

a. 127,980
b. 146,730
c. 135,600
d. 154,350

44. What is the total conversion cost during the month of September?

a. 114,060

b. 117,900

c. 99,760

d. 121,680

45. What is the total cost of Job88 during the month of September?

a. 182,580
b. 147,500
c. 151,280
d. 178,800

46. In a job order system, the use of direct materials previously purchased usually is
recorded as an increase in

a. Raw materials inventory control

b. Factory overhead control

c. Work in process control

d. Finished goods control

Numbers 47 and 48

888 Co. manufactured electric motor drills. During May 2016, Job888 produced 600 motor
drills with the following unit costs: Direct Materials P1,750, Direct Labor P1,200, Overhead
(P85 allowance included) P850.

Final inspection of Job888 disclosed 15 defective units and 35 spoiled units. The defective
drills were reworked at total cost of P16,500, and if the spoiled drills were sold the
company will have a loss of P79,450.

47. If the rework and spoilage were due to internal failure, what is the total cost of
Job888 for the month of May?

a. 2,280,000
b. 2,229,000
c. 2,147,000
d. 2,098,975
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48. If the rework and spoilage were due to exact specifications, what is the unit cost of
3ob888 for the month of May?

a. 3,800
b. 3,715
c. 3,970
d. 3,885

Numbers 49, 50, 51 and 52

MOTUL Co., a manufacturing company used process costing for its products. The products
underwent two departments namely Assembly then Finishing.

The following data were extracted in the Finishing department: Beginning inventory units
10,000 which were 70% incomplete, Ending inventory units 5,000 which were 35%
converted, transferred-out units from the Assembly department 80,000 and spoiled units
of 2,800 of which 2,500 were considered normal.

In the Finishing department, materials were added at the end of the process.
The following were the costs in the Finishing department: Beginning inventory costs of
Transferred-In, Direct Materials, Conversion respectively were P150,000. P80,000,
P76,000.

Current costs of Direct Materials and Conversion were P742,500 and P650,000
respectively.
Transferred-out cost from the Assembly department amounted to P1,162,500.

49. What are the equivalent units of production as to direct materials?

a. 85,000
b. 82,200
c. 80,300
d. 82,500

50. What is the cost of completed goods?

a. 2,630,400
b. 2,762,400
c. 2,672,400
d. 2,720,000

51. What is the cost f ending inventory?

a. 89,000
b. 134,000
c. 59,000
d. 120,000

52. What is the period cost?

a. 5,100
b. 9,600
c. 7,200
d. 6,900

53. Which of the following is not a characteristic of process costing system?

a. Costs of raw materials, direct labor and factory overhead applicable to each job
are compiled to arrive at an average unit cost
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b. Costs posted to departmental work in process accounts

c. Production in process at the end of a period is restated in terms of completed
units
d. Costs not assigned to specific units but to a manufacturing process or
department

54. Joint Control is

a. A contractual arrangement whereby two or more parties undertake an economic

activity
b. The contractually agreed sharing of control of an arrangement, which exists only
when decisions about the relevant activities require the unanimous consent of
the parties sharing the control
c. Short term associations of two or more parties to fulfill a specific project
d. The minimum proportion of the voting rights to make decisions about the
relevant activities of the joint arrangement

55. A joint operator shall recognize in relation to its interest in a joint operation the
following, except

a. Its assets and liabilities including its share of any assets held jointly and
liabilities incurred jointly
b. Its revenue from the sale of its share of the output arising from the joint
operation
c. Its share of the revenue from the sale of the output by the joint operation and
expenses, including its share of any expenses incurred jointly
d. Its investment and shall account that investment using the equity method

56. An entity’s functional currency is

a. The currency in which the financial statements are presented

b. The currency of the primary economic environment in which the entity operates
c. The currency in which sales prices for the entity’s goods and services are
denominated and settled
d. Always the local currency of the country in which the entity is based

57. Which of the following is true under PAS 21:

a. Must present its financial statement only in its functional currency

b. May present its financial statements in any currency (or currencies)
c. Must present its financial statement in the local currency of the country in which
the entity is based
d. Must present its financial statement in its functional currency but may present
additional financial statements in any currency (or currencies)

58. When there is a change in an entity’s functional currency, the entity is required to

a. Apply the translation procedures applicable to the new functional currency

prospectively from the date of the change
b. Apply the translation procedures applicable to the new functional currency
retrospectively
c. Disclose that fact and the reason for the change in functional currency
d. Both A and C above are required

59. Free assets are

a. Assets pledged as a security for a particular liability and the estimated realizable
value of the assets is less than the amount of the liability
b. Assets pledged as a security fur a particular liability and the estimated realizable
value of the assets equals or exceeds the amount of the liability
 CPA REVIEW SCHOOL OF THE PHILIPPINES
MANILA

c. Assets not. pledged as a security for any particular liability and thus available to
meet the claims of priority liabilities and unsecured creditors
d. Current assets

60. Partially secured creditors are

a. Creditors that have a Hen on specific assets, whose estimated realizable value
equals or exceeds the amount of liability
b. Creditors that have a lien on specific assets, whose estimated realizable value is
less than the amount of liability
c. Creditors that have no lien on any specific assets but the claims rank ahead of
the other unsecured liabilities in order of payment
d. Creditors that have no lien on specific assets

END