6.

The following information is available for JKL Company for April:

Started this month 80,000 units Beginning WIP costs:
Beginning WIP (60% unconverted) 7,500 units Materials 10,400
Normal spoilage (discrete) 1,100 units Conversion 13,800
Abnormal spoilage 900 units Currents costs:
Ending WIP (70% done) 13,000 units Materials 120,000
Transferred out 72,500 units Conversion 350,000

All materials are added at the start of production and the inspection point is at the end of the
process. (Use 2 decimal places)

I. What is the cost assigned to ending inventory using FIFO?

a. 56,420 c. 53,144
b. 75,920 d. 58,994

II. What is the total cost assigned to goods transferred out using weighted average?
a. 435,080 c. 429,824
b. 428,656 d. 423,400

7. Safe Company produces transparent soaps. Glycerin soaps as joint products and liquid
soaps as a by-product. The bottle liquid soaps can be sold for P2 per liter. Liquid soaps
require packaging costs of P0.10 per liter and sales commission at 10% of sales price. The net
revenue of the by-product is treated as a reduction from the joint costs. Joint products are
assigned joint costs based on the amount liters produced.
Transparent soaps 320,000 liters
Glycerin soaps 160,000 liters
Liquid soaps 1,600 liters
Joint costs 80,000
What is the cost assigned to transparent soaps?
a. 51,200 c. 51,520
b. 51,412 d. 53,332

8. Family Inc. manufactures four products E, L, C, M in a joint process. Every 10 kilos of raw
materials, the output is 4 kilos of E, 3 kilos of L, 1.5 kilos of C and 1.5 kilos of M. During the
first month of operation, 40,000 kilos of raw materials costing 115,000 were placed into
production, this is to be allocated based on units of outputs. Conversion costs of 200,000 were
also spent, which is to be allocated on the basis of their market values.
Further Processing Cost Sales Price Per Unit
E 28,000 15
L 25,000 12
C 23,000 10
M 22,000 9

How much is the net income of item L assuming operating expense are 20% of sales price?
a. 51,669 c. 21,200
b. 22,869 d. 50,000

9. Standard costing was used to evaluate variances. Consider the following independent cases
in answering the questions:
Case 1 Case 2
Units produced 1,500 240
 Standard hours / unit ? ?
Standard hour ? 480
Standard rate / hour 6 9.5
Actual hours 4,875 ?
Actual labor costs 26,812.50 4,560
Labor rate variance ? 228 U
Labor efficiency variance 2,250 U ?
I. How much is the labor rate variance using the data from Case 1?
a. 2,347.50 U c. 2,437.50 U
b. 2,437.50 F d. 2,347.10 F

II. How much is the labor efficiency variance using the data from Case 2?
a. 228 F c. 288 U
b. 228 U d. 288 F

10. A summary of production data from Sleepy Corporation for the month of January is
provided to you:
Standard time: 30 minutes per car Predetermined OH rates:
Normal capacity 9,000 DL hours Fixed 8 per DL hours
Actual hours 8,950 DL hours Variable 3 per DL hour
Actual production 17,600 cars
Actual Costs:
Fixed 72,600
Variable 25,900

How much is the Volume Variance for the month of January?

a. 1,700 F c. 1,700 U
b. 1,600 F d. 1,600 U

11. AXL Manufacturing Company identified the following overhead costs and cost drivers for
the coming year:
Overhead Item Cost Driver Budgeted Cost Budgeted Activity
Level
Machine Set Up No. of Set ups 20,000 200
Inspection No. of Inspections 130,000 6,500
Material handling No. of materials moves 80,000 8,000
Engineering Engineering hours 50,000 1,000

The following information was collected on three jobs that were expected to be completed in
the following year:
Job 901 Job 902 Job 903
Direct Materials 5,000 12,000 8,000
Direct Labor 2,000 2,000 4,000
Units Completed 100 50 200
No. of Set ups 8 10 14
No. of Inspections 22 15 30
No. of material moves 30 40 50
Engineering hours 25 50 15

For the past years, the company assigned overhead costs to products based on direct labor
costs. For the coming year, the budgeted direct labor cost was 100,000 and budgeted direct
material cost was 280,000. The company operates in a competitive market and sets product
process at cost plus 50% mark-up.

If the appropriate cost drivers are used in assigning factory overhead, determine the total
overhead cost of Job 901; total full cost per unit of Job 902; sales price per unit of Job 903.
Job 901 Job 902 Job 903
a. 2,790 364 114.375
b. 2,790 346 110.50
c. 2,640 358 114.375
d. 2,640 364 110.50

12. The following are the balance sheets of Pol & Sol Company as of December 31 2020.
Pol Sol
Cash 250,000 50,000
Receivables 175,000 37,500
Inventories 200,000 62,500
Land 187,500 250,000
Building (net) 800,000 250,000
Equipment (net) 625,000 600,000
Total Assets 2,237,500 1,250,000

Accounts Payable 462,500 150,000

Ordinary Shares 1,250,000 500,000
Share Premium 125,000 350,000
Retained Earnings 400,000 250,000
Total Liabilities and Equity 2,237,500 1,250,000

Pol decided to acquire 17,000 outstanding shares of Sol on January 1, 2021. Pol will issue
25,500 ordinary shares with market value of 30 per share in exchange for the 17,000
outstanding shares of Sol. Pol and Sol’s ordinary shares both have a par value of 25 per share.
The book values reflect fair values except for Building of Pol, which has a net realizable
value of 1,050,000 and Inventories and land of Sol which has a net realizable value of 87,500
and 325,000 respectively. Pol also paid costs of registering and issuing securities amounting
to 30,000 direct cost of combination amounting to 62,500.

How much is the consolidated shareholders’ equity after the combination?

a. 2,627,500 c. 2,702,500
b. 2,882,500 d. 2,927,500

13. The M Company holds 70% interest in the H Company. At the current year end, M holds
inventory purchased from H for 270,000 at cost plus 20%. The group’s consolidated
statement of financial position has been drafted without any adjustments in relation to this
holding of inventory. What adjustment should be made to the draft consolidated statement of
financial position figures for non-controlling interest and retained earnings?
Non-controlling Interest Retained Earnings
a. No change Reduced by 45,000
b. No change Reduced by 54,000
c. Reduced by 16,200 Reduced by 37,800
d. Reduced by 13,500 Reduced by 31,500
14. The L Company owns 75% of the V Company. On December 31, 2020, the last day of the
accounting period, V sold to L a non-current asset for 200,000. The asset originally cost
500,000 and at the end of the reporting period, its carrying amount in V’s books was 160,000.
The group’s consolidated statement of financial position has been drafted without any
adjustment in relation to this non-current asset. What adjustment should be made to the
consolidated statement of financial position figures for non-controlling interest and retained
earnings?
Non-controlling Interest Retained Earnings
a. Increase by 75,000 Increase by 225,000
b. No change Increase by 300,000
c. Reduced by 10,000 Reduced by 30,000
d. No change Reduced by 40,000

15. On July 1, 2019, the M Company acquired 100% of the N Company for a consideration
transferred of 160M. At the acquisition date the carrying amount of N’s net asset was 100M.
At the acquisition date, a provisional fair value of 120M was attributed to the net assets. An
additional value received on May 31, 2020 increased this provisional fair value to 135M and
on July 30, 2020, this fair value was finalized at 140M. What amount should M present for
Goodwill in its statement of financial position at December 31, 2020?
a. 25M c. 40M
b. 20M d. 60M

16. The L Company acquired a 70% interest in the O Company for 1.96M when the fair value
of O’s identifiable assets and liabilities was 700,000 and elected to measure the non –
controlling interest at its share of identifiable net assets. Annual impairment reviews of
financial position shows share capital of 100,000, a revaluation reserve of 300,000 and
retained earnings of 1.4M.

What figure in respect of goodwill should now be carried in L’s consolidated statement of
financial position?
a. 1,470,000 c. 160,000
b. 1,260,000 d. 700,000

17. The N Company acquired 80% of the L Company for a consideration transferred of 100.
The consideration was estimated to include control premium of 24M. L’s net assets were 85M
at the acquisition date.
Statement A: Goodwill should be measured at 32M if the non – controlling interest is
measured at its share of L’s net assets.
Statement B: Goodwill should be measured at 34M if the non- controlling is measured at fair
value.
Are the following statements true or false?
a. Both statements are false c. Only statement A is true
b. Only statement B is true d. Both statements are true