NAME: Date:

Section: Score:
Professor:
ASSYNCHRONOUS ACTIVITY-FINAL TERM

1. You are an accountant. Your client, a franchisor, asked you for an advice regarding
the recognition of revenue from a franchise contract. Your advice to your client
would most certainly be based on which of the following standards?
a. F'AS No. 45 (US GAAP)
b. PFRS 15
C. PAS 15
d. PFRS 18

2. The consideration received from a contract with a customer that does not meet the

criteria under 'Step 1' of PFRS 15 is

a recognized as liability.
b. recorded through memo entry only.
C. disclosed only.
d. b and c

3. Entity A enters into a franchise.contract with Customer X. The agreement provides

Customer X the right to access Entity A's intellectual property. How should Entity A
recognize revenue from the franchise agreement?
a. over time, as Customer X receives and consumes the benefit from Entity As
performance of providing access to its intellectual property.
b. at a point in time when Entity A transfers control over the promised license to
Customer X.
C. a or b as a matter of an accounting policy choice
d. when there is "substantial performance" by Entity A in accordance with US
GAAP

Use the following information for the next two cases:

On December 31, 20x1, Entity A enters into a contract with Customer X to transfer a
license for a fixed fee of P100,000 payable as follows:
20% is payable upon signing of contract. Pv
80% is represented by a note receivable collectible in 4 equal annual installments
starting December 31, 20x2. The appropriate discount rate is 12%.

Case #1: y
4. The license provides Customer X the right to use Entity A's patented processes.
Customer X continues to operate using its trade name and has the discretion of
developing a new product name for the products it will produce using the patented
processes. The license does not explicitly require EntityA to undertake activities
that will significantly affect the intellectual property to which Customer A has
rights. Neither does Customer X expect that Entity A will undertake such activities.
Entity A grants the license to Customer X on December 31, 20x1. How much
revenue from the franchise contract will Entity A recognize in 20x1?
a. 80,747
b. 21,187
,

C. 20,000
0
Case #2 A's patented processes.
Thc
5. The license Customer X the right to use Entity
provides instead
trade name and
agreement requires Customer
X to discontinue using its
the terms of the contract to
Entity A's trade name. Customer X is
bound by
use the right to0
abide with Entity As policies on the use
of the processes but is given
much r e v e n u c from thC
subsequent modifications to the processes. How
any
franchis0 Contract will A recognize in 20x1?
Entity
. 80,747
b. 20,187
C. 20,00o
d to its
manufacturing company, sells its products
1.Micum, a computer chip Due to irequcnt
sales to the ultimate customers.
distributors for onward
luctuations in the market prices for these goods, Micrium has a "price protcction
Clause in the distributor agreement that entitles it to
raise additional billings in
clause in the distributor's agreement is
Case ot upward price movement. Another
back goods at the cost
that Micrium can at any time reduce its inventory by buying
for the goods within
at which it sold the goods to the distributor. Distributors pay
revenue on
from the sale of to them. When should Micrium recognize
goods
60 days
sale of goods to the distributors?
à. When the goods are sold to the distributors.
goods (i.e., after 60 days of
b. When the distributors pay to Micrium the cost of the
the sale of goods to the distributors).
C. When goods are sold to the distributor provided estimated additional revenue is
also booked under the "protection clause" based on past experience.
. When the distributor sells goods to the ultimate customers and there is no
protection" clause or the buyback of
uncertainty with respect to the "price
goods.
2. In accounting for sales on consignment, sales revenue and the related cost of goods
sold should be recognized by the
a. Consignor when the goods are shipped to the consignec.
b. Consignee when the goods are shipped to the third party.
CConsignor when notification is received that the consignee has sold the goods.
d. Consignee when cash is received from the customer.

3. Aircon, Inc, consigned ten_one-horsepower air conditioning units to Argy Trading

and paid P2,000 for the freight out. The consignce is allowed a commission of 5%
on sales. Argý Trading submitted an account sales on its transactions for the period
as follows:

Sales (6 units, including 12.5% gross profit)

72,000 12.s %)
Less: Advances toconsignor 10,000.
Selling expensesS 800
Installation and delivery 1,200
Commission 7,200 19,200
Nct remittance 52,800
How much was the net profit or loss of Aircon on the consignment?
a. 52,800 profit ( 2,200 profit 2.
b. 7,800 loss d. 1,400 loss
Use the following information for the next two questions:

72.0o0
 colored TV sets
CR Manufacturing Co. consigned to CE Trading Corp. twelve (12) Sony
which cost P9,000 each. Freight out was paid by the consignor in the amount of Po00.
amount oi
CE Trading éight (8) sets, rendered an account sales, and remitted the
sold
P82,600 after deducting the following from the selling price of the sets so.d:
1-12IA

Commission on selling 2
price 12. %
1, 41W
Selling expenses 200
Cost of antennae given , 1t0 o

frec 400
2, S
Delivery and installation 800

4. The total seiling price of the eight (8) sets sold by CE Tradfng Corp. is
(a100,000 b. 88,000C. 98,560 d. 78,571.43
0,600

5. The net profît of CR Manufacturing Co. on the eight (8) sets sold by CE Trading
Corp. 1s
a. 40 b. 9,332.80(c.10,200 d. 10,600
Use the following information for the next two questions:
Stainiess Works Mfg. Co., consigned 5 dozens of stainless chairs to Urban Furniture
Co. on April 1, 20x1. Each chair cost P120 and the consignor paid P600 for the
shipment to the consignee. On August 15, 20x1, 36 were already sold and the
consignee rendered an account sales, and remitted the_balance duethe consignor_in
the amount of P5,580 after deducting the following:

Commission at 15% of the selling price

Selling expenses P360
Delivery and installation 180

6. How much is the profit on consignment?

we y3
a. 660 D900 C. 1,000 d. 1,260

G00
7. The cost of the inventory on consignment in the hands of Urban Furniture Co. is
a. 2,880 b 3,120 C. 3,480 d. 4,320

Use the following for the next two questions:

P 300
On January 1, 20x1, Pete Electrical Shop received from Marion Trading 309 piecas of
bread toasters. Pete was to sell these on consignment at 50% above cost, for a 15%
commission on the selling price. After selling 200 pieces, Pete had the remaining
unsold units repaired for some electrical defects for which he spent P2,000. Marion
subsequently increased the selling price of the remaining units to P330 per unit. On
January 31, 20x1, Pete remitted P64,980 to Marion after deducting the 15%
commission, P850 for delivery expenses of sold units, and P2,000 for the repair or 100
units.

The consigned goods cost Marion Trading P200 per unit, and P900 had been paid to
ship them to Pete Electrical Shop. All expenses in connection with the consignment
were reimbursable to the consignee.
14,00
P 300Y 30 0:000

73000
8. The (consignment profit on thc units sold was

b. 12,880 c. 13,000 d. None of these

.12,200

was
9. The Value oi inventory on consignment d. None of these
a. 8,120 b. 8,800 C. 8,9200

P60 and retailing for

10. in September 20x1, DEF Co. consigned 3,200 books costing
P100 cach to GHI Co., debiting Accounts Receivable
and crediting Sales for the
retail sales price. Freight cost of P3,200 was debited to Freight Expenses by the
from GHI Co. the amount of
Consignor. On September 30, 20x1, DEF Co. received
Accounts Receivable was
P142,020 in full settlement of the balance due, and
commission of P20 for cach
Crcdited for this amount. The consignor deducted a
book sold, P180 for delivery expenses and P200 for advertising expense. How mäny

books were actually sold by GHI, Co.?

C. 2,064 d. 3,2000
a. 1,124 b1,780
11.When the consideration receivable from an installment sale is discounted, the gross
profit rate is computed
receivable.
a based on the present value of the consideration
. based on the undiscounted installment sale price
C. a or b
d. none oi these

12.Whcn the consideration receivable from an installment sale is discounted, realized

(oSs profit is computed
b a s e d on collections pertaining to the principal
bascd on the total collection during the period

. none of these

13.Undcr the installment sales method, when merchandise previously soid is

repossesscd, the repossessed merchandise is recorded at
(a) fair value C. current cost
5 . original cost d. any of these

14.For purposes of applying the installment sales method, "fair value" is

a. the appraised value of the repossessed property or traded-in merchandise
b. the ostimated selling price of the repossessed property or traded-in
merchandise less reconditioning costs and normal profit margin, at date of
Tpossession or date of trade-in.
C. à or b
d. nonc of these

15. Gain or loss on repossession is computed as

a. the fair value of the repossessed property less the sum of the balance in
deferred gross profit and the balance in the defaulted installment account
Terevable
. the sum of the fair value of the repossessed property and the balance in the
defaulted installment account receivable less the balance in deferred gross
profit
the diference between the fair value of the repossessed property and the
balance h deferred gross profit
 d. the sum of the fair value of the repossessed property and balance in deferred
Jross profit less the balance in the defaulted installment account receivable

16.Mcrchandise received as trade-in is recognized at

fair valuc C. Current cost
6.original cosSt d. any of these

17.Under an installment sale where merchandise is received as "trade-in."

when
a the fair value of merchandiso traded-in is as part of collections
considered
cdetermining the realized gross profit in the year of sale.
b. the trado-in value of merchandise traded-in is considered as part of collections
when determining the realized gross profit in the year of sale
C. neither the fair value nor the trade in value affects the computation of realized
gross profit.
d. none of these

18.Tho excess of the trade-in value over the fair valuc of a traded-in merchandisc in a
sale accounted for under the installment sales method represents
a) over allowance C. no allowance
b. under allowance d. small allowance

19.Under the installment sales method, an "over allowance" is

a. treated as addition to the installment sale price when computing for the gross
profit rate.
b.)treated as reduction to the installment sale price when computing for the gross
profit rate.
C. not accounted for
d. none of these

20.Under the cost recovery method,

(a Lheinitial collections on the sale are treated as recovery of the cost of the
inventory sold. Thus, no gross profit or interest income is recognized until total
collections from the sale equals the cost of inventory sold.
b. the initial collections on the sale are treated as recovery of the cost of the
inventory sold. Thus, no gross profit is recognized until total collections from the
sale equals the cost of inventory sold. However, interest income may
nonetheless be recognized.
C. a orb
d. none of these
21.BUC0LIC RURAL Co. uses the installment method. Information on BUCOLIC's
transactions during 20x1 and 20x2 is shown beloW:
20x1 20x2
Installment sales 2,000,000 2,400,000
Cost of sales 1,200,000 1,320,000
Gross profit 800,000 1,080,0000
Cash collections from:
20x1 sales 800,000 400,000
20x2 sales 960,000
How much is the total realized gross profit in 20x2?
a. 160,000
b. 432,000
(C.) 592,000
 0 U 0
IAR

2 , 4 0 , v W

2 4 0

22

d. 642,000

Use the following information for the next three questions:

INNOCUOUS HARMLESS Co. uses the installment method. On January 1, 20x3,
INNOCUOUS Co.'s records show the following balances:

Installment receivable - 20x1 800,000

Installment reccivable - 20x2. 2,400,000
Deferred gross profit 20x1 176,000
Deferred gross profit 20x2 576,000

On December 31, 20x3, INNOCUOUS Co.'s records show the following balances before
adjustments for realized gross profit:
Installment receivable - 20x1
Installment receivable - 20x2 960,000
Installment receivable - 20x3 2,400,000
Deferred gross profit 20x1 176,000
Deferred gross profit -20x2 576,000 . , u

Deferred gross profit 20x3 1,500,0001'.

Installment sales in 20x3 were made at 33/3 above cost. 3333
22.How much is the installment sale in 20x3? 33.33
a. 4,836,000
b5,800,000
cJ6,000,000
d. 7,200,000
(ct
23, How much is the total cash collections in 20x3? Ded
5,840,000
1,440,000
C. 3,600,000-
d. 5,640,000 X 21' C 00o,v
2, u , v
24.How much is the total realized gross profit in 20x3?
a. 984,600
b. 1,241,200
1,520,000
X2
(d) 1,421,6000
25.DEMOTIC POPULAR Co. uses the installment method. The following information
was taken from the incomplete records of DEMOTIC Co.:
20x1 20x2 20x3
Installment sales 4,000,0000 4,800,000
Cost of sales
Gross profit
Gross profit rates 25%
Collections:
from 20x1 sales 2,000,00o 1,200,000 800,000
from 20x2 sales 2,400,000 1,440,000
from 20x3 sales 3,600,0000
Realized gross profit 440,000 1,421,600
How much is the cost of sales in 20x2?
a. 2,840,000
b. 3,248,000
C.) 3,648,000
d. 3,946,000

Use the following information for the next three questions:

SLAVE Co. the installment method. Information on installment sales in
THRAL uses

20x1 and 20x2 is shown below:

20x1 20x2
400,000 640,000
Sales
Cost of sales 320,000 448,000
Gross profit rate 20% 30%
Installmentreceivable 20x1 180,000 60,000
Installment receivable 20x2 288,000
During 20x2, THRALL Co. repossessed a property which was sold in 20x1 for P40,000
The estimated resale
Prior to repossession, P10,000 were collected from the buyer.
costs of P6,000.
price of the repossessed property was P34,000 after reconditioning
26.How much is the gain or loss on repossession?
17,800
6,200
12,800
d. 5,40D0

much is the total realized gross profit in 20x2?

27.How
a 123,600
b. 352,000
C. 117,400
d. 90,000

28.How much is the profit recognized in 20x2?

a. 123,600
352,000
117,400
d. 90,000
three questions:
Use the following information for the next
on installment basis. For each
Songing Co. sells household furniture both on cash and
installment sale, a contract is entered into whereby the following terms are stated
a. Adown payment of 25% of the installment selling price is required and the
installments.
balance is payable in 15 equal monthly
the unpaid cash sales price equivalent at
b. Interest of 1% per month is charged on

each installment.
C. The price on installment sale is equal to 110% of the cash sales price.

For accounting purposes, installment sales are recorded at contract price. Any unpaid
uncollectible accounts expense. Sales
balances on defaulted contracts are charged ton
credited to uncollectible accounts expense. Interests
are
of defaulted merchandise are
 December 31,
recorded in the period earned. For its first year of operation ending
20x1, the books of the company showed the following:

Cash sales P378,000

Installment saless 794,970
Merchandise inventory, Jan. 1 174,180
Cash collections on installment contracts
Down payment, including defaulted contract 198,750
Installment payments, including interest
of P27,758.52 (average of six
monthly installments on all
Contracts, except on defaulted
Contracts) 238,023
A contract amounting to P3,300 was defaulted after the payment of 3 installments.

29.The gross profit rate based on total sales at cash sales price equivalent is:

a. 33.75% c)37.00%
b. 36.34% d. 40.88%

interest earned for the first four months on the defaulted contract is:
30.The total
a)60.94 C. 72.07
b. 69.30 d. 80.85

31.The realized gross profit for the year 20x1 is:

a. 151,335.35 C. 249,674.52
b. 161,789.16 (d) 291,355.96

31.After year-end adjustments but before elimination entries, the balance in the
"allowance for mark-up on shipments to branch"
a. is equal to zero c. represents the realized mark
up
b.) represents the unrealized mark-up d. represents profit

32.When shipments to branch are billed at other than cost, the individual profit of
the branch is not equal to its true profit. The difference pertains to the
a. unrealized mark-up C. total mark-up
b) realized mark-up d. errors committed

33.The combined profit of the entity is equal

a. to the individual profits of the home office and the branch.
b. to the individual profits of the home office and the branch after eliminating any
unrealized mark-up during the period.
c to the individual profit of home office plus the true profit of the branch.
d. to the true profit of the home office plus its share in the profit of the branch.

34. Excess freight on inter-branch transfers of merchandise is

a, charged as expense in the home office books.
b. recorded as freight-in in the books of the recipient branch.
C. charged as expense in the boks of the recipient branch.
d. not recorded.

35. Freight savings on inter-branch transfers of merchandise is

 a. recognized as gain in the home office books.
b. recorded as a reduction to the cost of shipments.
C. recognized as gain in the transferring branch's books
(d) not recorded.

Use the following information for the next two questions:

The trial balances of INTERIM TEMPORARY Co.'s home office and branch are shown
below:

INTERIM TEMPORARY
Co.
Trial balance
December 31, 20x1

Home
office Branch
Dr.
Dr. (Cr.) (Cr.)
4,400,000 1,668,00
Cash
Accounts receivable 720,000 400,000
Inventory, beg. 2,600,000
Shipments from home office 920,000
Purchases 288,000 160,000
Freight-in 88,000 72,000
Shipments to branch (920,000)
Investment in branch 3,308,000
2,880,000 1,600,00
Equipment
Accumulated d e p r e c i a t i o n -
(288,000) (160,000
equipment
Furniture 360,000 200,000
Accumulated depreciation - (36,000) (20,000)
furniture
(288,000) (160,000
Accounts payable
(180,000) (100,000
Accrued expenses
(8,000,00
Share capital 0)
(2,000,00
Share premium 0)
Retained earningS beg. (824,800)
(3, 08,0
Home office 00)
(3,600,00 (2,000,0
Sales 0) 00)
Depreciation expense 672,000 272,000
Utilities expense 72,000 40,000
General overhead expense 28,800 16,000
Various operating expenses 720,000 400,000
Totals

The home office and the branch have ending inventories of P1,080,000 and P600,000,
respectively.
36.How much is the total assets in the combined statement of financial position?
a. 13,440,000
b. 14,800,000
C. 14,340,000
d)13,404,000
loss?
37.How much is the total profit in the combined statement of profit or
(a) 1,851,200
b. 1,960,200
C. 1,815,200
d. 1,720,200
38.AMNESTY PARDON Co. is currently preparing its combined financial
P624,000 balance in
statements. At December 31, 20x1, the home office shows a
its "Investment in branch" account while the branch showed a P280,800
balance in its "Home office" account. The following information has been

a. gathered:
The home office shipped merchandise worth P80,000 to the branch during
December 20x1 which the latter has received and recorded only in January
20x2.
b. The home office collected P40,000 accounts receivable on behalf of the branch.
The branch did not yet receive the credit memo sent by the home office.
C. The branch returned damaged merchandise worth P120,000 to the home office.
The home office did not yet receive the debit memo sent by the branch.
d. A remittance of cash collections amounting to P160,000 was not yet recorded by
the home office.
e. The home office allocated overhead cost of P20,000 to the branch which the
latter has recorded twice.
f.Freight charge of P48,000 paid by the home office for shipments of merchandise
to the branch was recorded by the latter as P4,800.

How much is the adjusted balance of the "home office" account?

a 324,000
b 344,000
C. 354,000
d. 364,000

39.ABASE HUMILIATE Co. is currently preparing its combined financial statements

for the year ended December 31, 20x1. As of this date, the "Investment in
branch" account has a balance of P380,000 while the "Home office" account has
a balance of P528,000. The following information has been gathered:
a. The home office allocated unpaid utilities expenses amounting to P40,000 to the
branch which the branch did not record in full. Instead, the branch sent a wrong
adjusting memo to the home office reducing the charge by P10,000 and setting up a
liability for the remaining amount.
 of shipment ot
branch for a return
b. The office erroneously credited the
home return of merchandise.

merchandise worth P100,000. The

branch did not make any
the home office correcting
entry for item
received a copy of on
C. The branch mistakenly of the home office
20x2 and entered a credit in favor
(b) above dated January 3,
December 31, 20x1. for
amounting to P12,000
sent the home office a debit memo office did
d. The branch mistakenly The home
remittance of collections
which did not happen.
an apparent
not record the debit memo.

office" account? increase (decrease)

much is the net adjustment to the "Home
How
100,000
b. 48,000
c. (48,000)
d. (52,000)
20x1, the
branches. On December 31,
40.ABOMINABLE VERY BAD Co. has several office shows a balance of
maintained by the home
"Investment in Branch One" One shows a
account maintained by Branch
P400,000 while the "Home office"
information was determined:
balance of P568,000. The following maintained in the books
of
for P120,000 to be
a. Branch Two acquired equipment office as a transaction with
recorded by the home
the home office. This was
Branch One. maintained in its books.
for P160,000 to be
b. Branch One acquired equipment
home office.
This was not recorded by the home office which the
collections of P40,000 to the
C.Branch Four remitted cash
latter failed to record. of P48,000
Branch One for a debit memo

d. The home office erroneously charged

received from Branch Five.
to
debit m e m o from Branch Six amounting
e. Branch One reversed a previous Branch
decided that this charge is appropriately
P24,000. The home office
Seven's Cost.

is adjusted balance of the "Home Office" account?

How much b. 588,000 c. 628,000 d. 658,000
a.)568,000

combined financial
41.ASTATIC UNSTABLE Co. is currently preparing its
the home office shows a P728,000 balance in
statements. At December 31, 20x1,
The following information has been
its "Investment in branch" account.
gathered during the reconciliation procesS:
the branch amounting to P48,000 was
a. A credit memo sent by the home office to
not recorded by the branch.
b. A debit memo sent by the home office to the branch amounting to P36,000 was
not recorded by the branch.
C. A credit memo sent by the branch to the home office amounting to P80,000 was
recorded by the home office twice.
d. A debit memo sent by the branch to the home office amounting to P120,000 was
recorded by the home office as P12,000.
c. The branch sent by mistake a credit memo amounting to P28,000 to the home
office. The home office did not record it.
 -

From outside
-
purchases
From home office 1,840,000 40,000
960,0000
How much is the combined
a. 4,340,000 profit?
Cb 3,440,000
C. 4,300,000
d. 3,400,000

Use the following information for the next two questions:

AB Co. decided to open a branch in Manila. Shipments of merchandise to the branch
totaled P54,000 which included a 20% mark-up on cost. All accounting records are to
be kept at the home office. The branch submitted the following report summarizing its
operations for the period ended December 31, 20x1.

Sales on account 74,000

Sales on cash basis 22,000
Collection of account 60,000
Expenses paid 38,000
Expenses unpaid 12,000
Purchase of merchandise for cash 26,000
Inventory on hand, Dec. 31; 80% from home office 30,000
Remittance to home office 55,000

44. How much is the branch inventory at cost?

( a 26,00o b. 20,000 C. 22,000 d. 23,000

45. How much is the profit (loss) of the branch as far as the home office is
Concerned?
a. (1,000) b. (4,000) (1,000 d. 800

Use the following information for the next two questions:

ABC Co. operates a branch in Davao. There are shipments in transit from home office
to the branch. The home office ships merchandise to the branch at 125% of cost in year
20x1. Profit and loss data for the home office and branch for 20x1 follows:
Home Bran
Office ch
75,00
Sales 250,000
15,00
Purchase from outsiders 200,000
Shipments to branch:
Cost to Home Office 30,000
32,50
Billing price to branch

10,00
Expenses 40,000
Inventories, Jan. 1, 20x1:
Home Office, acquired from outsiders,
80,000
at cost
Branch: Acquired from outsiders at
cost 7,500
Acquired from home office at billing 24,00
price
which averaged 20% above cost 0
Inventories, Dec. 31, 20x1
Home Office, acquired from outsiders
at cost 55,000
Branch: Acquired from outsiders at
COst 5,500
Acquired from Home Office, in 20x1, 21,00
at billed
price (physical count)
46.How much is the amount of merchandise in transit at billed price?
a. 3,0000 b. 3,500 c. 5,000 d. 5,500

47.How much is the combined cost of goods sold?

a. 241,200 b. 240,000 C. 242,400 d. 245,200

Use the following information for the next two questions:

Shipments received from the home office are billed at 120% above cost. During the
year, the branch received shipments billed at P480,000 and returned damaged goods
with billed price of P72,000. The branch has an ending inventory of P120,000, at billed
price. The branch reported loss of P40,000 in its individual financial statements.

48.How much is the balance of the "allowance for markup" account before year-
end adjustments?
a. 86,000 b.72,000 (c68,000 d. 64,000

49. How much is the true profit of the branch to be taken up in the home office
books?
C. 12,000 d. 14,000
(a 8,000 b. 9,000

50.The home office bills shipments of merchandise to its branch at a markup of

20% on the billed price. At the beginning of the period, the "Allowance for
markup" account has a credit balance of P16,000. During the period, the home
office made shipments of goods worth P960,000 at cost. The branch reported an
ending inventory of P480,000 at billed price.

How much is the realized markup?

a. 120,000 (b, 160,000 C. 180,000 d. 240,000