CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

ADVANCED FINANCIAL ACCOUNTING AND REPORTING

First Preboard Examination

SOLUTIONS

1. B

A share in NI 1,210,500
A salary (1,200,000)
A interest (324,000)
A share in remainder (313,500)

Total salaries (1,200,000 + 1,050,000 + 720,000) 2,970,000

Total interest (based on original capital) (324,000 + 486,000 + 729,000) 1,539,000
Total remainder [(313,500) x 3] (940,500)
Total net income 3,568,500

2. A

B share in NI 1,815,000
B salary (1,050,000)
B interest (486,000)
B share in remainder 279,000

Total salaries (1,200,000 + 1,050,000 + 720,000) 2,970,000

Total interest (based on original capital) (324,000 + 486,000 + 729,000) 1,539,000
Total remainder (279,000 x 3) 837,000
Total net income 5,346,000

3. B

C share in NL (594,000)
C salary (720,000)
C interest (729,000)
C share in remainder (2,043,000)

Total salaries (1,200,000 + 1,050,000 + 720,000) 2,970,000

Total interest (based on original capital) (324,000 + 486,000 + 729,000) 1,539,000
Total remainder [(2,043,000) x 3] (6,129,000)
Total net loss (1,620,000)

4. B
5. D

6. B
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Total capital after formation /
Agreed capital 360,000
x 55%
Charlie’s should be capital
after formation 198,000
Amount credited to capital (8,000)
Contributed capital of Charlie 190,000
Contributed cash (85,000)
Contributed machine 105,000

7. C

Total capital after formation /

Agreed capital 360,000
x 45%
Delta’s should be capital
after formation 162,000
Amount debited to capital 8,000
Contributed capital of Charlie 170,000
Contributed cash (55,000)
Mortgage assumed 35,000
Contributed equipment 150,000

8. C

Juliet capital 200,000

Kilo capital 220,000
Lima machine (FMV) 180,000
Total contributed/agreed capital 600,000 *since there is no implied revaluation
Percent interest of Lima x 40%
Capital credit to Lima 240,000
Capital contribution of Lima (180,000)
Bonus to Lima 60,000

Kilo capital 220,000

Share in the bonus (60,000 x 65%) (39,000)
Kilo capital after admission 181,000

9. A

Juliet capital 200,000

Share in the bonus (60,000 x 35%) (21,000)
Juliet capital after admission 179,000
Share in net income
(130,000 x 80% x 50%) 52,000
Juliet capital at the end of the yr 231,000
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10. B

Juliet capital 200,000

Kilo capital 220,000
Lima machine (FMV) 180,000
Total contributed capital 600,000
Total agreed capital
(180,000 ÷ 40%) (450,000)
Overvaluation (150,000)

11. D

Kilo capital 220,000

Share in the undervaluation
(150,000 x 65%) (97,500)
Kilo capital after admission 122,500
Share in net income
(130,000 x 80% x 50%) 52,000
Kilo capital at the end of the yr 174,500

12. A
13. C

14. A

Total Capital of partners 11,600,000

Total liabilities 4,400,000
Cash on hand (800,000)
Non-cash assets 15,200,000

X (25%) Y (35%) Z (40%)

Total interest before liquidation 2,500,000 6,000,000 3,700,000
Share in the loss on realization (3,800,000) (5,320,000) (6,080,000)
Balances after absorbing the loss (1,300,000) 680,000 (2,380,000)

NOTE: Since the partners are solvent (personal assets are greater than personal liabilities), the
deficient partner can contribute additional cash up to his deficiency to cover the outside creditors
and payment to partners.

15. D
X (25%) Y (35%) Z (40%)
Total interest before liquidation 2,500,000 6,000,000 3,700,000
Share in the total loss (2,675,000) (3,745,000) (4,280,000)
Cash paid to partner (175,000) 2,255,000 (580,000)

Total loss (3,745,000 ÷ 35%) 10,700,000

Total est. deficiency (755,000)
Liquidation expenses -
Maximum possible loss -
Gain on condoned liability -___
Loss on realization 9,945,000
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NOTE: After absorbing the share in the total loss, X and Z's interest became negative balances
indicating that they are the deficient partners and they will not receive any cash at the end of the
liquidation process.

16. B
17. C

18. C

Proceeds from the sale 192,000

Loss on realization 35,000
Book Value of non-cash asset sold during the first liquidation 227,000

19. B

Book value unrealized non-cash assets (357,000 - 227,000) 130,000

Cashwithheld for future liquidation expenses 4,800
Maximum possible loss 134,800

20. D

Cashwithheld for future liquidation expenses 4,800

Unpaid balance of outside creditors (120,000 - 33,600) 86,400
Total cash withheld 91,200

21. C
22. D

Interest of B 200,000
Bonus to remaining partners (30,000)
Amount paid to B 170,000

A (30%) C (40%)
Capital balance before retirement 300,000 100,000
Share in the bonus 12,857 17,143
Capital balances after retirement 312,857 117,143

23. A

DM per unit 0.15

DL per unit 0.25
Applied OH per unit (0.25 x 140%) 0.35
Total Rework cost per unit 0.75
x 250
Total Rework cost 187.5
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DM per unit 3.50
DL per unit 1.25
Applied OH per unit (1.25 x 140%) 1.75
Total Initial cost per unit 6.50
x 5,000
Total Initial cost in WIP 32,500
Total Rework cost 187.5
Total Cost of goods transferred to FG 32,687.5
Good units ÷ 5,000
Cost per good unit 6.5375

24. C

DM per unit 0.150

DL per unit 0.250
Applied OH per unit (0.25 x 150%) 0.375
Total Rework cost per unit 0.775
x 250
Total Rework cost 193.75

DM per unit 3.500

DL per unit 1.250
Applied OH per unit (1.25 x 150%) 1.875
Total Initial cost per unit 6.625
x 5,000
Total Initial cost in WIP 33,125
Good units ÷ 5,000
Cost per good unit 6.6250

NOTE: Since it is charged to the customer, the rework cost is charged to factory overhead
control and the Total Initial cost in the WIP equals the Total cost transferred to FG because no
adjustment needed.

25. D
26. C

Direct materials 168,000

Direct labor 156,000
Applied factory overhead 524,000
Total cost (CGM) 848,000
÷ 20,000
Cost per unit 42.40
x 18,000
Cost of goods sold 763,200

Unsold units 2,000

Applied conversion cost x 42.40
Finished goods at the end 84,800
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To record the sale:

Cost of goods sold 763,200

Finished goods inventory 84,800
Accounts payable 168,000
Wages payable 156,000
Various accounts 524,000

27. A
28. C

29. A

Direct materials (53 x 80,000) 4,240,000

Direct labor (12 x 80,000) 960,000
Applied factory overhead (1,980,000 x 80,000/120,000) 1,320,000
Total cost Product Z 6,520,000

30. D

Supporting direct labor (783,600 x 40,000/120,000) 261,200

Batch setups (495,000 x 200/300) 330,000
Product sustaining (701,400 x 1/2) 350,700
Total applied OH based on Activity-Based Costing 941,900

Direct materials (72 x 20,000) 1,440,000

Direct labor (24 x 20,000) 480,000
Applied factory overhead 941,900
Total cost Product X 2,861,900

Sales (140 x 20,000) 2,800,000

Cost of goods sold (2,861,900 x 100%) (2,861,900)
Gross loss (61,900)

31. A

Approx NRV of A [(15 - 6 - 4) x 4,000] 20,000

Approx NRV of B [(12.50 - 7 - 3) x 12,000] 30,000
50,000

32. D

Initial joint cost 105,000

NRV of by-product [(9 - 3 - 2) x 4,000] (16,000)
Adjusted joint cost 89,000

Share of A in joint cost (89,000 x 20/50) 35,600

Separable cost (6 x 4,000) 24,000
Total cost of A 59.600

33. D
34. C
35. C
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36. C

BP Cost Mark-up
BI 125% 100% 25%
2,700,000 2,160,000 540,000
Shipments 220% 100% 120%
3,135,000 1,425,000 1,710,000
Available 2,250,000
EI 288,750 231,000 57,750 (25%)
3,135,000 1,425,000 1,710,000 (120%)
1,767,750
CGS 482,250

37. D

TGAS at cost (2,160,000 + 558,000 + 1,425,000 + 751,200) 4,894,200

38. A

CGS per branch (4,894,200 + 2,250,000 = 7,144,200 - 288,750 - 3,135,000 - 414,000) 3,306,450

39. A
EI from outsiders (2,070,000 - 231,000 - 1,425,000) 414,000

40. C
41. C

42. A

Net Free Assets (4,200,000 - 90,000 -210,000) 3,900,000

Total Unsecured Liabilities without Priority (6,300,000 - 90,000 - 210,000 ) 6,000,000

240,000 - 144,000 = 36,000

36,000 x 65% = 23,400 + 144,000 = 167,400

43. B

Estimated loss on realization (200,000 - 150,000) (50,000)

Unrecorded liabilities (7,200)
SHE (200,000 - 170,000) 30,000 27,200

44. C
45. D

46. B

600 Million x 10% = 60 Million

600 Million x 32% (50% - 10% - 8%) x 90% = 172.8 Million 232.8 Million
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47. C

4,000,000 / 40% = 10,000,000 total estimated cost

10,000,000 x 60% = 6,000,000 cost incurred to date
6,000,000 - 1,850,000 = 4,150,000 cost incurred in year 1
4,150,000 / [4,150,000 + 6,225,000] 40%
250,000 / 40% = 625,000

48. B
49. A

50. B
51. A

Investment in Branch Home Office Current

P166,500 147,540
a. 1,680
b. (3,000)
c. 6,000 6,000
d. (1,380)
e. 17,400
f. (4,500)
g. (360)
167,940 167,940

52. B

Sales 46,500
Sales discount (810)
CGS (46,500 x 70%) (32,550)
Freight (1,100)
Selling expense (2,820)
Administrative expense (5% x 46,500) (2,325)
Samples expense (900) 5,995

53. A

Cash 59,500
Merchandise (free portion) 26,500 (410,000 - 383,500)
Building 495,000
Others 329,100*
910,100

*(2,400,000 - 59,500 - 615,000 - 384,000 - 645,000 - 38,000 - 110,000) 548,500 x 60%

54. D

Total Free Assets 910,100

Less: With Priority (187,500)
Net Free Assets 722,600
Total Unsecured Liabilities 1,263,200 540,600
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Total Unsecured Without Priority
Accounts Payable (978,000 - 275,000) 703,000
Accounts Payable (275,000 - 268,800) 6,200
Others (1,900,000 - 368,000 - 978,000) 554,000 1,263,200

55. C
56. C

57. B

Assets = Liabilities + SHE

Total of Debit [537,500 + 680,000 + 790,000 (squeeze) + 1,050,000 + 845,500] = 3,903,000

Total of Credit [3,903,000 + 437,000] = 4,340,000
Asset Not Realized [4,340,000 - 875,000 - 1,425,000 - 415,000 - 962,500] 662,500

Total Assets [1,050,000 + 510,000 + 148,000 + 437,000] 2,145,000

Cash [2,145,000 - 662,500] 1,482,500

58. B

Total Assets [1,425,000 + 510,000 + 148,000] 2,083,000

Cash [2,083,000 - 537,500] 1,545,500 - 1,482,500 = 63,000

59. C
60. D
Investment in Branch Home Office Current
2,255,170 2,275,000
a. 84,000
b. 37,800
c. 18,000
d. (8,370) ________
2,330,800 2,330,800

61. C

21,960 + 5,050 - 1,250 = 25,760

Caloocan books

Shipments from HO 21,960

Freight-in 5,050
Cash 1,250
Home Office Current 25,760

62. C

308,000 + 1,400,000 = 1,708,000 - 238,000 = 1,470,000 cost incurred year 1

5,880,000 - 784,000 = 5,096,000 - 1,708,000 = 3,388,000 - 700,000 = 2,688,000 cost in year 2

63. C
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64. B

Cost to date in 2026 600,000

Loss to date in 2026 (25,000) 575,000

65. A

Revenue recognized in 2026 (975,000 x 50%) 487,500

Loss realized in 2026 [(25,000) - 22,500] ( 47,500)
CGS 535,000

66. B

Total sales - sales on account - commission - reimbursable items = net remittance

X - (7 x P360,000) - .25X - 130,000 = 4,910,000
X - 2,520,000 -.25X - 130,000 = 4,910,000
.75X = 7,560,000
X = 10,080,000 - 2,520,000 = 7,560,000

67. C

Sales P10,080,000 (P360,000 x 28 sold items)

CGS (6,832,000) (P240,000 x 50 = 12,000,000 + 160,000 + 40,000 = 2,200,000 x 28/50)
GP 3,248,000
Freight out (48,000)
Advertising (90,000)
Samples (45,000) (120,000 x 3 months/8 months)
Commission (2,520,000) (10,080,000 x 25%)
Loss on Return (24,000) (200,000 x 6/50)
Net Income 521,000

68. C

(12,200,000 x 16/50) = 3,904,000

69. B
70. B

Allocated Revenue
Trade-name 12,000,000 9,600,000/8 yrs. x 10/12 1,000,000
Construction 9,000,000 7,200,000 x 70% 5,040,000
Delivery 4,000,000 3,200,000 x 5,600/8,000 2,240,000
25,000,000 20,000,000 8,280,000

END