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Use the following information for the first three items

The partnership of Maring and Habagat began business on January 1, 2013. The following assets were
contributed by each partner (the non-cash assets are stated at their fair values on January 1, 2013):




The land was subject to a P65,000 mortgage, which the partnership assumed on January 1, 2013. The
equipment was subject to an installment note payable that had an unpaid principal amount of P35,000 on
January 1, 2013. The partnership also assumed this note payable. According to the partnership
agreement, each partner was to have a 50% capital interest on January 1, 2013, with total partnership
capital being P300,000. Maring and Habagat agreed to share partnership income and losses in the
following manner:

Interest on beginning capital



Inventory was acquired at a cost of P30,000. At December 31, 2013, the partnership owed P6,000 to
its suppliers. The partnership inventory at December 31, 2013 was P20,000.
Principal of P10,000 was paid on the mortgage. Interest expense incurred on the mortgage was
P4,000, all of which was paid by December 31, 2013.
Principal of P7,500 was paid on the installment note. Interest expense incurred on the installment
note was P2,500, all of which was paid by December 31, 2013.
Sales on account amounted to P115,000. At December 31, 2013, customers owed the partnership
Selling and general expenses, excluding depreciation, amounted to P21,000. At December 31, 2013,
the partnership owed P3,000 of accrued expenses. Depreciation expense was P5,000.
Each partner withdrew P225 each week in anticipation of partnership profits.
The partners allocated the net income for 2013 and closed the accounts.
Additional information:
On January 1, 2014, the partnership decided to admit Nando to the partnership. On that date, Nando
invested P100,900 of cash into the partnership for a 20% capital interest.

D. P1,000

The capital balance of Maring at the end of 2013:

A. P138,000
B. P139,800

C. P148,800

D. P150,600

The capital balance of Habagat after Nandos admission must be:

A. P150,140
B. P151,100
C. P155,900

D. P156,860

Janine and Nicole formed a general professional partnership (practicing law) in the Philippines on
January 1, 2014. Their capital contributions were credited to their respective capital accounts as follows:
Janine, Capital P600,000
Nicole, Capital P1,000,000.
During the year, the partnership earned profit before tax of P4,000,000.
The income tax rate was 30%.


During 2013, the following events occurred:

The share of Habagat on the net income of 2013 must be:

A. P10,200
B. P9,000
C. P3,000

How much is the share of Nicole in the partnership profit?

a. P1,750,000
b. P2,500,000
c. P1,500,000


d. P2,000,000

Manolo, Jane, Joshua and Loisa own a publishing company that they operate as a partnership. Their
agreement includes the following:

Manolo will receive a salary of P20,000 and a bonus of 3% of income after all the bonuses
Jane will receive a salary of P10,000 and a bonus of 2% of income after all the bonuses
All partners are to receive the following: Manolo P5,000; Jane P4,500; Joshua P2,000; and
Loisa P4,700, representing 10% interest on their average capital balances.
Any remaining profits are to be divided equally among partners
Partnership reports a profit of P40,000.

How much is Janes share in the profit if the profit is distributed in the following order of priority:
interest on invested capital, then bonuses, then salary, and then according to profit and loss percentage?
A. P12,443
B. P12,560
C. P12,830.75
D. P13,235.75
Use the following information for the next two items
On June 1, 2012, L and M formed a partnership with cash investments of P330,000 and P420,000,
respectively. Upon formation, the partners agreed to bring their capital ratio in proportion with their
profit or loss ratio which is L-30% and M-70% and M is the partner who has to invest or withdraw

sufficient amount of cash to conform with the agreement.

Profit allocation were as follows: monthly salaries, L-P36,000 and M-P30,000. The partners will be
allowed with interest of 12% on their capital balances at the end of the year before closing the income
summary account and any distribution against net income. M receives a bonus of 20% of net income
after deducting the bonus and his salary.

In 2012, the partnership reported net income of P450,000 before any deductions and each partner has
drawings of P150,000 distributed at year-end against share in net income.

10. Rushnell, Adrianne and Christine were partners with capital balances on January 2, 2014 of P350,000,
P525,000 and P700,000. Their profit ratio is 5:3:2 while the original interest ratio is 4:4:2. On July 1,
2014, Jensie was admitted by the partnership for 20% interest in capital and 25% in profits by
contributing P87,500 cash. The partnership had a net income of P210,000 before admission of Jensie.
Prior to the admission of Jensie, the partners agree to revalue its overvalued equipment by P35,000. The
capital balance of Rushnell after admission of Jensie is:
A. P297,500
B. P354,200
C. P470,400
D. P588,000

On January 1, 2013, N was admitted as a partner by purchasing 1/3 interest of M, paying the selling
partner the amount of P276,000. N also invested P230,000 cash for a total interest of 20% in capital of
the partnership.

11. Partners A, B, C and D, who share profits 5:3:1:1 respectively, decide to dissolve. Capital balances at
this time are P60,000, P40,000, P30,000 and P10,000 respectively. Before selling the firms assets, the
partners agree to the following:

On August 1, 2012, L invested additional P80,000 and withdrew P30,000 on October 1, 2012. On
September 1, 2012, M invested additional P48,000 cash and withdrew P18,000 on December 1,2012.





admission of Max, the partners agree to revalue its overvalued equipment by P35,000. Capital balance of
Adrian increased by P10,500 as a result of the admission of Max while the capital balance of Nicole at
the start of the year is P700,000. The capital balance of Monica at the start of the year is:
A. P350,000
B. P354,000
C. P441,000
D. P577,500

Determine the capital balances of L, after admission of N.

A. P498,294
B. P541,340
C. P512,290

D. P529,798

Determine the capital balances of M, after admission of N.

A. P718,202
B. P724,306
C. P702,220

D. P698,440

D, E and F attorneys, decide to form a partnership and agree to distribute profits in the ratio of 5:3:2. It
is agreed, however, that D and E shall guarantee fees from their own clients of P60,000 and P50,000
respectively, that any deficiency is to be charged directly against the account of the partner with fees
exceeding the guarantee. Fees earned during 2009 are classified as follows:
From clients of D
From clients of E
From clients of F
Operating expenses for 2009 are P20,000.
From the above data, compute the net effect on partners capital increase or (decrease) by:
P 40,000
P 90,000
P 50,000
P 30,000
Monica, Adrian and Nicole were partners in The Legal Wife Partnership. Their profit ratio is 5:3:2 while
the original interest ratio is 4:4:2. On July 1, 2014, Max was admitted by the partnership for 20% interest
in capital and 25% in profits by contributing P87,500 cash, and the old partners agree to bring their
interest to their original capital ratio. Max is the recipient of the transfer of capital of P280,000 from the
existing partners. The partnership had a net income of P210,000 before admission of Max. Prior to the

1. Partnership furniture and fixtures, with the book value of P12,000, is to be taken over by partner
A at a price of P15,000.
2. Partnership claims of P20,000 are to be paid off and the balance of cash on hand, P30,000, is to
be divided in a manner that will avoid the need for any possible of cash from a partner.
How much the P30,000 cash be distributed to the partners?


P 0
P 11,500
P 20,000
P 20,000

P 30,000
P 20,500
P 10,000
P 20,000

P 0
P 500
P 0
P 0

12. The following selected accounts appeared in the trial balance of Aiza Corp as of December 31, 2013:
Installment receivable-2012 sales
Installment receivable-2013 sales
Inventory, December 31, 2012

P 6,000

Installment sales
Regular sales
Deferred gross profit 2012
Operating Expenses

P 1,200

Additional information:
Installment receivable 2012 sales, December 31, 2012
P 57,100
Inventory of new and repossessed merchandise as of December 31, 2013
Gross Profit percentage on installment sales in 2012 is 10% higher than the gross profit percentage on
regular sales in 2013

Repossession was made during the year and was recorded correctly. It was a 2012 sales and the
corresponding uncollected account at the time of repossession was P3,100.
Net Income for 2013 is
A. P 54,180

B. P 6,740

C. P 52,940

D. P 53,600

13. Siwag Company uses the installment method of reporting for accounting purposes. The following data
were obtained.
Installment sales
Cost of installment sales
Gross profit
Installment contract receivables, December 31:
2011 sales
P 360,000
P 270,000
P 120,000
2012 sales
2013 sales
In 2013, one of the customers defaulted in his payment and the company repossessed the merchandise
with an estimated market value of P30,000. The sales was in 2011 and the unpaid balance on the date of
repossession was P 45,000.

Costs of contracted research and development activities

Depreciation of idle equipment that is not used on a particular contract
Selling costs
General & administration costs expenses specifically included under the
terms of the contract
Borrowing cost incurred during the construction period
Costs of labor for site supervision


Advances made to subcontractors

* expensed in prior year although the contract was obtained in 2013



Using cost-to-cost method in determining the stage of completion, what is the realized gross profit for
the period 2013? (Round-off stage of completion to 2 decimal percentage)
a. P 111,055
b. P 125,195
c. P 134,610
d. P 141,330
15. ABC Construction Corporation contracted with the province of Pampanga to construct a bridge at a
contract price of P16,000,000. ABC Corporation expects to earn P1,520,000 on the contract. The
percentage of completion method is to used and the completion stage is to be determined by estimates
made by the engineer. The following schedule summarizes the activities of the contract for years 20112013.

Compute for 2013 (1) the gain (loss) on repossession; (2) total realized gross profit, and (3) the deferred
gross profit.

P (1,500)

P 189,000


P 451,500


Cost to
P 9,640,000

Estimate of

On Contract
P 5,000,000

On Billings

*A 10% retainer accounts for the difference between billings and collections.

14. On July 1, 2013, BINAY Construction Corp. contracted to build an parking office building for JOJO Inc.
for a total contract price of P2,950,000. Estimated total contract costs is P2,600,000.
Costs incurred to date are as follows related to the project were as follows:
Cost of direct materials used
Cost direct labor (includes labor cost of site supervision)
Cost of indirect materials used
Cost incurred in securing the contract*
Annual depreciation of plant and equipment used on the contract
Payroll of design and technical department allocated to the contract
Insurance costs (2/3 for other contracts)



Under the percentage of completion method, using the engineers estimate as the
to be applied to revenue and costs, how much is the gross profit earned each year?
A. P545,600;
P 498,400;
P 606,000
C. P1,760,000;
B. P545,600;
P 1,044,000
D. P1,760,000;

measure of completion


16. Daryl Company has started construction work on a project with a fixed contract price of P4,500,000.
Daryl expects to incur total costs of P3,375,000 on this project. During the first year of the project, the
following transactions occurred:
Incurred cost of materials, labor and overhead used in the work, P2,700,000.

Paid costs of materials purchased but set aside for use in a future date for this project, P225,000.
These materials do not have any alternative use and cannot be sold to other parties.
Paid and incurred rectification work not expected to be recovered, P292,500.
Incurred general and administrative costs that are not reimbursable, P112,500.
Incurred selling costs, P67,500.
Incidental income from the sale of certain materials, P45,000. These specific materials were sold
since it was considered surplus from the early phase of the construction.
The engineers determined that the original estimate of costs did not include any expected warranty
costs of P225,000.

19. How much is the gross profit recognize by Lyca on its 2014 Financial Statements?
a. P2,000,000
b. P600,000
c. P1,500,000

Applying principles of PAS 11 Construction Contracts, determine the profit for the first year.
a. P 170,000
b. P 220,000
c. P 247,500
d. P 720,000

20. Using information in #19 alone, calculate the value of current asset in Lycas 2014 Financial Statements.
a. P3,400,000
b. P5,600,000
c. P 1,400,000
d. P4,400,000

Use the following information for the next two items

21. On June 1, 2013, FNBC Corporation, franchisor, receives P200,000 from PP Fad representing down
payment on the franchise agreement signed that PP Fad gave FNBC a 12% interest bearing note for the
balance of P1,000,000, payable in four semi-annual installments. Franchise services was substantially
completed by FNBC on November 15 at a cost of P900,000. On December 31, 2013, the first semiannual installment became due was accordingly paid by PP Fad. FNBC appropriately uses the accrual
method of recording franchise revenues. In its December 31, 2013 financial statements, how much will
FNBC report as realized franchise income for the year?
A. P 112,500
B. P 300,000
C. P 250,000
D. P 187,000

On July 1, 2012, Kim Corp. obtained a contract to construct a building. The building was estimated to be built
at a total of P5,250,000 and is scheduled for completion on October 2014. The contract contains a penalty
clause to the effect that the other party was to deduct P17,500 from the contract price each week of delay.
Completion was delayed for three weeks. Below are the data pertaining to the construction period.
In 2013, there was an increase in the contract price in the amount of P200,000 per cost escalation clause. Kim
Corp. uses percentage of completion method.
Costs incurred
P 525,000
P 1,932,000
P 325,500
Estimated costs to complete
Billings to customers
17. How much is the excess of construction in progress over progress billings or progress billings over
construction in progress in 2012? (current asset or current liability)
a. P 840,000 current asset
c. P 800,000 current asset
b. P 840,000 current liability

d. P 630,000 current asset

18. How much is the excess of construction in progress over progress billings or progress billings over
construction in progress in 2013? (current asset or current liability)
a. P 682,500 current asset
c. P 262,500 current liability
b. P 635,250 current asset
d. P 635,250 current liability
Use the following information for the next two items
On January 1, 2014, Lyca Company, a real estate company entered into a contract to construct a building

on a piece of land it has acquired and, when construction is complete, to deliver the property to the
customer. The following information pertains to the contract: Total cost of land P2M; estimated total
cost of construction P10M; estimated total cost of contract P12M; agreed purchase price is P15M. In
2014, the total of construction cost incurred and fair value of land is P6M. By that time, the company
estimates a reasonable profit of P1M in the sale of its land. Records also disclose a Progress Billing in
the amount of P2.2M. The contract is considered a multiple element contract.

d. 900,000

22. On January 1, 2012, Mr. DJ entered into a franchise agreement with GB to market their products. The
agreement provides for an initial fee of P12.5m payable as follows: P3,500,000 to be paid upon signing
of the contract and the balance in five equal annual payments every end of the year starting December
31, 2012. Mr. DJ signs a non-interest-bearing note for the balance. His credit rating indicates that he can
borrow money at 15% interest for a loan of this type. The present value of an annuity of P1 at 15% for 5
periods is 3.352. The agreement further provides that the franchisee must pay a continuing franchise fee
equal to 3% of the monthly gross sales. On August 31, the franchisor completed the initial services
required in the contract at a cost of P4,290,120 and incurred indirect costs of P175,000. The franchise
outlet commenced business operations on November 30, 2012. The gross sales reported to the franchisor
were P1,800,000 for December, 2012. The first installment payment was made in due date, but further
collection of the balance was not reasonably assured. Calculate the net income for 2012 that the
franchisor will report in its income statement.
a. P 3,201,268
b. P 2,417,268
c. P 3,072,268
d. P 3,126,268
23. Each of Jury Co.s 21 new franchisees contracted to pay an initial franchise fee of P30,000. By
December 31, 2013, each franchisee had paid a non-refundable P10,000 fee and signed a note to pay
P10,000 principal plus the market rate of interest on December 31, 2014, and December 31, 2015.
Experience indicates that one franchisee will default on the additional payments. Services for the initial
fee will be performed in 2014.
What amount of net unearned franchise fees would Jury report at December 31, 2013?

(under US GAAP)
a. P400,000

b. P600,000

c. P610,000

d. P630,000

24. On December 31, 2013, Julrecha Inc. signed an agreement authorizing Ruel Company to operate as a
franchisee for an initial franchisee fee of P 50,000. Of this amount, P 20,000 was received upon signing
of the agreement and the balance is due in three annual payments of P 10,000 each beginning December
2014. The agreement provides that the down payment (representing a fair measure of the services
already performed) is not refundable and substantial services are required of Julrecha. Ruel Companys
credit rating is such that collection of the note is reasonably assured. The present value at December 31,
2013 of the three annual payments discounted at 14% (the implicit rate for a loan of this type) is P
On December 31, 2013, Ruel Company should record unearned franchise fees of:
A. P 50,000
B. P 30,000
C. P 43,220
D. P 23,220

Net income of the agency for the two months ended November 30, 2013 is
a. P 17,431
b. P 28,366
c. P 29,875

A home office ships inventory to its branch at a mark-up of 125% above cost. The required balance of
the allowance for overvaluation account is P 1,425,000. During the year, the home office sent
merchandise to the branch costing P 9,000,000. At the start of the year, the branchs Statement of
Financial Position shows P1,800,000 of inventory on hand that was acquired from the home office.
By what amount will the Allowance for Unrealized Gross Margin in Branch Inventory account be
debited at the end of the year?
a. P10,825,000
b. P2,610,000
c. P1,185,000
d. P12,250,000


Partial list of accounts from the trial balances of the John Rey Corporation, Branch A and Branch B at
December 31, 2013 are as follows:

25. On January 1, 2014, Hope Company granted franchise right to Love, Inc. The franchise agreement
contains the following:
The initial franchise fee is P400,000 payable as follows: 30% cash down payment upon signing
of the contract and the balance is payable as follows: 30% at the end of year 1; 25% each at the
end of year 2 and 3 and 20% at the end of year 4.
In addition to the initial franchise fee, a separate fee of P100,000 shall be provided for the supply
of equipment. The separate fee is payable upon delivery of equipment.
Love, Inc. commenced operations on April 1, 2014. The prevailing rate of interest is 11%. Equipment
with the cost of P100,000 and fair value of P120,000 was delivered on June 1, 2014.
For the year ended December 31, 2014, Hope Company will report unearned franchise fee in the amount
a. P20,000
b. P340,562
c. P120,000
d. P-026. On October 1, 2013, the Greenbelt Main Office established a sales agency in Ortigas.
The main office sent samples of its merchandise amounting to P8,400 and working fund amounting to
P72,000 to be maintained on the imprest basis. The samples sent were intended to last until June 1,
During the first two months of operations, the agency transmitted to the home office sale of goods
costing P291,600, but the home office were not able to fill-up 25% of the said transmitted sales order.
Collections from customers amounted to P73,941, net of 2% sales discount.
Payments made by the agency during October and November were as follows: annual rent of
P57,600, advertising expense worth P5,600 and utilities amounting to P7,200.
It purchased an equipment worth P9,000 which will be depreciated at 20% per annum.
The gross profit on sales agency order is 20% of sales

d. P 26,866

Inventory, Jan 2013

Branch A
Branch B
Shipments from home office
Home office
Shipments to Branch A
Shipments to Branch B
Loadings in Branch Inventory Jan 1

Home Office

Branch A

Branch B

Additional information:
Shipments to the branches are made at billed prices. Inventory on hand on December 31, 2013 Home
office P 31,000; Branch A P 7,260; Branch B P 8,250.
The merchandise inventory on the combined balance sheet as of December 31, 2013.
A. P 68,400
B. P 65,000
C. P 46,500
D. P 45,100
Use the following information for the next two items
The income statement submitted by the Sweet November Branch to the Home Office for the month of
December 2014 follows:

Less: Cost of Sales
Inventory, December 1, 2014
Shipments from Home Office
Purchases locally by branch
Cost of Goods Available for Sale
Inventory, December 31, 2014
Gross Margin
Operating Expenses
Net Income for the Month
The branch inventories consisted of:
Merchandise from home office
Local purchases

P 80,000

P 70,000
P 80,000


Marko Clothing Co. operates branch in BGC. At the close of the business on December 31, 2013, the
capital account in the books of BGC Branch showed a normal balance of P2,784,300. The inter-office
accounts were in agreement at the beginning of the year. For purposes of reconciling the inter-office
accounts, the following facts were ascertained:

P 60,000

P 84,000



After affecting necessary adjustments, the home office ascertained the true net income of the branch
to be P156,000.
29. What percentage mark up on cost did the home office use to bill the branch for merchandise shipped to
a. 40%
b. 26 2/3%
c. 36%
d. 20%


30. What is the balance of the Unrealized Profit in Branch Inventory account at December 31, 2014?
a. P24,000
b. P33,600
c. P20,000
d. P14,000


31. Judel Co. has a branch in Iloilo. The branch acquires its merchandise from outside sources and from the
home office (for which it is billed at 120% of cost). Below are excerpts from the records of the home
office and the branch:
Home Office:
Allowance for overvaluation of branch merchandise
P 370,000
Shipments to branch
Iloilo Branch:
Beginning inventory
Shipments from home office
Month- end Branch Inventory:
From home office, at billed price
From outside sources, at cost
The amount of overvaluation that was not realized as a result of branch sales during the month was:
c. P175,000
b. P370,000
c. P200,000
d. P195,000


On December 27, 2013, the BGC branch released a check for P13,500 to Fabric Warehouse
Trading. The branch inadvertently recorded the transaction as a remittance to Marko Clothing Co
and sent a copy of the memo notifying the home office. Marko recorded this upon receiving the
said memo on January 2, 2014.
Marko Clothing Co allocated promotions and advertising expense totaling P18,000 to BGC
branch. The home office erroneously charged the said expenses to Eastwood branch. BGC branch
was not yet informed of the said allocation as of year-end.
A memo from Marko Clothing Co for P20,700 regarding transfer of funds was recorded twice by
the BGC branch by debiting its inter-office account.
Coat and Ties, a BGC customer remitted P15,000 to Marko Clothing Co. The home office
recorded this as cash collection form own receivable on December 28, 2013. Upon notification
the following day, the branch debited the amount to Receivable from Home Office and credited
its reciprocal account.
A P105,000 shipment, charged by home office to BGC branch, was actually sent to and retained
by Rockwell branch.
The home office failed to take up a P12,000 credit memo from the branch.
BGC branch store insurance premium of P9,600 were paid by Marko. The home office debited
insurance expense and credited cash on its books. The branch recorded the amount of P96,000 as
a liability
Merchandise costing P39,000 was sent to the BGC branch by Marko on December 12, 2013. The
branch recognized a liability by crediting accounts payable upon receipt of the inventory.
Freight charge of P12,600 on merchandise shipped to BGC branch was paid by Marko and was
recorded in the branch books as P1,260.
Elite Designs, a BGC customer remitted P63,000 to Marko. The home office recorded this cash
collection on December 24, 2013. Upon receiving a notification, the BGC branch recorded the
transaction twice on December 28, 2013.

The unadjusted balance of Investment in Branch account as of December 31, 2013 is

a. P3,075,240
b. P3,051,240
c. P2,970,840
d. P2,962,140
Use the following information for the next two items
Janjoy Corp in bankruptcy and is being liquidated by a court-appointed trustee. The financial report that
follows was prepared by the trustee just before the final cash distribution:


purchases Js net assets for P 3,068,000, and incurred direct cost in combining the two companies of
P 350,000. How much goodwill is to be recognized on the books of the surviving company as a result
of the business combination?
A. P 338,000
B. P 350,000
C. P 312,000
D. P 0


Mortgage payable secured by property that was sold for P500,000
Unsecured accounts payable
Administrative expenses payable
Salaries payable
Interest payable related to mortgage payable
33.What was the total Free Assets?
a. P1,000,000
b. P500,000

c. P400,000

34.What was the percentage of recovery for unsecured creditors?

a. 100%
b. 44.44%
c. 57.14%


d. P100,000

d. 66.67%

The consideration transferred in the business combination was P55,000. Transaction costs amount ot
P1,000. The fair value of the acquirees net assets at the acquisition date was P63,000. The acquirer
has not yet decided whether to measure the 20% NCI in the acquire at the NCIs proportionate share
of the fair value of the acquirees net assets, which is P12,600, or at the NCIs fair value, which is
P13,000. Does the choice between the options for NCI impact the goodwill at the acquisition date?
a. No. the choice for NCI does not impact goodwill at the acquisition date.
b. Yes, it does. If the acquirer values the NCI at its proportionate share of the fair value of the
acquired business, the goodwill amounts to P4,600; while if NCI is valued at fair value, the
goodwill is P5,000.
c. Yes, it does. If the acquirer values the NCI at its proportionate share of the fair value of the
acquired business, the goodwill amounts to P5,600; while if NCI is valued at fair value, the
goodwill is P6,000.
d. None of the above.

Use the following information for the next two items

Minor Corporation reports net assets of P300,000 at book value. These assets have an estimated market
value of P350,000. If Major Corporation buys 80 percent ownership of Minor for P275,000,
35. Goodwill will be reported in the consolidated balance sheet in the amount of:
a. P0
b. P25,000
c. P35,000
36. The non-controlling interest will be reported in the amount of:
a. P55,000
b. P60,000
c. P70,000

39. Binfathi Group acquired an 80% interest in Entity B. The consideration for the 80% interest in Entity
B was 36,000 in shares in Binfathi and 12,000 cash. To issue the shares, Binfathi incurred a cost of
2,000 and incurred costs of 1,400 associated with legal fees and the valuation of Entity B. the fair
value of net assets of Entity B amounted to 64,000. How should Binfathi account for this

d. P40,000
d. P71,250

J Inc. was merged with S Inc. in a combination properly accounted for as purchase of interests. Their
condensed balance sheets before the combination show:
S Inc. J Inc.
Current assets
P 2,288,000
P 1,627,600
Plant and equipment, net
Total assets
P 6,942,000
P 2,927,600
P 2,704,000
P 171,600
Capital stock (par P100)
Additional paid-in capital
Retained earnings
Total equities
P 6,942,000
P 2,927,600
Per independent appraisers report, Js assets have fair market value of P 1,653,600 for current assets,
P 1,248,000 for plant and equipment and P 338,000 for patents. Js liabilities are properly valued. S

A. Binfathi shall book a gain (negative goodwill) through profit or loss of 3,200 related to the
acquisition, recognize expenses of 1,400 and deduct from equity 2,000 relative to cost of issuing
the shares.
B. Bithfathi shall book goodwill as an asset of 200.
C. Binfathi shall book gain (negative goodwill through profit or loss of 1,200 and recognize the
costs of legal fees of 1,400 as expenses in profit or loss.
D. Binfathi shall book a gain(negative goodwill) through a profit or loss of 3,200 and recognize
expenses of 3,400 relative to the costs of issuing shares, paying legal fees and performing the
valuation of the Entity B, in profit or loss.
40. Entity A is a first-time adopter with the transition date 1 January 2011. Entity A acquired Entity C in
2007. Entity A applies the business recognition exception to the acquisition of Entity C. Entity C
owns a registered internally generated trademark. The technical expertise to manufacture the
trademarked product is documented but unpatented. Therefore, Entity C has not recognized the
trademark in the consolidated financial statements of Entity A immediately after the acquisition.
What does Entity need to do with respect to thetrademark at transition of IFRSs?

A. As the internally-generated trademark meets the recognition criteria to qualify as an intangible

asset if Entity C had already applied IFRS in its separate financial statement, the trademark will
be capitalized at the date of transition to IFRS.
B. Even if the internally-generated trademark meets the recognition criteria to qualidy as an
intangible asset if entity C had already applied IFRS in its separate fianancial statements, the
trademark will remain subsumed in goodwill.
C. As the internally-generated trademark does not meet the recognition criteria to qualify as an
intangible asset if Entity C had already applied IFRS in its separate financial statement, an
amount corresponding to the original fair value of the trademark in 2007 shall be reclassified
from goodwill to retained earnings.
D. As the internally-generated trademark does not meet the recognition criteria to qualify as an
intangible asset if Entity C had already applied IFRS in its separate financial statement, the
trademark will remain subsumed in goodwill.

for using the equity method. The aggregate carrying amount of assets and liabilities of the joint
venture is 500 million; the impairment test made at the transition date valued its investment at 450
million. How should the entity account for its investment in the joint venture as at the date of
A. The entity should recognize its investment at 450 million and recognize an impairment loss of 50
million in other comprehensive income.
B. The entity should account its investment at the net carrying amount of the assets under previous
GAAP (that is 500 million) without recognizing any impairment loss.
C. The entity should recognize its investment at 450 million and recognize an impairment loss of 50
million in profit or loss.
D. The entity should account for its investment at 450 and recognize an impairment of 50 million in
retained earnings.
44. A taxpayer from the city of Las Pinas has the following information relating with his real property:
FMV of Land, P500,000; FMV of Res. House, P1,500,000. The one percent (1%) real property tax
and 1% special education tax are both based on the assessed value of the real property. The assessed
value is 20% of the fair market value. Garbage fees amounted to P500. How much is the total
amount collected from the taxpayer?

41. Green Group holds a 60% interest in Blue Group at 31 December 20x1. The inventory held by
Green Group was purchased from Blue Group for 50,000. It was purchased at cost plus 25%. The
Green Groups consolidated statement of financial position has been drafted without any adjustment
in relation to the inventory. What figure, in respect of inventory, should be included in the Green
Groups consolidated financial statements?
A. 50,000
B. 44,000
C. 40,000
D. None of the above
42. Redgrapes has a 70% ownership interest in EHC, giving it control. On January 1, 2013 Redgrapes
acquired additional 15% interest. At that date, equity of EHC is as follows: share capital- 1,000;
other comprehensive income-500; accumulated profits-800. On January 1, 2014, the non-controlling
interest in EHC had a value of 610. Redgrapes paid 400 for additional 15% interest in EHC.
Which of the following statements is correct?
A. Redgrapes recognizes a decrease in non-controlling interest of 400 and an increase in the parents
equity attributable to EHC of 400.
B. Redgrapes recognizes a decrease in non-controlling interest of 305 and an increase in the parents
equity attributable to EHC of 305. The remaining 95 is recognized as a reduction of equity.
C. Redgrapes recognizes a decrease in non-controlling interest of 305 and an increase in the parents
equity attributable to EHC of 305. The remaining 95 is recognized as a goodwill.
D. Redgrapes recognizes a decrease in non-controlling interest of 305 and an increase in the parents
equity attributable to EHC of 305. The remaining 95 is recognized as a reduction of parents
43. Entity A is a first-time adopter. Under previous GAAP, Entity A accounted for its interest in a joint
venture using proportionate consolidation. In accordance with IFRS, joint venture shall be accounted

P 40,500

b. P 8,500


P 400,500

d. P 4,500

45. A private, not-for-profit geographic society received cash contributions which were restricted by the
donors for the acquisition of fixed assets. In which section of the statement of cash flows would
these cash contributions be reported?
Financing activities
Investing activities
Operating activities
Capital and related financing activities
46. The governing board of Samaritan Hospital, which is operated by a religious organization designated
P 500,000 of cash for future expansion of the hospital. On the hospital's balance sheet, the cash
designated for future plant expansion would be disclosed in which of the following classes of net
Temporarily restricted net assets
Unrestricted net assets
Plant replacement and expansion.
Board designated net assets

47. The following expenditures were among those incurred by Cheviot Public University during 2014:
Administrative data processing
P 50,000
Scholarships and fellowships
Operation and maintenance of physical plant
The amount to be included in the functional classification Institutional Support expenditures
account is
a. P150,000
b. P50,000
c. P350,000
d. P300,000
48. A government agency ordered an office equipment for P1,000,000 on August 20, 2013. The
equipment was delivered to the government agency on September 11, 2013. The asset has an
estimated useful life of 10 years. The book value of the equipment on December 31, 2014 is:
a. P 787,500
b. P 977,500
c. P 887,500
d. P 857,500
49. A municipality of the province of Cavite received the following operating and service income for the
month of January 2014:
Garbage fees
P 300,000
All receipts and collections of operating and service income were deposited.
The entry to record the deposit of collections from operating and service income includes a:
a. debit to Cash in Vault, P700,000
b. debit to Cash in Bank, Local Currency Current Account, P700,000
c. Credit to Cash in Vault, P700,000
d. Both b and c

50. Arizona Company has produced two joint products A and B from a single input. Further processing
cost of product A results in a by-product X. A summary of production for 2012 follows:
Arizona Company input 600,000 tons of raw material into the Processing Department. Total joint
processing cost was P520,000. During the processing, 90,000 tons of material were lost.
After joint processing, 60% of the joint process output was transferred to Division 1 to produce product
A and 40% was transferred to Division 2 to produce product B.
Further processing in Division 1 resulted in 70% of the input in becoming product A and 30% of the
input in becoming the by-product X. The separate processing cost for product A in Division 1
Total packaging cost for product A was P321,300,000. After Division 1 processing and packaging cost,
product A is salable at P6,000 per ton.
Each ton of by-product X can be sold for P120 after selling cost of P 5,000,000. Arizona Company
accounts for the by-product using the net realizable method and showing the NRV as deduction in the
cost of goods sold of the main product.

In Division 2, product B was further processed at a separate cost of P 408,000,000. A completed ton of
product B sells for P3,700.
Selling cost for both product A and B is P 200 per ton.

The share of product A in the joint cost is

a. P 207,495
b. P 244,790


P 244,400

d. P 269,390