CPA REVIEW SCHOOL OF THE PHILIPPINES

MANILA

ADVANCED FINANCIAL ACCOUNTING AND REPORTING Sunday, September 17, 2023

Final Preboard Examination 1:00 p.m to 4:00 p.m.

Number 1

A and B are partners in a business known as AB Company. The partners are considering a number of
options regarding the partnership including the admission of a new partner and a potential sale of the
partnership. The following information has been prepared as a basis for evaluating various alternatives:
Item Book value Fair value Tax basis

Cash and cash equivalents 80,000 80,000 80,000

Accounts receivable 340,000 288,000 368,000
Inventory 268,000 120,000 200,000
Prepaid and other current assets 72,000 60,000 72,000
Property , plant and equipment (net) 1,368,000 1,200,000 1,280,000
Total Assets 2,128,000 1,748,000 2,000,000
Accounts payable 216,000 216,000 216,000
Other current liabilities 152,000 140,000 116,000
Notes/loans payable 960,000 960,000 960,000
A, capital 480,000
B, capital 320,000
Total liabilities and capital 2,128,000
The partners currently share profits and losses 60% and 40%, respectively, for A and B.
If B were to sell one-half of his interest in capital to someone outside the partnership based on
fair value, what would be the amount of that capital?
A. 86,400
B. 91,200
C. 141,600
D. 160,000

Number 2

Partners A and B share profits and losses equally for the remainder and have the provision for annual
salary allowances of P750,000 and P600,000, respectively.
Under this agreement, what is the total net income of the partnership in order for B to receive
P850,000 as his share?
A. 1,350,000
B. 1,600,000
C. 1,850,000
D. 850,000

Number 3

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.
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Numbers 4 and 5

A and B are partners having capital balances of P3,750,000 and P4,500,000, respectively, and profits
and losses equally. They admit C to a 1/3 interest in partnership capital and profits for an investment of
P4,875,000.

4. If the asset revaluation method is used in recording the admission of C to the partnership
A. C capital will be P4,375,000
B. Total capital will be P13,125,000
C. B capital will be P5,250,000
D. Asset revaluation will be recorded at P1,125,000

5. If the asset revaluation method is used in recording the admission of C, what is the under or
overvaluation of the asset upon admission of C?
A. 1,500,000 undervaluation
B. 1,500,000 overvaluation
C. 750,000 undervaluation
D. 750,000 overvaluation

Number 6

A, B, C and D are partners, sharing earnings in the ratio of 3:4:6:8. The balance of their capital
accounts on December 21, 2024 are as follows: A – P 12,500; B- P312,500; C – P312,500 and D
– P112,500. The partners decided to liquidate, and they accordingly converted the non-cash assets into
P290,000 of cash. After paying the liabilities amounting to P37,500, they have P277,500 cash available
for payment to partners.
What is the carrying amount of noncash assets?
A. 762,500
B. 787,500
C. 318,750
D. 567,500

Number 7

Entity A and Entity B agreed to a business combination. Their condensed statement of financial
position before combination show:
Entity A Entity B
Book Value Fair Value
ASSETS P 7,000,000 P 10,500,000 P9,950,000
Liabilities 4,987,500 2,932,000
Ordinary shares, P100 par 2,187,500
2,625,000
Share premium 918,000
Retained (612,500) 4,462,500
earnings/(deficit)
LIABILITIES & SHE P 7,000,000 P 10,500,000
It was agreed that Entity A will be the continuing entity and shall issue 64,980 shares to Entity B.
Market value of A’s share on the date of business combination is P102.
Immediately after the business combination, what is the increase in stockholders' equity?
A. 6,237,920
B. 9,030,500
C. 7,018,000
D. 6,627,960
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Number 8

P Corporation acquired an 80% interest in S Company on January 1, 2024 for P245,000. On this date
the ordinary shares and retained earnings of the two companies were as follows:
P S
Ordinary shares 630,000 175,000
Retained earnings 280,000 35,000
The assets and liabilities of S Company were stated at their fair values when P Corporation acquired its
80% interest and the proportionate share in net identifiable assets was used to initially measure the
non-controlling interest. Net income and dividends for 2024 for the affiliated companies were:
P S
Net income 105,000 31,500
Dividends declared 63,000 17,500
Dividends paid 31,500 8,750
End of year evaluation indicates P2,400 impairment in goodwill.
What is the consolidated retained earnings attributable to controlling interest at December 31,
2024?
A. 408,280
B. 393,800
C. 331,280
D. 330,800

Number 9

On January 1, 2024, P Corporation purchased 80% of S Company’s P10 par ordinary shares for
P487,500. On this date, the carrying value of S’s net assets was P500,000. The fair value of S’s
identifiable assets and liabilities were the same as their book values except for plant assets (10 years
remaining life) which were P50,000 in excess of the carrying amount. For the year ended December
31, 2024, S’s net income was P95,000 and the dividend income received by P Corporation from S
Company was P50,000.
In the December 31, 2024 consolidated statement of financial position, what is the amount of
non-controlling interest?
A. 140,875
B. 18,000
C. 127,375
D. 128,375

Number 10

On January 1, 2024, P Corporation purchased 80% of the outstanding shares of S Company at a cost of
P280,000. On that date, S Company had P120,000 of ordinary shares and P200,000 of retained
earnings. For 2024, P Corporation had net income of P136,000 and paid dividends of P40,000. For
2024, S Company reported net income of P60,000 and paid dividends of P20,000. All of the assets and
liabilities of S Company had book values approximately equal to their respective market values. On
April 1, 2024, S Company sold equipment with a book value of P12,000 to P Corporation for P24,000.
The equipment is expected to have a useful life of five years from the date of the sale.
How much is the non-controlling interest in net income?
A. 9,960
B. 10,080
C. 13,800
D. 10,560
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Number 11

On January 2, 2024, PP Company purchased 70% of the stocks of SS Company at book value. On
May 1, 2024, 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, 2025, SS Company purchased an equipment from PP Company for P570,000. The carrying amount
of this equipment was P630,000 and had a remaining life of 5 years.
Results of operation for the year 2025 were
PP Company SS Company
Net income 945,000 165,000
Dividends paid 345,000 -
In the consolidated income statement in 2025, what is the consolidated net income attributable to
parent’s shareholders equity?
A. 1,125,375
B. 1,078,125
C. 1,131,375
D. 1,128,375

Numbers 12 and 13

A Co. acquired 60% of the outstanding ordinary shares of B Co. on January 1, 2024. A Co. acquired it
at book value.
Income statements of A Co. and B Co. for 2025 are as follows:
A B
Net sales 218,750 87,500
Cost of sales (131,250) (52,500)
Gross profit 87,500 35,000
Operating expenses (26,250) (13,125)
Dividend income 14,000 -
Net income 75,250 21,875

B Co. made sales to A Co. of P28,000 in 2024 and P42,000 in 2025. A Co. reported inventory on
December 31, 2024 amounting to P17,500 of which 20% comes from B Co. and inventory on
December 31, 2025 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 2025 amounting to P21,000 and P17,500 respectively. On January 1, 2025, B Co.
has ordinary shares of P80,000; share premium of P30,000 and retained earnings of P40,000.

12. In the Consolidated Income Statement for the year ended December 31, 2025, what is the net
income attributable to parent shareholders’ equity?
A. 77,315
B. 77,539
C. 78,211
D. 78,435

13. In the Consolidated Income Statement for the year ended December 31, 2025, what is the
cost of goods sold?
A. 141,750
B. 141,190
C. 184,310
D. 142,310
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Numbers 14 and 15

AA Corp. uses job order costing system to produce its products. Its uses a single factory overhead rate
that is based on machine hours. Its manager believes that the company would be better if it will use
two overhead rates, one based on material costs and the other one is based machine hours. The
following data is for year 2024:
Budgeted FOH
Materials related Factory Overhead 3,840,000
Machine related Factory Overhead 10,400,000
Total Budgeted Factory Overhead 14,240,000

Costs of materials used on jobs 12,800,000

Total Machine hours 1,600,000
Data related to three jobs worked on in December follow:
Job # 1 Job # 2 Job # 3
Material Costs 168,000 656,000 312,000
Direct Labor Costs 128,000 104,000 144,000
Machine Hours used 68,000 36,000 23,200

Actual factory overhead related to materials was P318,400 and actual factory overhead related to
machine hours was P846,400.

14. Assuming AA Corp uses predetermine factory overhead based on machine hours. What is
the factory overhead applied to job # 1?
A. 320,400
B. 605,200
C. 442,000
D. 50,400

15. Assuming AA Corp uses the two overhead rates suggested by the manager to determine
factory overhead rates. What is the total cost of job #3?
A. 662,480
B. 901,200
C. 1,190,800
D. 700,400

Number 16

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 2024, Parent sold goods with a 30%
gross profit to Subsidiary. Subsidiary sold all of these goods in 2024. For 2024 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 the non-controlling interest in profit.
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Number 17

The company has two main products, Alpha and Beta. Charlie on the other hand was a by-product of
Beta. Alpha and Beta came from the same raw material. Charlie was manufactured from the residue of
the joint process. The cost before separation was P375,000. The company opted to use the NRV
(approximated) in accounting its joint costs and the NRV of product Charlie was a reduction from the
cost where it came from. The following data were ascertained during the year:
Alpha Beta Charlie
Units produced 25,000 14,425 1,200
Units sold 23,000 12,000 1,200
Cost after separation P16,200 P49,300 P3,500
Selling price per unit P15 P20 P5
What is the gross profit of product Alpha?
A. 105,300
B. 124,476
C. 61,765
D. 49,560

Number 18

ABC Corporation manufactures a certain product. For October, there were no beginning inventories of
materials. ABC uses a Just in Time system and backflush costing with three trigger points for making
entries to record their manufacturing process. ABC’s October costs per product are direct materials,
P75 and conversion costs, P60. The following data pertains to October operations:
Materials purchased P412,500
Conversion costs incurred 330,000
Number of finished units 5,250 units
Number of units sold 5,000 units
What is the balances of MIP inventory account at the end of October?
A. 33,750
B. 15,000
C. 18,750
D. 19,643

Number 19

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

Number 20
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
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Numbers 21, 22 and 23

The following data were extracted in the first department of a three step process to complete the
company's product and opted to use the FIFO method in accounting the process: Beginning inventory
units were 8,000 (25% to complete). Ending inventory units were 5,000 (15% to complete). Units
started were 20,000. Normal lost units were 2,000 and abnormal lost units were 1,000. Materials were
added when the conversion process was 80% complete.
Beginning inventory cost: Direct materials P15,000 and Conversion P23,000.
Costs during the year were the following: Direct materials P375,000 and Conversion P569,800.
Units were inspected when the conversion process was 70%.

21. What is cost of transferred-out goods to the next department?

A. 730,000
B. 769,200
C. 780,124
D. 758,948

22. What is the ending inventory cost?

A. 194,000
B. 204,252
C. 213,076
D. 233,200

23. What is the period cost?

A. 19,600
B. 34,600
C. 43,000
D. 30,100

Numbers 24 and 25

AA Agency received Notice of Cash Allocation in the amount of P1,000,000 from DBM. AA Agency
made a total cash disbursements in the amount of P800,000.

24. What is the journal entry to record the receipt of the NCA?
A. Cash Collecting Officer 1,000,000
Subsidy income national government 1,000,000
B. Cash Treasure Agency Deposit Regular 1,000,000
Subsidy income national government 1,000,000
C. Cash-Modified Disbursement System Regular 1,000,000
Subsidy income national government 1,000,000
D. Memo entry

25. What is the journal entry to record the return of the unused NCA?
A. Subsidy income national government 200,000
Cash Treasure Agency Deposit Regular 200,000
B. Subsidy income national government 200,000
Cash-Modified Disbursement System Regular 200,000
C. Subsidy income national government 200,000
Cash Collecting Officer 200,000
D. Memo entry
 Page 8
Number 26

This refers to a serially-numbered document prescribed by the DBM that should be used by the NGAs
in the remittance of withheld taxes on funds coming from DBM.
A. Modified Disbursement System
B. Modified Disbursement System Check
C. Tax Remittance Advice
D. Official Receipt

Numbers 27, 28 and 29

On January 1, 2024 entity A acquired 30 percent of the ordinary shares that carry voting rights of
entity Z for P100,000. In acquiring those shares entity A incurred transaction costs of P1,000. Entity A
has entered into a contractual arrangement with Entity C that owns 25 per cent of the ordinary shares
of entity Z, whereby entities A and C jointly control entity Z. Entity A uses the cost model under IFRS
for SMEs to account for its investments in jointly controlled entities. A published price quotation does
not exist for entity Z. In December 31, 2024, entity Z declared and paid a dividend of P20,000. At
December 31, 2024 management assessed the fair values of its investment in entity Z as P102,000 and
the cost to sell are estimated at P4,000.

27. What is the balance of the Investment in Entity Z on December 31, 2024?
A. 101,000
B. 100,000
C. 102,000
D. 98,000

28. What is the net effect in profit of loss for the year ended December 31, 2024?
A. 3,000 net profit
B. 17,000 net profit
C. 4,000 net profit
D. 6,000 net profit

29. Assume there is a quoted price, what is the balance of the Investment in Entity Z on
December 31, 2024?
A. 98,000
B. 100,000
C. 101,000
D. 102,000

Number 30

Which of the following will increase the cost of goods sold of a manufacturing concern during the
year?
A. Adjusting entry for insignificant over-application of factory overhead.
B. Decrease in the salary of the factory workers during the year.
C. Increase in the work in process inventory during the year.
D. Decrease in the finished goods inventory during the year.

Number 31

As a result of the retirement of a partner in an existing partnership, the capital balance of the remaining
partners increases. If the assets of the partnership before retirement are properly valued, which of the
following statements is true?
A. The retiring partner receives less than his capital balance before retirement.
B. There is partnership net loss prior to the retirement of the said partner.
C. The remaining partner gives bonus to the retiring partner.
D. There is impairment of existing assets recognized prior to retirement.
 Page 9

Number 32
Process Inc. employs process costing method to account for its inventory. If this is the first year of
operation and production of the company, which is true as to the cost of goods manufactured during
the first year if computed under average process costing method or FIFO process costing method?
A. The cost of goods manufactured computed under either methods will be the same.
B. The cost of goods manufactured computed under either method will only be the same if there is no
work in process ending inventory.
C. The cost of goods manufactured computed under average process costing will be higher when
materials are added at the end of the process.
D. The cost of goods manufactured computed under FIFO process costing will be higher when
materials are added at the beginning of the process.

Number 33
Under IFRS 11, which of the following is the proper accounting treatment by joint venturer in its
interest in joint venture?
A. The joint venturer shall subsequently measure its investment in joint venture at fair value with
gain or loss on changes in fair value presented in profit or loss.
B. The joint venturer shall recognize as dividend income in its profit or loss the amount of dividend
received from the joint venture.
C. The joint venturer shall recognize its share in the net income of the joint venture in its profit or
loss by increasing its investment account.
D. The joint venturer shall proportionately consolidate its interest in the joint venture in its
consolidated financial statements.

Number 34
The factory overhead applied is less than the actual factory overhead incurred. If the difference is
considered insignificant by the company, the journal entry to adjust the difference shall include a
A. Debit to work-in-process inventory, end
B. Credit to cost of goods sold
C. Debit to finish goods inventory, end
D. Credit to factory overhead account

Number 35
A new partner is admitted in an existing partnership through investment. If the total contributed capital
of all partners is higher than the total agreed capitalization of new partnership while the agreed
capitalization of new partner is lower than his contributed capital, which of the following is correct?
A. The capital balance of old partners will always increase.
B. Impairment loss shall be recognized and shared by all the partners including the new partner.
C. Revaluation surplus shall be recognized and shared by all the partners including the new partner.
D. Impairment loss shall be shared only by old partners with bonus coming from new partner.

Number 36
Which of the following statements regarding Corporate Liquidation is TRUE?
A. The free assets must deal with the secured creditors first.
B. Liquidation is the only remedy for financially-distressed corporations.
C. The estimated payment to unsecured non-priority liabilities may be equal to zero.
D. The Statement of Financial Affairs is prepared when there is an actual realization of assets of an
entity initiated by the appointed Trustee.
 Page 10
Numbers 37, 38 and 39
The Kilusang Manggagawa, a recognized labor union of the non-teaching staff of LMN University,
had the following cash receipts and disbursements for the year ended December 31, 2024:
Receipts:
Membership dues P 4,500,000
Sale of organizational supplies 240,000
Contribution for an establishment of term endowment 575,000
Donation of a pure endowment fund 1,000,000
Interest received from the pure endowment fund 150,000
Disbursements:
Labor negotiations 900,000
Fund-raising 350,000
Long-term debt 400,000
Administrative and general 320,000
Computer equipment 80,000
The interest received from permanent endowment is restricted by the donor for acquisition of computer
equipment.

37. Compute the net cash provided by operating activities.

A. 3,245,000
B. 2,930,000
C. 3,170,000
D. 3,395,000

38. Compute the net cash provided by financing activities.

A. 1,725,000
B. 1,100,000
C. 1,175,000
D. 1,325,000

39. Compute the total amount of supporting expenses.

A. 900,000
B. 350,000
C. 670,000
D. 430,000

Number 40
Which of the following statements regarding Corporate Liquidation is FALSE?
A. Revenues earned and expenses incurred during liquidation are found in the periodic report of the
trustee.
B. The expected recovery percentage does not apply with fully secured creditors.
C. The current and non-current classifications of the asset and liability accounts may be helpful in the
determination of the estimated deficiency to unsecured creditors.
D. In the planning report of the receiver, assets pledged to partially secured creditors have no free
portion.

Number 41
A private not-for-profit entity receives donations and contributions from different individuals. In
which case should no contribution revenue be reported?
A. A restricted fund
B. A donation with condition
C. A board-designated contribution
D. A donation which is to be retained
 Page 11
Numbers 42 and 43
On January 1, 2024, ABC Inc. paid a premium to acquire a put option from a writer. This is in
relation to a forecasted sale of merchandise worth $130,000. (option price is P4.965)
1/1/2024 3/31/2024 6/30/2024
Spot rate P4.934 P4.908 P4.75
Fair value of option P19,600 P22,800 P27,950
42. Compute the gain or (loss) affecting earnings on the first quarter of 2024
A. 3,380
B. (3,380)
C. 3,200
D. ( 180)

43. Compute the gain or (loss) affecting other comprehensive income for the second quarter
ended 2024
A. 20,540
B. 23,920
C. 27,950
D. 8,360

Numbers 44 and 45
On November 1, 2024, JDS Company entered into a firm commitment to acquire machinery. The said
fixed asset is customized for the operations of JDS Company. Delivery and passage of title would be
on February 28, 2025 at the price of AUD35,000 . On the same date, to hedge against unfavorable
changes in the exchange rate, JDS entered into a 120-day forward contract with LMN Bank for
AUD35,000. Exchange rate were as follows:
Spot Forward
Bid Offer Bid Offer
Nov. 01, 2024 P36.10 P36.25 P34.15 P34.30
Dec. 31, 2024 37.15 37.40 36.50 36.70
Feb. 28, 2025 39.20 39.50 39.20 39.50

44. What is the fair value of the derivative instrument on December 31, 2024? Indicate whether
positive or negative fair value
A. 82,250 positive
B. 0
C. 82,250 negative
D. 84,000 positive

45. What is the gain or loss on the hedged item for the year 2025?
A. 98,000 gain
B. 98,000 loss
C. 94,500 gain
D. 94,500 loss

Number 46
Which of the following statements regarding foreign currency transactions is TRUE?
A. A decrease in the buying spot rate will result in a foreign exchange loss to an asset exposure.
B. An increase in the selling spot rate will result in a foreign exchange gain to a liability exposure.
C. Foreign transactions are affected by the fluctuations of exchange rates.
D. A transaction exposure exists when the importer is required to pay in foreign currency on the date
the purchase was made.
 Page 12
Number 47
On December 31, 2024, a foreign subsidiary in Hong Kong submitted the following accounts stated in
its local currency which is the functional currency of the foreign operation. The subsidiary in Hong
Kong acquired in 2024 is not integrated with the operations of the parent in the Philippines. Moreover,
its cash flows do not directly affect the parent company. The foreign operation is self-sufficient and is
not dependent on the parent company for financing.
Total Assets HK$ 980,000
Total liabilities 196,000
Ordinary Shares 490,000
Retained Earnings 294,000
No dividends were declared in 2024. The exchange rates were: Closing rate, P7.75; Historical rate,
P7.10 ; Weighted average rate, P7.50.
Compute the cumulative translation adjustment (Dr)/Cr on December 31, 2024
A. 392,000 debit
B. 509,600 debit
C. 392,000 credit
D. 509,600 credit

Number 48
JKL Company sold merchandise for 893,150 pounds from a vendor in Thailand on November 30,
2024. Payment in Baht was due on January 30, 2025 a date when the spot rate was P1.65. The
exchange rates for the Thai Baht were as follows:
November 30, 2024 December 31, 2024
Spot rate P1.67 P1.69
30-day rate 1.64 1.59
60-day rate 1.63 1.56
In its 2025 statement of comprehensive income, what is the amount to be reported by JKL
Company as foreign exchange difference?
A. 17,863 loss
B. 17,863 gain
C. 35,726 gain
D. 35,726 loss

Number 49
The Reverendo family lost its home due to a typhoon. On December 22, 2024, a donor sent money to
the Good Heart Society, a private not-for-profit entity, specifically to purchase a temporary shelter for
the Reverendo family. During the first month of 2025, Good Heart Society purchased the said shelter
for the family. How should the not-for-profit entity report the receipt of the donation in the 2024
financial statements?
A. As a permanently restricted contribution
B. As a liability
C. As an unrestricted contribution
D. As a temporarily restricted contribution

Number 50
Which of the following statements regarding derivatives is TRUE?
A. The sole purpose for entering into derivative contracts is to manage market risks such as foreign
exchange risk and interest rate risk.
B. A forward contract is presented as an asset in the separate financial statements of the holder.
C. An option contract may have a negative fair value to the holder.
D. An option contract has a fair value at the inception date which is equivalent to the premium paid.
 Page 13
Numbers 51 and 52
The following selected account balances were taken from the Statement of Financial Position of TUV
Corp. as of December 31, 2024, immediately before the takeover of the trustee:
Trading Securities P1,200,000
Inventories 440,000
Land 600,000
Building 1,600,000
Additional information:
● Trading securities are estimated to be realized in the amount of P1,280,000. These securities
have been pledged to secure notes payable of P1,120,000.
● The estimated worth of inventories is P280,000. However, inventories with book value of
P200,000 have been pledged to secure notes payable of P240,000. The realizable value of the
inventories pledged is estimated to be P160,000.
● Land and buildings are estimated to have a total realizable value of P1,800,000. These
properties are pledged to secure the mortgage payable of P1,000,000.
● Unsecured priority claims amounted to P30,000.

51. Compute the estimated amount available for preferred claims and nonpriority claims out of
the assets pledged with fully secured creditors
A. 0
B. 3,080,000
C. 1,080,000
D. 960,000

52. Compute the amount of net free assets

A. 1,050,000
B. 970,000
C. 1,080,000
D. 960,000

Numbers 53 and 54
A trustee has been appointed for STU Company, which is being liquidated under the Bankruptcy Law.
The following transactions occurred in the first month of liquidation after the assets were transferred to
the trustee.
1. Credit sales by the trustee were P400,000. Cost of goods sold were P288,000, consisting of all
the inventory transferred from STU.
2. The trustee sold all P80,000 worth of marketable securities for P60,000.
3. Receivables collected by the trustee: P112,000 from the P200,000 existing at the beginning of
the month; and P260,000 from the increase during the period. Remaining receivables are to be
realized by next month.
4. Disbursements by the trustee: Old current payables: P124,000 of the P260,000 transferred;
Trustee's expenses: P24,000. Remaining liabilities are to be liquidated next month.
5. Recorded P96,000 depreciation on the plant assets of P480,000 transferred from STU.

53. Compute the net income/net loss for the period

A. 48,000
B. ( 48,000)
C. ( 28,000)
D. (124,000)

54. Compute the total amount of assets not realized at the end of the period
A. 228,000
B. 708,000
C. 472,000
D. 612,000
 Page 14
Number 55
Which of the following statements regarding accounting for home office and branch is TRUE?
A. A debit memo sent by the home office to the branch will decrease their reciprocal accounts.
B. The retained earnings of the branch is eliminated through the working paper and not extended in
the combined financial statements.
C. The branch may purchase merchandise from the home office or from outside suppliers.
D. The separate statement of comprehensive income of the home office includes the results of
operations of the branch.

Number 56
On December 31, 2024, the Home Office Current account in the books of Pasig Branch had a balance
of P1,950,000. In analyzing the activity in each of these accounts for December, you found the
following differences:
a. A P40,000 branch remittance to the home office initiated on December 21, 2024 was recorded
twice by the home office on December 23 and 27.
b. The home office incurred P72,000 of advertising expenses and allocated 1/3 of this amount to the
branch on December 22. The branch recorded this transaction on December 23 amounting to
P2,400.
c. Inventory costing P100,600 was sent to the branch by the home office on December 17. The
billing was at cost, but the branch recorded the transaction at P106,000.
The adjusted balance of the reciprocal accounts on December 31, 2024
A. 1,966,200
B. 1,977,000
C. 1,923,000
D. 1,933,800

Number 57
The home office in Cebu shipped merchandise costing P222,000 to the Iloilo branch and paid the
freight amounting to P16,800. The home office transfers merchandise to the branch at a 20% mark-up
based on cost. The Iloilo branch was subsequently instructed to transfer the merchandise to the
Bacolod branch wherein the latter paid P11,200 freight. If the shipment was made directly from Cebu
to Bacolod, the freight cost would have been P24,800.
Compute the amount credited to Home Office Current account in the books of Bacolod branch
A. 291,200
B. 246,800
C. 284,960
D. 280,000

Number 58
A home office ships inventory to its branch at a mark-up of 125% based on cost. The required balance
of the unrealized intercompany account is P1,710,000. During the year, the home office sent
merchandise to the branch costing P10,800,000. At the start of the year, the branch's books showed
P2,160,000 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 in the books of the home office at the end of the year?
A. 14,700,000
B. 1,422,000
C. 12,990,000
D. 3,132,000
 Page 15

Number 59

During the year 2024, goods billed at P2,600,000 were shipped to the branch at 130% of cost. The
account Loading in Branch Inventory has a balance of P980,000 before adjustment. The beginning
inventory of the branch from the home office at cost is P1,900,000; the beginning inventory of the
branch from outsiders is P432,000; purchases from outsiders is P1,160,000.
Compute the total goods available for sale of the branch
A. 4,246,668
B. 5,070,000
C. 6,472,000
D. 4,880,000

Number 60

On June 1, 2024, the home office established an agency in Rizal, sending samples costing P490,000
which are useful until the end of May 2025 and have a salvage value of 10% of cost. A working fund
of P398,125 is to be maintained using the imprest basis. During 2024, the agency submitted to the
home office a sales order amounting to P4,134,375. Sales per invoice were P3,215,625 which were
duly approved by the home office. Collections during the year amounted to P1,717,021.25 net of 3%
sales discount. The cost of merchandise sold during the year is equal to 75% of the gross sales.
Vouchers for expenses amounted to P214,375.
How much net income would be reported by the Rizal agency on December 31, 2024?
A. 315,927.50
B. 508,865.00
C. 279,177.50
D. ( 95,427.50)

Numbers 61 and 62

On January 1, 2024, VST Company accepted a long-term construction project for a fixed contract price
of P56,000,000 to be completed on November 30, 2026. The entity provided the following data
concerning the direct costs related to the said project for 2024 and 2025:
2024 2025
Costs incurred 16,800,000 25,200,000
Estimated remaining costs to complete at year-end 67,200,000 10,500,000

61. Under IFRS 15, compute the amount VST Company should report as realized gross profit or
(loss) for the year ended December 31, 2025
A. 30,800,000
B. 3,500,000
C. 2,800,000
D. (25,200,000)

62. Under IFRS 15, compute the amount VST Company should report as construction in
progress balance on December 31, 2025
A. 42,000,000
B. 72,800,000
C. 61,600,000
D. 44,800,000
 Page 16

Numbers 63 and 64

QRS Inc. purchased 100,000 units costing P700,000, and paid P7,000 freight for its shipment. After a
day, the company consigned these goods to TUV Inc. stating that the consignee is entitled to 10% of
the revenue from all sold units. The shipment from the consignor to the consignee amounted to P3,500
with payment terms Freight collect. With a standard retail price of P13.30, the consignee remitted a
total of P914,200. Other notable expenses paid by the consignee on the consignor’s behalf were P8,400
advertising expense, P2,100 delivery charges to customers, and P5,460 installation fee on the
customer’s premises.

63. Compute the cost of goods still out on consignment

A. 156,310
B. 154,770
C. 155,540
D. 154,000

64. Compute the net income from sale of consigned goods

A. 365,510
B. 360,010
C. 363,510
D. 353,010

Numbers 65 and 66

On January 1, 2024, DEF Company granted a franchise to a franchisee. The franchise agreement
required the franchisee to pay a nonrefundable upfront fee in the amount of P3,000,000 and on-going
payment of royalties equivalent to 10% of the sales of the franchisee. The franchisee paid the
nonrefundable upfront fee on January 1, 2024.
In relation to the nonrefundable upfront fee, the franchise agreement required the entity to render the
following performance obligations which were separate and distinct from each other:
● To construct the franchisee’s stall with stand-alone selling price of P1,600,000.
● To deliver 20,000 units of raw materials to the franchisee with stand-alone selling price of
P2,000,000.
● To allow the franchisee to access the entity's tradename for a period of 5 years starting January 1,
2024. The stand-alone selling price of the access of the trade name was P400,000.
On June 30, 2024, the entity completed the construction of the franchisee’s stall. On December 31,
2024, the entity was unable to deliver the remaining 5,000 units of raw materials to the franchisee. For
the year ended December 31, 2024, the franchisee reported sales revenue amounting to P4,000,000.

65. Under IFRS 15, compute the amount DEF Company should recognize as revenue from
franchise fee on the December 31, 2024 Statement of Comprehensive Income
A. 2,385,000
B. 0
C. 2,785,000
D. 3,000,000

66. Under IFRS 15, compute the amount DEF Company should recognize as unearned revenue
in relation to the performance obligation on raw materials as of December 31, 2024
A. 1,125,000
B. 375,000
C. 1,500,000
D. 0
 Page 17

Number 67

Which of the following statements regarding accounting for home office and branch is FALSE?
A. The Allowance for overvaluation account must be debited in the separate books of the home office
to adjust the results of operations of the branch.
B. A credit memo received by the branch from the home office may be a notification from the home
office about allocation of expenses incurred by the latter.
C. Shipment of merchandise to the branch which is in transit may understate the home office current
account.
D. A home office shall notify the branch through a debit memo for a payment made by the home
office to the suppliers of the branch on account.

Number 68

Which of the following statements regarding IFRS 15 is FALSE?

A. A key feature of the revenue arrangement is that the signing of the contract by the two parties is
not recorded until one or both of the parties perform under the contract.
B. A performance obligation is a promise in a contract to provide a product or service to a customer.
C. When a company sells a bundle of goods or services, the selling price of the bundle is often more
than the sum of the individual standalone prices.
D. A company satisfies its performance obligation when the customer obtains control of the good or
service.

Number 69

Which of the following statements regarding IFRS 15 is TRUE?

A. Total revenue from franchise fees includes interest revenue from the notes receivable.
B. Expenses paid by the consignee on behalf of the consignor affects the computation of both the net
remittance to the consignor and net income of the consignor.
C. Construction cost presented in the Statement of Comprehensive Income is always the actual cost
incurred for the year.
D. The percentage of completion method recognizes revenues, costs and gross profit as a company
makes progress toward completion on a long-term contract.

Number 70

A private not-for-profit entity receives three cash donations:

▪ One gift of P350,000 is internally-imposed
▪ One gift of P450,000 is donor restricted for acquisition of fixed assets.
▪ One gift of P600,000 is to be held indefinitely with the income to be used for research activities.
Which of the following statements is FALSE?
A. Temporarily restricted net assets have increased by P450,000.
B. Permanently restricted net assets have increased by P1,050,000
C. When the donated money is spent for fixed assets, temporarily restricted net assets will decrease.
D. Unrestricted net assets have increased by P350,000.

END