(Final) Acco 30013 - Accounting For Special Transactions

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance

CAF Review: M&M
ACCO 30013: ACCOUNTING FOR SPECIAL TRANSACTIONS
1. The following are indicators that a performance obligation is satisfied at a point in time, except?
A. Right for payment for the asset
B. The customer has legal title to the asset
C. The entity has transferred physical possession of the asset
D. The customer controls the asset as it is created or enhanced
2. Statement 1: Shipment of goods requires only a memorandum entry in the books of the consignee.
Statement 2: Freight paid for goods returned to consignor is treated as expenses.
A. Both statements are true
B. Both statements are false
C. Statement 1 is true; Statement 2 is false
D. Statement 1 is false; Statement 2 is true
3. Silk manufacturing company ships merchandise costing P180,000 on consignment to Cream Co. Silk
pays P18,750 of freight costs and Cream Co. pays P11,750 for local advertising costs that are
reimbursable from Silk. By the end of the period, two-thirds of the consigned merchandise had been
sold for P200,000 cash. Cream Co. notifies Silk of the sales, retains a 10% commission, and remits
the cash due Silk. How much is the net remittance of the consignee?
A. P163,750
B. P26,250
C. P168,750
D. P180,000
4. Statement 1: A franchise is an exclusive right or privilege received by a business or individual to

perform certain functions or sell certain products or services.
Statement 2: Costs associated with franchising comprise of sum paid specifically for the franchise
right, legal fees and other costs incurred in obtaining the franchise.
Statement 3: Initial fees normally include amount paid by the franchisee for initial services and other
obligations required of the franchisor such as assistance with site selection, staff training, financing
and advertising.
A. Only 1 statement is true
B. Only 1 statement is false
C. All statements are true
D. All statements are false
5. A penalty in a construction contract is an example of which kind of consideration?

A. Variable consideration
B. Fixed consideration
Education and Research Committee
CAF Reviews 2nd Semester Finals 2
CAF Review: M&M
C. Noncash consideration
D. Time Value of Money
6. On March 1, 2021, Syn Company obtained a contract to construct a building for P17.5M and
scheduled for completion two years from March 1, 2021. The contract contains a penalty clause to the
effect that the other party is to deduct P50,000 from the contrac price for each week of delay.
Completion was delayed for 5 weeks. Below are data during the construction period.
2021 2022 2023
Costs incurred P1,750,000 P6,440,000 P2,550,000
Estimated cost to complete P8,500,000 P2,500,000 0
What is the amount of profit realized from this project?

A. P6,510,000
B. P17,250,000
C. P10,740,000
D. P5,660,000
7. Statement 1: At the time the financial statements are prepared, there may be asset transfers between
the home office and the branch that the intended recipient has not yet recorded.
Statement 2: A credit memo sent by the home office to the branch means the home office has debited
(increased) the "Investment in branch" account.
A. Statement 1 is true; Statement 2 is false
B. Statement 1 is false; Statement 2 is true
C. Both statements are true
D. Both statements are false
8. Which of the following statements is incorrect?

A. A lag in the recording of a debit or credit memo can result in an imbalance in the reciprocal
accounts on the cut-off date.
B. Reconciliation shall be made if the balances of the “Investment in Branch” and “Home office”
accounts are equal.
C. The reconciling entry is debit to "Shipments from home office" (and probably to "Freight-in"
also) and credit to "Home office."
D. Errors, such as omissions in recording, double recording, mathematical mistakes, and the like, can
result in disparity between the reciprocal accounts.

CAF Review: M&M
9. The following are the summary of the revenue recognition principles under PFRS 15, EXCEPT:
A. Identify the contract with the customer.
B. Identify the performance obligations in the contract.
C. Determine the transaction price.
D. Recognize revenue, when (or as) a performance obligation is dissatisfied.
10. Statement 1: Construction contracts are generally short-term.

Statement 2: No revenue is recognized on a contract that does not meet the criteria.
A. Statement 1 is true; Statement 2 is false
B. Statement 1 is false; Statement 2 is true
11. Garena Co. started work on a construction contract in 20x1. The contract price is P10M. Additional
information follows:
20x1 20x2
Costs incurred to date 2,400,000 4,500,000
Estimated costs to complete 3,600,000 1,500,000
Progress billings to date 4,000,000 7,500,000
Collections 3,000,000
In 20x2, ABC assessed that it cannot collect 10% of the total contract price. Compute for the profit in
20x2.
A. 1,000,000
B. 500,000
C. 400,000
D. 300,000
12. A debit memo sent by the home office to the branch means the home office has debited (increased)
the "Investment in branch" account. What is the corresponding entry to be made in the branch books
and its effect?
A. Debit (increase) to the "Home office" account
B. Credit (increase) to the "Home office" account
C. Debit (decrease) to the "Home office" account

CAF Review: M&M
D. Credit (decrease) to the "Home office" account
13. The following should be recognized as assets of the consignee, EXCEPT:

A. Cash from the advance commission fee
B. Consigned Inventory
C. Shouldered freight and other incidental costs (reimbursable)
D. All of the items should be recognized as assets of the consignee
14. Statement 1: If a promise to grant a license is not distinct, the specific principles are applied to
determine whether the customer has a right to access or a right to use the entity's intellectual property.
Statement 2: If a promise to grant a license is distinct, the general principles are applied to determine
whether the performance obligation is satisfied over time or at a point in time.
A. Only Statement 1 is true
B. Only Statement 2 is true
C. Either of the statements is true
D. Neither of the statements is true
15. Which of the following statements is correct?

A. Mobilization costs are indirect costs of construction.
B. Retention fee is a percentage, usually in the order of 5 to 10 percent of the value of the work
already completed, withheld by the owner for the contractor to reach substantial completion of the
project.
C. The total amount retained by the client is paid to the contractor at final completion.
D. All of the statements are correct.
16. In January 2023, Mariah Corporation was contracted to build a building for P150M, the project to be
completed in two years. The contract provided for the following:
● Initial payment will be 20% of the contract price. This payment will be made upon signing of
the contract and it will be used for mobilization and starting of the works.
● The succeeding payments will be as follows:
30% of the contract price at 50% completion
20% of the contract price at 75% completion
30% of the contract price at 100% stage of completion
● All payments made to contractors will be subject to 10% reduction to cater for retention
money. The payment of retention fee will be made after the expiration of the Warranty Period
of 10 weeks and after the issuance of Certificate of Completion. All necessary repairs will
have been done to the satisfaction of the client's engineer before payment is released.

CAF Review: M&M
● Mariah Corporation uses percentage of completion in accounting for this project. Initially, the
engineer's estimated gross margin profit of 25% on the project. By the end of 2023, SMD
Corporation presented progress billings corresponding to 50% progress at completion.
Compute the amount of gross profit to be presented in the income statement on December 31, 2023.
A. P56,250,000
B. P37,500,000
C. P18,750,000
D. P67,500,000
17. The following are found in the Jolly’s Home Office books and its branches.
Branch Books Home Office Books
Sales 700,000 Branch current account 650,000
Billings from HO 625,000 Shipments to branch 500,000
Operating expenses 100,000 Allowance for markup - 125,000

Unadjusted
Ending inventory at 250,000

billed price
How much is the adjusted balance of the branch current account?

A. P650,000
B. P500,000
C. P875,000
D. P675,000
18. What accounts are eliminated when preparing combined financial statements to remove the markups
and restate the branch’s cost of goods sold and ending inventory to their original costs?
A. Shipments to HO and Allowance for markups
B. Allowance for markups and Retained Earnings
C. Share Capital and Allowance for markups
D. None of the above
19. Home office transfers inventory worth P160,000 to Mori Branch, paying freight of P10,000. Later on,
the home office instructs Mori Branch to transfer the merchandise to Hikaru Branch. Mori Branch
pays freight of P4,000. If the merchandise had been shipped directly from the home office to Hikaru

CAF Review: M&M
Branch, the freight cost would have been P11,000. What are the correct amounts recorded in Hikaru
Branch books?
A. Dr. Shipments from HO 160,000, Freight-in 11,000; Cr. Home Office 171,000
B. Dr. Shipments from HO 160,000, Freight-in 3,000; Cr. Home Office 163,000
C. Dr. Home office 173,000; Cr. Shipments from HO 160,000, Freight-in 10,000, Cash 3,000
D. Dr. Home office 173,000; Cr. Shipments from HO 160,000, Freight-in 11,000, Cash 2,000
20. Statement I: On repossession date, the repossessed good is debited to an inventory account at fair
value. For the purpose of applying the installment sales method, “fair value” is the appraised value of
the repossessed good.
Statement II: On repossession date, the repossessed good is debited to an inventory account at fair
value. For the purpose of applying the installment sales method, “fair value” is the estimated resale
price of the repossessed goods, less reconditioning costs and normal profit margin.
A. Only statement I is true
B. Only statement II is true
21. Information on Kaoru Co.’s installment sales is as follows:

2021 2022
Sales 200,000 320,000
Cost of Sales 160,000 224,000
Gross Profit rate 20% 30%
Installment Receivable - 2021 90,000 30,000
Installment Receivable - 2022 144,000
During 2022, Kaoru Co. repossessed a property that was sold in 2021 for P20,000. Prior to
repossession, P5,000 was collected from the buyer. The repossessed property is expected to be resold
for P17,000 after reconditioning costs of P3,000. The normal profit margin is 30%.
Compute for the profit recognized in 2022.

A. P58,700
B. P52,800
C. P3,100

CAF Review: M&M
D. P5,100
22. SPJ Company has a branch in the cities of Caloocan and Batangas. Their consolidated financial
statement should comprise _____.
A. SPJ Home Office only
B. SPJ-HO and Caloocan branch only
C. SPJ-HO and Batangas branch only
D. SPJ-HO, Caloocan and Batangas branch
23. A performance obligation is explicitly stated if it is _____.

A. Requested
B. Written in the contract
C. Implied
D. Ordered
24. Revenue in installment sales shall be recognized when the control of the good or service is _____.
A. Transferred to the consignee
B. With the logistics company
C. Still with the seller
D. Transferred to the customer
25. An entity, a software developer, enters into a contract with a customer to transfer the following:
Software installation service (includes changing the web screen for each user); software updates; and
technical support for 2 years. The entity sells the above separately. The installation service is
routinely performed by Other entities and does not significantly modify the Software. The software
remains functional without the updates and the technical support. How many performance
obligations are there in the contract?
A. Four
B. Three
C. Two
D. One
26. DRAE Manufacturing Company ships merchandise costing P160,000 on consignment to NAM Store.
DRAE pays P15,450 of freight costs and NAM Stores pays P11,250 for local advertising costs that
are reimbursable from DRAE. By the end of the period, one-thirds of the consigned merchandise has
been sold for P200,000 cash. NAM Store notifies DRAE of the sales, retains a 15% commission, and
remits the cash due to DRAE. What is the amount of inventory consignment to be recorded by
DRAE?
A. P171,250
CAF Review: M&M
B. P186,700
C. P175,450
D. P176,000
27. On January 1, 2023, Burger Factory sold a franchise to sell its products for P3M. The initial fee of
P500,000 is payable upon signing of the contract and the balance in four equal installments every
December 31, evidenced by a 12% promissory note. How much is the interest revenue to be recorded
by BF on the first payment of the franchisee?
A. P925,000
B. P625,000
C. P360,000
D. P300,000
28. Larrazabal Corporation is a manufacturer of computers. On July 1, 2023, it enters into a contract with
ESC College to deliver 120 computers for a price of P6,000 per unit in four deliveries (30 units per
delivery) to start on September 1, 2023 and every month thereafter. After the first delivery, the ESC
College discovered 6 units to have minor defects. Because of this minor defect, Larrazabal
Corporation issued a partial credit memo equal to 12% of the price. After the first delivery, they
amended the contract. Larrazabal will supply an additional 30 units at a discounted price. The price
for the 30 additional units was significantly reduced by 30%. As of end of year, all the 120 units as
per initial agreement and 30 units under the contract amendment were delivered. How much is the
total revenue related to these transactions at December 31, 2023?
A. P895,680
B. P874,080
C. P841,680
D. P769,680
29. In consignment, the __________ ships merchandise to the _________ who is to act as an agent for
the former.
A. consignor(dealer); consignee(manufacturer)
B. consignee(manufacturer); consignor(dealer)
C. consignee(dealer); consignor(manufacturer)
D. consignor(manufacturer); consignee(dealer)
30. It is a construction contract in which the contractor agrees to a fixed contract price, or fixed rate per
unit of output, which in some cases is subject to cost escalation clauses.
A. Fixed Priced Contract
B. Cost Plus Contract
C. Long-term Contract
CAF Review: M&M
D. Revenue Contract
31. In long-term construction contracts, contract costs that relate to future activity on the contract, such as
costs of materials that have been delivered this year but set aside for the use in the following year are
______ from costs incurred to date unless the materials have been made specifically for the contract.
Also _____ are payments made to subcontractors in advance of work performed under the
subcontract.
A. Included; included
B. Excluded; excluded
C. Included; excluded
D. Excluded; included
32. Modifications considered part of the original contract are accounted for differently, depending on the
attributes of the remaining goods and/or services. If the modification type is: Goods and services not
yet provided are distinct from the goods and services transferred on or before modification. The
accounting result should be: Update the transaction price and measure of progress toward completion;
Record an adjustment to revenue for the effect of modification.
A. True
B. False, the accounting result should be: allocate the remaining transaction price to the remaining
performance obligations.
C. False, the modification type should be: all promised goods and services (excluding those not yet
provided or any partially provided) are part of a single performance obligation that is not fully
satisfied at modification date.
D. Both b and c
33. Which of the following criteria makes a good or service promised to a customer distinct according to
paragraph 27 of IFRS 15?
A. The customer can benefit from the good or service either on its own or together with other
resources that are readily available to the customer
B. No revenue shall be recognized prior to substantial performance of the services covered by the
initial fee.
C. An entity has no remaining obligation to transfer goods or services to the customer and all, or
substantially all, of the consideration promised by the customer has been received by the entity
and is non-refundable.
D. The scope of the contract increases because of the addition of promised goods or services that are
distinct.
34. On January 1, 2023 Kapuso mo GMA sold a franchise to Kapamilya ABS, to sell its products for
P5M. The initial franchise fee is payable in cash P500,000 and the balance in equal installments every
CAF Review: M&M
December 31, evidenced by a note. It is assumed that the franchisee could borrow money at 12% and
the present value of an ordinary annuity of 1 at 12% for 5 periods is 3.6048. The agreement provides
that the franchisor shall provide the necessary initial services required.
As of December 31, 2023, Kapuso mo GMA has substantially performed all the initial services
costing P748,864. What is the amount of the initial entry to be recorded as Unearned interest revenue
as of January 2023 in the books of the franchisor?
A. P500,000
B. P1,255,680
C. P4,500,000
D. P748,864
35. Which of the following statements is not a condition when recognizing a revenue in the sale of
goods?
I - The entity has transferred to the buyer the significant risks and rewards of ownership of the goods.
II - The entity retains neither continuing managerial involvement to the degree usually associated
with ownership nor effective control over the goods sold.
III - The amount of revenue can be measured reliably.
IV - It is probable that the economic benefits associated with the transactions will flow to the entity
V - The costs incurred or to be incurred in respect of the transaction can be measured reliably.
A. Only Statement IV
B. All of the above
C. None of the above
D. Only statement I & V
36. On the stated provisions of IAS 18, the revenue to be recognized from installment sales is measured
at the Book Value of the consideration received or receivable?
A. True
B. False, the revenue should be measured at its carrying value
C. False, it was stated in IAS 16 not IAS 18.
D. False, the revenue should be measured at its fair value
37. In June 2023, Rockwell Land Corporation signed a contract to renovate a building and install new
windows with window blinds. Total contract price is P12M. Total expected contract costs are P6M for
windows and P4M for labor, materials and other costs related to the project.
As of December 2023
a. Rockwell land corporation handed over windows to the client, although the installation has not
been completed. However, the client obtained control of windows.
CAF Review: M&M
b. Other costs incurred to December 31 were P1M (Cost of Labor, P400k and cost of paints, P600k)
Just before the year-end, the client paid the first progress payment of P8M. When will the
performance obligation be satisfied?
A. June 2023
B. At the point of time for the revenue on windows
C. Before the year-end
D. Based on the progress towards completion
38. In connection with no 37. Compute for the revenue to be recognized in December 2023 other than the
windows.
A. P4,000,000
B. P1,200,000
C. P1,500,000
D. P5,200,000
39. Under the efforts-expended (labor-hours based) method of measuring progress, an increase to
estimated labor hours to complete will result in _____.
A. Increase to percentage of completion
B. Decrease to percentage of completion
C. Increase to total labor hours to date
D. Decrease to total labor hours to date
40. A contractor uses the “cost-to-cost” method in determining its progress on a contract. The estimated
total contract cost is P10,000,000. The following costs were incurred in the first year of the
construction:
Cost of negotiating the contract (immediately expensed) 100,000

Costs of materials used in construction 3,000,000
Costs of materials purchased but not yet used 500,000
Site labor costs 1,000,000
Site supervision costs 200,000
Depreciation of equipment used in construction 120,000
Depreciation of idle equipment not used in the contract 60,000
Costs of moving equipment to and from the contract site 40,000
Costs of hiring equipment 140,000
What is the percentage of completion?

A. 51.60%
CAF Review: M&M
B. 50.60%
C. 45%
D. 46%

CAF Review: M&M
ANSWER KEY
1. D 22. D
2. A 23. B
3. C 24. D
4. C 25. A
5. A 26. C
6. A 27. D
7. A 28. C
8. B 29. D
9. D 30. A
10. B 31. B
11. C 32. B
12. B 33. A
13. B 34. B
14. D 35. C
15. D 36. D
16. C 37. D
17. C 38. C
18. A 39. B
19. A 40. C
20. C
21. A
CAF Review: M&M
SOLUTION / EXPLANATION
1. D
Explanation: It is a criteria of a performance obligation satisfied over time.
3. C
Solution:
Sale proceeds P200,000
Less: Commission (200,000 x 10%) (20,000)
Advances by consignee - Advertising (11,250)
Net remittance P168,750
6. A
Solution:
Contract price P17,500,000
Less: liquidated damages (250,000)
Net contract price P17,250,000
Costs of constructions P10,740,000
Gross profit P6,510,000
7. A
Explanation: A debit memo sent by the home office to the branch means the home office
has debited (increased) the "Investment in branch" account.
8. B
Explanation: Reconciliation shall be made if the balances of the “Investment in Branch”
and “Home office” accounts are not equal.
9. D
Explanation: Recognize revenue, when (or as) a performance obligation is satisfied.
10. B
Explanation: Construction contracts are generally long-term.
11. C
Solution:
20x1 20x2
Total contract price 10,000,000 10,000,000

CAF Review: M&M
Costs incurred to date 2,400,000 4,500,000
Estimated costs to complete 3,600,000 1,500,000
Estimated total contract costs 6,000,000 6,000,000
Expected profit (loss) 4,000,000 4,000,000
Multiply by: % of completion (a) / (b) 4% 75%
Profit (loss) to date 1,600,000 3,000,000
Profit recognized in prior years (1,600,000)
Total 1,600,000 1,400,000
Impairment loss on receivable (1,000,000)
Profit for year 1,600,000 400,000
16. C
Solution:
Contract Price 150,000,000
Estimated Cost (75%) 112,500,000
Estimated Gross Profit (25%) 37,500,000
For the Year Ended Dec. 31, 2023:
Revenue (150M * 50%) 75,000,000
Cost of Revenue (112.5M * 75%) 56,250,000
Gross Profit 18,750,000
17. C
Solution:
Branch current - unadjusted P 650,000
Individual profit of branch 225,000
Branch current - adjusted P 875,000

CAF Review: M&M
Individual Profit:
Sales P 700,000
Cost of Sales:
Inventory, beg. -
Shipments from home office 625,000
Total goods available for sale 625,000
Inventory, end. (250,000) (375,000)
Individual gross profit of the branch 325,000
Operating expenses 100,000
Individual profit of the branch P 225,000
18. A
Explanation: When combined financial statements are prepared, the “allowance” account
is eliminated together with the “shipments” accounts in order to remove the markups and
restate the branch’s cost of goods sold and ending inventory to their original costs.
19. A
Explanation: A branch should be charged only for the normal freight and not excessive
freight.
Normal freight-in from home office to Hikaru Branch P11,000
Entry:
Shipments from Home Office 160,000
Freight-in 11,000
Home Office 171,000
20. C
Explanation: On repossession date, the repossessed good is debited to an inventory
account at fair value. For the purpose of applying the installment sales method, “fair
value” is either
a. The appraised value of the repossessed goods; or
b. The estimated resale price of the repossessed goods less reconditioning cost and
normal profit margin.
21. A
Solution:
Realized gross profit from:
CAF Review: M&M
2021 sales (45,000** x 20%) P 9,000
2022 sales (176,000*** x 30%) 52,800
Total realized gross profit in 2022 P 61,800
Less: Loss on Repossession (3,100)
Profit in 2022 P 58,700
Entry:
Inventory* 8,900
Deferred gross profit (15k x 20%) 3,000
Loss on repossession (squeeze) 3,100
Installment receivable (20k - 5k) 15,000
* Inventory/”Fair Value” of repossessed property

Estimated Sale Price 17,000
Reconditioning Cost (3,000)
Normal Profit Margin (17,000 resale price x 30%) (5,100)
Inventory/”Fair Value” of repossessed property 8,900
** Collections in 2022
Installment Receivable 2021
Beg. 90,000 15,000 Write-off
45,000 Collection
30,000 End.
Installment Receivable 2022
- -
320,000 176,000 Collection
144,000 End.
26. C
Solution:
Merchandise Cost P160,000
Add: Freight P15,450
Inventory on consignment P175,450
CAF Review: M&M
27. D
Solution:
Franchise Cost P3,000,000
Less: Initial payment 500,000
Balance of Notes Receivable P2,500,000
Multiply by: Interest 12%
Interest Revenue P300,000
28. C
Solution:
Revenue from the original contract - before modification:
Delivered units at original price (30 x 6,000) 180,000
Reduction of revenue - credit memo (6,000 x 12% x 6) catch up (4,320)
Net revenue, before modification 175,680
Total revenue from subsequent deliveries

From the original contract (90 x 6,000) 540,000
From the contract modification (30 x 4,200*) 126,000
*6,000 x 0.70 = 4,200
Total 666,000
Total revenue after modification 666,000

Net revenue before modification 175,680
Total revenue at December 31, 2023 841,680
32. B
Explanation: The accounting result should be: Allocate the remaining transaction price to
the remaining performance obligations. Or the modification type should be: All promised
goods and services (including those not yet provided or any partially provided) are part of
a single performance obligation that is not fully satisfied at modification date.
34. B
Solution:
Notes Receivable P4,500,000
PV of annual Payments (Pvf x 900k) 3,244,320
Unearned Interest P1,255,680
38. C
Solution:

CAF Review: M&M
Contract Price Excluding Windows P6,000,000
Progress at completion 25%
Revenue P1,500,000
39. B
Explanation: The formula of percentage of completion under efforts-expended method
consists of total labor hours to date as numerator and total labor hours to date plus
estimated labor hours to complete as the denominator. This shows an inverse relationship
between the estimated labor hours to complete and the percentage of completion.
40. C
Solution:
Costs of materials used in construction 3,000,000
Site labor costs 1,000,000
Site supervision costs 200,000
Depreciation of equipment used in construction 120,000
Costs of moving equipment to and from the contract site 40,000
Costs of hiring equipment 140,000
Total costs incurred to date 4,500,000
Total costs incurred to date 4,500,000

Divide: Estimated total contract costs 10,000,000
Percentage of completion 45%


(Final) Acco 30013 - Accounting For Special Transactions

Uploaded by

Copyright:

Available Formats

(Final) Acco 30013 - Accounting For Special Transactions

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

(Final) Acco 30013 - Accounting For Special Transactions

Uploaded by

Copyright:

Available Formats

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

College of Accountancy and Finance

4. Statement 1: A franchise is an exclusive right or privilege received by a business or individual to

5. A penalty in a construction contract is an example of which kind of consideration?

2021 2022 2023

Costs incurred P1,750,000 P6,440,000 P2,550,000

Estimated cost to complete P8,500,000 P2,500,000 0

What is the amount of profit realized from this project?

8. Which of the following statements is incorrect?

Education and Research Committee

10. Statement 1: Construction contracts are generally short-term.

Costs incurred to date 2,400,000 4,500,000

Estimated costs to complete 3,600,000 1,500,000

Progress billings to date 4,000,000 7,500,000

Education and Research Committee

13. The following should be recognized as assets of the consignee, EXCEPT:

15. Which of the following statements is correct?

Education and Research Committee

Sales 700,000 Branch current account 650,000

Billings from HO 625,000 Shipments to branch 500,000

Operating expenses 100,000 Allowance for markup - 125,000

Ending inventory at 250,000

How much is the adjusted balance of the branch current account?

Education and Research Committee

21. Information on Kaoru Co.’s installment sales is as follows:

Sales 200,000 320,000

Cost of Sales 160,000 224,000

Gross Profit rate 20% 30%

Installment Receivable - 2021 90,000 30,000

Installment Receivable - 2022 144,000

Compute for the profit recognized in 2022.

Education and Research Committee

23. A performance obligation is explicitly stated if it is _____.

Cost of negotiating the contract (immediately expensed) 100,000

What is the percentage of completion?

Education and Research Committee

Total contract price 10,000,000 10,000,000

Education and Research Committee

Costs incurred to date 2,400,000 4,500,000

Estimated costs to complete 3,600,000 1,500,000

Estimated total contract costs 6,000,000 6,000,000

Expected profit (loss) 4,000,000 4,000,000

Multiply by: % of completion (a) / (b) 4% 75%

Profit (loss) to date 1,600,000 3,000,000

Profit recognized in prior years (1,600,000)

Total 1,600,000 1,400,000

Impairment loss on receivable (1,000,000)

Profit for year 1,600,000 400,000

Contract Price 150,000,000

Estimated Cost (75%) 112,500,000

Estimated Gross Profit (25%) 37,500,000

For the Year Ended Dec. 31, 2023:

Revenue (150M * 50%) 75,000,000

Cost of Revenue (112.5M * 75%) 56,250,000

Gross Profit 18,750,000

Education and Research Committee

Normal freight-in from home office to Hikaru Branch P11,000

* Inventory/”Fair Value” of repossessed property