CPA REVIEW SCHOOL OF ""HE PHILIPPINES

-MANu.A

PROBLEMS 11
PRACTICAL ACCOUNTING
Tuesday, May 13, 2014
PREWEEK - PART I Batch 75

I
COST ACCOUNTING• PARTNERSHIP ACCOUNTING• SPECIAL REVENUE RECOGNITON
i
L NON-PROFIT ORGANIZATION & GOVERNMENT ACCOUNTING •CORPORATE LIQUIDATION

·
ProbJem 1. Which of the following statements regarding 6overn·ment Acc ou ��ffA is true?

A. In the constructio n of bu ilding by contract, Ad1.ances to Contractor account must be credited

w hen billings are received.

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B. Collection of income taxes from ind iv i d uals ov t le BIR shall be credited to a liability account o f

the collect ing agency since they are not author zed to use their collections and must remil all
collections to the Bureau of Treasury.

C. In the c onstruction or building by contract, l'rog1 ess B illin g s account is credited to recognize the
Buil ding account, which is equal tQ the a mo unt of the contract price.

D. The re•1ersion of the ·mused NCA to th e Bureau c f Treasury decreases both an asset account and
a revenue a ccount .

Problem 2. a Non-?rofit Organization is . .

Which of the f(lflow1!1g statem e nts regaroing Accounting for
true? . ' .

A. Net assets that are restricted by the govern� 1g boa rd of a not-for-profit or ganizati on are
reported as a part of temporarily rest;ic ted net .. ss et for re � so n that the board had the ccintrol
s
anytime to lift such restrictions.

• B. Any cash inflow rest11cted by the donoJ for ttle .icquisition of property or payment of l9ng-term •

debt should be re po reed as an increase in fi l'\anc1ng �ctivities.

c. Patient . service reve11ues are recognized at est;:blished rates on an accrual bas is . Contructual
adjustments and court esy allowances are deducted from the related receivable account.

0. Voluntary health and welfare organizations.may . nclude social clubs and fine arts association.

Problem 3. Which of the following statements regarding G·ov ernme nt Accounting is fal se?

fl.. In an i11tc agency tr a · 1 sf er of funds to 1111p le 1 er.1

: � �n agt!KY proje�t. tJ \i �ource agency will oebtt
:
and credrt an asset account upon rece1v
. .
!ng ;: 1e completion report from the im ple menting
agency.

B. In the r.onstruction of the building, .the obligatio11 for the contract price is entered in the RAQCO.
Upon payment of the first billing less withholdi -rg tax, a liabil ity account and an asset account
•

are credited.
 zt
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t3
----
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C. Under the Tax Remittance Advice System, the No�i :e of Cash Allocation released to the agencf is
reduce d by the amount of estimated withnolding t axes oertinent to the allotment covered bv
the cash allocation.
'

D. Un der the NGAS, the final procedure in the cl�s ing process is to close the balanee of Income and
•

.
Expense Summary account to Retained Operating :.urplus account .

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.
Problem 4. The Dep artment of Hea lth received bills on Jar\Uary 2, 2014 for Rent (Annual), P7,000,000 ;"
Office supplies, 1'800,000; MERALCO Pl,000,000 and PLOT bill of P650,000.

Which of the following is corre :t?

A. Memo Entry on th1� RAOPS
8. The payment of MERALCO bill will credit Cash .>Jational Treasury MOS
C. The Receipt of PLOT bill will debit Cash Co llecting Officer
D. The payment of Rent will C red i t Cash Disbursir g Officer
·

Problem 5. On Ap ril 15, 2014, The BIR coll e cte d taxe� fro11 ind ividual taxpayers in tne amount of P490 -
· .
billion. The BIR has no a utho rity to use these collections ir their ope ra t i o n and therefore deposited it to
t ile Bureau of Treasury.

What i's th e j ournal entry to record the remitta�c e to Bure'. 1u of t reas u i=v ?
A. Income Taxes - Individuals 4508
Cash Disbursin� Officer 4� OB

.
B. Cash Collecting Officer 450B
.
Cash Disbursing Officer 4�os·

c. Inco me Ta xes - I ndivi duals 4508

(ash Collecting Officer 4�0B

o_ Cash Collecting Ofricer 4508.

i:ash N a tio n al rreasury MOS 4�08

Problem 6 . .ll<L University, a �,nvate not for pro:1t unaver: 11�-. had the followinP. cash inflows ouring
the
• •• - •t=•
year ended June 30 2014: , • • ·

i. PlOO mi llion from student tuition

fl. PSOO million from a donor who stipulated tha·_ the money be invested indefinitely

111. P800 million from a donor who stipula ted th:;t the money be spent in accordance with the
wishes of JKL's gov e rn i n g board. ·

C•n JKL's statement of cash flc1ws for the year ended Ju••� 30, 2014, w hat amount of theSe cash flows
s h ould be reported as operating activities?
A. P900 million
LI. P600 mill;on
C. P800 million
o_ Pl.3 billion

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 •
PrnblP.m '/. Uncfor DEF Hos:pitH s e $tablished ratt struct:..i '!, ::hf! hospi to1 billed its patient tor se rvices
rcndr!r�d ;n the amount of P9,CYJO,OOO for the year ended £Jee.ember 31, 2014. Charity care amo unted te
P .i..:i00,000 and third party payrAs amo
unted to P750,000.

For the year ended December 3 L, 2014, wh at amount shoc!'.2 I.JS recod as net patient service revenues?
A. PG,750,000
B. PB,250,000
C. P7,SG0,00<1
D. P9,000,000

Mii<t•Jre Corporauon manufacture!. proau-:< ,X ano Product KO from 4oint proce

.
Problem 8.
ss. f-or .

F-rocwct JX, 4,000 un its were prod ced ha<lmg a sa!es vaUt* ilt split off of P37,500. If prod uct JX
u° w e re

i:,.rocessed furthl:!r, tr1e acJcJit1<.na1 cost wo1.11d l:.te: P7,:>()::..al'o the sc;1es value would be PS·O,OCX>.
For

1�roduct KO, 2,000 units were :Jroduced having a sat� -;alJe al.split off of
P25,000. If product KO were

proce�sed further, the add iti onal cost would be P2.soo art i t
· ne sales v�l1,;e w o u ld be P30,000. •

Using the sales value at split off method, the porrton of th� lot.al joint costs allocated to product JX was·
P22,500, what was the total joint cost?
A. P47,500
B. P46,000
C. P36,000
0. P37,�00

Problem 9. PB·: produces m lin produ�.s AG ;s11d BY. Tl � process a lso yields by product CT. The by
product i� known to be sigr.1f1cant an d is reC-:>Rnized upon production. The following information
pertains to producti�n in May Z014 at 3 joint c os t of P2�? 500.

�c�itiona1 Cost
P roduct Units Produced Miiritet•value • Aftl!r s"plit Mir'

AG '!.000 • 021 C:.COO

BY 4,500 1�3.750

CT 1,500 35,750 PlS,750

If PBC uses the NRV met hod for ullocating joint cost. how nuch was the total cost of Product BY?
- •

A. P98,700
8. PlOS,JOO
C. Pl22,500
D. P143,500

Problem 10. The JIT C orp uses the Mate rials ;:;nd In P•0)cess (MIPJ i;wentory account. At the enc of
�ach month, all inventories "'� counte<i, rhei< convers1c 1� componems are estima ted, and invent o
<iccount balanu!s are adjustec: accord ingly . Raw rr.atem;.1 ; bac1Cflusr1ed from MIP account to finishe �
!:oods. The following data IS fc r the month or Mc{"

Matf!rials and In-Pr vces� I nventory accou:i • . .

debited ·' Pl.020,000

MIP account, June !
62,850
Conversion cost debited
7,200
Com.ersion cost cr1-jited
MIP acco1.;nt. April 30
7,950
58,050

··rtrii m
 The amount of direct materia1s and conversion costs to b? backflushed to finished goods are
A. Pl,015,200, P7,200 . .
B. Pl,015,200; P7,95C . '
C. Pl,020,000; P7,20C
D. Pl,020,000; P7,9SC

Problem 11. GBX manufacturer of variety of GCM5. The owner had recently decided to implement JIT •

system. The followin g transa.:tions occurred:

•

• Raw materials totaling P315,000 were purchased

• P280,000 m at er ia ls were requisitioned fu: p rodu ction
• Direct labor cu st of P175,000 were incum!d
• Ind irect labor cost amounted to P84t),00C
• Utilities cost totaled P350,000
• Ot her actual factory overhead costs amounted to P700.000
• Applied convt!rsion costs totaled Pl,750,COO. This includes the direct labor cost.
• All units were comp l eted and sold ••

What was the overapp lied or underapplied conversion cost and cost of gootffl�ld before adjustment
for over or under applied conversion cost?
•
•

A. ?140,000 ove:; P2,030,000

B. ?140,000 o ver; P2,065,000
C. P315,000 over; P2,065,000
0. P315,000 under; P2,030,000

.
.

Problem 12. During April, CPD C orp incurred the following cost of Job 456 for the 200 tanks:

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.
Method A - the reworl: cost were
attributable tc �ne exacting specification of job, the full rework
•

job.
cost wem charged to this specific

fall wi thi n the normal range and i:he rework cost is noi: related to a
Method B _the defective units
specific job.

456 using Met.hod .A.is:

Tbe cost per finished unit of Job
A. P124.80
B. P106.40
C. P126.40
0. PlOS.00
 Problem 13. PRV Cor p man f
. u actures contan�
.
rs tq the exacting specification of various cu tomers. �
Du ring May 2014 ' Job
005 for the production of 2,200 Jnits was completed at the following cos c per
U n'I t·• •

Direct materials
p 550
Direct labor
440
Factory Overhead
660

Final inspection of Job

005 disclosed 100 defective units md 200 spoiled units. The defective units ,;e re
rework at a tot.ll cost of P27,!>
00 and t he spoiled unirs wt re sold at P82,SOO

The unit cost of good units produced

on Job 005 was
A. Pl,787.�0
U. Pl,t.50
C. Pl,815
D. Pl,622.SO

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.
Problem 14. The tallowin g intormation pertains to .i\XL C )mpany for May 2014.

Direct M aterial D1rec1 Labor Overhead

.lob #323 p 80,000 Pll2,500 I

.lob ft325 ? 125,000 ?

.lob #401 141, 750' P138,750

.!\XL Company <1pplies overhe,1d for Job #323 ai 14U per�·ent of d rrec t labor cost and at 150 percellt of
direct labor cost for Jobs #32�) and #401. The t·:tal cost ( r Jobs tt323 and #325 is ident i caf. Assume that
Jobs #3 23 and lt401 are incomplete at the end· of May.

'Nhat rs the bal;ince in Work 111 Process lnventoi",, at that ll!ne?

/\. P7� 3,000 . .
B. P723,000 . '

• C. P473,000
D. P565,500

Pro,blem 15. KGC Company h<1d the following in•1entorjes 3t the beginning and end o f March 201�:
3£1/2l11 3/31/2014
Direct Mate rials P 54.i lOO P 45,000
WorK in Process 27,llOO 18,000

Finished goods 81,tlOO 108,000

I ne following additional manufacturing cost data wete avi1ilable for the rnonth of March 2014:

Direct materials purchased P 126,000

Oirect labor payroll 90,000
Direct labor rate per hour 7.50
Factory ove.-l1ead rate per d ire c t labor tour 10.00

l :11: cost of goods put into µru,:ess tor March 20J.4 wa�: .
. . . , ,.
A.
•

P318,000
B. P345,000
::. P372,000
D. P354,000

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 ?f'OIMH\ 16. � NOP Corp.. nakes;.rs in rw0 de�rtm1·nts: Formm1 and Decoratln9. Formlnt t>enan
and 4� compl ete as to
-ht> moo ttl Wltt 500 ,ars m pr .xess that w�re hlO'u ..:om >lete a:o to materials
.:un�n. Ou1ing toe month, �500 .iars were starteq. At 17'0nthend, Formtne-.M 2,+00
jlrs that were
still in p�ss that were lOCK 'com p lete as to materials and 50% complete as to co n version. A\sume

.:orming uses the m�thod of process costing that result; to a higher equivalent units of production.
Costs in the Forming �partment are as foC'.'W'.:
•

'>eginnmg Won. in Process Co�ts

.
Materials p 45.000 .
Con�rsion 67,500
Current Costs:
Matenals 144,000
Conversion 227.025
·�
What was the cost transferred o ut of forming during the month?
I, P374.8SO
b. P240,34�;
(. P371,025
•

D. P288.85�·

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Problem 17. R.it) Corp. produces a specia1 kine of souv�ir items. Materials are added at the end of
the production of Department B. For the mont.h of May �)14, the foll�wing data were gathered:

'Nork in Process May l 40% work done as to conversion cost 32,000 •

Started in Process during the month 80,000
Tra!lsferred to Finishing Dept. 68,000
.
:..ost units in processing s:ooo .
0
'Nock in Process, May 31 40% incompl ;te a; to conversion cost 36,000

The costs corresponding to the lost units were acsorbed ;)y the remJinmg units.

Which of the following is incc·rrect.

A. FIFO and Average!
•

THE EUP of materials u·1dcr .-ire tne same.

8. Th e EUP of conversion cost under FIFO is lt>ss than 19,200 compared to Average
C. The £UP of conversion .:ost under FIFO method to11led 76,800.
D. Thi• EUP uf work In pro::ess end mat e ri als under A.erage method is equal t o FIFO method .

.. � ••1•

Problem 18. CNR Inc. had 28,JOO units of work in p r oc es � in its Dep<>rtment A on March 1, 2014, which •

were 50% complete as to conversion costs Materials are 1doed flt the beginning of the process. During
�
March, 59,500 units were started, 63,000 upits were cor. µleted and there were 7,000 units of norrnill
s po ilage. CNR had 17,500 units of work in process at Mar:.11 31, 2014, which was 40% incomplete a! to
conversion costs. Under CNR'�; cos t accounting system, s�·oilage units reduce the number Df units 0.,1er •

which total cost can be spreao.

Using the method that conibines tt1e t-eginninf, ilW� liory .rnd current production activity, the
rsion costs were:
equivalent units for March for conve
A. 73,500
B. 66,500
c. 80,500
D. 59,SOO

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Problem 19. If 140 'ooo
·

pou nd s of direct materials ar·! purchased for Pl00,800 on account ancl the
. •

\lilnd nrd cost rs P · 70 per poun

.

d, the Journal entry to rec )rd the purchase is

1\. llaw M n te r l a ls Inventory

· · · ········· ·· · ······· · · · · ········ · ··· ......................... .... . 1 00,8 00
.�..................................... ........ ...... .
Accounts P;iyable ........ . 100,800

.
11. Work In Process lnve11tory ................................... . .
,,. . ..... ........... ... . . .. 100,800
Accou nts Payable . . ..... ...... ........... .. .......• .................. . ...........
98,000
MC1 terials Quantity Variance . . . . ... ... ...... .... .... . . .. ........ . . ... . .... 2,800

C. Haw Materia ls Inventory 100,800

0
. . ..................... . ... .. ... ... . .. ......... . .......... . . . ...... .

Ac.co unts P.iyable ....................... : . . . ........ .... .

.. ........ ......... .... 98,ooo . .

Mnterials Price Variance ........................ ,. ..... . . .. .. 2,BOO

.
. .. ............
.

D. Raw Mat erials Inventory . . . . .. . . .....�.............................

... .. ...... ....... .. .. 98,000
Mate rials Price Variance .................... ,................1........:. . . .. . ... . . .. .
... .

... . . . . 2,800
Accounts Payable . . . .. . .
. . ........... ...., . . .
....... ... ... . ... .... . . ............ .
100,BOO

Problem 20. GBT Company uses a stand ard cost system for its production process and applies overhead
based on direct labor ho urs . The following informatio11 is ava i la ble for May when GBT made 27.000
units:

Standard:
Dl.H per unit 2.50
Variable overhead per DLH Pl.75
Fixed overhead per DLH P3.10
13udgeted va ria ble overhead P131,250
111idr,eted fixed over head P232,500

Actllal:
Direct labor hours 60,000
Vilriable overhead P157,500
Fixed overhead P228,000

using one variance approacl'.. what is the total overheac variance and using the two way-approach what
is the controllable variance?
A. P36,375 U: P26.250 U
B. 1'21,750 U: 1126,250 F
C. PSS,125 U: P34,875 U
D. P39,375 U: P34,875 F

Problem 21. TYM Co. inc urs Pl60,000 of overhead com each year in it s three main departments, setup
.
P 10,000), macilinrnc (PllO,OIJO), and pa cking (P40,000). The setup department performs 40 setups per
1e<ir, the m<ichining department works 5.000 hours pe · year, anu the pack ing department packs 500
)rders pe r year. Information .1bout TYM's 2 products w.:1<: as follows:
•

.
Product One
.
, Product Two
·
• •

Number of setups 20 20
Machining hours 1,000 4,000
Orders packed 150 • 350.
Number of products
Manufactured 600 4 00
 ...:
{.

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,

' .
umc Al/£.. !lDW' much O\llf mNd is asslgn@d to Produc Two etch year?
"- �.ODO . ,

s. �.000
(._
D.
?:�.Q-.0
?:18.,Q"O
. ' .
·1
•

Pll '£ 22. A com�ny tncors Pl.200,000 of �verh�aa each year in three departments, Processing,
h...� -0 Testq. Thf· company performs 800 processing transactions, 200,000 pa�ka1Jlng
�� � 2..000 tests per1 yNr in producing 400.ooo drums of Oil and 600,000 drums of Sludse.
1he �� ..an� •vaiubk

i)p�t E\p.::cred ust> of Driver Cost

fl'ir-oc.c-ssinS 800 11500,000
P�ing 200,000 500,000
'Test� 2,000 200,000

Pnxt� intannation fur Oil 1s as follows:

l>epartmem ll£ertea use.ofDriver
Processing :1)0
P3Cka�ing l 20.( 00
Testi.-5 .l,1.00 .. ! ..
. ..

� � �ount of ove�d assegne-d to Oil.

"- PS.5.2..500
S. fl.4iD,OOO
i:.. P&lO,tlOO
"
,). ' 0. *'647 ,500
'···....: .
.

Pl14IM'A n... On·� l.. W14, l\IJ and KR agreed to invest e �ual amounts a n d share profits equally to form
� :;a:zi:ieuh., n..n'W!!d MR Company. MJ invested P2,340,0ll0 cash an<'.! a piece of eq ui pm ent . KR Invested
50-:li:' assen ...rucn are shown bi tow:

.--------
______ ·-1 Book Value
Accounts Receivable l.0 3lJO,OOO
- rp s.10.000
_____....
___.._ _

lnvrnrnry
_M_a_c_h_
in _e_r_
1
e_�"'""
. n_e_t___ ·� t P l,6t0,0ll0 . .
1 lntahgibles, net j 4>, 690,LlOO j

� �ts �sreo b\' KR ue nut property.valued. Only P276,000 of the accounts receivable are
. .•

�-..�. )nwntom-s ari' to t>t> written down oy PfiO,O )0. Included in the machineries is an o bsolete
P:irt of the intangibles Is a patent
�!US �cqwr�d far ?36,0flO 1� et of accumulated dt>prc
ciation. with
'! anyi� val!Jf ot P-tl�OO) w:,il!'1 was sut-.1 up\n by J .::.i ,,petit0r. KR unsuccessfully defended the case
·
l> of�
.��the- fifQJ �t.isln C'•'urt was released on Ma rrh 15. 2014.
.
•

·\�rs� bir vakte of the equ

ipment invested by MJ?
A. z- ! .(\.)$ ::X"X'
r. n:t5.�'\)
C. PUlll. �
!.'. I' l.OSC, l'X\J

...
 Pro61em 24. May 8, 2014 MW
inv·rted MM• to JOIO
.
t .tm '" his business. MM agreed prowied that
On
,. , ...
. .
.
ad"JUst the accu
.

mul at ed depr eoation o: -

•

'" . "
•
v1·11
•
. . .
his cqu1Jmlmt acco unt to a certain �mount. � wil
• :cogmze additio
.
ses of P75,000. Afte · mat. MM ;s to invest additional � of
•
nal ac crued
. expen
t:qu1pment to make
her intere�.t equal to
45%.

!! h � ��
pital balances of
before and after ad;ustQ'lent were Pl,042.SOCTand P907,SOO respecti,wetr
MW
wna is the effect
Eq:.11omen! 2· a result of the admissio!'l of "M7
.. in the carrying value of the
·\. P742,50)
ii. P682,50.)
C. P(G0.0()(1)
D. P(607.5CO)

•• • •l:t

Problem 25. JN. AB, an d CP are partners who share proti:! and 1osses as follows: JN 35"· AB 25"· and
CP 40%. The Statement of Fina n cial Positio � of the partner ;111p as of December 31, 2013 is given bekl�
-
JAC Compan• ·
Statement cf Financial Position
As of December 31. 2013

I Assets I Liab. itres and Equit\

P40,CCO I Liato· ?90,0C\J
Cash
! it;e�

lIi; N oncash Asset j �so.coo j Loan from AB 10.CXXl

.i JN. :: 1pital
P. a, .:.3p1tal
163,500
117.500
209.00J.
..

! To ta l Assets ' 1, -
- 9- 0-.
-----P5 - --t-T-o-t-ai
000 I C?. C3pital
Liabilities and Equity ?590,000

On January 1. 201<1, the partnHs decid�d to iiqw.:1att:. For tr.e me :itt. cf . .mu.uy, som.e assets were s:i!l . .
for a loss of PlCl,000. Payment to partners JN, AB••ano 1J\ ! roo1 the initial sale of assets wet"e P750,
P t!.iSO. and P2.l,OOO resp ecti 1eiy. Ci1sh withheld tor oo.;$,ble l1qu1dat:on el\J)E!nses and unrecognL.�
li.1bil1ties amoumed tc; PG,290.

What was the book/carrying va1ue of the noncam assets s: 1d i:i January;
A. Pl41,290
B. Pl01,290
C. P91,290
D. P95,000

Pro!:Jlem 26. VR, FH, and HT are partners who share proiits 3no tosses as follows: VR 35%, FH 25%. and tf"
40%. The Statement of Financial Position of the partnership Js of December 31, 20 13 is given below:

\'Fh Compar.1
Statement of Financial Posi tion
..
!\s of Dect!'TlOe• .! J 2013
•
•I:•
I Assets 1 Liab 111cies and Equitv
; CiJsh P40,00u I Lrao1:n1ts P3SO.OOC l '\
i Noncash Assets s;;o,ooo I Loan rem VR 13,800 I
I Vrt, (.op1cal
; FH. C:
85,900;' .
j11tal 30,00C
I HT, (.ipital 110 , 300 '
�- � p� 1
•

e- ty- ,090
�-� �___,=P S=9=� +-- - 5
' Total Assets an-d E-
�-'- ��
0 ,0=0=0=-i... t l.
a
T o.=.: ab�i-il-it-s
-
1_ - q 1u - �90 �
.c..:.:. .

..
. �··

· ·· ·-� - .. �� - - · -
�·

On Januarv 1, 2014, the partners decided to liqui date. All the partners are solvent. If after the
sale �f
partner, FH s
noncash assets but before additional investment to COVt!r the capital deficiency of any
capital balance was a debit of 1'15.000,
. � .�
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••
� •U •
What is the total amount that VR will receive?
A.' P36,700 �.

8. P22,900
C. P30,300
0. PlS,900

.
.

Problem 27. PJ, SQ. and IP have the following capital acc.:unts in their partnership for 2014:

I
'
PJ SQ I IP
I Jan. l, Balance p 80,000 .p 100.000 p 60,000
Feb. 28 Investment 30,000 75.000
----
April 14 Withdrawal 10,000 40,000
July 1 Withdr;iwal 25,000
Sept. 23 ln�stment 22,000 20.000 36,000

llefore any allocation. nt>t inc1>me for the year was Pl69.•00. Interest for each partner amounts to 10%
of the weighted average capital b<Jlances. Annual salarit� of eJ, SQ. and IP are Pl�,000. P25,000, and
'
PlO� respectively. SQ receiv es a bonus of 20% of net i'lcome after deducting the bonus, IP's inte rest
and PJ's Sillary. o\ny remainder is divi de d in a 2:2:1 ratio t-r· PJ, SQ and IP, respectively .
.

How much of the net income was distributed to IP?

A. P82,630
8. P86,770
•
. .C. P35,090
D. PSl,680

Problem 28. lZ a nd TK are partners engaged in a m an ;,,1factun ng business. Transactions affecting ihe
·
.)artners' capital accounts in 2014 were as follows:

.
The income summarf has a debit balance of P45,000. .

Agreement between f.Z and Tl( are as

follows:

3%
Interest on average c;ipital at
g i�en to £Z" u.1 TK, re�
o .
e.. ,ively
-·

o
.
Salam�� of P:!S,000 ar. d P35 00 0 are
· t and salaries but before deducting
· •

after ded uct1. ng 'nteres•

o u to TI< at 25% Jf �t income
Bon s
bonus
o Balance is to be divided equally.
. . '
··.•
 ,,
>

"
'

_,
.,..

'
...

.
.

�\X �1\ � � •'ttt �'\•Mt'/Q�f-t�s� In TK i '4\Pltal

iili:-:ount durtna 20147
�
•

r\�°'().)l
"- �· L�\lV
''- ''�\.�'()
I.\ ''l\\,.a\)\\

:""'�• n.. ft�. (.'C>. 4110 ML) lite P'\rtno"' dividing protits and los ses in t he ratio of 2:3:3, respectively.
. �' �oll ��11\"T� (>I) ll\x 31. iou Wfre: ID. p �10,(h 10; co. P70,000; MD. p H0,000. .
.
' . ''

M�� 15. •�\tfll� :t\'tl\ th� µ�1U1er�h1p llS of April ;u. l014. Alter the retirement of MO, TO and CD "'ould
P789,000 for·.
� �t\\ N \\.� 10 th.t rt111aioinl original ratio. The partnership re ported n et income of
•

� � N\.t Mt'> Is ti.) b� oalct an a mount 'equal to if)% of his adjusted equity as of the date of his
�\��'14tt\t.

�'l \Mt �t locomt' ls considered 1s having been ·eallzed eve nly throughout the year, how much
� thlt �_,.,� �t{\nc� of rn a� ot I.lee. 31, 20147
-� N..�SSI.)
� I' .t�?.�"0
\.'. l'S��.ioo
L� ��".ais

\11�' 10- AA Partn�rshiµ 11as a book va lu e of Pl4.0.0ll0 and profit percentages on Jan. l, 2014 c:re as
•;.ill\'""
.. . ''"

tr::_=:· <>p'!'l B•�_nce P'Efl"ndLo , %

S j
AG P 50,000 35%
AC=·_[ .
__.,____6So/.
70.0_ 00
_
�. --

��\ ""- 2. a01d. A8 is to irwE·st a certain amount or cast into the partnership. AB will have a K interest
.Ul\�"' � shatto of profits Alj and AC will share the rem•iining 80% profits in the ratio of 70:30.
.

IT �C"!>
�-.apit.il ,1tte-r .'\8's i1we,tment <1mounted to P79,'i' iO. how much was AB's cash investment in the
p-trtnt!·nh.iJ\ i'
A. �.ll(�.)
S. Pl 6S. CXlO
r Pl�S.WO
l>. �8S.QOJ

� .U. dal�arn providea by HFG C P[P· '.'Jhich is u nd e rgoing liquidation proce s5:
. .
·1 h\' tolk>win�
. .

-� '1..>t.il .t.'-�t'tS <1mo unts to P9�0.000 a nd has a totarfilir ma rket value P735,000.

o ll)tiil li.ib1lit•t>S •mou11ts to ?692,000. 1s full· sf:cured by �ssets amounting to ?270,000 with
JS% ;
.to FM\' cit P2W.OCX>; 40% 1s partially secured by assets amounting to P300,000 with an fMV-of
P�2S.Cl>O; •nd the remaining balance is unsecun� l

;:. .

.r
•.··.
'-' �I_U .J..lQ4!f�W·· �-..., . <"!II · �ot�. ...
- _
.. • -· ··- oiftJ�-··
.. '7... �.. -.,'
,
. P l!"f
CPO

::;,. ·�·; .�� .

 •
.
. ' ..
'.

•
•

. t �
i:. Addi tio na l salary p a y..1 ble and administrative expenses tota le d P46,000, while unpaid income ..

taxes amount to P72,000.

. .
� '

Lompute for th� t' Stim at e d re�ov'erV perce n t age of unsecu,\'d

I
.
•
cfeditors. ; .
•

• A. 86.65�
B. 94.53�
c . 83.19%
.

,. D. 66.b4'JI,
..

. . ,
.

Problem 32. FVG Corp orat ic• n has b een undergoing JiqJidation since January 1. As of June 30, ·its
condensed state ment of realization and l iquidatio n is presented below:

.t.ssets realized p 525,000

l!llerest on Investment 2,625

htrchases 26,250
.t.ssets Acquired 87,500
I
l1Jbifities assumed 26,250
r .1yinent of expenses of tru�
·-
ee 131,250
L.abilities
. to be li quida ted 1.137,500 ••
: tit•
.
�ales on Account 87,500
Assets not realized 735,000
liabilities not Uquidated 557,375
Sales for cash •
437,500
t.ssets to be realize d 1,662,500

•
.
liabilities liquidated 612,500

.
.

The net gain (loss) on re alizati on and liquidation is:

A. P 306,250
13. P( 126,000)
C. P(3116,250)
D. P 126,000

Problem 33. On Jar:. 1, 201:;: TDC Construction Corporc.1 ion b ega n constructing a P7,000, 000 contract.
/IS of year-end, �h� following<. re relevant information pro 11ded by the corp.: . . .
. '
.

.
I'
I
2012 . 2013 2014

/ Construction in Progress p 1,470,000 ?

/
P 4.497,SOO
.
6stimateq_�sts t o complete 5,33£,500 '! 502,500 -

'-- ·
Costs Incurred
_
1,417,500 I J.230,000 : p 2,252,500

How much is tht! (1) HGP in 2013 using the percentag9 or' completion method a nd (2) RGP In 201A uslni

zero profit method?

/\. P(202,500); 0
B. P(97,SOU) ; P194,500
·�. P(lS0,000); P250,000
D. P(202,SOO ; P250,00:J

• ..,. 1f'• . \• ... ..

___
_ ...,.
I>-_•� � :
..,., 'C
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Hl- Uor •v IH1lldl1t.

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: 1 1 1 .i

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! ��1"'11\-'t:•' 1 ' \ I ''111 ''-'lh 'tl
1
: I \\\\\\.\\,•,j 1'\t ' \\ I 1 1\11\pl�h'
I
! I' \\l.1\,'ll. \ J 1 1
"' "'1·

l '-l,,l'\H.\1111 1
'''' ''1111' ' ""'l�l\l:l',\ 1\1
1 .1;11 � ·l'l<I 11 '11 )I I �,1tH1I
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t,.c;\l\llti
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.\t\, �\IL \, L S (''"'"'""" "11tl11•1 1, 11,t Iii\ C 1•q1 ' " 11pdt<1lt> 11� 4 tor illi "
,

� U. 01\ N1w�111�1
lnit1;\I ti �lldWM? tn� 11t !' \ \)\\I \\\\\) l)I Hll\ "ll li l \11 1 1 1• ·1 >.1) . 11. \I Wll� t'f!W IV�d 11po11 Mlj(lllllH l h ti lll(fll"fllflf ll
'
(
�11.I \lw l\.:\l."\11 �. t\.'P''' Wll\ ..\I ,, , .\ l\\11 .. . ,, lilll' Ill "' '" •1111111.11 P"VlllPllh � l <! r t l l l l( Nov11mlmr j(), 2U l ll .
P">).\>11\ '"""nc> ,,, I' \ ·" 1 : <>1, " " -4 1wt 1111h I\ \ l, \\, 11.'. l'll'\1'111 • •111111 \If 11 1 1 I l l d iI I MY 1 :111 1 1 lty
u nf I' 1 il l 1 i')f, ht
...
" l''-'."''h 1). -'·'"-' 1. 1 111· �·1111\I ,,, tt'lllllil will (''"'"'"'II ,•11 J " " " " ' Y '1 t, Jt l l •I r h 11 t 1 1111chlll•r h11\ p11 r torm111J
suu·t""t�llv "" ,,, th" 1111\inl w• vl\-o� b111 th� �1p111 ;1th"'' 11· " '" �tor" h 11 v11 y111 Ill \liHt Cullor.tll>lllly l of
,
"''' 11,_1\• I� f�S\)1Hll11\' 1-.,,1 \�H\

H1'w mud' 1s th� ''-'11\l'\I h'1md11 '"'f"� un t htt Yetl\I 1•111l�11 1.hi.1t1 nl1v1 J !. 20 LH
<\. l'�l \ \ .: .\.)
t: N . "t\ L .' .;1l
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i' I' 'Sl.W\"1'.I
. ' . '

PNbt.m 36- 88 C'MU'U\�1' Stl'1t' 'l\IU'tttd tts C'pfr.,tlon 111 J. m11.irv l, .!OM. l1urlnH thi> yenr, It hntl c;1 1h •
..l�
$��:-. ,,, !)l)., .' Sll ( \) ,1 1111 1t1st.11tn1(\nt s;1los 01 P19.�uo.ouo. n 1 1n1po·.11� n 11111rk up 011 c:os� of 2S% lor c:11sh
o� tor lt\Sti\lllllCHI snltts. DurhlR �14. •lllS . .-lln1f'nt
S<Alv� • .and s 1t 'Ct•lvc1hlfl balanc: t 11moun1od to
t''.' .J�ll,()J.'· • •

H\lW r:1ud1 is th._. ''i.�liwd �ross l'f'l)tlt tl)r 201•1?

•\. l'ti,N�.Ol�l
t' PS,\• hl,lXlll
\. �!1.1�).(lt.�l
I' I'.�.Ot1tlJI( \1

Pl'\l0h'IU J7. �)ti I.IOI! .. ' I _.,, ) ,\lH 1 · r , • , :11•1 1· 11111 .1 I ll" llt\<' 1lflft'i�lllf'l\I with nx IO n 1 :ir k 1 · 1 lhl!lr
pni.1u..t,. 1 11'-• •.g1 cc1111�t1t µ1 ,J\<ldt'l> 1111 ''" 1111\h)i re� ut yti !>M PcJVilble a � 1Ullo-e14 Pl"l.SM to be pa id
• .

up,•n ''1:11111� ,11 tht• rn1111.h t .1.i.l tlw 11.11,mn' i 1 1 llvw 1'q1 111 .1n1111al P11Ytnents u vcry end of t h t! year
st.: 1 t 111!l P•'•"-'nlhr1 H . .!ll l·l 1\11 \'1 'lt\11! .1 1n111 · 1 1 1 1 t' t t"·I ll •.ii lni: 11oh• 101 th1• l.111 l.11u:r. His crt>tllt rating
in,11� .1\I'� th,lt ht' (,111 ll\'1 1 \'" """ ll'\• .tt 1!1•1, i111t•11·�1 1111 , ln.111 1 11 t hl<, typl!. T l w present v.ilue of ;1n
•1 1:11.t(\' Lil 1' 1 .it l )�. 1l1r '-. 1wr1.Hh i' .\.. \)2 . .f ht\ ilt'.r t•flnw 1 1 t l11rthl"'r prov1ci1is th:-11 the franchisee must
P.." .1 ''011t11111n\g '' ·""·111�·· "''' '''l '"'' w .\\'\. ,,, 1 h • 11wntt1·v K r os·. ''''l' '· · On l\11 1{w.1 3 1, thCJ franchiser
com1\l\21h'<l tlw i11it1;1I St' fVl\'ilS n.•qrnr c-<1 111 the ront t ..i c t .H ,, ,. ·�t of 1'2 1 . 'lr,o.tiOO .ind Incurred Indirect cc.st
ot l':-1' 5,(ll'(l. The II 4rnrh1,l'r 1'0111111!"11n•d busll1t"�s Opt'r.lt 1.111.; ci11 Novttmbl*r 30, 2014. The gross sale�
"'1>ort\'\i to tht' t t ,mrhiw1 w,• 1 1 · l ' l .�00,tlOO tot nt1 c � 111l>, 1 JOl•I. The 1 1 1 �t im1.1llment payment was
m.1dr i11 d11t• d.lt\'

. : ..� . ·.:.1 "'("",.... --·���'"t"""·_ ...... ,__ ....

...
,,... '"'('. · -··�
. ......���¥4·ildl"a �th
_8...,.
....n•1"'4....
u
 .
.

J\\',\llHfl t ho colltict lhillty o l t l io note is not reasonably ;.ssured, the net income fo r the year e n de d,
I tH.t•tnbt11 .I J , ] ( ) 111 ,
f\. l ' l 'i, ( ' 1 l , 1•10
I I, I' l t 1,l 'I ll1, Jill> .. !
,,, ,
c. fl] !l, 790.3'10
I>. P I S, '.lfi l , 3'10

;
Problom 38. l l h se l l � lwmr. applia nce!. o n i nstal l me nt ba! is. O n August 15, 20 1 3, a new ap pl i a nc e 'N'ilS
�.l1ld to MH wi l l l 11 11;.t price l ' l , 37 �.000. LIB ga ·�e it� cu ;to me r s a 20% trade discount o n sales. The
n p pllancc cust WJ�. 1'1.l2!),uoo. IL gra n te d MH an a ll ow a nce of P425,000 for her old appliance as trade in,
llw cu rr e n t v " l 1 1 t � of wl ilch wa:. estimated td br: P408,50C. The balance was payable as fo llows: a do wn
1 •.1y11wn1 ut I' 1 7 '.i,llOD .incl lhe ti,1la11ce co b{� pa1tl in 20 m < i n t hl y instJllment sta rt i ng September 1, 2 0 1 3 .
0 1 1 /\prll l , 2 0 1 4 , M R clefauttc<l payment o f M a rc h 1 , 2014 installmerit. The n ew car was repossessed; its
value \'o I l i c! �c 1 1 .. r i·; l· ' l00,000 (u�e two decimal p l aces for the gross profit percentage).
-

I he Wtal 1 i.:? illlled gross profit llll installment saJes in 2014 1s;
/\. 1 ' 1 811/1 9 5
ii. P 1 6 :.l ,08!i
\ .. P l l,930
ll. P65,o15 . .

. '

Problem 39. On Aue u st 1, 2014, GD Mar k et i ng Co. sold an auto m o bi l e costing Pl,012,500 at a gros·s
margin of 66 2 / 3 '>::, <1bove c:o:;t. The buyer paid 1/5 de wn pa y m e n t and made fo u r installment.; of
P67:soo each during t h e same year.

Usinh the installment method 1f accounting, how much is �he realized gross m arg i n in 2014?
/\. 1' 1 3 5 , 000
Li. P 162 ,ODO
C. P364.500
D. P243,000

hoblem 40. TS I ' ua ke$hOp sol0 cl franchise to IL. The sale agreement , sig ned on J a nua ry 2014 callee tor
a Pl00,000 down payment plus two PS0,000
annual p ayments re ti rese ntin g the'"'91ue of initial franchise

e b a ke � ho p . In a d dit i o n, the-agre·�men t required the franchisee to pay 8% of its

servicesre n d er d by TSP
20 14 and its sales for the year
•

12ross revenues to the franchisor. The bakeshop open1!d earl'{ in

a m o u n t ed to P7S0,000. Assum ing a 12% i n� re
st rate is ai: propr iate,

TSP'� 2014 t ot a l franch ise revrn ue will :

be (f'V of a nn u i ty oi Pl at 12% for two period s i s 1.6 01)
A. P84,505 .
.

B. P2'14,S05
C. Pl84,SOS
·....
D. P266,646
-I
J -,.

'<�;�l

END OF PREWEEK
 C P A RE VIE W SC
HO OL O F TH E PH ILIP P INE S
MA NIL A
�RA CTIC AL AC CO UN TIN G 11 •

G UE RR ER O/ GE RM AN / SIY PREWEEK LECTURE

/DE JES US I LIM /FE R R:E RB atc h 7 5

P roble m _1 . O n 1 Janua ry 2 01 1 a parent entity, a [ ·plying PFRS for S M E , (who se functi o na l

': Jr�'.mcy is CU) made a F C U20,000 lo<r n to a forei� i t su b s id i a ry (whose functional curre n cy is
i- CU�. _ The parentn a s info r mea the s ubs1d1 ary .th a t, it wll� not demar.1.-1fepay m e nt a nd the
1
subs d1ary do not expect to r e pa y
the loan. The amomzed cost of the loan at each reporting date
in FCU 20,0 00.

The exchange rates are a s tallows:

1 January 201 1 : C U ·; = FCU 2
3 1 Decembe r 201 1 : C U 1 = FCU 2 . 1

In pre pa ring the consolidated financial statements, what is the entry for the consolidation
adjustment related to the exchange difference?

c. . No entr)'

b. Dr. Profit or loss - exchange difference cu 476

Cr. Long term rece1v;:ible cu 476
•

c. Dr. Long term payab1e cu 2,000

Cr. Other comprehensive incom� C U 2 , 000

c. Dr. Other comprehensive income cu 476

Cr. Protit or loss - e> change difference cu 476
. .

·
Problem 2.0n 1 December 2ox 1 an SME entity pur ciatsses raw materials costing F C U 1 0 , 000
e n credit. At the entity's ye 3r-end, 31 December 2l.�X 1 , the raw materials have not yet been
• useJ and are not impaired. The SME entity pays th<! SUftplier on 1 5 January 20X2. The SME
•

ent1ty'has a functional currency of CU .

'

Exchange rates are as follows:

• 1 December 20X 1 : F C U 1 = CU2
.. 31 December 20X1 : FCU1 = CU2.3 •

• 1 5 January 20X2 FCt.J1 = CU1 .8

On 1 December 20X 1 the entity recognizes the follow• ng journal entry

Debit Inventory CU20,000

Credit Trade Payabli:s CU20,000

What are the correct journal entries on 31 December :�OX 1 for the transaction?
(a) No adjustment on 31 December 20X1 so both the trade payable and the raw materials
continue to be recorded at CU20,000

( '.) J Debit I nventory CU3 , 000

Credit Profit or loss 1 .�xchange difference) •:u: GOO

Debit'Profit or loss (exchange difference) CU3,000

Credit Trade payable CU3,000

On 31 December, both the trade payable .and the raw materials are measured at
CU23,000. There is no effect on profit or loss as the tvic exchange differences offset
each other.
 1 camber 20X 1 :
c) On 31 '.J�
. .

Poblt Prom t)1 Im;� (exchm1ge d l ffo renc e ) CU3 ,000

Credit Trnde paynble CU3,000 . '

:1 t Dt�1�0111ht'.)1 . t h e traoti payable is m e:.\ s ured a� C U 2 3 , 000 and the i nventory is

\... '"
111t�l\Sl11�<1 :lt CU:l0,000. l llere i s <in exchange . loss. of CU3,000 on the trade pa y ab l e .
' .
(li) Ot;\bit Inventory FCU3,000
r t? d1t P rof it or lo� .; ( e xch a n ge difference) F � U3,000

NI) adl l� stm ent for t rade p aya b l e

. .
C),1 31 December. the trade payable is mea sured at FCU20,000 and th e inventory is
rnea�llrocl nt FCU23.000. T h ere is an exchange gain of C U 3 , 000 on t h e inv ento ry. ·

Problem 3 and 4.0n January 1 . 2 0 1 O an entity pu1 chased a tract of va ca n t land that is situated
.wurse as tot 8Rht80, 000. fhtt entity classified Ule l<1nd as a n investment property. The fair value
1
•

n1 th" land ::.lt D�cernber :� 1 . 2 0 1 0 is 8aht100,000. -

T l loe entity\; 1 unct1onal currency is the Php (Peso)
Spot ur rem :y exchnnge 1 ates:
Jummry ·1 . 2 0 1 0 : 1 BAht = P2
Wo iriht ed �verngE' exchange r ate i n 20XO: 1 F3aht :: P 2 . 04
1 11.!C<!llll'<'I .l I . :w I L)· 1 B:'l 1t
-:: P2 1 .

Wt nt is t h e carrying amo1mt of the in vestm ent· pro� e rty at December 3 1 , 2 0 1 0 and what
)
ninount/s would be presented in profit or loss tor th � year ended December 3 1 , 201 O?

tei) C:my1ng .m1ount of i n v e st m ent property = P21 0.000. Profit for the year includes
P30.000 increase in the f:m valL1e of investment property.

tb) Carrying amount of investment property = P 2 1 0.000. Profit for the year includes
P20.400 increase in the t:1ir value of in ves tment property and P9 .600 foreign
e ch a n g e g:un.

(r.) C:irrying amount of investment property = P 1 80. 000. Profit for the year includes no
�mount in respect of the in ve st m e nt p rope rty .
t d ) Carryin g �mount of
irl':estment property = P 1 8S,OOO. Profit for the year includes
P9,000 foreilJn exchang e gain
•

Assuming the entity cannot, without undue co�t or effort. determine the fair value of its
invest ment proper1y reliably on an ongoing basis . What is th1: carrying amount of the investment
pn .)perty at December 31 2 0 1 0 and what amountis wou ld be presented in profit o r lass for the
y.�ar ended December 3 I . 2 0 1.0? . .
· ' .
(�•) Carrying 3motmt of investment property = P �l o:ooo.
Profi t for the year includes P:10 , o o o
increase in the fcii r va lue ·)f inve
stme nt property. • •

a mo unt of invest ment proper

ty = P 2 1 C . OOO. Profit for the yea � includes
(u) 'carrying
se in th e fair value of i n ve s tm ent property and P9,600 foreign exchang e gain .•
P20,40 0 increa

y t=: 1 8 ), 000. Profit for the year includ e s n� amou nt· .

tc) C arryi n g amou nt of investment propefl =

in respect of the investment p roperty . • •

•

l 9 0
(d) Carrying amo unt of investment
prop rty e = p·1 89 , 000 . P rofit for t h e year inc udes P , 0 0

fo reign exchange gain.

 f'rc- b lem 5. On De: cem ber :3 1 , 20 1 2 a foreign
031a nce s h eet s t a t e d rn forei gn cur
suL..;1 J1ary in Hongkong submitted the follow!ng
ren c•.
;otal a sset s.
. $SOO C')O
1 OO,OOC
� ot a l L1a b1!1t1e�;
G o m � o n stock
250 000
fletai ned Earni ngs
1 50 000
:
The exc ha n g e rate are :
Curre· nt rate f' 3 4C
histo . 1cal rate J. 1 C
We i g nt ed a ve rag e • I •3 00

,J,ssu�ing . t h e functional currency of tr.e suc:; :;1ar; iS the not the currency of !:he ; •

hype�inflat1onary economy was used ano tr-J<:? retain,!d earnings ·of the subsidiary on Decerrf'Je-f"
3 1 . 200 1 2transl ated to Peso is p 460,000. What amc unt of Cumulative tra n s lation ad1ustment ::
lo be reported in the co ns o lidated balance sheer on C •ecembe r 3 1 20 1 2 ?
a . 2 5 , 000 b. 1 0,000 ::: 50. 000 d. 1 25, 000

PrcU>lem 6.M Company sold merchandis9 tor" 11 . 2 00 rupees t o a customer in India or.
N ove mbe r 02, 2 0 1 2. C oll e cti on in India rupeas was c ue on January 3 1 . 20 1 3. Dec. 3 1 . 2012. to
l1edge this foreign c urre nc y exposure . M C ompa r y entered imo a futures contract to �
1 1 1 .200 rupees to a bank for delivery on januarv 3 1 . 2 0 1 3 . Exchange rates for rupees on
different dates a re a s foll ows :

Nov . 2
"'"" �
31
. I _:\.,
.
Jan. 3 1
Strike price P8 1 . 8 ?B 1 . a P8 1 . 8
Bid spot ra te 81.9 80 1 8 0. 1
Offer spot rate 81.7 8 0. 5 80. 3
30-day futures 82 . 3 ':(> '· 83 . 9
GO-day tutures 31.3 ;)J .> 82. q ··= ·
.
9D-day futures 80. 6 81 6 83.4
1 20-day futures 80. 1 51 4 82. 8

What was the net im pa ct i n M ·company s 11 1 co m e i n 2 0 1 2 a s a result of this hecging

•

act1v1ty?
•

a. P22,240 b P 1 1 1 ,200 c. i ' 3 : . 360 d. P1 33.4401oss

ga in loss qa1 n

Problem 7.0n Nov . 1, 20 1 .2, Cars took d eli ve ry fror.1 US firm of inventory costing US t 00,000.
Payments 1s due on January 30, 2 0 1 3. Concurrenrly C a rs paid P900 cas h to acquire a 90 day
call option for U S 1 G 0.000

::
Nov. 1 , 2 0 1 2 •)ec. 31, 20 1 2 Jan. 30, 20 1 3
::.
Spot rate 1 .2 � .22 1 .23
.,
Strike price 1 .2 ?

FV of call option ? . !. 2 00 ?

What is the net FOREX gair• (Joss) to be recognizeo � y Cars on 0-ec. 3 1 , 20 1 2 should be: ....
a. 700 net toss .: 1 300 net loss
b. I ,300 net gain c.:: 2 000 net gain
• I

Problem 8.0n Nov 2, 20 1 ;: , NICO entered into f1. m .:::c mm1tment ·,uith Japanese firm to acquire
an equipment, delivery and passage of title on Marc. n 3 1 . 2 0 1 2, at a price of 4,375 yen. On me
same date, to hedge against unfavorable changes ir1 exchange- rate of the yen. NICO ente�
into a 1 50 day forwa rd contract with BPI for 4 , 3 7 5 1en Tne relevant exchange rate were as
follows ·

1 1 /2/ 1 2 213 1 1 1 2 313 1 / 1 3

Spot rate 37 :;z 35
Forward rate 40 :13 35

How much 1s the amount debited to t h e equr pm e nt ac::ount o n t h e date of:

ci.200,000 ; 1 1 /2/1 2 --: 1 8 5 , G ·: 0 ;. 1 1 /21 1 2
t). 200.000 , L./3 1 / i 3 d . 1 ?5 . 0C O ; 3/3 1 / 1 3
 ,..

.·

Problem 9. On
Novembe r 1 . Naga Company entered into a firm commitme
nt to acquire- ·a
.
be on =ebruary at the price of $ 1 2 ,000
machinery Delivery and passage of title would 28, 20 1 3
Singapore dollars. On the same date, to hedge agai11st unfavora ble changes .11n the exchange
S1flgapor e dollars .
rate. S entered into a 1 20-day · forward contract with China bank for $ 1 2,000 '
Exchange rate were as follows:

Spot Rate • ForvVa rd Rate

Nov 01 . 20 1 2 P36.25 P34.30
Dec. 3 1 , 2 0 1 2 37.40 36.70
Feb. 28, 20 1 3 39.50 • 39.50

How much is the forex gain or Joss recognized by the S company on the firm commitment ..
on December31, 2012?
)
,.
.· A P13,800 gain
E. P28,800 loss
C.
"
P1 3,800 loss
D. P28,800 gain

I Problem 1 0.011 October 2, .20 1 3 , KO Inc. ordered a custom built d e li very truck from a Japannse
firm. The purchase order is non-cancellable. The pU"" chase price 1s 1 million yen with delivery
a nd payment to be made 0n March 3 1 , io·14. On October 2, 201 3, KO Inc. entered int<> .a
brward contract to buy 1 r 1 illion yen on Ma rc h 3 1 , 2014 for P0.57. On March 3 1 , 2 0 1 4 , the
customer build delivery truck was delivered.

1 0/02.' 1 3 · ; 2/3 1 / 1 :; 3/3 1 / 1 '1

Spot rate P0.50 P0. 9 6 • I P0.57
For.Yard rate 0.53 0.58 0.57

As a f;:iir value hedge, the December 3 1 , 20.1 3 p rofit and loss statement forex gain or loss on the
hedging instrument amounted to?

A P50,000 loss B. P50,000 gain C P60, 000 loss D . P60,000 gain

the Dec e mbe r 3 1 , 201 3 profit e nd loss statement forex gain or loss-on
°
As a cash flow hedge,
tne hedging instrument amounted to?

A P50,000 P/L gain B. P50,000 OCI gain C P60,000 OCI los s D . P60,000 P/Lgain

Problem 1 1 .Clippers Company operates a branch operation in a foreign country. Although this
branch deals i n foreign cummcy (FC), the peso is viewed as its functional currency. Thus, a re­
measurement !S necessary is necessary to oroduce financial information for external reporti�g
purposes. The branch began the year witn 1 00,000 FCs in cash and no other assets or
liabilities. However, the bra11ch immediately _used 60, )00 FCs to acquire equipment. On May 1,
ii p u rch ase d inventory cost111g 30,000 FCs ror cash < ind 1t sold o n July 1 for 50,000 FCs cash.
Tile branch transferred 1 0,000 FCs to the parent on ( •ctober 1 ;;ind recorded depreciation on the
.;: qu1pment of 6 , 000 FCs for tile year. C u rrency ex:11a.1�e rat�s !or I F!; fP.lj�ws.

Janu�ry 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P0. 1 6 = 1 FC
•

May 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . P0. 1 8

L . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 0 . 20 ·
.iuly
•
Octob er 1 . . .. .. . . . . . . . . . . . . . . . . . P0 . 2 1
Dece mber 1 . . . .
. . . . . . . . . . . . . . . . . . . . . . P0 . 22
Aver age for the year. . . . .. .. . . . . . . PO. 1 9

or loss to be r·3Cognized i n the comb ined i ncom e

What is the forex re-me asure ment gain
s ta tem en t?
B. P2,400 C P2,700 D. 3,000
A. P2, 1 00
 ,oblem 1 2. T h e statements of finan era
· I position
·

of Eriilty A and Entity B Immedi atel y btforit

1. ':1e business .combination a rR (i·n thousands):
J
•

Entity A E r1tlty B

c urrent assets
P500 P700
Non-current assets
1 . 300 3.000
r
I.
Total assets ..
i;,
�� .._.,.

1 . 800 3.700
t
Current liabilities P J OO P80!)
\
f\lon-current liabihtie� ·�·JO
••,. -
1 , 1 00
T otat liabilities 700 1 . 700
... -4

Equity
Retained ea rni n g s �00 1 . 400
. .
.
Issued equity
1 00 . 000 ord i na ry s ha res 300
60,000 ordina ry
� !l
_
a_ es
r_ __ ______ _ -�-Q__ ___ __ _ _ --�- __ ------ --

Total shareholders' equity 1 , 1 00 2,000

� ,800
- - -·- -----·� ---- - - ·

Total liabilities and Equity 3,700

On Se pte m ber 30. 201 1 En t ity A issues 2 . :, share! in exchM g e for each ordinary share of
Entity B All of Entity B's sl 1areholders, exchange t111 1ir sh ar es in Entity 8. Therefore , Entity A
issu es 1 50 ord in a ry shares in e xc h ang e for all 60 or din ary 'ihare� of E n tity B. The fair valutt o f
E· ach ordinary !;hare of Ent11': B at Sept e mbe r JO. :?0 1 l 1s P40 ThE: quoted market price of Er.Ill y
1-, s o rdina ry shares at tha t date is P 1 6 Tr.e fair v;.lueB of E. ntity A'i; 1dentif1able as�ets and
liabilities at Se ptem ber 30, 201 1 are the same as !l ·e1r carrying amounts , except ' t hat the f� ir
value of Entity A's non-cu rrent assets at Se ptember '.l ), 201 1 is P1 . 500,000. Entity A ls the legal
0

p are n t and accounting acquiree While Entity B is th� leq al subsidiary and accounting acqu1 rer
\'Vhnt i5 the am oun t of goodwill to be reporteo rn the •: msolidaled fir ranclal statemants?

. .
I\. 200,00() B. �00,000 ( •IOO,QOO 0. 5(')0,000
. ' ·

Problem 1 3.Michae! Comp; in y 1s a retailer aM Jor".1 ; , 1 C o mpa n y . its 1 00%-owned subsid i a ry , is

Cl manufacturer. Mrchaei p:.irchases all of 1t :; 1mer1· one� from .Jordan. On January 1 , 2 0 1 0, '
Michael's inve nt ory was P4!�0.000. For the y�ar t:nd ; rl Deci�mber J 1 , 2 0 1 0 . its purr.hases we re
·

P2, 250,000 and its cost of sales wa s P2,437,500 Jordan ' s sales to Mrchael reflect an 80%
rnark-up on cost. M ich a el then re sells the gocds to u itsider s at 1 50% mark-up o n cost. At what
amount shou ld the rnter-coripany inve nt ory purchas•: d from Jordan be reported in the Separate
•
(Pa'rent Company) Financia! Statements?

A. 202.500 B 1 62,000 c 501,01)0 D. 1 1 2,500

Problem 1 4. E ntity P has a 90% controlling i ntere st in E nt it y S. On December 3 1 , 2010, th e

carrying va lue of Entity E s net assets in Enti ty P'; consolidated financial s t atem e nt !; 1s

P450.000 an d the carrying amount attributable. to • 1e non-controlling i n teres t ' s 1n Entity !) i s

1i5.DOO On J anua ry 1 . 201 1 . E n t ity P sells 80% of tr e s ha re in En t i t y S to a third party for c as h

µ-oceeds of P540,000 As a r e su lt of the sale. E nti ty P l os e s control of Entity S b ut retaine: a
"0% no n -controllin g interest i n Entity S Tho3 fair va1ue of the retained interest on th at dato: is
P54.000

�::etermine !he gain or loss r.n d i sposal (deco:isolid:J!:· :n)

:.> 1 44 . 000 pin C P 1 � : v J'J -� .: : ·
. . . .. ,.
1:3 P�44.000 loss D. P 1 89 000 lo� !J
'
Problem 1 5. On July 1 . 20 1 1 t h e Venus Company ; cqu1red tht: net assets of Cu pi d Company
tor a cons1derat1on transfer·ed of P 1 6 .900.000. At t r e acqu1sit1on date, the carrying amount of
Cupi<fs r.et assets was P 1 0 000 . 000. •

At trie acqu1s1t1on date . a prov1s1onal fair va1ue of P 1 . ' . 000.UOO was a tt r ib uted to the net as sets
1\n., add 1honal valuation re<;e1ved on May 3 1 . 20 1 : · increa sed this provisional fair value- t�
•

P L . 000,000 and on July 30. 2 0 1 2 this fatr value was finalized at P 1 4,000,000.
•

What amount should Ven u s present for goo dwi l l 1'1 its statement of financial positior· at
Oecember 31 , 201 2?
.
..i. PS,000,000 C P4.000.COC
6 ?3.000 ,000 D. P2. 000 000
'-- ��
�,�-.. .
... ..
,� ,&$+���� � ----..... ..... .
· I
}....'!""""'� �.;,,.-_;...._..:..,..- .:.:.•.
""' : --··"�"--
. ... .. ... .......
,. �-·-· ...--··

--
�-�·-· "'�, !
.t!""'"' �
'�"1
.P< --....,._
� ,, u. '"
� .#
• n
!!!1..;..i; - •
 . //

Problem 16 and 1 7 . Atlas CorporatioQ acqwrec an 80% interest in Rogets Company,

.

on •
January 1 , 201 2 for P 1 ,225,000. On this date the c 1pital stock and retained e arn i ngs of the two
companies were as follows:
Atlas Rogets
Capital stock P3, 1 50,000 P875,000 . .

Retained earnings 1 ,40C�QOO . 1 75,000

.
.

The assets and liabilities nf Rogets were stated at 'heir fair values when Atlas acquired its 80%. •
interest and the proportionate share in net identifiable assets yJaS used to initially measure the •
non -co ntrolli ng interest. Alias uses the cost method to account for its investment in Rogets

Net income and dividends for 201 2 for the affiliated companies were:

Atlas Rogets
Net income P5'25,000 P1 57,500 .
Dividends declared 31 5,000 87,500 .

Dividends paya bl e December 3 1 , 201 2 1 57,500 43,750

End of year evaluation indicates P1 2,000 impairment in goodwill.

1 6. The consolidated diviaends payable at D ecemb·�r 31 , 20 1 0:

a. P201,250 b. P 1 66,250 c. P 1 57 , 500 d. PO

1 i' . The consolidated retained earnings at Decemb! r 3 1 , 2 0 1 2 :

A. P2,041 ,4.00
B P.1 ,969,000
C . P 1 ,656,400
D . P 1 ,654,000

Problem 1 8.The net assets of CS Company have a book value of P600,000 and a fair market
vc.lue of P840,000. Amonq the undervalued assets are the machinery which have a book valu�
of P400,000 and a fair •1alue of P450,000. DY Company issues stock with a par value of
.
P500,000 and a market value of P1 ,200,000 for the net assets of CS Company. Shortly after the .

stock issue, CS merges with DY Company At what amount should CS's machinery be recorded
on DY Company's books.

A P400,000 B. P500,000 C P600,000 D. P450,000

Problem 1 9. P P Corp owns 80% of SS Inc 's common stock. During 2 0 1 3 , PP

sold SS
P250,000 of inven tory or the same terms as salns made to third parties. SS sold all
of the
i n ven tory purcha sed from PP in 201 3. The fo llowi ng information pertains to SS Md PP's sales
for 201 3:
pp SS
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 1 ,000,000 P700,000
Cost of Sales. . . . . . . . . . . . . . . . . . . . . . 400,000 3 50,000
P, 600,000 P 350,000
• I

h
W at amoum s hou ld pp r.:!pori as Cost of Sales in �1s 201 3 consolidated incom e stateme nt?
a. P 75 0 , 000 b. 680,000 c. 500,000 d . 430,000

p robl m 2o The M C om p a ny holds an

85% intere! t in the H Company. At the current yem �nd
M no I des inven
·

. tory purc h a sed from H for P3 30,000 at cost pl u s 1 0% . The group's consoli d ated
. hou t any a dJUS
. t men ts in re Ia t.i o to this
·
.

.draft� d wit ti
.

has
•

statement of financial position been ,

. . s should be made to the draft consolidated . statement of
holding of inven t ory. Wh·it adj·ustment
•
• •
,

r
•

n ed ings?
. .

retain earn
fiin.a ncra 1 pos1•1.10n figures for non-controllin
.
g. i te e st and
·
·
Retaine d earnings
Non -con troll ing interest
Rt?duce by P30,000
A. N o c h ange
Redu ce by P33 000
B. No chan ge
C. Red uce by P4, 500
educe by P 25 , 500f3
Rnd uce by P28 ,050
D. Red uce by P4 . 950
.
.. '
.,

�.

'>
\•
 ,oblem 2 1 . T he S Cornpa1 1 y owns 9r 1 ·
:c 0 f u�e (. " 0 �
�

r �ipu11v.
.

1 1 10 l 1 1 !l t t11w of lho ::int:uunt111g

1· l 1 1
�nod G sold to S a non- curre� t asset t or P.2JO. OOO
.f,e end of the reporting PE'rro. its·
carrv1ng amount
he 4.ISSt>t �)1 1y111ully cu81 P111;10.u uu "lld u t
l
'll G's bo�1tq1 Wt:lfl I ' 1 7 D,000 1 l ll'l 01 01.1p's
� o�solid ated st a t e m e nt of f i n a 1 1c1 al position lms
been url.ltted w111lu1H u 1 1y QirlJu:.tt111t rnt11 111 rol1;1llon
·

0 t 1 i.is n1on-cu rrent a sset . What

_ adjust ments sholtld . be mnd6 to tilt' oon1to llt1ol l'H1·�t� tClmtt1 1 t nr
: 1nanc1a pos1 t ion f 1gure s for r1on ·
-cur re n t asstHs ano r nt�rneo enrn1n9� ?
N on-
. cur ren t . 1sse ts
l • fltained onr 1 11 1 1os
A. I n crea se by P�S 0,00 0
lrw r.71Se DY I ':' '.i . ' , t1Ql)
�· Red uce by P55 .JOO
Rrt .111ce by P�i5. 000
C. f' educ e by P5 .> ,00lJ
H" lu�11 L"Y r-=-5- . �50
D. I ncre a se by P250 , 00 0 1 1 11: .·c,=tst! uy I·' �!.iu,ooo

? rob I em 22.A Philippine e 1 1 11ty acquirecl 60" ,, 01 llltl �.I 1.lr r1 t .aµ11"11 or u tornl911 t•nllty on Juno JU.
2 0 1 1 � The fair value of thP net assets of the foreiqt1 ontrtv nt !'h . t dnlt' wM1 $4 h mllllon. This
value wa s $ 1 . 2 million h ig her than the c ar r y ing ..:urn l l l ll of tlH rkt na�it I� or th� 1<>r olon (.•nllly
_ fhe ex c ess w�s due to the i nc re as e In value of non-t ic>prec1ablo l 1 1 1 1 d l het tur1 c 1 1 01111I t:urronr.y '"'

tile e n t ity is the Pl1p (Peso) 01 tllcl 0 1 1 1 1 t v IS I >r11:�111brir ;\ I , �>O 1 ·1

The financial ve Ar· t"I \\ I ho
-:: x c;hange rat e s Decamber.:3 1 4:!0 1 1 wero :Ii I a •I() I l i p �111d $ 1 A '!� f > l1p,
at J u n e 30, 20 1 ·1 . and
respectively. What figure fnr the f a i r vnlue ndJu!ltmt onl should llr'l inch1uoll 1 1 1 tl1t1 cn1 11u.i l1d11ttl!d
finync1al statements for t h e year ended De ce m ber 3 1 . 2t> 1 I ?

A. P 2 02 f:. m1ll1on B . P54.0 milhon i: P l 2 1 . 5 million D. P32.4 mllllon

Problem 23.P Corp . . an SME. buys 1 00% or S Co r1 0111 Mr. X. P µnys I 00 M llP front Rnd
agrees Mr X another GO M if the µatents ior w uc:h S Co. h.rs appl1od aro grantod. Both P
t o pay
Corp. nnd Mr :< t h i n k t11ere·:� a 'better than eve n ' cha11ce of the patents bolng grontod. FV of S�s
identifiable as:>ets r s 80 M

rlow much goodwill 1sreco9111zed at acqu1sit1on dute :

A 20 M 8 GO M .35 M D /IO M

.:;,.ame grven, except that botll P t,;orp. and Mr . X trim � t11er�·s 11 · 1c ....:s·H 11n11t4vt r n ' cluitnctt of the
patel"\ts being granted. How m u c h goodwill i�; rec;og ni !ed nt �cql1isitlon c f : 1 t ?
•

.
A. 20 M 8. 60 M 3� M D. 80 M
•

�roblem 24. Jeremy Lin. I nc. establishe d a t1ranch w ,£\ntlpi>lo 10 c f 1 s trl b 1 1t 0 µm1 f t h o qoods
purchased by 1t1e home oif1.. :e. T ile t1ome omce pnc.� s inventory sh1ppod to tile bro(1ct1 at 25%
.
.Jbove c ost The following a.xoun t balances were tnl\ m frorn th� lodger maintained by tho hc•rne .
•Jffice and the �ranch

Jeremy Lin, Inc. /\nt1polo Branch

:3ales P336,000 t > 1 44 . 000 (20% still uncoller.ted)
i3eginning lnVE!ntor11 69, 000 . 18,•1 00 < 1 /3 from HO)
u
1 => r cha ses 222, 000 • 110.�oo (�0% unpo1d)
·3111ornents to br�nch 66,000
.;111pments from HO t!2 , !)U0
Operating exp�nl'e� 68,000 ! 1 .:?00 (415 unpoid)
Ending Inventory 48,000 � U300 ( 1 0% trom outsider s )

•-:: a lculate the combined net i n c o m e for the home olt1 0 .m d the L>rn nch:

A. P84 , 500 8. fBJ, 1 72 ! ' ! J G , � l7 �: 0 �l9,G72

. '
.

P ro blem 25.0n December J 1 , 20 1 2 , the horne otticr. ul Tony 1.:ompeny recorded a s h i pm en t of

i n e 1 chand1se t0 its Calambci bra n ch as rollows · •

• � a l .'.lmba branch JO.COO

Shipment to Calaml: 3 branch :�5.000
Unrealrzed pro fi t rn toranch inventory 4 , 000
Cc.sh (for freight charges) 1 , 000
·
Th& Calamba branch sell!. 40% of the merchandr!'\� to outs1d� entities d L J ring the re!llt of
December. 20 1 2 The book s of th e home oltrce , nCJ Culanib;i ur;im:h are closed on December
: 1 1 of each year. �--t what 1mounti; should t11c1 GO';, of t h tt n 1t:11\: l l andlse remAtnfng unsolcl •fU
t?ecember 3 1 , 20 1 .? should be rncluded 1n tttfj µubll :.· ied stute1 1 1H1 1 t of financial positron of Tony
Lornpany at D ece mber 3 1 . !0 1 2?

A. 1 5,600 8 . 1 5. 000 C. 1 8 .00· > D. 1 8.oOU

. ..
' - ...__ --�- - .

·--- - ... ,. .
 -
· .-.. - -
�:i�
r­
, .- ' "1t-
-, )

"

Opern�s n tirnnct; In v1Urtklnl'I City. On D"c. 3 1 . '101 1 . M1n�n1

Problem 26.AMV ldOI C\'.
::ranch � in the HO books showed n debit ti.alonee of �22.760. ·rhe Interoffice aceciuntt
v.�re m a�me t at tht' � 1nni� of th� yeor F or p11rpo!ll'>S of rf)conclllng IM lnt1rntf1u .
,
�cts WE>re g 1v.-1 1 ·
->-�"'ints, tne 1'\lll.:'\\.'\fl9
t·onsll aa of yoar-end. Mariklna r1tcorderJ tN
,
J. �ts tt> M�mkma '1t l'O�t of 92. 8 1 0 �re in
smd transf� Ofl Jno -· .� I �
: ·0t1 Od J · . �2 · t ti � 1 · ,11111._· ''t11ce IJ,\ltl runt o t � 1<11iki11 ,l anio 1 inl lnc1 1 0 �iR.8fj0 tor rh� fv'l)ct f1
mooms H<ll1� l.'.lft� recorded the said trAnsacMn usln'Q the a1�6t 'rftMhod. Branch '!'" not , .
� cl t� �aio rent :r.ms1tct1on.
:: The �"ti \\ntes off un .:tiltectible nccollnt� of 1 :: 1 2 2 The u l lowa nco for doubtful accountt i�
•

1 la'«ltaine-:: on the boo!<.� of home office Home office is not yet not ified about th& wnt1:-off

..:: Home .:iffi� <.:dtecte<..i AR from Monk1ml's Cl1·1torners urnounting lo 9 1 , 680 . net of 411fr.
aiscount l � HO treat'E'<I the stlld tr:ins�ct1on as 11 i t was a collocti on from its own cuttom"rs
Mankt."\3 \WS not yet nt't1fied of the \ollection.
•

.
.
. : •s the �II\::) of th� home office to blll 1ts branches .1t 20% above cost.
\-\'hat is � unaqusted balance of the HO-current ot B ata ngos branch on Dee. 3 1 . 201 1 ?
.J 502, 1 10 c. :186. 1 86
� 462.i'i'O d ·14.4208

.
Problem 27. The Chubby :3ranch of Shm Company 3ubmilled.the following tr i al balance as o1
Oe-cember 3 1 , 20 13. after its first year of operation!>:
Debit Credit
- .:: ash P 1 0,400
Accounts re<:etvable 63.200
Shrprnents from HO 168,000
'::: xpenses 1 0,800
Sales P1 34,400
'-10 Current . ' 1 1e.ooo �
�al '252,400 25�. 400 -
-
� tnventory end is PS0.400.
Shipme nts to the' br anct;i are billed at 140% of cost.
:
Wl3t is the true net income of the Branch d uri ng 2C. i P

\ . Po.Oc.'11.l
.-
c. 39,t illll D.54,000

PrQblem 28.� S� MANUEVO

•

Co.·s hom o office b11Js' R i z al

branch at 1 20% above cost during
2009 and 1 25� er cost cunng 2 0 1 0 . In 2010, go )ds billed at 355,600 were shipped to the
branch Also. dunng t he y:ar. the branch returned 1 1 9,050 worth of defective merchandi'.l� to
t e home ffit.-e. T"':e account unrealized intra-comp.my inventory profit has a balance of 1 E:,240
a: the ena of last year. The branch sta rted to a cq 1 1 1 re merchandise from outsiders during the
year in the amou�t of 54. POO a nd returned derec t1-.e merchandise to the vendor amounting
.

· 9 570. How much is the cvst of goods avai lable for sale. at cost?
to
•

3 3 t4.870 c. :11 1 .222

::'. 189, 308 d . :100,420

Problem 29. Joint arrangt-rnent activ i ties tor A, 8 : nd C l 1 a v1ng proved to be unprofitable, the
parties agree to dissolve the 1omt operations. Accounts wit h fne! •angement and joint
o;>erators on the books of A. the m anag ing operator. are as follows just before dissolufion and •

. :q:.J1dation:

Debit Credit
Joint Operation Ca!ih P84.000'
Jomt Operation 45. 50(
B. Capital P 1 0 1 ,500
45.500
C. Capita!

by A to : P24,5�0. A is all?we� s_pecia�

The baiaflce of Joint operatt0n assets on hand is sl lld
•

compensation of P2, 1 00 ror winding up the ventLre: remaining

profits or loss is drstnbutea

�:Jatly. B and C received in final settle,ment

(; B. P73,500 : C, P24,500
A None
8. S. P93.800 . C. PJ/, 800
�\B. 1 1 0,850 : C. P54,950
 .c.-� •

q
�m 30.0n Ja nuary 1 . : 0 1 3, Lebron 8a sh and D Nayne (the 101nt . .
operators) jointly buy a
"'-'opter for P .30 mill ion eac h · The J. o . nt a
11t-
·

i rrang e111ent nclud es the following terms

'.,, ll1e parties are the i· c,.int owners of the h
.
. :
, er. is at t e :disposal of eac e l icop1. , ,r
l: Tl'e l'eI".•copt � h part y f:>r 70 days each yea r
nie parties may d e ci
TI .
de to use the helic opte r 01 lease
'. it to a thi rd part y I
�rte
"' · ... m ai ntenance aM dispos al f
o the he licopt e· require the unanim ous cbnsent of the
,.,.. 1 es
E'. n,e cont ract u a l arrar:gerne
nt is for the expecti?d life (20 years) o f the helicopter and Ccln
l"le change oi-ly if :-ill 1 iarties
:.>greE: Th·:- res1du , I •1aluE of the ii ehco pter is ni l .
t
�qu.iJly among the joint! �rators .
• Revenues and expenses are to be shared
.

!: �013, the parties paid P300,000 to meet the cdsts .:f m a i n t ai ni ng the helicopter. In 201 3,
eact1 party also incurred costs of running the heli co pte r when they made use of the helicopter
\�-�- Lebron mcurred costs C•f P 20 0 , 00 0 Qn pilot fees. lVlation fuel and landing costs). I n 201 :3 .•

the P3fttes earned renta l mcl1me of P2.5 million by rer.nng the helicopter t o other s .

Vv1,st is the book value of tht� helicopter 1n the booKs ( f Lebron o n Decembe r 3 1 , 201 3?

I\.. P28.5M B P 1 9M C. P21 M D. P9.5M

Problom 3 1 . On January 1 201 1 entities A a nd 8 : ach acq u ired 30 per cent of the ordinary
snaresthat carry vot i ng rights at a general meeting 01 sh a rehold ers of entity Z for P300,000.(9)
E nllties A and 13 imme diat el y agreed to share control over ent ity" Z .

For the year ended Dec. 3 1 . 201 1 en t it y Z recogn1z! ·d a profit of P400,000. On �c. 30 201 :
.

entity z declared and pa id ci d iv id en d of Pi S0.000 fer the year 20X 1 . At Dec. 31 , 201 1the fa1r
value ot each venturers' m·.testment in entity Z is P425.000. H oweve r, there is no p u bl_i s he d -
;.:nee quotation tor e nt it y Z

. .
(ln Dec. 3 1 , 201 1 y
e ntit A sell� goods for F60,000 to entity Z. .L\t Dec. 3 1 ,• 20 1 1 t h e goods
purchased from en tity A wer e in e nt ity Z's invento rie s 'ie 'they had not bee n sold by ent�ty_ Z).
E.nt1�y A sells '.:JOOds at a t·O per cen t mark-up :in .:ost. En tiu es A and 8 account for JOmtly
c0ntrolled ent1t1es using the �qu1ty method.

The amount of investment to be rec ogni zed by ent i ty 1\ should be.

.l. 375.000 c 425 .002

�). 369.000 d. 30(},0CO

Pro blem �
32.0n December :31 , 2009 entit y A a n SME . acquired 30% of th e ordinary shares that
c a:ry votmg rights of entn y Z for P 1 00,000 . In � cqu 1 nn g those sh a res entity A incu rr� d
t ·a n s a ct 1on costs of P1 ,000 E ntity A h as entered 1nio a co nt ra ctu a l arrangement with a not he r
pa11y (entity C) tl1at owns 2!: % of t he ordinary sh.ires )f e ntit y Z , where by entities A and C j oi nt ly
controllet1 entity Z. E ntity A uses the cost model tc account for its i nve st ments in J C E . A fair
\ 3lu atio n of t hn inv-=stment!. in e n t ity Z d eterm inea using a reliable earnings multiple appro<lch

t:\1sts. In January 2 0 1 0 . ent it y Z dec la red and paid d vidend of P20,000 out of pro fi t s earned in
:.oo-:J. No furthm dividends v11e re paid 1n 2010, 20 1 1 a :)d 201 2. At Dece mb er 31 . 201 O, 201 1 and
::u 1 2. m a nagem e nt assessE'd the fair v a l ues of its inv � stm en t in entity Z as P1 02,000, P 1 1 0,000
: ·�,1 PPC'.000. 1 e$ped1vely 1 : o�ts to sel l are �·stirr.atE• I at P4 .OC1Q throughout E n tity A measures
. . ' 11
:•
its nwestment in ent ity Z on December 3 1 , 201 1 at?

P 1 1 0 . 000 b . P 1 0 1 . 000 c. P 1 06,000 d. P95,000

l'nihlem 3.tOn J a nu ary 1 , 2 0 1 3 e_nti ties· A and B (th•! venturers) f o rm a joint vent u re (entity 'I').
_ .
l ioon 1 nc o1 po ration of e ntity Y. e n ti t ies A ano B each take up 50 per cent of the sh a re capital of
t>nt11y Y . 111 return for their i n te re sts
m e nt it y Y . e nt 1 1 1es A a nd B ea ch contribute P 1 00,000 to •
E'nt.ty YEntity A con tri butes machine with a fair va l Je of P 1 00,000 and a carrying amount of
PB0.000 . Ent1tv B's c o ntr i b ution is P 1 00,000 in cash The m ach i ne contributed by entity A h a s
an e stim at ed useful life of 1 l J years with no re si du a l Vi slue.

i:�1t1ty Y's prof1 : for t!'e year e nde d December 3 1 , 20· 3 1s P30,000 (after ded ucti ng depreciation
t•xpense 01 P 1 0,000 on ti 1e machine. contributed by ent ity A . ) E nt ity A ac c o u nt s for the
hvestment usin g the equity m et h od What is the ca1 rym g amaunt of investment of ent it y A o n
\ �ecember 3 1 . 20 t :' ?

. ... A PM nn.� Q p , .., 1 ()()() r· 01nc: """ n n1 nc '"'"

.... ...�..,..
... ,.,,. -�.-- ·•>n ·--·· , T"
 •'

.�11 111"lll 11tWr �llnll ._Cl o�n contain 1:1. 1th deposit and insurance
1"1 t1l\hm\ H, elements. �n
le\ i:.1we nantrnct ne c ed e nt receives a repayment of the
"' 'i1m 1 1le1 1 1 11u111 1 1i; tt:ill\'-111 wl1e1e
1 1 1 i:111rn11 1 1" nl rt l i 1 h f l e1 t1111r;1 11 tl\d\11 � 1 0 no cla11ns vnae. the
contract. Effectively this constitutes a
1, 1q11 l lv 1111· 1111t:111I 1 1 1<11 w1ll I 1u lu� 1 11w1 in the fu ture
, . If F S 4 r equires that

:\ I , , , 1 1 1 1 1 1 \ 1 1 1 1 1 1 11 1 1\ ll1•• 1:c1dan1 tli accounted for its a loan advance and as a payment for
II lt1 I It 111 I· • ' , ., •\hi\
11 I llr< 1111t 111 n 1 1 •:a pt P l l \ 1 • 1 1 1 1 1� �COL)Ul\ted luf as � 1avenue i te m in the statement of income
'' I llr.o 1 '' "" 1 1 1 1 1 1 1 1 1 111 "':''' 1 1 1 111:111 fnr 1mcter PAS I A
' 1 1 1 11<1 p 1 1· 1 1 11 1 1 1 1 1 1 •<11d ' "' U r:lc:Uoll purely "to a h1d l l ind 11 1-; aL·.:: o unted for under PAS 39
" I lll•

t1h,lll ..m �ft A I J 1� .inml'"'W'� 1ma1on s11b111c1iary hart the following amounts in stickies (§) in
�·11 1 )
"f
I '. 1 \lil I 11 Ul\fh hi n, noo, MO

I
QI 1td
t
i I 11d1111-1 111v1111to1 y !l00 , 000
,.
I
.· ' (
I '"1.111 11111 llJ 11 11111111\11 y

1 11r.o i1v•1 �u11 •m111�nutt 11th11 lhtrlng

t J0,000

�u 1 2 waa § 1 = $ ·16 The beginning inventory was acquired

wllPll l l 11i 1111t'l\i*t11Jo $1 .�O
tttht w.-11 § I
:: The 11nd1ng inv en to ry was acquired when the
t- \ r l \llt1\Jc:1 1 n l d w�t> § I .. 1 Qll. Tht' exchM!)f'I i atr· at December 3 1 . 2012 was §1 = $.84.
....

"""""'ll"l l t 11�t lllr1 1. 11 Pl\Jtl 1 • nmtt y ''"1i i;t IWIXJI -1ntlai1t nary economy, at what amount should the
l<lf 'f'IUl l 1111l 1•ldt1UV 1 l\ l1l)lll "' oooda sole! havt been 1eflected jn the 2012 U . S . dollar income
i: l1tle$llldt1l 1 11

.,_
a
l'.
.
1\, i,IWn.MtHI U. ,\ 040,0llO • S,760.000 D. 5,824,800

. .
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.,1.
. .

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•• ...............�... ........... t........................___ ··--EN D-' --·---------------

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