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1. If a company reports a receivable denominates in Euros (€) and the Philippine peso weakens vis-à-
vis the Euro:
A. The company will not report the change in the relative value of the receivable until the
receivable is collected.
B. The company will accrue the gain in its financial statements as of the statement date, even
before the receivable is collected.
C. The company will accrue the loss in its financial statements as of the statement date, even
before the receivable is collected.
D. The company will recognize the increase in the Philippine peso value of the receivable on its
balance shees as of the statement date, but the unrealized gain will not be recognized in its
income statement until the receivable is collected.
7. A December 15, 2019 purchase of goods was denominated in a currency other than the entity’s
functional currency. The transaction resulted in a payable that was fixed in terms of the amount of
foreign currency, and was paid on the settlement date, January 20, 2020. The exchange rates
between the functional currency and the currency in which the transaction was denominated
changed between the transaction date and December 31, 2019, and again between December 31,
2019, and January 20, 2020. Both exchange rate changes resulted in gains. The amount of the gain
that should be included in the 2020 financial statements would be
A. the gain from December 31, 2019, to January 20, 2020
B. the gain from December 15, 2019, to January 20, 2020
C. the gain from December 15, 2019, to December 31, 2019
D. zero.
8. In a production cost report using process costing, transferred-in costs are similar to
A. direct materials added at a point during the process
B. conversion costs added during the process
C. costs transferred to the next process
D. costs included in beginning inventory
10. If a new partner acquires a partnership interest directly from the partners rather than from the
partnership itself,
A. no entry is required.
B. the partnership assets should be revalued.
C. the existing partners’ capital accounts should be reduced, and the new partner’s account
increased.
D. the partnership has undergone a quasi-reorganization.
Project 1 Project 2
Contract price P420,000 P300,000
Cost incurred during 2019 240,000 280,000
Estimated cost to complete 120,000 40,000
Billed to customers during 2019 150,000 270,000
Received from customers during 2019 90,000 250,000
If Pelicans used the percentage of completion method, what amount of gross profit (loss) would
Pelicans report in its 2019 income statement?
A. (20,000) C. 22,500
B. 20,000 D. 40,000
12. On January 1, 2019, SMV Corp. issued 200,000 additional shares of P10 par value common stock in
exchange for all of QM Corp’s common stock. Immediately before this business combination, SMV’s
stockholder’s equity was P8,000,000 and QM’s stockholder’s equity was P4,000,000. On January 1,
2019, fair market value of SMV’s common stock was P20 per share, and fair market value of QM’s
net assets was P4,000,000. SMV’s net income for the year ended December 31, 2019, exclusive of
any consideration of QM, was P1,250,000. QM’s net income for the year ended December 31, 2019,
was P300,000. During 2019, SMV paid dividends of P450,000. SMV had no business transactions
with QM in 2019. Assuming that purchase method was used in this business combination, how
much is the consolidated stockholder’s equity at December 31, 2019?
A. 8,800,000 C. 13,100,000
B. 9,100,000 D. 13,350,000
Owen Sharp
Balance Sheet Accounts:
Investment in subsidiary 1,300,000
Retained earnings 1,240,000 560,000
Total stockholders’ equity 2,620,000 1,120,000
13. In Owen’s 2020 consolidated income statement, what amount should be reported for amortization
of goodwill?
A. 0 C. 18,000
B. 12,000 D. 20,000
14. In Owen’s December 31, 2020 consolidated balance sheet, what amount should be reported as total
retained earnings?
A. 1,240,000 C. 1,380,000
B. 1,360,000 D. 1,800,000
15. The following information pertains to shipments of merchandise from Home Office to Branch
during 2020:
In the combined income statement of Home Office and Branch for the year ended December 31,
2020, what amount of the above transactions should be included in sales?
A. 250,000 C. 200,000
B. 230,000 D. 180,000
Cash 45,000
Other assets 625,000
Beda, loan 30,000
700,000
17. The assets and liabilities are fairly valued on the balance sheet. Alfa and Beda decide to admit Capp
as a new partner with a 20% interest. No goodwill or bonus is to be recorded. What amount should
Capp contribute in cash or other assets?
A. 110,000 C. 140,000
B. 116,000 D. 145,000
18. Instead of admitting a new partner, Alfa and Beda decide to liquidate the partnership. If the other
assets are sold for P500,000, what amount of the available cash should be distributed to Alfa?
A. 255,000 C. 327,000
B. 273,000 D. 348,000
19. The flexible budget for the month of May was for 9,000 units with direct materials at P15 per unit.
Direct labor was budgeted at 45 minutes per unit for a total of P81,000. Actual output for the month
was 8,500 units with P127,500 in direct materials and P77,775 in direct labor expense. The direct
labor standard of 45 minutes was maintained throughout the month. Variance analysis of the
performance for the month of May would show a (an)
A. 7,500 favorable materials usage variance.
B. 1,275 favorable direct labor efficiency variance.
C. 1,275 unfavorable direct labor efficiency variance.
D. 1,275 unfavorable direct labor price variance.
21. For the first semester of 2020, Public University assessed its students P4,000,000 (net of refunds),
covering tuition and fees for educational and general purposes. However, only P3,700,000 was
expected to be realized because tuition remissions of P80,000 were allowed to faculty members’
children attending Public University, and scholarship totaling P220,000 were granted to students.
What amount should Public University include in education and general current funds revenues
from student tuition and fees?
A. 4,000,000 C. 3,780,000
B. 3,920,000 D. 3,700,000
22. In April 2020, Alice Reed donated P100,000 cash to her church, with the stipulation that the income
generated from the gift is to be paid to Alice during her lifetime. The conditions of this donation are
that, after Alice dies, the principal can be used by the church for any purpose voted on by the church
elders. The church received interest of P8,000 on the P100,000 for the year ended March 31, 2021
and the interest was remitted to Alice. In the church’s March 31, 2021 financial statements
A. P8,000 should be reported under support and revenue in the activity statement.
B. P92,000 should be reported under support and revenue in the activity statement.
C. P100,000 should be reported as deferred support in the balance sheet.
D. The gift and its terms should be disclosed only in notes to the financial statements.
23. Queen Co. is a print shop, which produces jobs to customer specifications. During January, Job #123
was worked on and the following information is available:
24. The Lotus Co. manufactures a specialty line of product using a job order costing system. During
May, the following costs were incurred in completing Job #03: direct materials, P13,700; direct labor,
P4,800; administrative, P1,400; and selling , P5,600. Factory overhead was applied at the rate of P25
per machine hour. Job #03 requires 800 machine hours. If Job #03 resulted in 7,000 good units,
what is the cost of goods sold per unit?
A. 6.50 C. 5.70
B. 6.30 D. 5.50
Dept. A Dept. B v
Direct materials consumed P5,000 P3,000
Direct labor rate per hour 4 5
Production overhead per direct labor hour 4 4
Direct labor hours employed 400 200
Administrative and other overhead cost 20% of full production cost
Profit markup 25% of selling price
26. The Backflushers Manufacturing Corp. uses a Raw and In Process inventory account and expenses
all conversion costs to the cost of goods sold account. At the end of each month, all inventories are
counted, their conversion cost components are estimated, and inventory account balances are
adjusted accordingly. Raw material cost is backflushed from RIP to finished goods. The following
information is for the month of May:
27. Seco Corp. was forced into bankruptcy and is in the process of liquidating assets and paying claims.
Unsecured claims will be paid at the rate of P0.40 on the peso. Hale holds a P30,000 noninterest
bearing note receivable from Seco collateralized by an asset with a book value of P35,000 and a
liquidation value of P5,000.
Additional information:
● Marketable securities have present market value of P320,000. These securities have been
pledged to secure notes payable of P280,000.
● The estimated worth of inventories is P70,000. However, inventories with book value of
P50,000 have been pledged to secure notes payable for P60,000. The realizable value of the
inventories pledged is estimated to be P40,000.
● Land and building are estimated to have a total realizable value of P450,000. This property
is pledged to secure the mortgage payable of P250,000.
28. What is the estimated amount available for preferred claims and unsecured creditors out of assets
pledged with fully secured creditors?
A. 840,000 C. 770,000
B. 810,000 D. 240,000
30. Krebs Crabs, Inc. franchisor, entered into a franchise agreement with Liwayway Ligaya, franchisee,
on July 1, 2020. The total franchise fees agreed upon is P1,100,000, of which P100,000 is payable
upon signing and the balance payable in four equal annual installments. It was agreed that the down
payment is not refundable, notwithstanding lack of substantial performance of services by
franchisor. When Krebs prepares its financial statements on July 31, 2020, the unearned franchise
fees to be reported is:
A. 0 C. 1,000,000
B. 100,000 D. 1,100,000