AFAR Finals Dec 2017

(1)

1 pts 1 pts

Horse Co. manufactures products A and B from a joint process. During October, sales Horse Co. manufactures products A and B from a joint process. During October, sales values at the point of “split

values at the point of “split--off” were P50,000off” were P50,000 for 4,000 units of product A and P100,000 for 4,000 units of product A and P100,000 for 12,000 units of product B. Selling prices per unit are P25.00 and P12.50,

for 12,000 units of product B. Selling prices per unit are P25.00 and P12.50, respectively, for product A and for product B.

respectively, for product A and for product B.

Assume that the joint cost allocated to product A by using the

Assume that the joint cost allocated to product A by using the market value method wasmarket value method was P40,000. The production

P40,000. The production cost of product cost of product B B would be reported would be reported at __________.at __________. P80,000 P80,000 P90,000 P90,000 P130,000 P130,000 P140,000 P140,000 1 pts 1 pts

Magna Co. produces three products, A, B and C. A and C are joint products while B is a Magna Co. produces three products, A, B and C. A and C are joint products while B is a by-product of A. No joint cost is allocated to the by-product. The production data for the by-product of A. No joint cost is allocated to the by-product. The production data for the year 2017 were as follows:

year 2017 were as follows:

In Department I, 220,000 kilos of raw materials are processed at a total cost of In Department I, 220,000 kilos of raw materials are processed at a total cost of

P240,000. After processing, 60% of the units are transferred to Department II while 40% P240,000. After processing, 60% of the units are transferred to Department II while 40% of the units (now C) are transferred to Department III.

of the units (now C) are transferred to Department III.

In Department II, the materials are processed further at total additional cost of P76,000. In Department II, the materials are processed further at total additional cost of P76,000. On completion of the process, 70% of the units (now A) are transferred to Department On completion of the process, 70% of the units (now A) are transferred to Department IV while the other 30% emerge as B, the by-product, which is sold at P1.20 per kilo. The IV while the other 30% emerge as B, the by-product, which is sold at P1.20 per kilo. The selling expenses related to B amounted to P16,200.

selling expenses related to B amounted to P16,200.

In Department III, C is processed further at total additional cost of P330,000. In this In Department III, C is processed further at total additional cost of P330,000. In this department, a normal loss units of C occurs during processing, which is equal to 10% of department, a normal loss units of C occurs during processing, which is equal to 10% of the good output. The good output of C is sold at P12 per kilo.

the good output. The good output of C is sold at P12 per kilo.

In Department IV, A is processed further at total additional cost of P47,320 after which it In Department IV, A is processed further at total additional cost of P47,320 after which it is ready for sale at P5 per kilo.

is ready for sale at P5 per kilo.

Market value method is used in allocating joint costs and treating the NRV of by-product Market value method is used in allocating joint costs and treating the NRV of by-product as an addition to product A sales.

as an addition to product A sales.

Determine how much of the total joint cost of P240,000 is allocated to product A. Determine how much of the total joint cost of P240,000 is allocated to product A. P101,564 P101,564 P91,210 P91,210 P95,267 P95,267 P88,880 P88,880 1 pts 1 pts

Magna Co. produces three products, A, B and C. A and C are joint products while B is a Magna Co. produces three products, A, B and C. A and C are joint products while B is a by-product of A. No joint cost is allocated to the by-product. The production data for the by-product of A. No joint cost is allocated to the by-product. The production data for the year 2017 were as follows:

year 2017 were as follows:

In Department I, 220,000 kilos of raw materials are processed at a total cost of In Department I, 220,000 kilos of raw materials are processed at a total cost of

(2)

(3)

P240,000. After processing, 60% of the units are transferred to Department II while 40% P240,000. After processing, 60% of the units are transferred to Department II while 40% of the units (now C) are transferred to Department III.

of the units (now C) are transferred to Department III.

In Department II, the materials are processed further at total additional cost of P76,000. In Department II, the materials are processed further at total additional cost of P76,000. On completion of the process, 70% of the units (now A) are transferred to Department On completion of the process, 70% of the units (now A) are transferred to Department IV while the other 30% emerge as B, the by-product, which is sold at P1.20 per kilo. The IV while the other 30% emerge as B, the by-product, which is sold at P1.20 per kilo. The selling expenses related to B amounted to P16,200.

selling expenses related to B amounted to P16,200.

In Department III, C is processed further at total additional cost of P330,000. In this In Department III, C is processed further at total additional cost of P330,000. In this department, a normal loss units of C occurs during processing, which is equal to 10% of department, a normal loss units of C occurs during processing, which is equal to 10% of the good output. The good output of C is sold at P12 per kilo.

the good output. The good output of C is sold at P12 per kilo.

In Department IV, A is processed further at total additional cost of P47,320 after which it In Department IV, A is processed further at total additional cost of P47,320 after which it is ready for sale at P5 per kilo.

is ready for sale at P5 per kilo.

Market value method is used in allocating joint costs and treating the NRV of by-product Market value method is used in allocating joint costs and treating the NRV of by-product as an addition to product A sales.

as an addition to product A sales.

Determine how much of the total joint cost of P240,000 is allocated to product C. Determine how much of the total joint cost of P240,000 is allocated to product C. P138,436 P138,436 P148,790 P148,790 P144,733 P144,733 P151,200 P151,200 1 pts 1 pts

Silver Company’s operations for the month just ended originally set up a 60,000 direct Silver Company’s operations for the month just ended originally set up a 60,000 direct labor hour level, with budgeted direct labor of P960,000 and budgeted variable

labor hour level, with budgeted direct labor of P960,000 and budgeted variable

overhead of P240,000. The actual results revealed that direct labor incurred amounted overhead of P240,000. The actual results revealed that direct labor incurred amounted to P1,148,000 and that the unfavorable variable overhead variance was P40,000. Labor to P1,148,000 and that the unfavorable variable overhead variance was P40,000. Labor trouble caused an unfavorable labor efficiency variance of P120,000, and new

trouble caused an unfavorable labor efficiency variance of P120,000, and new

employees hired at higher rates resulted in an actual average wage rate which was employees hired at higher rates resulted in an actual average wage rate which was higher by P0.40 than the standard average wage rate per hour.

higher by P0.40 than the standard average wage rate per hour.

The total number of standard direct labor hours allowed for the actual units produced is The total number of standard direct labor hours allowed for the actual units produced is __________. __________. P52,500 P52,500 P60,000 P60,000 P62,500 P62,500 P70,000 P70,000 1 pts 1 pts

Use the information presented below: Use the information presented below:

Budgeted fixed overhead

Budgeted fixed overhead P10,000P10,000

Standard variable overhead (2 DLH @ P2 per DLH)

(4)

Actual fixed overhead

Actual fixed overhead P10,300P10,300

Actual variable overhead

Actual variable overhead P19,500P19,500

Budgeted volume (5,000 units x 2 DLH)

Budgeted volume (5,000 units x 2 DLH) 10,000 DLH10,000 DLH Actual DLH

Actual DLH 9,5009,500

Units produced

Units produced 4,5004,500

Calculate the total overhead spending variance. Calculate the total overhead spending variance. P500 unfavorable P500 unfavorable P800 unfavorable P800 unfavorable P1,000 unfavorable P1,000 unfavorable P1,300 unfavorable P1,300 unfavorable 1 pts 1 pts

Union Company uses a standard cost accounting system. The following overhead costs Union Company uses a standard cost accounting system. The following overhead costs and production data are available for August:

and production data are available for August: Standard fixed overhead rate per DLH

Standard fixed overhead rate per DLH P1P1 Standard variable overhead rate per DLH

Standard variable overhead rate per DLH P4P4 Budgeted monthly DLH

Budgeted monthly DLH 40,00040,000

Actual DLH worked

Actual DLH worked 39,50039,500

Standard DLH allowed for actual production

Standard DLH allowed for actual production 39,00039,000 Overall overhead variance, favorable

Overall overhead variance, favorable P2,000P2,000 The applied factory overhead for August should be ____________. The applied factory overhead for August should be ____________. P195,000 P195,000 P197,000 P197,000 P197,500 P197,500 P199,500 P199,500 1 pts 1 pts

Information on Ripley Company’s overhead costs for the January production activity is Information on Ripley Company’s overhead costs for the January production activity is as follows:

as follows:

Budgeted fixed overhead

Budgeted fixed overhead P75,000P75,000

Standard fixed overhead rate per DLH

Standard fixed overhead rate per DLH P3P3 Standard variable overhead rate per DLH

Standard variable overhead rate per DLH P6P6 Standard DLH allowed for actual production

Standard DLH allowed for actual production 24,00024,000 Actual total overhead incurred

Actual total overhead incurred P220,000P220,000

Ripley has a standard absorption and flexible budgeting system, and uses two-variance Ripley has a standard absorption and flexible budgeting system, and uses two-variance method (two-way analysis) for overhead variances.

method (two-way analysis) for overhead variances.

The volume (denominator) variance for January is ________. The volume (denominator) variance for January is ________.

(5)

P3,000 unfavorable P3,000 unfavorable P3,000 favorable P3,000 favorable P4,000 unfavorable P4,000 unfavorable P4,000 favorable P4,000 favorable 1 pts 1 pts

Woodman Company applies factory overhead on the basis of direct labor. Budget and Woodman Company applies factory overhead on the basis of direct labor. Budget and actual data for direct labor and overhead for the year are as follows:

actual data for direct labor and overhead for the year are as follows: Budget

Budget Actual Actual Direct labor

Direct labor P600,000P600,000 P550,000P550,000 Factory overhead costs

Factory overhead costs P720,000P720,000 P680,000P680,000 The factory overhead for Woodman for the year is ___________.

The factory overhead for Woodman for the year is ___________. Over applied by P20,000. Over applied by P20,000. Over applied by P40,000. Over applied by P40,000. Under applied by P20,000. Under applied by P20,000. Under applied by P40,000. Under applied by P40,000. 1 pts 1 pts

Schneider, Inc. had the following information relating 2017. Schneider, Inc. had the following information relating 2017.

Budgeted factory overhead

Budgeted factory overhead P74,800P74,800 Actual factory overhead

Actual factory overhead P78,300P78,300 Applied factory overhead

Applied factory overhead P76,500P76,500 Estimated labor hours

Estimated labor hours 44,000 hours44,000 hours

If Schneider decides to use the actual results from 2017 to determine the 2018 If Schneider decides to use the actual results from 2017 to determine the 2018 overhead rate, what will the 2018 overhead rate be?

overhead rate, what will the 2018 overhead rate be? P1.650 P1.650 P1.700 P1.700 P1.738 P1.738 P1.740 P1.740 1 pts 1 pts

Warley Company has under applied overhead of P45,000 for the year. Before Warley Company has under applied overhead of P45,000 for the year. Before

disposition of the under applied overhead, selected yearend balances from Warley’s disposition of the under applied overhead, selected yearend balances from Warley’s accounting records were:

accounting records were: Sales

Sales P1,200P1,200

Cost of goods sold

Cost of goods sold P720,000P720,000

Direct materials inventory

Direct materials inventory P36,000P36,000

Work-in-process

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Finished goods P90,000

Under Warley’s cost accounting system, over or under applied overhead is allocated to appropriate inventories and CGS based on year-end balances in its year-end income statement. Warley should report CGS of __________.

P682,500 P684,000 P756,000 P757,500 1 pts

Some units of output failed to pass final inspection at the end of the manufacturing process. The production and inspection supervisors determined that the incremental revenue from reworking the units exceeded the cost of rework. The rework of the defective units was authorized, and the following costs were incurred in reworking the units:

Materials requisitioned from stores:

Direct materials P5,000

Miscellaneous supplies 300

Direct labor 14,000

The manufacturing overhead budget includes an allowance for rework. The predetermined manufacturing overhead rate is 150% of direct labor cost.

The account(s) to be charged and the appropriate charges for the rework would be: WIP inventory control for P19,000.

WIP inventory control for P5,000 and factory overhead for P35,300. Factory overhead control for P19,300

Factory overhead control for P40,300. 1 pts

Gumamela Mfg. Co. started 150 units in process on job order #13. The prime costs placed in process consisted of P30,000 and P18,000 for materials and direct labor, respectively, and a pre-determined rate was used to charge factory overhead to

production at 133-1/3% of the direct labor cost. Upon completion of the job order, units equal to 20% of the good output were rejected for failing to meet strict quality control requirements.

The Company sells rejected units as scrap at only 1/3 of production cost and bills customers at 150% of production cost.

If the rejected units were ascribed to Company failure, the billing price of job order #13 would be ___________.

(7)

P86,400 P90,000 P102,000 P108,000 1 pts

Gumamela Mfg. Co. started 150 units in process on job order #13. The prime costs placed in process consisted of P30,000 and P18,000 for materials and direct labor, respectively, and a pre-determined rate was used to charge factory overhead to

production at 133-1/3% of the direct labor cost. Upon completion of the job order, units equal to 20% of the good output were rejected for failing to meet strict quality control requirements.

The Company sells rejected units as scrap at only 1/3 of production cost and bills customers at 150% of production cost.

If the rejected units were ascribed to customer action, the billing price of job order #13 would be ____________. P86,400 P90,000 P102,000 P108,000 1 pts

AJD Company has two service departments (A and B) and two producing departments (X and Y). Data provided are as follows:

Service Departments Operating Departments

A B X Y Direct costs P150 P300 P5,000 P6,000 Services performed by Dept A 0% 40% 40% 20% Services performed by Dept B 20% 0% 70% 10%

If step-down is used to allocate service department costs and Department A costs are allocated first. The service department cost allocated to Department X is _______. P5,374.00

P5,075.00 P5,087.50 P5,270.00 1 pts

(8)

AJD Company has two service departments (A and B) and two produ cing departments (X and Y). Data provided are as follows:

Service Departments Operating Departments

A B X Y Direct costs P150 P300 P5,000 P6,000 Services performed by Dept A 0% 40% 40% 20% Services performed by Dept B 20% 0% 70% 10%

If reciprocal method is used to allocate service department costs. The service department cost allocated to Department X is _______.

P5,295.83 P5,087.50 P5,375.00 P5,085.00 1 pts

Ablan Co. produces a special find of insecticides. Materials are added at the end of production of Mixing Department. For the month of March, the following data were gathered:

WIP March 1, 40% complete

as to conversion costs 40,000 units

Started during the month 100,000 units

Transferred to the Molding Department 85,000 units

Lost units in processing 10,000 units

The costs corresponding to the lost units were absorbed by the remaining units. What are the equivalent units (FIFO)for the materials unit cost calculation?

130,000 85,000 140,000 85,000 1 pts

(9)

The costs corresponding to the lost units were absorbed by the remaining units. What are the equivalent units (FIFO)for the conversion cost calculation?

96,000 90,000 112,000 106,000 1 pts

The costs corresponding to the lost units were absorbed by the remaining units. What are the equivalent units (AVERAGE) )for the conversion cost calculation? 112,000

96,000 90,000 122,000 1 pts

Dex, Co. had the following production for the month of June.

WIP June 1, 40% complete 10,000 units

Transferred to Finished Goods 33,000 units Abnormal spoilage incurred 2,000 units

(10)

Materials are added at the beginning of the process. As to conversion costs, the

beginning WIP was 70% completed and the ending WIP was 60% completed. Spoilage is detected at the end of the process.

The equivalent units (FIFO) for June, with respect to conversion costs, __________. 44,000

35,000 40,000 37,000. 1 pts

Dex, Co. had the following production for the month of June.

WIP June 1, 40% complete 10,000 units

Transferred to Finished Goods 33,000 units Abnormal spoilage incurred 2,000 units

WIP June 30, 60% 15,000 units

Materials are added at the beginning of the process. As to conversion costs, the

beginning WIP was 70% completed and the ending WIP was 60% completed. Spoilage is detected at the end of the process.

The equivalent units (AVERAGE) for June, with respect to conversion costs, ______. 44,000

42,000 37,000 40,000 1 pts

Given for a certain process:

Beginning WIP, 2/5 completed 500 units

Transferred in 2,000 units

Normal spoilage 200 units

Abnormal spoilage 300 units

Goods completed and transferred out 1,700 units

Ending WIP, 1/3 completed 300 units

Conversion costs in beginning inventory P610 Current period conversion costs P3,990 All spoilage occur at the end of the process.

(11)

P1.90 P2.19 P2.00 P1.90 1 pts

Given for a certain process:

Beginning WIP, 2/5 completed 500 units

Transferred in 2,000 units

Normal spoilage 200 units

Abnormal spoilage 300 units

Goods completed and transferred out 1,700 units

Ending WIP, 1/3 completed 300 units

Conversion costs in beginning inventory P610 Current period conversion costs P3,990 All spoilage occur at the end of the process.

The conversion cost (AVERAGE) per equivalent unit amounted to ____________. P1.73

P2.00 P1.90 P1.80 1 pts

On September 1, 2017, Ramus Company purchased machine parts from Jackie Chan Company for 6 million Hong Kong dollars to be paid on January 1, 2018. The exchange rate on September 1 is HK$7.7 = P1. On the same date, Ramus enters into a forward contract and agrees to purchase HK$6 million on January 1, 2018, at the rate of HK$7.7 = P1. On December 31, 2017 and on January 1, 2018, the exchange rate is HK$8.0 = P1.

What is the fair value of the forward contract on December 31, 2017? P0

P29,221 P750,000 P779,221 1 pts

On September 1, 2017, Ramus Company purchased machine parts from Jackie Chan Company for 6 million Hong Kong dollars to be paid on January 1, 2018. The exchange rate on September 1 is HK$7.7 = P1. On the same date, Ramus enters into a forward contract and agrees to purchase HK$6 million on January 1, 2018, at the rate of HK$7.7 = P1. On December 31, 2017 and on January 1, 2018, the exchange rate is HK$8.0 =

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P1.

The nominal value of the forward contract on December 31, 2017? P0

P29,221 P750,000 P779,221 1 pts

Stark, Inc. placed an order for inventory costing 500,000 foreign currency (FC) with a foreign vendor on April 15 when the spot rate was 1FC = P0.683. Stark received the goods on May 1 when the spot rate was 1FC = P0.687. Also on May 1, Stark entered into a 90-day forward contract to purchase 500,000 FC at a forward rate of 1FC = P0.693. Payment was made to the foreign vendor on August 1 when the spot rate was 1FC = P0.696. Stark has a June 30 yearend. In that date, the spot rate was 1FC = P0.691, and the forward rate on the contract was value of the changes in the forward rates over time. The relevant discount rate was 6%.1FC = P0.695. Changes in the current value of the forward contract are measured as the present

The foreign exchange gain or loss on hedging instrument (forward contract) on June 30 amounted to _____________. P2,000 P1,000 P995 P0 1 pts

Stark, Inc. placed an order for inventory costing 500,000 foreign currency (FC) with a foreign vendor on April 15 when the spot rate was 1FC = P0.683. Stark received the goods on May 1 when the spot rate was 1FC = P0.687. Also on May 1, Stark entered into a 90-day forward contract to purchase 500,000 FC at a forward rate of 1FC = P0.693. Payment was made to the foreign vendor on August 1 when the spot rate was 1FC = P0.696. Stark has a June 30 yearend. In that date, the spot rate was 1FC = P0.691, and the forward rate on the contract was value of the changes in the for ward rates over time. The relevant discount rate was 6%.1FC = P0.695. Changes in the current value of the forward contract are measured as the present

The nominal value of the forward contract on June 30 amounted to ___________. P2,000

P1,000 P995 P0 1 pts

(13)

Stark, Inc. placed an order for inventory costing 500,000 foreign currency (FC) with a foreign vendor on April 15 when the spot rate was 1FC = P0.683. Stark received the goods on May 1 when the spot rate was 1FC = P0.687. Also on May 1, Stark entered into a 90-day forward contract to purchase 500,000 FC at a forward rate of 1FC = P0.693. Payment was made to the foreign vendor on August 1 when the spot rate was 1FC = P0.696. Stark has a June 30 yearend. In that date, the spot rate was 1FC = P0.691, and the forward rate on the contract was value of the changes in the forward rates over time. The relevant discount rate was 6%.1FC = P0.695. Changes in the current value of the forward contract are measured as the present

The fair value of the forward contract on June 30 amounted to ___________. P2,000

P1,000 P995 P0 1 pts

On November 1, 2017, Creamline Dairy Corp. concluded that the Thailand baht would weaken during the next six months because of the coup that transpired recently. In hopes of reporting a gain, Creamline entered into a foreign exchange forward

for speculation on November 1, 2017, to sell 1,000,000 baht on April 30, 2018 at the forward rate.

11/1/2017 12/31/2017 4/30/2018

Spot rate P1.190 P1.180 P1.210

Forward rate P1.199 P1.187 P1.210

The December 31, 2017 profit and loss statement, foreign exchange gain or loss on forward contract amounted to _________.

P10,000 gain P10,000 loss P12,000 gain P12,000 loss 1 pts

On January 1, 2017, George Fatima, Inc. paid P16,000 cash to acquire a put foreign exchange option for 1,000,000 Thailand baht, with an expiration date of December 31, 2017. The option hedges 2017’s forecasted exporting sales of 1,000,000 baht. George Fatima’s fiscal year ends June 30. Include the time value of money in assessing hedge effectiveness or nonsplit accounting is used.

1/1/17 6/30/17 12/31/17

Spot rate (market price) P1.20 P1.12 P1.15

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Fair value of put option at

6/30/17 P181,000

What is the intrinsic value (IV) on January 1, 2017? P16,000

P0

P10,000 P6,000 1 pts

1/1/17 6/30/17 12/31/17

Strike price (exercise price) P1.19 P1.19 P1.19

6/30/17 P181,000

What is the time value (TV) of option on January 1, 2017? P0

P6,000 P16,000 P10,000 1 pts

1/1/17 6/30/17 12/31/17

6/30/17 P181,000

The forex gain or loss on option contract on June 30, 2017 should be __________. P5,000 loss- current earnings

(15)

P65,000 gain-OCI P65,000 loss-OCI P0 gain-OCI

1 pts

1/1/17 6/30/17 12/31/17

6/30/17 P181,000

The June 30, 2017 forex gain or loss to be recognized in current earnings if zero export sales for 2017: P0 P26,000 P39,000 P65,000 1 pts

On January 1, 2015, Par Company purchased 80% of the outstanding shares of Sub Company by paying P340,000, the Sub Company’s common stock and retained

earnings on this date amounting to P150,000 and P230,000, respectively. Also on this date, an equipment is undervalued by P20,000 with a remaining life of 10 years.

On January 1, 2017, Sub Company had P150,000 of capital stock and P300,000 of retained earnings. Also on the same date, Par Company had P1,000,000 of capital stock and P700,000 of retained earnings.

During the year, Par Company sold merchandise to Sub for P60,000 and in turn, purchased P40,000 from Sub Company. Inter-company sales of merchandise were made of the following gross profit rates:

Sales made by Parent

Company 25% based on cost

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On December 31, 2017, 30% of all inter-company sales remain in the ending inventory of the purchasing affiliate.

The beginning inventory of Par Company includes P2,500 worth of merchandise

acquired from Sub Company on which Sub Company reported a profit of P1,000. While the beginning inventory of Sub also includes P3,000 of merchandise acquired from Par Company at 35% mark-up.

Using cost method, the following selected results of operations for 2017 were as follows:

Parent Subsidiary

Dividend paid P60,000 P10,000

Net Income from own operations P100,000 P30,000

Dividend income 8,000 0

Net Income P108,000 P30,000

The dividend income of Par Company for 2017 should be ________. P18,330

P10,000 P8,000 P8,200 1 pts

Sales made by subsidiary 25% based on sales

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of the purchasing affiliate.

Parent Subsidiary

The balance of Investment in Sub Company as at December 31, 2017 should be _______. P354,600 P351,960 P350,330 P340,000 1 pts

(18)

Parent Subsidiary

The NCI in net income for 2017 should be _____________. P6,280

P6,120 P5,720 P5,320 1 pts

acquired from Sub Company on which Sub Company reported a profit of P1,000. While the beginning inventory of Sub also includes P3,000 of merchandise acquired from Par

(19)

Company at 35% mark-up.

Parent Subsidiary

The profit attributable to equity holders of parent/controlling interest for 2017 should be ______________. P122,600 P118,730 P118,570 P118,330 1 pts

(20)

Parent Subsidiary

The consolidated net income/group net income for 2017 should be _________. P124,050

P112,600 P118,570 P118,330 1 pts

(21)

Parent Subsidiary

The parent’s portion of consolidated retained earnings as at December 31, 2017 should be ____________. P700,000 P752,000 P753,600 P809,680. 1 pts

(22)

Parent Subsidiary

The consolidated retained earnings as at December 31, 2017 should be ___________. P700,000

P752,000 P753,600 P809,680 1 pts

(23)

Parent Subsidiary

The stockholders’ equity of subsidiary as at December 31, 2017 should be _________. P450,000

P470,000 P481,600 P484.000 1 pts

(24)

Dividend paid P60,000 P10,000 Net Income from own operations P100,000 P30,000

The NCI using proportionate basis (partial goodwill method) as at December 31, 2017 should be _____________. P97,120 P96,920 P96,320 P73,520 1 pts

Parent Subsidiary

(25)

The NCI using full goodwill method as at December 31, 2017 should be ___________. P101,320

P96,920 P96,320 P73,520 1 pts

acquired from Sub Company on which Sub Company reported a profit of P1,000. While the beginning inventory of Sub also includes P3,000 of merchandise

acquired from Par Company at 35% mark-up.

Parent Subsidiary

(26)

The consolidated stockholders’ equity using proportionate basis (partial goodwill method) as at December 31, 2017 should be __________.

P1,911,000 P1906,000 P1905,920 P1740,000 1 pts

acquired from Sub Company on which Sub Company reported a profit of P1,000. While the beginning inventory of Sub also includes P3,000 of merchandise

acquired from Par Company at 35% mark-up.

Parent Subsidiary

(27)

The consolidated stockholders’ equity using full goodwill method as at December 31, 2017 should be _____________. P1,911,000 P1,906,000 P1,905,920 P1,740,000 1 pts

Income information for 2016 taken from the separate company financial statements of Peras Corporation and its 75% owned subsidiary, Sky Corporation is presented as follows:

PERAS SKY

Sales P1,000,000 P460,000

Gain on sale of building 20,000

Dividend income 75,000

Cost of goods sold (500,000) (260,000)

Depreciation expense (100,000) (60,000)

Other expenses (200,000) (40,000)

Net Income 295,000 100,000

Peras gain on sale of building relates to a building with a book value of P40,000 and a 10-year remaining useful life that was sold to Sky for P60,000 on January 1, 2016. At what amount will the gain on sale of building appear on the consolidated/group

income statement of Peras and Sky for the year 2016 should be _______. P0

P5,000 P15,000 P20,000 1 pts

(28)

purchased P40,000 from Sub Company. Inter-company sales of merchandise were made of the following gross profit rates:

Parent Subsidiary

The consolidated/group depreciation for 2016 should be __________. P158,000

P160,000 P162,000 P180,000 1 pts

(29)

Company 25% based on cost Sales made by subsidiary 25% based on sales

Parent Subsidiary

The profit attributable to equity holders of parent for 2016 should be ___________. P295,000

P277,000 P275,000 P220,000 1 pts

The Lampara Company acquired a 70% interest in the Oak Company for P1,960,000 when the fair value of Oak’s identifiable assets and liabilities was P700,000 and elected to measure the non-controlling interest at its share of the identifiable net assets. Annual impairment reviews of goodwill have not resulted in any impairment losses being

recognized. Oak’s current statement of financial position shows share capital of P100,000, a revaluation reserve of P300,000 and retained earnings of P1,400,000. Under PFRS 3 Business combinations, what figure in respect of goodwill should now be carried in Lampara’s consolidated statement of financial position?

P1,470,000 P1,260,000 P700,000 P160,000

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1 pts

Chapel Hill Company had common stock of P350,000 and retained earnings of P490,000. Blue Town Inc. had common stock of P700,000 and retained earnings of P980,000. On January 1, 2016, Blue Town issued 34,000 shares of common stock with a P12 par value and a P35 fair value for all of Chapel Hill Company’s outstanding

common stock. The combination was accounted for as an acquisition. Immediately after the combination, what was the consolidated net asset? P2,870,000

P2,520,000 P1,680,000 P1,190,000 1 pts

On January 1, 2016, Post Company acquired an 80% investment in Stake Company. The acquisition cost was equal to Post’s equity in Stake’s net assets at that date. On January 1, 2016, Post and Stake had retained earnings of P500,000 and P100,000, respectively. During 2016, Post had net income of P200,000, which included its equity in Stake earnings, and declared dividends of P50,000. Stake’s net income and

dividends for 2016 amounted to P40,000 and P20,000, respectively. There were no other intercompany transactions.

On December 31, 2016, what should the consolidated retained earnings be? P650,000

P666,000 P766,000 P770,000 1 pts

At the end of 2016, Paper Company’s stockholders’ equity includes common stock of P500,000 and additional paid-in capital of P300,000. Paper purchased a 70% interest in Slick Company on January 1, 2016, when the non-controlling interest in Slick had a fair value of P90,000. No differential arose from the business combination. During 2016, Slick reports net income of P20,000 and declares dividend of P5,000. The 2016

consolidated balance sheet includes retained earnings of P630,000 (controlling interest portion).

Determine the consolidated equity on December 31, 2016: P1,430,000

P1,457,000 P1,524,000 P1,526,000

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1 pts

On January 1, 2016, Gold Rush Company acquires 80% ownership in California Corporation for P200,000. The fair value of the non-controlling interest that time is determined to be P50,000. It reports net assets with a book value of P200,000 and fair value of P230,000. Gold Rush Company reports net assets with a book value of

P600,000 and a fair value of P650,000 at that time, excluding investment in California. What will be the amount of goodwill that would be reported immediately after the

combination under current accounting practice of the option of full goodwill method is used? P50,000 P40,000 P30,000 P20,000 1 pts

On November 1, 2016, the Western Appliance Center ships five (5) of its appliances to the ABC store on consignment. Each unit is to be sold at P25,000 payable P5,000 in the month of purchase and P1,000 per month thereafter. The consignee is to be entitled to 20% of all amounts collected on consignment sales. ABC Store sells three (3)

appliances on November and one (1) on December. Regular monthly collections are made by the consignee, and appropriate cash remittances are made to the consignor at the end of the month. The cost of the appliances shipped by the consignor was P15,500 per unit. The consignor paid shipping costs to the consignee totaling P5,000.

The cost of inventory on consignment on December 31, 2016 is ____________. P15,500

P16,500 P19,600 P24,500 1 pts

On November 1, 2016, the Western Appliance Center ships five (5) of its appliances to the ABC store on consignment. Each unit is to be sold at P25,000 payable P5,000 in the month of purchase and P1,000 per month thereafter. The consignee is to be entitled to 20% of all amounts collected on consignment sales. ABC Store sells three (3)

appliances on November and one (1) on December. Regular monthly collections are made by the consignee, and appropriate cash remittances are made to the consignor at the end of the month. The cost of the appliances shipped by the consignor was P15,500 per unit. The consignor paid shipping costs to the consignee totaling P5,000.

The total amount remitted to consignor for the year 2016 is __________. P23,000

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P18,400 P12,000 P6,400 1 pts

On July 15, 2016, James Last Sales Company received a shipment of merchandise with a selling price of P150,000 from James Bond Company. The consigned goods cost James Bond Company P100,000 and freight charges of P1,200 has been paid to ship the goods to James Last Company.

The consignment agreement provided for a sale of merchandise on credit with terms of 2/10, n/30. The 15% commission is to be based on the accounts receivable collected by the consignee. Cash discounts taken by customers, expenses applicable to goods on consignment and any cash advanced to the consignor are deductible from the

remittance by the consignee.

James Last Company advanced to James Bond Company upon receipt of the shipment. Expenses of P8,000 was paid by James Last. By August 2016, 70% of the shipment had been sold, and 80% of the resulting accounts receivable had been collected, all within the discount period. Remittance of the amount due was made on August 30, 2016.

The cash remitted by James Last Company is ________. P1,720

P22,300 P23,400 P61,720 1 pts

James Last Company advanced to James Bond Company upon receipt of the shipment. Expenses of P8,000 was paid by James Last. By August 2016, 70% of the shipment had been sold, and 80% of the resulting accounts receivable had been collected, all within the discount period. Remittance of the amount due was made on August 30,

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2016.

The net income (loss) on consignment is ___________. P14,280

P13,560 P11,880 P8,730 1 pts

James Last Company advanced to James Bond Company upon receipt of the shipment. Expenses of P8,000 was paid by James Last. By August 2016, 70% of the shipment had been sold, and 80% of the resulting accounts receivable had been collected, all within the discount period. Remittance of the amount due was made on August 30, 2016.

The cost of unsold units in the hands (merchandise on consignment) of James Last is _________. P15,000 P30,360 P30,840 P31,860 1 pts

Shake’s, Inc., franchisor, enters into a franchising agreement with Sha, franchisee on June 30, 2016. The agreement calls for a total franchise fee of P1 million of which P100,000 is payable upon signing the contract and the balance in four equal semi-annual installments. It is agreed that the down payment is nonrefundable

notwithstanding lack of substantial performance of services by the franchisor.

When Shake’s, Inc. prepares its financial statements as of June 30, 2016, the unearned franchise fee to be recorded is _________.

P0

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P900,000 P1,000,000 1 pts

PJD Enterprises, a franchisor, charges franchisees a “franchise fee” of P500,000. Of this amount, a nonrefundable P200,000 is paid upon the signing of the contract with the balance payable in three equal installments after each year thereafter starting 2017. PJD will assist in locating a suitable business site conduct market study, oversee the construction facilities, and provide initial training for employees.

On October 1, 2016, PJD entered into a franchising agreement to cover an entirely new and untested area. By December 31, 2016, PJD had substantially completed and

rendered appropriate services at a total cost of P150,000 but, somehow has raised some doubts on the collectability of the balance of the franchise fee.

In its 2016 income statement, PJD Enterprises should recognize profit of ________. P50,000

P140,000 P200,000 P350,000 1 pts

Ferragamo’s entered into a franchise agreement with Rusty. As per agreement on July 1, 2016, Rusty is to pay Ferragamo an up-front franchise fee of P1,000,000 and

subsequent annual franchise fees of P50,000 over the next four years. Cost of initial franchise services renderedby Ferragamo’s during the year is P250,000 which is substantial, and it estimates the cost of subsequent annual services to be P10,000. Rusty paid that annual franchises fee for 2017, and Ferragamo’s rendered the services for the year.

In its December 31, 2017 income statement, the amount of realized franchise fee revenue to be reported by Ferragamo’s is ____________.

P25,000 P50,000 c. P250,000 P300,000 1 pts

SSR Restaurant Inc., sold a fastfood restaurant franchise to Shar. The sale agreement, signed on January 2, 2016, called for a P30,000 down payment plus two P10,000

annual payments, representing the value of initial franchise service rendered by SSR Restaurant. In addition, the agreement required that franchisee to pay 5% of its gross revenue to the franchisor; this was deemed sufficient to cover the cost and provide a

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reasonable profit margin on continuing franchise services to be performed by SSR Restaurant. The restaurant opened early in 2016, and its sales for the year amounted to P500,000.

Assuming a 10% interest rate is appropriate, SSR Restaurant’s 2016 total revenue will be ________. (The present value of an annuity of P1 at 10% for 2 periods in 1.7355) P30,000

P47,355 P72,355 P74,090 1 pts

On September 1, 2016, Cindy Company entered into franchise agreements with two franchisees. The agreements required an initial fee payments of P700,000 plus four P300,000 payments due every four (4) months, the first payment due December 31, 2016. The market interest rate is 12%. The initial deposit is refundable until substantial performance has been completed. The following table describes each agreement:

Franchisee Profitability of Full Collection

Services Performed by Franchisor, Dec 31, 2016

Total Costs Incurred to Dec 31. 2016

A Likely Substantially P700,000

B Doubtful 25% N/A

The present and future value tables at 4% for four (4) periods were as follows: Present value of P1 ………. 0.8548 Present value of an ordinary annuity of P1 ………. 3.6299

Future value of P1 ……… 1.1699

Future value of an ordinary annuity P1 ………. 4.2465

What amount of net income to be reported in 2016, assuming P1,000,000 was received from each franchisee during the year:

Franchisee A, P1,088,970; Franchisee B, P0 Franchisee A, P1,788,970; Franchisee B, P0 Franchisee A, P1,132,529; Franchisee B, P0

Franchisee A, P1,132,529; Franchisee B, P43,559. 1 pts

On October 1, 2014, Oldies Corp. enters a contract to build a sports arena which it estimated to cost P3,120,000. Oldies bills its client at cost plus 20% and recognized

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construction revenue on a percentage of completion basis. Data on this project for 2014, 2015 and 2016 are as follows:

Year Cost Incurred Estimated Costs to Complete

2014 P546,000 P2,054,000

2015 P998,400 P1,315,600

2016 P1,575,600

-Oldies Corp.’s gross profit on the project for 2016 is __________. P146,640

P477,360 P237,160 P624,000 1 pts

In 2016, AJD Construction Co. was contracted to build Village Company’s private road network for P100 million. The project was estimated to be completed in two years, and the contract provided for:

5% mobilization fee (to be deducted from the last billing) payable within 15 days after signing the contract;

10% retention provision on all billings; and

Payment of progress billings within 10 days from acceptance.

The Company which uses the percentage of completion method of accounting,

estimated a 25% gross margin on the project. By the end of 2016, the Company had presented progress billings corresponding to 50% completion. All of the progress billings presented in 2016 were accepted, except the last one for 10% which was accepted on January 5, 2017. With the exception of one bill for 8% which was due on January 7, 2017, all of the billings accepted in 2016 were settled.

Payments made by the Village Company in 2016 amounted to ________. P33,800,000

P38,500,000 P40,000,000 P45,000,000 1 pts

The Kirby Construction Company has consistently used the cost recovery method (zero-profit approach) of recognizing income.

In 2016, it began a construction project to erect a building for P3,000,000. The project was completed during 2017. Under this method, the accounting records disclosed the following (any costs are expected to be recoverable):

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2016 2017

Progress billing during the year P1,100,000 P1,900,000

Costs incurred during the year 900,000 1,800,000

Collections on billings during the year

900,000 2,100,000

Estimated costs to complete the

project 1,800,000 0

The Compute should recognize revenue for the year amounting to ______. 2016, P0; 2017; P3,000,000

2016, P900,000; P2,100,000 2016, P0; 2017, P0

2016, P1,000,000; 2017, P2,000,000 1 pts

The Gamboa Construction Company started work on three job sites during the current year. Any costs incurred are expected to be recoverable. Data relating to the three jobs are given below:

Batangas Laguna San Fernando

Contract price P500,000 P700,000 P250,000

Costs incurred P375,000 P100,000 P100,000

Estimated costs to complete

0 P400,000 P100,000

Billings on contract P500,000 P100,000 P150,000

Collections on contract P500,000 P100,000 P100,000 What would be the amount of construction in progress to be reported on yearend

balance sheet if the percentage of completion method or cost recovery method is used? Percentage of completion, P765,000; Cost recovery method, P700,000

Percentage of completion, P765,000; Cost recovery method, P765,000 Percentage of completion, P265,000; Cost recovery method, P265,000 Percentage of completion, P265,000; Cost recovery method, P200,000 1 pts

DJ Builders Company began operations on January 1, 2016. During the year, the Company entered into a contract with Joey Company to construct a manufacturing

facility. At that time, the Company estimated that it would take five years to complete the facility at a total cost of P4,800,000. The contract price for the construction of the facility is P5,800,000.

During 2016, the Company incurred P1,250,000 in construction costs related to the project. Because of rising material and labor costs, the estimated cost to complete the

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contract at the end of 2016 is P3,750,000. Joey Company was billed for and paid 30% of the contract price in accordance with the contract agreement. It is further agreed, that any costs incurred is expected to be recoverable.

Compute the amount of construction in progress (net) - due from customers or progress billings (net) - due to customers ___________.

Cost recovery method, P290,000 due to; Percentage of completion, P490,000 due fr Cost recovery method, 0 due from; P0 due to

Cost recovery method, P490,000 due to; Percentage of completion, P290,000 due to Cost recovery method, P490,000 due fr; Percentage of completion; P290,000 due to 1 pts

Dudong Electronics makes all of its sales on credit and accounts for them using the installment sales method, For simplicity, assume that all sales occur on the first day of the year and that all collections are made on the last day of the year. Dudong

Electronics charges 18% interest on the unpaid installment balance. Data for 2016 and 2017 are as follows:

2016 2017

Sales P100,000 P120,000

Cost of goods sold 60,000 80,000

Cash collections (principal and interest )

2016 sales 40,000 50,000

2017 sales 90,000

The interest income recognized in 2017 amounted to __________. P14,040

P21,600 P35,640 P49,700 1 pts

Dudong Electronics makes all of its sales on credit and accounts for them using the installment sales method, For simplicity, assume that all sales occur on the first day of the year and that all collections are made on the last day of the year. Dudong

Electronics charges 18% interest on the unpaid installment balance. Data for 2016 and 2017 are as follows:

2016 2017

Sales P100,000 P120,000

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Cash collections (principal and interest )

2016 sales 40,000 50,000

2017 sales 90,000

The realized gross profit in 2017 amounted to ___________. P14,384

P22,800 P37,184 P39,600 1 pts

Dipolog Company sells appliances on an installment basis. Below are information for the past three years:

2017 2016 2015 Installment sales P750,000 P600,000 P400,000 Cost of sales 450,000 375,000 260,000 Collections on: 2017 installment sales 275,000 2016 installment sales 180,000 240,000 2015 installment sales 125,000 120,000 150,000

Repossessions on defaulted accounts included one made on a 2017 sale for which the unpaid balance amounted to P5,000. The depreciated value on the appliance

repossessed was P2,500.

The realized gross profit in 2017 on collections of 2017 installment sales was _________. P108,000 P110,000 P221,250 P221,500 1 pts

On January 1, 2016, Art Company sold its idle plant facility to Tony, Inc. for P1,050,000. On this date, the plant had a depreciated cost of P735,000. Tony paid P150,000 cash on January 1, 2016 and signed a P900,000 note bearing interest at 10%. The note was payable in three annual installments of P300,000 beginning January 1, 2017. Art

appropriately accounted for the sale under the installment method. Tony made a timely payment of the first installment on January 1, 2017 of P390,000 which included interest

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of P90,000 to date of payment.

At December 31, 2017, Art has deferred gross profit of ________. P153,000

P180,000 P225,000 P270,000 1 pts

Gianne Co. sold a computer on an installment basis on October 1, 2016. The unit cost to the Company was P86,400 but the installment selling price was set at P122,400. Terms of payment included the acceptance of a used computer with a trade-in

allowance of P43,200. Cash of P7,200 was paid in addition to the traded-in computer with the balance to be paid in ten monthly installments due at the end of each month commencing the month of sale.

It would require P1,800 to recondition the used computer so that it could be resold for P36,000. A 15% gross profit was usual from the sale of used computer.

The realized gross profit from the 2016 collections amounted to _________. P5,760

P14,100 P11,520 P48,960 1 pts

The Molino Furniture Company appropriately used the installment sales method in accounting for the following installment sale. During 2016, Molino sold furniture to an individual for P3,000 at a gross profit of P1,200. On June 1, 2016, this installment account receivable had a balance of P2,200 and it was determined that no further collections would be made. Molino, therefore, repossessed the merchandise. When reacquired, the merchandise, was appraised as being worth only P1,000. In order to improve its salability, Molino incurred costs of P100 for reconditioning. Normal profit on resale is P200.

What should be the loss on repossession attributable to this merchandise? P220

P620 P320 P880 1 pts