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FINAL PRE-BOARD EXAMINATIONSADVANCED FINANCIALACCOUNTING and REPORTINGSET AINSTRUCTION: Select the best answer for each of the following questions. Mark only one answer for each item on the answer sheet provided. Strictly NO ERASURES ALLOWED. Erasures will render your examination answer sheet INVALI...

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FINAL PRE-BOARD EXAMINATIONS

ADVANCED FINANCIAL ACCOUNTING and REPORTING SET A INSTRUCTION: Select the best answer for each of the following questions. Mark only one answer for each item on the answer sheet provided. Strictly NO ERASURES ALLOWED. Erasures will render your examination answer sheet INVALID. Use PENCIL NO.2 only. GOODLUCK!☺ BAHAY-PARE CORPORATION purchases all the outstanding shares of SINAG-TALA COMPANY on January 2, 2019 for P385, 000 cash. On this date the stockholders equity of SINAG-TALA is as follows: Share Capital, P10 par P 175, 000 Paid-in capital in excess of par 87, 500 Retained earnings 175, 000 Any excess of the fair value of the net assets over the fair value of the investment is attributable to SINAG-TALA’s building which is currently overstated in its books. All other net asset items of the acquired company are fairly valued at the acquisition date. The building has an estimated life of 10 years from January 2, 2019 without salvage value. The condensed trial balances of the affiliated companies on December 31, 2019 appear as follows: BAHAY-PARE SINAGTALA Current Assets P 420,000 P302,750 Land 210,000 210,000 Building (net) 1,050,000 283,500 Investment in SINAGTALA 385,000 -Current liabilities (708,750) (367,500) Ordinary shares, P3 par (525,000) -Share capital, P10 par -(175,000) Paid-in capital in excess of par (315,000) ( 87,500) Retained earnings, Jan. 2, 2019 (446,250) (175,000) Sales (367,500) ( 70,000) Cost of goods sold 210,000 61,250 Operating expenses 78,750 17,500 dividends declared 8,750 -Totals --1. Compute the consolidated net income for 2019. a. P75,520 b. P70,525 c. P72,550 d. P75,250 2. Compute the consolidated Retained Earnings at December 31, 2019. a. P517,250 1 | Page

b. P525,170 c. P515,270 d. P512,750 3. Company Y purchases an 80% controlling interest in Company Z on January 1,2019. Which of the following would appear as the stockholders equity amount on Company Y’s consolidated balance sheet on the date of acquisition? a. Company Y’s shareholders equity. b. The sum of the shareholders Equity of both companies. c. Company Y’s shareholders equity as well as company Y’s proportional share of company Z’s net assets at fair value. d. The sum of company Y’s shareholders equity and the proportional share of company Z’s non-controlling interest from the full fair value of company Z’s outstanding shares at the acquisition date. On January 1,2019, GININTUANG PUSO CORPORATION acquired 80% of the outstanding shares of BAGAL SULONG COMPANY for P743,750. At this date, the stockholders’ equity of BAGAL SULONG COMPANY follows: Ordinary shares, P5 par APIC Retained earnings

P 350,000 175,000 175,000 P 700,000 The net assets of BAGAL SULONG on January 1, 2019 were fairly valued. GININTUANG PUSO assigned the full fair value to the non-controlling interest at the date of acquisition in analyzing the fair value of its investment. Selected information over the first two (2) years of affiliated operations follows: ● Intercompany merchandise sales are summarized as follows: Date Transaction sales amount GPR Purchaser’s Remaining ending Inventory In 2019 Upstream 35,000 25% 6,125 In 2020 Downstream 56,000 30% 10,500 ● Condensed trial balances of the two (2) companies on December 31,2020 follows: GININTUANG BAGAL SULONG PUSO CORP. COMPANY Current assets P1, 428,000 P 387,275 Investment in BAGAL 743,750 --SULONG Equipment, net 1,891,750 262,500 Buildings, net 1,592,500 332,500 Goodwill 105,000 --Liabilities (1,123,500) (186,025) Common Stocks, P1 par ( 437,500) ---ordinary shares, P5 par (350,000) APIC (2,187,500) (175,000) Retained earnings, (1,933,750) (245,000) January 1, 2020 Sales (1,540,000) (1,102,500) Dividend income ( 42,000) ---2 | Page

Cost of Goods sold Other expenses Dividends declared Totals

1,232,500 227,500 43,750 P 0

882,000 141,750 52,500 P 0

4. Compute the consolidated cost of goods sold for 2020. a. P2, 050,355 c. P2,500,553 b. P2, 059,619 d. P2,056,381 5. Compute the consolidated net income for 2020. a. P195, 125 b. P161, 043

c. P215,915 d. P157,631

6. Compute the amount of the consolidated net income for 2020 attributable to the parent’s shareholders. a. P175, 500.50 c. P145,000 b. P141, 575 d. P143,482.50 7. Compute the amount of consolidated net income to the non-controlling interest a. 19,624.50 c. P15,794.00 b. 16,056.00 d. P15, 732.50 8. Any negative goodwill arising on the date of the business combination a. Is recognized as a gain on the date of acquisition b. Is prorated among the parent’s company identifiable net assets c. Should be amortized over a predetermined period d. Is recognized as a loss on the date of acquisition 9. A company owning a majority (but less than 100%) of another’s voting shares on the date of acquisition should account for its subsidiary a. By including only its share of the fair market values of the subsidiary’s net assets b. By including only its share of the book values of the subsidiary’s net assets c. By including 100% of the fair values of the subsidiary’s net assets d. By including 100% of the fair market values of the subsidiary’s net assets and accounting for any un-owned portion of the voting shares using the non-controlling interest account. On January 1, 2019, Companies AA, BB, and CC established a “joint operations” to manufacture a product they each need in their respective operations. They will contribute equal amounts and agreed to share on the production output equally. AA contributed cash of P200, 000; BB contributed equipment with a carrying cost of P215, 000; and CC contributed machinery with a carrying cost of P185,000. Both non-monetary contributions had a fair value of P200, 000 each. The equipment will be depreciated over 5 years and the machinery over 10 years. 10. Compute the net amount of plant assets . Equipment & Machinery CC will show in its own balance sheet at December 21, 2019. a. P108,833 b. P55,500 c. P160,333 d. P58,500 3 | Page

Pol Boba III is City Administrator of the City of LA PRESA in the Bontoc Peninsula.Returning from the national seminar in Manila for city administrators, Boba III presented receipts for valid disbursement of P23,500 and refunded the city Treasurer’s Office unspent amount of P6,500 to liquidate his cash advance in relation to the seminar.

11. The entry to record the liquidation of the cash advance would be a. Training and seminar expenses Cash- collecting officer Due from officers employees b. Cash-Collecting office Training and Seminar expenses c. Cash-NT-MDS Training and Seminar Expenses d. Training and Seminar expenses Cash-NT-MDS Due from officers and Employees

P23,000 6,500 P30,000 P 6,500 P6,500 P 6,500 P6,500 P23,500 6,500 P30,000

12. The entry to record the remittance to the National Treasury of the unspent amount would be a. Due to National Treasury P6,500 Cash-NT-MDS P6, 500 b. Due to National Treasury P6,500 Cash- Collecting officer P6, 500 c. Memo Entry only in RAOMO -----d. Subsidy Income from the NG P6,500 Cash-Collecting Officer P6,500 On December 31, 2019 a foreign subsidiary of ARTS-PRTC Company, a Philippine corporation, submitted the following balance sheet measured in its local currency. Monetary Assets FC Monetary liabilities FC 200,000 180,000 Non monetary 800,000non monetary 20,000 Assets liabilities Share capital 400,000 Share premium 100,000 Retained earnings 300,000 Total FC Total FC 1,000,000 1,000,000 The relevant exchange rates for one (1) unit of the FC are as follows: Current rate- P0.34 Historical Rate- P0.31 Average rate -P0.30 13. Assuming the related Earnings of the subsidiary on December 31, 2019 translated to Philippine Pesos is P91,525, what amount of cumulative translation adjustment must be reported in the consolidated balance sheet presented in Philippine Pesos on December 31,2019? a. P25, 000 c. P24,525 4 | Page

b. P24, 255

d. P25,475

14. How much will be the Philippine peso retained earnings of the foreign subsidiary on December 31, 2019 if the functional currency of the foreign subsidiary is also the Philippine peso rather than the local currency? a. P92, 000 c. P94,100 b. P93, 600 d. P91,525

15. In a Job order costing system, indirect labor used should be debited to a. Payroll liability b. Work in process control c. Finished goods control d. Factory overhead control On July 1, 2019 Pyramid Company paid P755, 000 cash for net assets of Stir Company. The recorded assets and liabilities to stir are: Cash, P74, 000; Inventory, P215,000; Land, P200,000; Building(net), P208,000; and liabilities of P220,000. At the same date Stir inventories had a fair value of P184, 000; the Land, P271, 500; and the Building (net), P187, 500. 16. Determined the amount of goodwill resulting from the business combination. a. P285, 000 c. P258,000 b. P280, 500 d. P250,800 On January 1, 2019, multiple Company, an SME, acquired Unilateral Company, another SME, by issuing 600,000 of its own P10 par value ordinary shares. Subsequently, Unilateral was liquidated and its net assets and liabilities merged into Multiple Company. Multiples Stock was selling at P50 per share on January 1, 2019. The amount of goodwill recorded by multiple in connection with the combination was P6, 120,000. Multiple incurred P300, 000 of professional fees associated with the combination and P30,000 of indirect costs. 17. Determine (i) the fair value of Unilateral’s net assets and (2) amount of increase in multiple’s stockholders’ equity at the date of acquisitions. a. (1) P23,880,000 and (2) P29,670,000 b. (1) P24,180,000 and (2) P29,670,000 c. (1) P23,880,000 and (2) P29,970,000 d. (1) P24,189,000 and (2) P29,970,000 18. Working paper eliminations are entered in a. Both the parent company’s and the subsidiary’s accounting records b. The parent company’s accounting records only c. Neither the parent company’s nor the subsidiary’s accounting records d. The subsidiary’s accounting records only Agency LLL, a national government agency, incurs an obligation on April 20,2019 for the purchase of IT Software for P120,000 for delivery on April 24,2019 and to be paid on May 25,2019. 19. The entry to be recorded by LLL for the incurred obligation would correctly include a 5 | Page

a. b. c. d.

Debit to equipment and Software Credit to accounts payable Credit to Cash-NT_MDS Memo entry in RAOCO

20. It is a system of prescribing the procedures for recording appropriations, allotments and obligations a. Fund accounting b. Budgetary accounting c. Obligation accounting d. Treasury disbursement coding system

21. Allotment are recorded in the registries a. At the beginning of the year b. At the end of the year c. Semi-annually d. Quarterly Amounts related to the statement of affairs of Distressed Company as of April 30,2019 follow: Assets pledged for fully secured liabilities P 80,000 Assets pledged for partially secured liabilities 50,000 Free Assets 272,000 Fully secured liabilities 60,000 Partially secured liabilities 80,000 Unsecured liabilities with priority 40,000 Unsecured liabilities without priority 330,000 22. Calculate the expected amount recoverable by partially secured creditors in the event of liquidation. a. P71,000 c. P69,500 b. P50,000 d. P80,000 23. In a statement of affairs, assets pledge for partially secured creditors are a. Included with assets pledged for fully secured creditors b. Offset against partially secured creditors c. Included with free assets d. disregarded During 2019, there was no change in either the raw material or the work in process beginning and ending inventories. However, finished goods, which had a beginning balance of P25,000, increased by P 15,000. 24. if the manufacturing costs incurred totalled P 600,000 during 2019, the goods available for sale must have been: a. P585,000 c. P610,000 b. P600,000 d. P625,000

6 | Page

On January 1,2019 , Robert Red and William White have formed a partnership that has the following contributed assets that are all fairly valued. Contributed by Partners R. Red W. White Cash P 16,000 P 24,000 Inventory 14,400 12,000 Building 480,000 Furniture and Fixture 200,000 -The Building is subject to a mortgage of P96,000 that will be assumed by the partnership. The partners also agree that profits and losses shall be divided on 4:6 ratio to Red and White respectively. 25. What amount of capital should be recorded for Red and White at the formation of the partnership? a. P230,400 & P516,000 b. P226,000 & P516,000 c. P226,000 & P420,000 d. P230,400 & P420,000 In continuation with the item above, assume : (1) partnership net profit for the 1st half of the year 2019 was P20,000; and (2) Baby Blue was admitted as a partner on July 1, 2019; investing P201,120 for 30% interest in Capital and profits. A. If the admission of Blue comprises the purchase of 30% each of the old partners’ existing capital at July 1, 2019: 26. Blue’s Capital credit will be a. P201,120 b. P202,110 c. P211,200 d. P221,100 27. The amount Red’s capital after the admission of Blue will be a. P166,880 b. P168,600 c. P160,680 d. P186,600 B. If Blue’s investment of P201,120 is contributed into the partnership, instead of using it to purchase existing interest: 28. Blue’s capital credit will be a. P261,456 b. P395,798 c. P214,266 d. P201,120 29. The amount of White’s capital after the admission of Blue will be a. P261,456 b. P395,798 c. P214,266 d. P201,120 30. Which of the following statements, in respect of foreign currency translation, are correct according to PAS 21 The effects of changes in foreign exchange rates? I. The functional currency of an entry is selected by management 7 | Page

II. The presentation currency of an entity is selected by management III. The functional currency of an entity is identified by reference to circumstances of the business IV. The presentation currency of an entity is identified by reference to circumstances of the business a. I and II only b. II and III only c. I and IV only d. III and IV only Street Co purchased goods for FC450,000 from an overseas supplier on 30 November 2019. Street Co paid for the goods on 31 January 2020. Exchange rates were: FC=P1 30 November, 2019 1.50 31 November, 2019 1.45 31 January, 2020 1.55 31. What is the exchange difference that should be reported in profit or loss for the year ended 31 November 2019 and at what amount should the goods be included in inventory in the statement of financial position at that date? Exchange Difference Inventory a. P9,677 gain P290,323 b. P9,677 gain P300,000 c. P10,345 loss P300,000 d. P10,345 loss P310,345 32. Which of the subsidiaries are likely to have a different functional currency from Parent Co? a. A Co and B Co b. A Co and C Co c. B Co and C Co d. all three subsidiaries Archway Co has an overseas subsidiary in a foreign country. This subsidiary is 75% owned and operates independently of its parent. The exchange gain arising from the translation of the subsidiary’s accounts for the year ended 30 June 2018 was P20,000. On 1 June 2019 Archway Co purchased raw materials from a foreign supplier for FC250,000. It paid for the materials on 31 July 2019. Relevant exchange rates were: FC=P1 01/June/2019 1.60 30/June/2019 1.61 31/July/2019 1.63 33. In respect of this items, what is the exchange gain that should be included in the consolidated income statement for the year ended 30 June 2019? a. P970 b. P2,876 c. P22,876 d. P20,970 34. When a parent has a foreign subsidiary whose functional currency is the national currency of the country where it operates, which rates of exchange should be used to translate the items the items below into the parent’s functional and presentation currency? Non-current assets Receivables Non-current liabilities a. closing rate closing rate closing rate b. historic rate closing rate closing rate 8 | Page

c. historic rate historic rate closing rate d. historic rate historic rate historic rate Rain Org is a subsidiary of the Weather Group. Its functional currency is the Zyco, and the presentation currency of the group is the Peso (P). The abbreviated statement of financial position of Rain Org at 31 December 2019 is as follows: Zyco Non-current assets 420,000 Current assets 210,000 Total assets 630,000 Share capital Retained earnings Current liabilities Equity and liabilities

360,000 100,000 170,000 630,000

35. What cumulative exchange difference is shown in Rain Org’s balance sheet at 31 December 2019, assuming retained earnings computed by its components is P82,500. a. P27,500 credit b. P0 c. P25,700 debit d. P20,750 debit

36. Which of the following provide evidence of a parent-subsidiary relationship? I. The parent has power over more than 50% of the voting rights through agreement with other investors II. The parent has a power to govern the financial and operating policies of the entity by statute III. The parent has the power to remove a majority of members of the board of directors. IV. The parent has representation on the board of directors a. I only b. I and IV only c. I, II and III only d. I, II, III and IV 37. Which of the following statements are true? I. Intra-group transactions must be eliminated on consolidation II. A holding of 10% of ordinary voting shares in another company is accounted for in accordance with PAS 27 Consolidated and separate financial statements III. Where a subsidiary does not adopt the same accounting policies as its parent company, adjustments must be made to bring its accounting policies into line prior to consolidation IV. Where a group comprises a parent company and an investee over which the parent has significant influence, consolidated accounts must be prepared a. I and III only b. I and IV only c. II and III only d. I, II, III, and IV 9 | Page

Comparative trial balances of the Home Office and the two branches of Aggregate Corporation at December 31, 2019 were as follows: Debits Home Office Branch ONE Branch TWO Cash P5,000 P15,000 P22,000 Accounts receivable 80,000 30,000 40,000 Inventories 150,000 60,000 40,000 Branch ONE 170,000 Brach TWO 117,000 Plant assets 730,000250,000200,000 Purchases 900,000 Shipments fr. home office 300,000200,000 Expenses 300,00075,000 50,000 P2,452,000 P730,000 P552,000 Credits Accounts payable P100,000 P45,000 P30,000 Other liabilities 80,000 15,000 5,000 Loading in branch inventories 60,000 Share capital, P10 par 500,000 Retained earnings 262,000 Home office equity 170,000117,000 Sales 1,000,000 500,000400,000 Shipments to branches P2,452,000 P730,000 P552,000 The home office bills Branch ONE at 120% of cost. Since Branch TWO is relatively new, to deal with competition, it is billed by the home office at cost. These billing policies had been in effect over the last two years. Home office and branch office inventories at December 31, 2019 were Home Office, at cost P120,000 Branch ONE, at billed prices 72,000 Branch TWO, at billed prices 80,000 38. Compute Aggregate’s ending inventory at December 31, 2019. a. P240,000 b. P258,667 c. P272,000 d. P260,000 39. Compute the amount of the inter-office profit realized from branch sales to outsiders in 2019. a. P62,700 b. P26,667 c. P44,667 d. P48,000 For the quarter ended September 30,2019, Victory Company consigned 80 units of 35M truck batteries costing P6,250 each to Florida Enterprises. The freight cost incurred by Victory for the merchandise shipments was P10,500 60% of which was paid by Victory and balances by Florida. On September 30, an account sales was received from the consignee reporting the 45 batteries had been sold for P9,375 each. Remittance was made by the consignee for the amount due, net of 6% commission on sales, advertising of P2,500, installation cost of P4,000 on units sold, and amount advance for the freight on Victory’s shipments. 40. The inventory value of the unit unsold in the hands of the consignee is 10 | Page

a. b. c. d.

P69,437.50 P223,343.75 P116,725 P110,312.50

41. The profit for the consignor for the units sold is a. P102,906.25 b. P102,793.25 c. P104,031.25 d. P106,540 42. The amount of cash that will be remitted by the consignee is a. P395,987.50 b. P283,9...