Afar-set-b (1).docx

AFAR Pre-Board – Set B 1. Snoopy Co. applies factory overhead on the basis of direct labor hours. The current year operation yields the following comparison of budgeted and actual data: Actual Budgeted Direct labor hours 275,000 300,000 Factory overhead costs 340,000 360,000 By how much will cost of goods sold change if the over / under application is to be considered immaterial? a. 10,000 decrease c. 20,000 increase b. 10,000 increase d. 20,000 decrease 2. The overhead of Power Company Is applied based on direct labor cost. The work-in-process on December 31 represents Job # 222 which has been charged with direct labor cost of 700 and Job # 258 which has been charged with applied overhead of 600. Summary of work-in-process inventory account is as follows: Work-in-Process Debit Credit Jan. 1 6,250 Finished Goods 29,000 Direct Materials 12,500 Direct Labor 10,000 Applied overhead 7,500 How much was the cost of direct materials charged to Job # 222 and Job # 258? a. 5,950 c. 2,625 b. 7,250 d. 4,625 3. Consider the following data from the records of Monkey Co. Units produced 20,000 Manufacturing cost incurred (per unit): Cost incurred to rework (per unit) Direct materials 5 Direct materials 2 Direct labor 7 Direct labor 3 Overhead cost 6 Overhead cost 2 Defective units Spoiled units Sales value of spoiled goods

500 300 10

What would be the unit cost of good units, assuming both the defect and spoilage were both attributable to exacting specifications? a. 18 c. 18.30 b. 11 d. 18.12 4. BMW Inc. adds materials at the start of the process. The following information is available for the month of Dec. 2020. Work-in-Process, (35% complete as to conversion cost) 12/1/2020 700 Units started in December 2,000 Work-in-Process, (30% complete as to conversion cost) 12/30/2020 800 What are the equivalent units of production for the month of December 2020? Weighted Average FIFOs Materials Conversion Materials Conversion a. 2,700 2,140 2,000 1,895 b. 2,140 2,140 1,140 1,895 c. 2,700 2,140 2,140 1,895 d. 2,700 2,140 1,440 1,895 5. Heineken Inc. uses process costing to account for the production of its beer s. Units of product are started in the Fermentation Department and then transferred to the Filtration Department. In both departments, units are inspected at the 70% stage of conversion. In the Fermentation process, all materials are added after inspection point. The normal loss cannot exceed 5% of the units started or received from prior department. Production data are as follows: Fermentation Filtration Beginning Inventory / stage of completion 8,000 / 90% 10,000 Ending Inventory / additional work required 10,000 / 10% 16,000 Transferred out ? 32,000 Lost Units 4,000 6,000

How much are the equivalent units of production of the Fermentation Department using FIFO method? Materials Conversion a. 48,800 40,500 b. 50,000 41,700 c. 58,000 47,700 d. 50,000 40,500 6. The following information is available for JKL Company for April: Started this month 80,000 units Beginning WIP costs: Beginning WIP (60% unconverted) 7,500 units Materials Normal spoilage (discrete) 1,100 units Conversion Abnormal spoilage 900 units Currents costs: Ending WIP (70% done) 13,000 units Materials Transferred out 72,500 units Conversion

10,400 13,800 120,000 350,000

All materials are added at the start of production and the inspection point is at the end of the process. (Use 2 decimal places) I. What is the cost assigned to ending inventory using FIFO? a. 56,420 c. 53,144 b. 75,920 d. 58,994 II. What is the total cost assigned to goods transferred out using weighted average? a. 435,080 c. 429,824 b. 428,656 d. 423,400 7. Safe Company produces transparent soaps. Glycerin soaps as joint products and liquid soaps as a by-product. The bottle liquid soaps can be sold for P2 per liter. Liquid soaps require packaging costs of P0.10 per liter and sales commission at 10% of sales price. The net revenue of the by-product is treated as a reduction from the joint costs. Joint products are assigned joint costs based on the amount liters produced. Transparent soaps 320,000 liters Glycerin soaps 160,000 liters Liquid soaps 1,600 liters Joint costs 80,000 What is the cost assigned to transparent soaps? a. 51,200 c. 51,520 b. 51,412 d. 53,332 8. Family Inc. manufactures four products E, L, C, M in a joint process. Every 10 kilos of raw materials, the output is 4 kilos of E, 3 kilos of L, 1.5 kilos of C and 1.5 kilos of M. During the first month of operation, 40,000 kilos of raw materials costing 115,000 were placed into production, this is to be allocated based on units of outputs. Conversion costs of 200,000 were also spent, which is to be allocated on the basis of their market values. Further Processing Cost Sales Price Per Unit E 28,000 15 L 25,000 12 C 23,000 10 M 22,000 9 How much is the net income of item L assuming operating expense are 20% of sales price? a. 51,669 c. 21,200 b. 22,869 d. 50,000 9. Standard costing was used to evaluate variances. Consider the following independent cases in answering the questions: Case 1 Case 2 Units produced 1,500 240 Standard hours / unit ? ? Standard hour ? 480 Standard rate / hour 6 9.5 Actual hours 4,875 ? Actual labor costs 26,812.50 4,560 Labor rate variance ? 228 U Labor efficiency variance 2,250 U ?

I. How much is the labor rate variance using the data from Case 1? a. 2,347.50 U c. 2,437.50 U b. 2,437.50 F d. 2,347.10 F II. How much is the labor efficiency variance using the data from Case 2? a. 228 F c. 288 U b. 228 U d. 288 F 10. A summary of production data from Sleepy Corporation for the month of January is provided to you: Standard time: 30 minutes per car Predetermined OH rates: Normal capacity 9,000 DL hours Fixed 8 per DL hours Actual hours 8,950 DL hours Variable 3 per DL hour Actual production 17,600 cars Actual Costs: Fixed 72,600 Variable 25,900 How much is the Volume Variance for the month of January? a. 1,700 F c. 1,700 U b. 1,600 F d. 1,600 U 11. AXL Manufacturing Company identified the following overhead costs and cost drivers for the coming year: Overhead Item Cost Driver Budgeted Cost Budgeted Activity Level Machine Set Up No. of Set ups 20,000 200 Inspection No. of Inspections 130,000 6,500 Material handling No. of materials moves 80,000 8,000 Engineering Engineering hours 50,000 1,000 The following information was collected on three jobs that were expected to be completed in the following year: Job 901 Job 902 Job 903 Direct Materials 5,000 12,000 8,000 Direct Labor 2,000 2,000 4,000 Units Completed 100 50 200 No. of Set ups 8 10 14 No. of Inspections 22 15 30 No. of material moves 30 40 50 Engineering hours 25 50 15 For the past years, the company assigned overhead costs to products based on direct labor costs. For the coming year, the budgeted direct labor cost was 100,000 and budgeted direct material cost was 280,000. The company operates in a competitive market and sets product process at cost plus 50% mark-up. If the appropriate cost drivers are used in assigning factory overhead, determine the total overhead cost of Job 901; total full cost per unit of Job 902; sales price per unit of Job 903. Job 901 Job 902 Job 903 a. 2,790 364 114.375 b. 2,790 346 110.50 c. 2,640 358 114.375 d. 2,640 364 110.50 12. The following are the balance sheets of Pol & Sol Company as of December 31 2020. Pol Sol Cash 250,000 50,000 Receivables 175,000 37,500 Inventories 200,000 62,500 Land 187,500 250,000 Building (net) 800,000 250,000 Equipment (net) 625,000 600,000 Total Assets 2,237,500 1,250,000

Accounts Payable Ordinary Shares Share Premium Retained Earnings Total Liabilities and Equity

462,500 1,250,000 125,000 400,000 2,237,500

150,000 500,000 350,000 250,000 1,250,000

Pol decided to acquire 17,000 outstanding shares of Sol on January 1, 2021. Pol will issue 25,500 ordinary shares with market value of 30 per share in exchange for the 17,000 outstanding shares of Sol. Pol and Sol’s ordinary shares both have a par value of 25 per share. The book values reflect fair values except for Building of Pol, which has a net realizable value of 1,050,000 and Inventories and land of Sol which has a net realizable value of 87,500 and 325,000 respectively. Pol also paid costs of registering and issuing securities amounting to 30,000 direct cost of combination amounting to 62,500. How much is the consolidated shareholders’ equity after the combination? a. 2,627,500 c. 2,702,500 b. 2,882,500 d. 2,927,500 13. The M Company holds 70% interest in the H Company. At the current year end, M holds inventory purchased from H for 270,000 at cost plus 20%. The group’s consolidated statement of financial position has been drafted without any adjustments in relation to this holding of inventory. What adjustment should be made to the draft consolidated statement of financial position figures for non-controlling interest and retained earnings? Non-controlling Interest Retained Earnings a. No change Reduced by 45,000 b. No change Reduced by 54,000 c. Reduced by 16,200 Reduced by 37,800 d. Reduced by 13,500 Reduced by 31,500 14. The L Company owns 75% of the V Company. On December 31, 2020, the last day of the accounting period, V sold to L a non-current asset for 200,000. The asset originally cost 500,000 and at the end of the reporting period, its carrying amount in V’s books was 160,000. The group’s consolidated statement of financial position has been drafted without any adjustment in relation to this non-current asset. What adjustment should be made to the consolidated statement of financial position figures for non-controlling interest and retained earnings? Non-controlling Interest Retained Earnings a. Increase by 75,000 Increase by 225,000 b. No change Increase by 300,000 c. Reduced by 10,000 Reduced by 30,000 d. No change Reduced by 40,000 15. On July 1, 2019, the M Company acquired 100% of the N Company for a consideration transferred of 160M. At the acquisition date the carrying amount of N’s net asset was 100M. At the acquisition date, a provisional fair value of 120M was attributed to the net assets. An additional value received on May 31, 2020 increased this provisional fair value to 135M and on July 30, 2020, this fair value was finalized at 140M. What amount should M present for Goodwill in its statement of financial position at December 31, 2020? a. 25M c. 40M b. 20M d. 60M 16. The L Company acquired a 70% interest in the O Company for 1.96M when the fair value of O’s identifiable assets and liabilities was 700,000 and elected to measure the non – controlling interest at its share of identifiable net assets. Annual impairment reviews of financial position shows share capital of 100,000, a revaluation reserve of 300,000 and retained earnings of 1.4M. What figure in respect of goodwill should now be carried in L’s consolidated statement of financial position? a. 1,470,000 c. 160,000 b. 1,260,000 d. 700,000 17. The N Company acquired 80% of the L Company for a consideration transferred of 100. The consideration was estimated to include control premium of 24M. L’s net assets were 85M at the acquisition date. Statement A: Goodwill should be measured at 32M if the non – controlling interest is measured at its share of L’s net assets. Statement B: Goodwill should be measured at 34M if the non- controlling is measured at fair value. Are the following statements true or false? a. Both statements are false c. Only statement A is true b. Only statement B is true d. Both statements are true

18. Bacolod Company acquired 55% of the outstanding common stock of Silay Company on August 1, 2020 at a total cost of 5,005,000. At the acquisition date, Silay’s common stock and retained earnings amounted to 200,000 and 4.8M, respectively. All of Silay’s assets and liabilities had fair values equal to book values of 400,000. The patents have remaining life of five years. For 2020, Silay had the following earnings and dividends: Jan – July Aug – Dec. Net Income 500,000 1,100,000 Dividends paid 300,000 1,200,000 Compute the net income attributable to the non-controlling interest? a. 667,500 c. 594,000 b. 442,500 d. 369,000 19. Parent Company acquires 25% of Subsidiary Company’s common stock for 380,000 cash and carries the investment using the cost method. After three months, Parent purchases another 55% of Subsidiary’s common stock for 1.1M. On this date, Subsidiary reports identifiable assets with carrying value of 1.8M and fair value of 2.3M and it has liabilities with book value and fair value of 700,000. The fair value of the 20% non – controlling interest is 360,000. Goodwill valued on the fair value basis: a. 350,000 c. 360,000 b. 320,000 d. 330,000 20. P Company acquires 80% of S Company common stock for 320,000 cash. At that date, the non – controlling interest in S has fair value of 140,000. Also on that date, S reports identifiable assets with a book value of 650,000 and a fair value of 800,000 and it has liabilities with a book value and fair value of 260,000. Gain on bargain purchase arising on consolidation if fair value of net identifiable assets is to be valued on the proportionate basis: a. 112,000 c. 80,000 b. 100,000 d. 94,000 21. Entity P has a 90% controlling interest in Entity S. On December 31, 2020, the carrying value of Entity S’s net assets in Entity P’s consolidated financial statements is 450,000 and the carrying amount attributable to the non-controlling interest in Entity S (including the non-controlling interest share of accumulated other comprehensive income) is 45,000. On January 1, 2021, Entity P sells 80% of the share in Entity S to a third party for cash proceeds of 540,000. As a result of the sale, Entity P losses control of Entity S but retained a 10% non-controlling interest in Entity S. The fair value of the retained interest on that date is 54,000. Determine the gain or loss on disposal (deconsolidation). a. 144,000 gain c. 144,000 loss b. 189,000 gain d. 189,000 loss 22. A Co. acquired 60% of the outstanding ordinary shares of B Co. on January 2, 2020. A Co. acquired it at book value which is the same as its fair value at the date of acquisition. Income statements of A Co. and B Co. for 2021 are as follows: A B Net sales 1,093,750 437,500 Cost of sales 656,250 262,500 Gross profit 437,250 175,000 Operating expenses 131,250 65,625 Operating income 306,250 109,375 Dividend income 70,000 Net income 376,250 109,375 B Co. made sales to A co. of 140,000 in 2020 and 210,000 in 2021. A Co. reported inventory on December 31, 2020 amounting to 87,500 of which 20% comes from B Co. and inventory on December 31, 2021 amounting to 105,000 of which 30% comes from B Co. A Co, uses 30% mark up on cost and B Co. uses 25% mark up on cost for their selling prices. A Co. and B Co. declared and paid dividends in 2021 amounting to 105,000 and 87,500 respectively. On January 1, 2021, B Co. has common stock of 400,000; additional paid-in capital of 150,000 and retained earnings of 200,000. How much is the consolidated net income attributable to parent shareholders’ equity and non-controlling interests in net assets? a. 370,195 and 306,230 c. 387,695 and 306,230 b. 387,695 and 307,630 d. 370,195 and 307,630 23. The A Company acquired the B Company, a foreign subsidiary, on September 10, 2020. The fair value of the assets of B was the same as their carrying amount except for land where the fair value was $50,000 greater than carrying amount. This fair value adjustment has not been recognized in the separate financial statements of B. Consolidated financial statements are prepared at year end December 31, 2020 requiring translation of all foreign operation results into the presentation currency of pesos. The following rates of exchange have been identified:

September 10, 2020 December 31, 2020 Average rate for the year ended December 31, 2020 Average rate for the period Sept. 10 to Dec. 31, 2020

$1.62:P1 $1.56:P1 $1.60:P1 $1.58:P1

What fair value adjustment is required to the carrying amount of land in the consolidated statement of financial position? a. 30,864 c. 32,051 b. 31,250 d. 31,646 24. The A Company has the pesos as its functional currency functional currency. On October 16, 2020, A ordered some inventory from a foreign supplier and agreed a purchase price of $160,000. The inventory was received on November 15, 2020. At December 31, 2020, the inventory remained on hand and the trade payable balance for the inventory purchase remained outstanding. The supplier was paid on January 27, 2021 and the inventory was sold on January 31, 2021. The following information about exchange rates is available: October 16, 2020 P1:$2.60 November 15, 2020 P1:$2.50 December 31, 2020 P1:$2.40 January 27, 2021 P1:$2.50 At what amount should the trade payable balance due to the supplier be presented in the statement of financial position of A at December 31, 2020? a. 61,538 c. 64,000 b. 66,667 d. 71,111 25. Virgo Company acquired 65% of the share capital of a foreign entity on August 31, 2020. The fair value of the net assets of the foreign entity at that date was 8,240,000 yen. This value was 2,640,000 higher than the carrying value of the net assets of the foreign entity. The excess was due to the increase in value of non-depreciable land. The functional currency of the entity is Philippine Peso. The financial year-end of the company is December 31, 2020. The exchange rates at August 31, 2020 and December 31, 2020 were Yen 2 = P1 and Yen 1.25 = P1, respectively. What figure for the fair value adjustment should be included in the group financial statements for the year ended December 31, 2020? a. 4,284,800 c. 2,678,000 b. 2,112,000 d. 1,320,000 26. On November 1, 2020, Galaxy Philippines took delivery from a Thailand firm of inventory costing 225,000 baht. Payment is due on January 30, 2021. Concurrently, Galaxy Philippines paid 2,025 cash to acquire a 90-day call option for 225,000 Thailand baht: 11/1/2020 12/31/20 1/30/2021 Spot rate 1.20 1.22 1.23 Strike price 1.20 1.20 1.20 Fair value 2.025 4,950 6,750 I. What is the intrinsic value and time value of option on December 31, 2020? Intrinsic value Time value a. 4,500 450 b. 450 4,500 c. 4,950 P0 d. P0 4,950 II. The foreign exchange gain or loss on option contract (hedging instrument) due to change in time value on December 31, 2020 if changes in the time value will be excluded from the assessment of hedge effectiveness should be: a. 1,575 loss c. 4,500 loss b. 2,925 gain d. 4,500 gain III. The foreign exchange gain or loss on option contract (hedging instrument) due to change in intrinsic value on December 31, 2020 if changes in time value will be excluded from the assessment of hedge effectiveness should be: a. 4,500 gain c. 2,925 gain b. 1,575 loss d. 1,575 gain IV. The foreign exchange gain or loss on option contract (hedging instrument) on December 31, 2020 if changes in the time value will be included from the assessment of hedge effectiveness should be a. 1,575 loss c. 1,575 gain b. 2,925 gain d. 4,500 gain

27. O Company sold merchandise for 90,000 pounds from a vendor in London on November 1, 2020. Payment in British pounds was due on January 30, 2021. On the same date, O entered into a 90-day futures contract to sell 90,000 pounds from a bank. Exchange rates for pound on different dates are as follows: 11/1/20 12/31/20 1/30/21 Spot rate 71.4 72.7 71.9 30-day futures 72.3 72.5 73.2 60-day futures 71.8 72.2 72.6 90-day futures 70.6 72.6 73.4 How much is the net forex gain or loss on January 30, 2021? a. 18,000 loss c. 9,000 loss b. 18,000 gain d. 9,000 gain 28. On November 1, 2020, S company entered into a firm commitment to acquire a machinery. Delivery and passage of title would be on February 28, 2021 at the price of HK$2,000. On the same date, to hedge against unfavorable changes in the exchange rate, S entered into a 120-day forward contract with China bank for HK$2,000. Exchange rate were as follows: Spot rate Forward rate 11/1/20 26 24 12/31/20 27 26 2/28/21 29 29 How much is the forex gain or loss recognized by S company on the firm commitment on December 31, 2020? a. 2,000 gain c. 2,000 loss b. 4,000 loss d. 4,000 gain 29. DEF Company began operations on January 1, 2020 appropriately uses the installment method of accounting. The following data pertain to DEF’s operations for year 2020: Installment sales (before adjustment) 450,000 Cost of installment sales 315,000 Regular sales 187,500 Cost of regular sales 107,500 Operating expenses (before write-off and repossessions) 36,000 Cash collections on installment sales (including interest of 12,000) 156,000 Installment receivables written-off due to defaults 22,000 FMV of repossessed merchandise 27,000 Actual value of trade-in merchandise 40,000 Repossessed accounts 50,000 Trade-in allowance 70,000 I. How much is the deferred gross profit at December 31, 2020? a. 50,500 b. 41,000 c. 50,500

d. 41,000

II. What is the net income for the year-ended December 31, 2020? a. 65,000 b. 63,000 c. 91,500

d. 75,000

30. On July 1, 2019, NR Construction Corp. contracted to build an office building for FM Inc. for a total contract price of 121,875. 2019 2020 2021 Contract cost incurred 9,375 65,625 56,250 Estimated costs to complete the contract 84,375 50,000 Billings to FM Inc. 12,750 74,750 34,375 How much is the Construction in Progress account balance at December 31, 2020, using the percentage of completion method? How much is the Construction in Progress, net of Progress Billings at December 31, 2020 using the zero-profit method? How much is the realized gross profit (loss) using percentage of completion in 2021? a. 71,875; 2,875; (9,375) c. 74,687; 2,875; (6,250) b. 71,875; 15,625; (9,375) d. 71,875; 15,625; (6,250) 31. On January 2, 2020, SD Company signed an agreement to operate as a franchisee of TQ Products Inc. for an initial franchise fee of 937,500 for 7 years. Of this amount, 175,000 was paid when the agreement was signed and the balance payable in four annual payments beginning on December 31, 2020. SD signed a non-interest bearing note for the balance. SD’s rating indicates that he can borrow money at 16% for the loan of this type. Assume that substantial services amounting to 283,500 had already been rendered by TQ Products and that additional indirect franchise cost of 25,500 was also incurred. PV factor is 2.80.

If the collection of the note is not reasonably assured, the net income for the year ended December 31, 2020 is a. 313,435 c. 228,035 b. 168,135 d. 253,535 32. The Meridian Corporation is maintaining a branch in Cebu. During the year, the home office shipped goods to the branch at a cost of 120,000. The branch submitted to the home office the following report summarizing its operations for the period ended December 31, 2020: Sales, (30% on account) 196,000 Expenses (50% of which still unpaid) 50,000 Purchases 25,000 Shipments from Home Office 150,000 Inventory, 1/1/20 (30% from outsiders) 30,000 Inventory, 12/31/20 (40% from Home Office) 90,000 Remittance to Home Office 60,000 The branch Cost of sales in so far as the home office is concerned and required balance of the allowance for overvaluation account are: a. 88,000 and 27,000 c. 92,000 and 34,200 b. 88,000 and 7,200 d. 83,000 and 27,000 33. Examination of the reciprocal accounts between Manila Home Office and Cebu Branch shows the following: I. P10,000 advertising expense of another branch was erroneously charged by the Home Office to Cebu Branch. II. Cebu recorded shipments of merchandise from Home Office amounting to 75,000 twice. III. Home Office recorded cash transfer of 65,700 from Cebu Branch as coming from Davao Branch IV. Transfer of equipment from Home Office amounting to 53,000 was not recorded by the branch. V. Cebu recorded a debit memo from Home Office of 5,540 as 5,450. How much is the net adjustments to Cebu Branch Account and to the Home Office Current Account? Cebu Branch Account Home Office Account a. 75,700 dr. 20,910 dr. b. 75,700 cr. 21,910 dr. c. 75,700 dr. 21,910 cr. d. 65,700 cr. 22,000 cr. 34. The partnership agreement of X, Y and Z provides for the division of net income as follows: I. Y who manages the partnership is to receive a salary of 16,500 monthly II. Each partner is to be allowed interest at 15% on ending capital III. Balance is to be divided 25:30:45 During 2020, X invested an additional 96,000 in the partnership. Y made an additional investment of 60,000 and withdrew 90,000 and Z withdrew 72,000. No other investments or withdrawals were made during 2020. On January 1, 2020, the capital balances were X, 280,000; Y, 300,000 and Z, 170,000. Total capital for year-end was 975,000. Compute the capital balances of each partner at year-end. X Y Z a. 36,750 214,920 (20,670) b. 412,750 484,920 77,330 c. 316,750 514,920 149,330 d. 398,750 412,500 87,250 35. The statement of financial position as of September 30, 2020 for the partnership of D, E and F shows the following information. Assets 360,000 D, loan 20,000 D, capital 83,000 E, capital 77,000 F, capital 180,000 It was agreed among the partners that D retires from the partnership and it was also further agreed that the net assets should be adjusted to their fair value of 345,000 as of September 30, 2020. Net loss prior to the retirement of D amounts to 70,000. The partnership is to pay D 62,000 cash for D’s partnership interest, which would include the payment of his loan. No goodwill is to be recorded. D, E and F share profit 40%, 15% and 45% respectively. After D’s retirement, how much would F’s capital balance be? a. 66,000 c. 147,000 b. 136,500 d. 185,250

36. Partners A, B and C share profits and losses in the ratio of 5:3:2. At the end of a very unprofitable year, they decided to liquidate the firm. The partner’s capital account balances at this time are as follows: A, 616,000; B, 697,200; C, 420,000. The liabilities accumulate to 840,000, including a loan of 280,000 from A. The cash balance is 168,000. All the partners are personally solvent. The partners plan to sell the assets in installment. If B received 100,800 from the first distribution of cash, how much did C receive at that time? a. 56,000 c. 22,400 b. 33,600 d. 61,600 37. As of May 1, 2020, FF and GG decided to form a partnership. Their balance sheets on this date are: FF GG Cash 45,000 114,000 Accounts receivable 1,620,000 675,000 Merchandise inventory 606,000 Machineries & equipment 450,000 810,000 2,115,000 2,205,000 Accounts payable FF, capital GG, capital

405,000 1,710,000 2,115,000

720,000 1,485,000 2,205,000

The partners agreed that the machinery and equipment of FF is under depreciated by 45,000 and that GG is over depreciated by 135,000. Allowance for doubtful accounts is to be setup amounting to 360,000 for FF and 110,000 for GG. The partnership agreement provides for a profit and loss ratio and capital interest of 60% to FF and 40% to GG. How much cash must FF invest to bring the partner’s capital balances proportionate to their profit and loss ratio? a. 427,500 c. 960,000 b. 555,000 d. 307,500 38. The statement of financial position of the partnership of P, J and M who share profits and losses in the respective ratio of 5:3:2 as follow: Cash 120,000 P, capital 320,000 Other assets 1,280,000 J, capital 460,000 Liabilities 200,000 M, capital 420,000 The partners agreed to liquidate the partnership by installments. Immediately there was a realization of 400,000 cash from selling other assets with book value of 600,000. Of the cash available, the priority is the payment of the liabilities and the balance is to be distributed to the partners. How should the remaining cash be distributed to P, J and M? a. 200,000; 120,000 and 80,000 c. P0; 124,000 and 196,000 b. 160,000; 96,000 and 64,000 d. P0; 192,000 and 128,000 39. Bruno, Jango and Gimo are partners sharing profits in the ratio of 3:3:2. On July 31, their capital balances are as follows: Bruno, 280,000; Jango, 200,000 and Gimo, 160,000. The partners agree to admit Aldo on the following agreement: I. Aldo is to pay Bruno 200,000 for 1/2 interest of Bruno’s interest II. Aldo is also to invest 160,000 in the partnership III. The total capital of the partnership is to be 960,000 of which Aldo’s interest is to be 25% What are the capital balances of the partners after the admission of Aldo? Bruno Jango Gimo a. 82,500 82,500 55,000 b. 140,000 200,000 160,000 c. 222,500 282,500 215,000 d. 200,000 160,000 140,000 40. During the year ended December 31, 2020, a not-for-profit performing arts entity received the following donorrestricted contribution and investment income: I. Cash contribution of 1,350,000 to be permanently invested II. Cash dividends and interest of 75,000 to be used for the acquisition of theatre equipment As a result of these cash receipts, the statement of cash flows for the year ended December 31, 2020 would report an increase of a. 1,425,000 from operating activities b. 1,425,000 from financing activities c. 75,000 from operating activities and an increase of 1,350,000 from financing activities d. 1,350,000 from operating activities and 75,000 from financing activities

41. The agency signed a construction contract with A Builders Corp. for the construction of building, 5,000,000. The agency paid 20%of the contract price. After 6 months, the agency received its first billing from A Builders Corp., 90% of the contract price. On the 7th months, the company paid the first billing less 1,000,000 withholding tax. What will be the entry of the agency on its books upon receiving the first billing? a. Building 4,500,000 Accounts payable 4,500,000 b. Accounts payable 4,500,000 Cash National Treasury MDS 3,500,000 Due to BIR 1,000,000 c. Construction in progress 4,500,000 Accounts payable 4,500,000 d. Construction in progress 4,500,000 Advances to contractors 1,000,000 Accounts payable 3,500,000 42. What is the entry to record the collection of 1,000,000 corporate income tax by the BIR in its agency books? a. Cash National Treasury MDS 1,000,000 Income Tax – Corporation 1,000,000 b. Cash – collecting officer 1,000,000 Income Tax – Corporation 1,000,000 c. Cash in bank – LCCA 1,000,000 Income Tax – Corporation 1,000,000 d. Income Tax – Corporation 1,000,000 Cash – disbursing officer 1,000,000 43. JKL Park, a private not-for-profit zoological society, received contributions restricted for research totaling 40,000 in 2020. None of the contributions were spent on research in 2020. In 2021, 28,000 of the contributions were used to support the research activities of the society. The net effect on the statement of activities for the year ended December 31, 2021 for JKL Park would be a. 12,000 increase in temporarily restricted net assets c. 28,000 increase in unrestricted net assets b. 28,000 decrease in temporarily restricted net assets d. 28,000 decrease in unrestricted net assets 44. Faith and Hope, a private not-for-profit voluntary health and welfare organization, received the following contributions in 2020: I. 80,000 from donors who stipulated that the money be held indefinitely II. 50,000 from donors who stipulated that the contributions be used for the acquisition of equipment, none of which was acquired in 2020 Which of the above events increased permanently restricted net assets for the year ending December 31, 2020? a. I only c. Both I and II b. II only d. Neither I nor II 45. The following data were taken from the Statement of Affairs of ABC Company: Assets pledged to fully secured liabilities 218,750 Fully secured liabilities Assets pledged to partially secured liabilities 157,500 Partially secured liabilities Free assets 152,250 Unsecured liabilities without priority Unsecured liabilities with priority Which of the following is correct? Types of Liabilities Estimated amount to be paid a. Fully secured liabilities 218,750 b. Partially secured liabilities 192,500 c. Unsecured liabilities with priority 20,475 d. Unsecured liabilities without priority 141,750

175,000 192,500 157,500 22,750

46. On June 1, 2020 SME J and SME K each acquired 35% of the equity of entities L, M and N for 64,000, 58,000 and 37,000 respectively. SME J and SME K have joint control over the strategic financial and operating decisions of entities L, M and N. Transaction costs of 5% of the purchase price of the shares were incurred by SME J and SME K. On December 31, 2020, entity L declared dividends of 9,000 for the year ended 2020 while entity M declared a dividend of 15,000 for the year ended 2020.

The dividend declared by entity L and M were paid in 2021. On December 31, 2020, entity N declared and paid a dividend of 24,000 for the year ended December 31, 2020. For the year ended December 31, 2020, entities L and M recognized loss of 30,000 and 42,000 respectively. However, entity N recognized a profit of 18,000 for that year. Using appropriate valuation techniques, the venturers determined the fair value of each of their investment in entities L, M and N at December 31, 2020 as 60,000, 65,000 and 49,000 respectively. Costs to sell are estimated at 9% of the fair value of the investments. Neither SME J nor SME K prepares consolidated financial statements because they do not have any subsidiaries. What is the profit (loss) of SME J to be presented in the Income Statement in entity N using the fair value model? a. 20,400 c. 15,990 b. 18,550 d. 14,140 47. On January 1, 2020, entities A and B each acquired 30% of the ordinary shares that carry voting rights at a general meeting of shareholders of entity Z for 300,000. Entities A and B immediately agreed to share control over entity Z. For the year ended December 31, 2020, entity Z recognized a profit of 400,000. On December 31, 2020, entity Z declared and paid a dividend of 150,000 for the year 2020. At December 31, 2020, the fair value of each venturer’s investment in entity Z is 425,000. However, there is no published price quotation for entity Z. On the same date (December 31, 2020), entities A and B lost joint control over entity Z when entity A reduced its shareholding in entity Z to 15% by selling half of its shares in Entity Z to an independent third party for 212,500. Transaction costs of 5,000 were incurred in selling the shares. Entity A accounts for the investment using the equity method. What is the amount that entity A must recognize in profit and loss for the year ended December 31, 2020? a. 120,000 c. 165,000 b. 140,000 d. 45,000 48. The following data are provided by ABC Corp. which is undergoing liquidation process; I. Total liabilities amounts to 692,000, 35% is secured by assets amounting to 270,000 with a FMV of 250,000, 40% is secured by assets amounting to 300,000 with a FMV of 225,000 II. Total assets amounts to 890,000 and has a total fair market value of 695,000 III. Unpaid income taxes amounts to 35,000. Additional salaries payable and administrative expenses totaled 28,000. How much is the estimated deficiency to unsecured liabilities? a. 72,000 c. 48,000 b. 60,000 d. 54,000 49. J, K and L formed a joint venture in 2020 and agreed to divide profits equally. K is designated to act as a manager. The venture is terminated on December 31, 2020 even though there is still unsold merchandise. On this date, K’s trial balance shows the following account balances before profit and loss distribution. Debit Credit Joint venture cash 49,000 Joint venture 6,000 J, capital 15,000 L, capital 11,000 K receives 4,000 for his share in the venture profit. Furthermore, he agrees to be charged for the unsold merchandise as of December 31, 2020. Amount due to K in the final settlement is a. 4,000 c. 15,000 b. 22,000 d. 14,000 50. The following data were taken from the statement of realization and liquidation of ABC Corp. for the quarter ended June 30, 2020: Assets to be realized 515,625 Liabilities to be liquidated 843,750 Assets acquired 562,500 Liabilities liquidated 562,500 Assets realized 656,250 Liabilities assumed 281,250 Assets not realized 234,375 Supplemental credits 796,875 Supplemental charges 731,250 The ending capital balances of capital stock and retained earnings are 648,750 and 178,500 respectively. A net loss of 226,500 for the period is recognized. How much is the ending balance of cash? a. 1,125,000 c. 978,750 b. 1,260,000 d. 807,000