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NATIONAL FEDERATION OF JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS BALIUAG UNIVERSITY CHAPTER BU_KLAT: Baliuag University Knowledge and Learning Assessment Test

ADVANCED ACCOUNTING AND REPORTING 1.

Goodwill represents the excess cost of an acquisition over the a. book value of an acquired company. b. sum of the fair values assigned to intangible assets less liabilities assumed. c. sum of the fair values assigned to tangible and intangible assets acquired less liabilities assumed. d. sum of the fair values assigned to intangibles acquired less liabilities assumed.

2.

The translation adjustment from translating a foreign subsidiary's financial statements should be shown as a. a component of cash flows from financing activities on the consolidated statement of cash flows b. an asset or liability (depending on the balance) on the consolidated balance sheet c. a component of stockholders' equity on the consolidated balance sheet d. an element of the notes which accompany the consolidated financial statements

3.

When a company purchases another company that has existing goodwill and the transaction is accounted for as a stock acquisition, the goodwill should be treated in the following manner. a. Goodwill is not recorded until all assets are stated at full fair value. b. Goodwill is treated consistent with other tangible assets. c. Goodwill on the books of an acquired company should be disregarded. d. Goodwill is recorded prior to recording fixed assets

4.

In partnership liquidation, how are partner salary allocations treated? a. Salary allocations take precedence over amounts due to partners with respect to their capital interests, but not profits. b. Salary allocations take precedence over creditor payments. c. Salary allocations take precedence over amounts due to partners with respect to their capital profits, but not capital interests. d. Salary allocations are disregarded

5.

The partners, A and B, share profits 3:2. However, A is to receive a yearly bonus of 20% of the profits, in addition to his profit share. The partnership made a net income for the year of P24,000 before the bonus. Assuming A’s bonus is computed on profit after deducting said bonus, how much profit share will B receive? a. b. c. d.

6.

15,200 9,600 8,000 9,000

Philippine National Bank holds a P500,000 note secured by a building owned by Luigi Software, which has filed for bankruptcy. If the property has a book value of P600,000 and a fair market value of P450,000, what is the best way to describe the notes held by Philippine National Bank? The bank has a. A secured claim of P500,000 b. An unsecured claim of P500,000 c. A secured claim of P450,000 and an unsecured claim of P50,000 d. A secured claim of P50,000 and an unsecured claim of P50,000

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7.

The ONINZ Company began operating at the beginning of the calendar year 2011 and, using the installment method of accounting, presented the following data for the first year:

The balance of the deferred gross profit account, end of 2011 should be: a. 192,000 b. 128,000 c. 96,000 d. 80,000 8.

Fischer Company opened its Baliwag Branch on January 1. Merchandise shipments from home office during the month, billed at 120% of cost, is P125,000. Branch returned damaged merchandise worth P15,620. On January 31, the branch reported a net loss of P2,270 and an inventory of P84,000. What is the net income (loss) of the branch to be taken up in the books of the Home Office? a. (1,690) b. 6,500 c. (2,270) d. 1,960

9.

Maurice Company adds materials at the beginning of the process in the Forming-Department, which are the first two stages of its production cycle. Information concerning the materials used in the Forming Department in April is as follows:

Using the weighted average method, what were the materials cost of WIP at April 30? a. 6,120 b. 11,040 c. 12,000 d. 12,240 10.

The following information relates to a given department of Herman Company for the fourth quarter of 2011:

Actual total overhead (fixed plus variable) Budget Formula Total overhead application rate Spending variance Volume variance

178,500 110,000 plus 0.50/ hr. P1.50/hr. 8,000 U 5,000 F

The total overhead variance is divided into three variances – spending, efficiency, and volume. What were the actual hours worked in the department during the quarter? a. 110,000 b. 121,000 c. 137,000 d. 153,000 11.

The Ayala Company has a 25% equity interest in The Greenbelt Company which has been correctly classified as a jointly controlled entity. Ayala accounts for its investment in Greenbelt by proportionate consolidation. During the year ended December 31, 2012 Ayala sold goods to Greenbelt for P160,000. Greenbelt held these goods in its inventory on December 31, 2012. The goods had cost Ayala P100,000. What amount in respect of Greenbelt’s inventories should Ayala recognized in its consolidated statement of financial position on December 31, 2012, according to PAS 31 Interest in Joint Ventures? a. 25,000 Page 2 of 9

b. 36,250 c. 100,000 d. 160,000 12.

What is the method of accounting for investment in joint venture? a. Cost Method b. Equity Method c. Consolidation Method d. Fair Value Method

13.

Jose Inc., a Portugese firm was acquired by a U.S. company on January 1, 2013. Selected account balances are available for the year ended December 31, 2014, and are stated in euro, the local currency: Sales Inventory (bought on February 1, 2014) Equipment (bought on January 1, 2013) Dividends (paid on September 1, 2014) Accumulated depreciation - Equipment 12/31/13 Depreciation expense - Equipment, 2014 Relevant exchange rates are given below: January 1, 2013 January 1, 2014 February 1, 2014 September 1, 2014 December 31, 2014 4th quarter average, 2013 4th quarter average, 2014 Average, 2014

€400,000 20,000 90,000 20.000 45,000 9,000 P .91 .93 .94 .97 1.01 .90 .98 .95

Assume the functional currency is the euro, compute the restated amount for inventory for 2014 a. 19,600 b. 18,000 c. 18,600 d. 20,200 e. 19,000 14.

When translating Jose' financial statements, which of the following statements is true? a. There will be a remeasurement loss reported on the consolidated income statement b. There will be a positive cumulative translation adjustment reported on the consolidated balance sheet c. There will be a remeasurement gain reported on the consolidated income statement d. There will be a positive cumulative translation adjustment reported on the consolidated income statement

15.

The cash available for distribution to the partners on July 31, 2019 is a. 2,000 b. 11,000 c. 7,000 d. 4,000

16.

Which of the following procedures is acceptable when accounting for a deficit balance in a partner’s capital account during partnership liquidation? a. If a partner with a negative capital balance is personally insolvent, the negative capital balance may be absorbed by those partners having a positive capital balance according to the residual profit and loss sharing ratios that apply to those partners having positive balances. b. A partner with a negative capital balance must contribute personal assets to the partnership that are sufficient to bring the capital account to zero. c. If a partner with a negative capital balance is personally insolvent, the negative capital Page 3 of 9

balance may be absorbed by those partners having a positive capital balance according to the residual profit and loss sharing ratios that apply to all the partners. d. All of the procedures are acceptable. 17.

For a subsidiary to be eligible to be included in a consolidated tax return, at least _____ of its stock must be held by the parent company or another company included in the consolidated return a. 50 percent b. 40 percent c. 80 percent d. 75 percent

18.

Under the temporal method, retained earnings would be restated at what rate? a. Historical rate b. Composite amount c. Average rate d. Current rate

19.

On October 1, 2013, Gabriel Company forecasts the purchase of inventory from a British supplier on February 1, 2014, at a price of 100,000 British pounds. On October 1, 2013, Gabriel pays P1,800 for a three-month call option on 100,000 pounds with a strike price of P2.00 per pound. The option is considered to be a cash flow hedge of a forecasted foreign currency transaction. On December 31, 2013, the option has a fair value of P1,600. The following spot exchange rates apply: Date October 1, 2013 December 31, 2013 February 1, 2014

Spot Rate 2.00 1.97 2.01

What is the 2014 effect on net income as a result of these transactions? a. 201,000 b. 195,000 c. 202,600 d. 201,600 20.

Jason Corporation about to be liquidated, has the following amounts for its assets and liabilities: Book value 200,000 70,000 500,000 300,000 240,000 60,000 510,000 80,000

Current assets Land Building Equipment Accounts payable Income taxes payable Mortgage payments Note payable

Net realizable value 140,000 100,000 350,000 160,000 -

The mortgage is secured by the land and building, and the note payable is secured by the equipment. Jason expects that the expenses of administering the liquidation will total P40,000 How much should Jason expect to pay on the accounts payable? a. 100,000 b. 128,000 c. 240,000 d. 96,000 21.

The following account balances are available for Esposito, an Italian U.S. subsidiary for 2015: Beginning inventory Purchases Page 4 of 9

€20,000 400,000

Ending inventory Relevant exchange rates follow: 4th quarter average, 2014 December 31, 2014 Average 2015 4th quarter average, 2015 December 31, 2015

15,000 P.93 = €1 . 94 = 1 .96 = 1 .99 = 1 1.01 = 1

Compute ending inventory for 2015 under the temporal method a. 15,150 b. 13,950 c. 14,400 d. 14,850 22.

Compute the cost of goods sold for 2015 in U.S. dollars using the current rate method a. 400,950 b. 388,800 c. 409,050 d. 387,750

23.

Compute ending inventory for 2015 under the current rate method a. 15,150 b. 14,400 c. 13,950 d. 14,850

24.

On January 1, 2009, Gwapings Inc. paid P40,000 cash to acquire a put foreign exchange option for 1,000,000 rupee. With an expiration date of December 31, 2009. The option hedges 2009’s forecasted exporting sales of 1,000,000 rupee. Gwapings fiscal year end June 30. Jan 1, 2009 June 30, Dec 31, 2009 2009 Spot Rate 1.18 1.12 1.15 Strike Price 1.19 1.19 1.19 Fair value of put option 202,500 Which of the following is true? a. The forex loss to be presented in the income statement on December 31, 2009 amounted to P132,500, if the time value element is included in the assessment of the hedge effectiveness. b. The forex gain to be presented in the stockholders equity on June 30, 2009 is P70,000, if the time value element is excluded from the assessment of hedge effectiveness. c. The forex gain or loss on option contract on June 30, 2009 should be P162,500 if the time value element is included in assessing the hedge effectiveness. d. The intrinsic and time value of option on January 1, 2009 were 0 and 16,000 respectively.

25.

The following quantity schedules and related information are for Dept. 1 and Dept. 2 for the current month, August 2009, of XYZ Corp. Dept. 1 Dept. 2 Beginning unit in process 35,000 80,000 Units started in process 550,000 585,000 Units received from preceding debt 421,200 Units added to production 62,000 563,200 Units completed and transferred Ending units in process

421,200 163,800

428,030 135,170

All beginning units in process for both departments are 100% complete for direct materials. Beginning units in process are 60% complete as to conversion costs in Dept 1 and 40% complete as to conversion costs in Dept 2. All ending units in process are 100% complete as to direct materials as well as 50% complete as to conversion costs in both departments.

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For Dept. 2 what is the difference in equivalent production conversion cost basis between using the weighted average and FIFO costing methods? a. 21,000 units c. 44,000 units b. 32,000 units d. 53,000 units 26.

Which of the following costs of a business combination are included in the value charged to paidin-capital in excess of par? a. direct and indirect acquisition costs b. direct acquisition costs and stock issue costs if stock is issued as consideration c. direct acquisition costs d. stock issue costs if stock is issued as consideration

27.

Under the current rate method, how would cost of goods sold be restated? a. Historical rate b. Current rate c. Beginning of the year rate d. Average rate

28.

On December 5, 2013, Texas based Kit Corporation purchased goods from a Saudi Arabian firm for 100,000 riyals (SAR), to be paid on January 10, 2014. The transaction is denominated in Saudi riyals. Kit's fiscal year ends on December 31, and its reporting currency is the U.S. dollar. The exchange rates are: December 5, 2013 1 riyal December 31, 2013 1 riyal January 10, 2014 1 riyal

.265 .262 .264

What journal entry would Kit make on January 10, 2014, to revalue foreign currency payable to equivalent U.S. dollar value? i

Accounts Payable (SAR) Foreign Currency Transaction Gain ii Accounts Payable (SAR) Foreign Currency Transaction Gain iii Foreign Currency Transaction Loss Accounts Payable (SAR) iv Foreign Currency Transaction Loss Accounts Payable (SAR) a. b. c. d.

300 300 100 100 100 100 200 200

Option iv Option ii Option i Option iii

29.

Romeo is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus a bonus of 10% of net income after salary and bonus as a means of allocating profit among the partners. Salaries traceable to the other partners are estimated to be P100,000. What amount of income would be necessary so that Romeo would consider the choices equal: a. 305,000 b. 165,000 c. 290,000 d. 265,000

30.

It is an instruction by the customer for a change in the scope of work to be performed under a construction contract. a. Variation b. Claim c. Incentive payment d. Initial amount agreed in the construction contract

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31.

Miguel Co., which began operations in 2011, produces gasoline and a gasoline by-product. The following information is available pertaining to 2011 sales and production:

Miguel accounts for the by-product at the time of production. What are Miguel’s 2011 cost of sales for gasoline and by-product, respectively? a. 105,000; 25,000 b. 115,000; -0c. 108,000; 37,000 d. 100,000; -032.

The factors that determine whether the functional currency of the foreign operation is the same as that of the reporting entity include all of the following, except a. Whether the foreign operation is an extension of the reporting entity’s business b. The proportion of the foreign operation’s transactions with the reporting entity c. The nature of cash flows of the foreign operation d. The legal structure of the foreign operation, whether associate, subsidiary, joint venture or branch.

33.

It is an additional amount paid to the contractor if specified performance standards are met or exceeded. a. Variation b. Claim c. Incentive payment d. Bonus

34.

Jane Inc. purchased chocolates from Switzerland for 200,000 Swiss francs (SFr) on December 1, 2013. Payment is due on January 30, 2014. On December 1, 2013, the company also entered into a 60-day forward contract to purchase 100,000 Swiss francs. The forward contract is not designated as a hedge. The rates were as follows:

December 1, 2013 December 31, 2013 January 30, 2014

Spot Rate $0.89 0.91 0.92

Forward Rate $0.90 (60 days) 0.93 (30 days)

The entries on January 30, 2014, include a a. Credit to Cash, P180,000 b. Debit to Foreign Currency Transaction Loss, P4,000 c. Credit to Foreign Currency Units (SFr), P184,000 d. Debit to Dollars Payable to Exchange Broker, P184,000 35.

The PQR Partnership is being dissolved. All liabilities have been paid and the remaining assets are being realized gradually. The equity of the partners is as follows:

P Q R

Partners’ Accounts 24,000 36,000 60,000

Loans to (from) partnership 6,000 (10,000)

Profit & Loss ratio 3 3 4

The second cash payment to any partners under a program of priorities shall be made thus: a. To R P8,000 b. To Q P6,000 Page 7 of 9

c. To R P2,000 d. To Q P6,000 and R P8,000 36.

Chris Company was formed on January 1, 2015 as a wholly owned foreign subsidiary of a U.S. corporation. Chris' functional currency was the stickle (§). The following transactions and events occurred during 2013: Jan 1 June 30 Dec. 31

Chris issued common stock for §1,000,000. Chris paid dividends of §20,000. Chris reported net income of §80,000 for the year.

Exchange rates for 2015 were: Jan 1 June 30 Dec. 31 Weighted average rate for the year

P1 = §.48 P1 = §.46 P1 = §.42 P1 = §.44

What exchange rate should have been used in translating Chris’ revenues and expenses for 2015? a. §.46 b. §.45 c. §.42 d. §.44 37.

On December 1, 2013, Robert Corporation acquired 100 shares of Paul Corporation at a cost of P40 per share. Robert classifies them as available-for-sale securities. On this same date, it decides to hedge against a possible decline in the value of the securities by purchasing, at a cost of P250, an at-the-money put option to sell the 100 shares at P40 per share. The option expires on February 20, 2014. Selected information concerning the fair values of the investment and the options follow:

Paul Corporation Per Share Put Option (100 shares) Market Value Intrinsic Value Time Value

December 1 2013

December 31 2013

February 20 2014

P40

?

?

P250 0 P250

P400 ? P100

P400 400 ?

Assume that Robert exercises the put option and sells Paul shares on February 20, 2014. What is the market price of Paul Corporation stock on December 31, 2013? a. 40 b. 38 c. 37 d. 36 38.

Which of the following journal entries will be made on February 20, 2014? i ii

iii iv

Cash Available-for-sale securities Cash Put Option Available-for-sale securities Loss on Hedge Activity Put Option Loss on Hedge Activity Available-for-sale securities

a. Option ii b. Option i Page 8 of 9

4,000 4,000 4,000 400 3,600 150 150 400 400

c. Option iii d. Option iv 39.

During April 2017, Faithful Inc. incurred the following costs for Job 522 (450 drum sets): Direct materials P 42,500 Direct labor 65,250 Factory overhead 78,300 45 units of drum sets were found to be defective and Faithful Inc. had to incur the following to remedy the said defects: Direct materials P 13,550 Direct labor 15,250 If the rework cost is normal but specific to Job 522, the cost per finished unit is: a. 575.68 b. 497.75 c. 484.22 d. 518.11

40.

Emmanuel Corporation has identified activity centers to which overhead costs are assigned. The cost pool amounts for these centers and their selected activity drivers for 2017 follow: Activity Cost Center Costs Activity Drivers Set-ups P 620,000 24,800 set-ups Utilities 950,000 125,000 machine hours No. of parts 320,000 16,000 parts Direct costs of producing product GG amounted to P75,000. The said product took 17,000 direct labor hours and 15,000 machine hours to finish. Also, the product needed 7,500 set-ups and 550 parts to complete. 25,000 units of product GG were produced during 2017. How much was the full cost per unit of product GG using ABC? a. b. c. d.

19.07 16.07 15.50 12.50

-End of Examination-

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