ReSA

The Revlew School of Accountancy

ETel. No. '135-9807 &'734-3989

TAXATION septeober L6, 20].7 (saturday)

Fiaa]. Pre-Board Exa!-inati-on 8;00 AM to 11:00 A.M.
MUITIPLE CIIOICE
fN IRUCTION : se-lect t}1e cotrecX answer fot: each of the foTJowing
guestjons. Mark anfy ol]e arsre.r fot each iten by shading the box
corresponding to tl?e letter of your: choice on tle sheet ptovided.
STR]CTLY ,fo -mAsa/REs ARE AILOWED. Use percil na . 2 oniy.

1. D 11. D 21. D 31. C 4l- B .

5-r B 61. C
12- E 32. D 42. O 5:. B
3. D 13- D 23. D 33. D 43- S 63. C
:4. B 34. D 44. B 54. C
D 25. C 15. D 45 - C 65. A
26. D 66- B
,- B l?- B 57. D
,46. D 5 rr. B
I 39. B
20. i 30. B 40. B ?0_ B

SUPPORTING CC'''IUTAAIONS

5. D
Normal income Lax P100,000
Less : Unexpired etcess MCIT
2016 i',t5,0o0 - 5o, o00) 25,000
201r (100,000 - 60,000) 40,000 65, 000
Tax payable P 35, 000
17. D
value oi the frj.nge benefir P340,000
Monetary value of the fr:inge benefit (5Ot x 340,00C) P1-/0,000
lF:inge irenefit tax {110,000/63i x 32-ri P 80,000

Net income before interest expense P1,000,000

Less: Interest expense P160,000
Reduction (339 x 180. 000 ) 5n,400 100,600
Taxable net incone P 899,400
Tax rate 30?5
Tax due P 269.420
24. ts
se l- li price (hiqher than EI,IV ) P5,000,0o0
Tax rate 6-r
capital gains tax P 300. 000

25. C
Plofessionaf tas P300
GraveL and sand tari 20,000
U.5.A income tax for 2017 5C0,000
Road r.rser':r tax on hls delivery vans 50,000
l-ocai annuaL fixed Ea\ for his de_Iiwery vans 10,000
Tota I P 5308300
 Basic personai exemption P50,000
Addit-ional enemption (any of the fcllowing dependents:
Czarina, Dianne, Eaith. Grace and Isaiah) (4 x 25,o00) 100, 000
Tc taI P150,000

51. B
Basic persorraf ex tion P 50,000
Additionaf exemption (Faith, and Isaiah) (3 x 25,OOO) 75,000
P1.25, 000

6)- A
Se Lling price P2,000,000
LeEs: Val"ue i.n the hands of the donor ( 100,000)
capital. gain P1,900.000
63. C
Domestic purcha-ses of goods (50O,O O x 5/6) Tp 50,000
rmpcltaEion.a T-
(700,000 x:12* = 84,000 x 5/6) 10,000
Paynent for services for a11 transactions
(450,000 x 129 = 54.000 x s/6) 45,000
Total P165,000
64 - C
Output tax on domestic sales (5,000,000 x 129) P600,000
Less: Input i:axes (see no. 50) 165,000
VAT payabfe 435,000
Less: vAT pajd for the firs! trro (2) months 300,000
lax payab-Le P135,000
55- A
Discount to senior citizens :1,0OO,OOO x 2Og) P200. 000
Service expenses 450,000
Salaries of senlor citizens 7AO , a0A
sFecrar oeoucElon ror salarles oI senlor crtlzens (15* x 15,000
1C0,000)
Assistance given under Adopt-a-School progia^ , r00, 000
special" deducijion lllaer aOopt-a- sCnool-l S Ot x -ftOlilo 50, u00
Other operatlng expenses (50C,000 - lOO,OOO) 400,000
Input tax on services allocated to vAT-exempE Gf,TEl-lJ7El 9,0a0
54,00J)
Total deductjble expenses P1,324,00J
66. B
Gross sales (5,000,000 + 1,000,000) P6,000,000
Less: cost of sal es
Beginning inventory 300,000
Add: Purchases (500,000 + 10,000* t,224,000
+ ?00,000 + 14, t00* )
TotaI 1, 524, 000
Less: tindfng rnventory 200,000 1,324 , AAA
4,676,AAA
I,ess: Deducui5le expenses tsee no. 52) 1,324 , AAA
Taxabte net i.come P3,352,00C
*Ioput tax on donestiq purchases allocated to VAT-exempt
l1/'6 x 60,000) P10, 000
*Input tax on importation of goods alfocated to VAT-
exemp: (1./6 x 34,000) P14. 000

END OE E:XI}'TINATIO}T
TAXATIOII - FINAL PRE-BOARD EXA}IINATION (BATCH 34)
 ReSA
The Review School of Accountancrt
R. Papa cor. 5. H. Loyola S&,. fumpatoc, Manila
J Tel 6, 234-i9-A9 & 735-9A-oz
Advancd Financial Ac@urrb:Dg & Rep.tiog 9lu6on to
Final Prc- board Examina tion-34th
1.D ,

201a
10l17l20t9: Originat torward rate (90 days)..... ..............p 1.36
12131/2018i Current (remaining) forward rate (15 days)........................................ 1.43
Forex gain per unit....... ............._...................._._.................p .0.?
Multiplied by: Number of foreign curreocies....... ............. 10.000
Foreign exchange girin due to forward contract.. ..,..........g -lO0 (D)

20ag
12131/2018: Cunent (remaining) forward rate (15 days)........................................p 1.43
1/15/2019: Spot rate.... ............... 1.40
Forex loss per !nit........ .....F
....._.. . .03
Multjplied by: Number of foreign currencies-_._...................--_...._..............._.._......... 10.000
Foreign exchange loss due to foMard contract.. ......... ....e__:OOfOl

me forwatd rate b the rate quotd for the exchange of two cuffendes at d spetifrd future date. It
ditreE fom the spot ,ate beoause of the drrerenc in inteten rates io the tntemaibnal
financial
markets.

Aprehiun exisb on an foreign exchange forward when a @fty buys or setls forward at more than the
s@t aE. A dii@unt dis6 on ao foreign exchange foruard wheo a patty buys or sets foDerd
at less
than the spot raE
fur t@rding purpoes, prct iurns of dit@ung have no bearing at all meanlng there is no ned
Howevq for option @Dtract wherein the iriter assutw the responsibittty of
.y-^::!l alrr!:ryyl!
ncumnq toss, the wrner chages a fe alld a pEmium, Thus, dte pemlum-is the prie
@tendat
pid b aquirc the option.
fotward ,ata gehenttt, dilbrr lrom the spot ,ate, but aS ooe noves ctosg to
rye
dab (or tetderneht dab) the dtfetence tEh,,ren ti? ,pot ,t iriii-A*"rAthe expiration
runaiokg pedcd of the contact beames snallet, and smaller
mE for the
bnyatd Bte will have conyergd wid, dre spot ate.
s that at dte cxpiatbn date, the

fo detennine if a gah or toss on fotward coniact octured duing any t rO dates,

atrya)6 view:
(1) the forward rate at dre ih@ption date as the buyng
Dte (when buying fotuard) ot the Elthg
Ete (lfselng forwatd) and
(2) all gubreguent foraydrd rates as the owsite hte.
fuaue the fotwatd nte inceptiot, is
tu4 nerely ask: ,,Did the opposite ,aE ,noyet lb@Ebly or unbycrably?. AnatindEase in
tlre *th-ng ntc is hvorable, whercas an irrdEa* iD the iuying
rate k unfayorabte.
It should tu nod that on the setdenent daE, the s@t rate wil be usd nne tbe s@t ate on that
date is simply the sane wnh the folwad jae atso on thesme date, .
A - P48,000 x 201770 - P8,000 (note: adjusted auowance refers to the alowance rerated
to the ending
inventory so, the allowance retatd to the CGS, ,ahich is pl0,0o in this case ts constde.ed
to be the
adJustsnenb in the books of Home Omce to determine tie adjusted brandr net incomel
120so 20vo
Billed Price Cost AIlowance
MerdEndise inventory, 1/1/x4 0
ShiOmen$ 108,000
Cc6t of qoods avaitable for sale 108.000
!ess: MI. 12l31/x4 (p60.m0 x 80%) 48.000
Qlewaruarion of CGS (60,000 x 20/120) 60-ul0 10.000*
Advarrcd Frrrancial Advuntirrg & Reporting gtution b FiDat Pteb@td 44 &atd, - page 2
3.4
Sales (P148,000 + P44,000) P192,000
Less: Cost of Sales
' Inventory, UU20x4 PO L

Purchases 52,000
Shipments From home ofEce 108.000
Cost oF goods available for sale P 160,000
Less: Inventory, 12131/20x4 60.000 100.000
Gross profit P 92,000
Less: Exoenss (P76,000 + P24,000) 100.000
Net income, unadjusbed P( 8,000)
Add: O/eNaluation of CGS 10-000
Adjusted branch net income LZO00
4.8
Adunl l&orilole Eoui. Prod.- Mat.
IP- beoinoino 4,000
StarlEd in Process 48.000
5L000
FandT 30,000 1000/o 30,000
IP- erd 22.0m 1m% ?2,000
52-000 s, {m
Materials Cost per equivalent unit: (P2,000+P23,480)/52,000...............P .49
IP, end (CC): 22,000 x P.49 per unit............................-.....,.....................P-]OZ80
5.C
6.C
Amourt paid................. .........P 121,000
Rey*....................
Less: Book value of interest - ....... 115,000
Eonus b retiring partner--..,-............................... -......P 6-000
* Dom: P83,000 + (P408,000 - P360,0000) x 25olol + P20,000.............P 115,000
Joe: P77,000 + (P48,000 x 2so,6) = P89,000 - (P6,000 x 25l75)..........P 87,000
Rey: P180,000 + [(P48,000 x 50o/o) = P204,000 - (P6,000 x s0/75)]..P 200,000 (C)
7. B
Contiact oric p 4-ooo o00
Costs inornd each \ear fP2.000.000 + P1.000.000) P 1.rn0.000
Md: Co6t incuned in orio. years
Co6ts incuned to date P3,000_mo
Add: Estlmated co$ to comDlete 2_0{Y}-mo
Total estimated costs P5.000.000
Estrnated Gross Profit (h6s) P( 1.000.000)
Mu[idv bv: % of comDletion 1000/o
Recoonized Gross Proft (Lossl to date P(1.000.000 )
Less: Gmss Profit fLo6s) in Drior vear {-
Recoqnlzed Gross Profit (Loss) in current year P(1.000.000)
8.8
9.8
10. A
Contr{t Drice P 71 000 rYY)
CnsE indrrred each vear fP5.000.0O0 + P2.000.00O + P2-o00-0o0) P 9,000,000
Acld: Cost inorred in Drior veaB
Cosls incund to date P 9,000,000
Add: Estjmated cost to comDlete q_fi'x)_(no
Tobl eatirnated costs P 18.ffJ0-0m
Estirnated Gross Frofit (loss) P 3.000.000
MultiDlv bv: Yo of cornDlelon 9/18
Recoonized Gross Prorlt (Loss) to date -. P 1,500,000
Less: Gross Profit (Loss) in orior year {)
Rermnized Gross Profit (Loss) in current vear P1.500.000
11. B
P41,500-[(P3,000+6,000)+P14,000+(P3.50x3,600)]...........................P1,900
12. A
Mual Factory Overhead / Manufdcturing Overhead Control:
P2,300+P3,700+P19,400+P5,400.......................................................p30,800
Applled Manufacturing Overhead: P3.50 x 8,500........... .. ... . . .. . ............ 29,750
Underapplied Factory Overhead.......................................................................P1-05!
Adv.nd F rarrcial A@ut ting & Reportirrg hlution to FiDal Prebard 4? BaM, - prge j
13. A
'fftnslation fnb Fut ctiottal Currcnqt (lemq.al/Reffeasurement Method)
Philippine Peso:
- Functional Currency is the

Machinery (non-monetary at carryinq vatue) - historicat.rdte: r5o,o0o rc x pllFc 1.25......p120,000

Inv. property (non-monetary at cost) - historicat ratei 200,000 FC x p1lrc 1.25..........,...... 160,000
Recejvables (monetary asset - cunent rate; 250,000 rc x pIlrc 1.29._....................._....... 195,313
Crsh(monetaryasset-currentrate:300,000rcxp1/rc1.28..........-.............................231_1f5
Total lssets........... .. ......... . ...............2709.699
Translation from Functional Currency Into presenbtion Cuiency (Cufient Rate Method) - Functioral
Currency is the Foreign Currency (Curency of the country location of Sing Sing Ltd);
Ivlachinery -current rate: 150,000 FC x P1lrc 1.28.......-.--_.... ..... . . ._. __ ... .-................p117,187
Inv, property - current rdte: 200,m0 rc x Pl/rc 1.28 ......................................................... 156,250
Receivables - current rate: 250,000 FC x P1/FC 1.28......_._................. .. . ... . ................_ 195,313
Cash - cunent rate: 300,000 rc x p1l rc 1.28. .........................,......234,375
TotalAsseB (900,000 FCx Pl/1.28 FC).............
* unds drrret t ,zE ,rEdrod. a r*8, tt ould b ArBlaacd usr'Dg cn rurrt nte
..............................L203-1251

(i-a, ahe baLoa rhcct aE)

14. B*
fhe elininatihg eniy it as tbllo$:
toogb uorc.ti.c.l Gain and ,l,$,'tDE quipt r.t t,o iE otigin l book rrt,t . dtte ofsara (1/1/2OOS)
*Gah on 9le of equipnent
Acqumulated depEabtioh.... ..
.
---.-. ----.. 1,5001,500
sellang Price. ............... ....... P16,000
Less: Book value of warehouse, 1/1/2005..._....._._........... 14.500
Unrealized Gain 0n sale of equipment..................._......... P-j100

15. A the total mantenance cost is deEnnine<1 by adding orchead @sB incufied in tle Maintenance
kpatunent p/us any share in the Utilitbs k@dment Muse of serr'ices provided to the Utlines
Depaftment
Notei Service provided tD (not'by').
16. C
17, D
18. D

Fair value hedge

10/02/2018: Original forveard rdte (180 days)_.....................................p
12131/2018: Cunent (remaining) foMard rate (90 days).................... .58
.05
l'lultiplied by: Number of foreign curencies......_...........-...-..._............ 1.00C_000
Foreign exchanqe loss due to hedgd item/commitmenL....................p:_SlllXD (C)

fhe lonratd rdte generally diffeB fiom tlre tpot nE, but aS one moves (Joser to the expira bn
date (or setdemeot date) the difrence betwen the s@t ate and the bttuad BE for the rcnainioq
penM of the conttact b@rrret srrrallet arrd srnallct so that at the expiration date the forayard rate
wi haye converged with dr6 spt ate.
Ptot&ting agai|St an adverse change i4 the exchange aE betwen the order date (@rn nibnent date)
and the Eansdion daE is hdging a fim beign-curcDcyienominaed @mnituE tt
Cash Flow Hedge - Not applicable.

20. A
Fair value hedge - tri.ome Statement
10/02/2018: Origlnal fo^/ard rate (180 days)...........,..........,...............p .53
12131/2018: Current (remainlng) forward rate (90 days).................... .58
.05
Multiplied by: Number of foreign currencies...._...........:........................._ 1.000.000
Foreign exchange gain diie to foMard contrad - vs.......................... P:r51u000 (A)

Cash flow hedge - Equity

10/02/2018: Original forward rate ( 180 days).......................................p
12l31/2018; Current (rernaining) fotyiad rate (90 days)..:.................. .58
Forex gain per unit....... .........._.........................p .05
Multiplied byi Number of foreign currencies_...._.....,............,.........._....... 1.000.0e0
Foreign exctange gain due to forward contract - OO (Equity).....-......P1!.0_0! (A)
 ,

Advdhd Finahcial Adounting & Reprting hlubbn to Fidal Prcboard -34 Batch - page 4
21. B
Work In Process

wP, beq. P 30,000 To FG P160.000

DlI 60,000
DL 50,000
oH 45,000

\ /P, end P 25,000 DM (?) 14,650 -' P25,000 - P5,750 - P4,600

DL 5,750 100%

OH 4,600 / 80o/o
:

FIFO
-5,500
Received. F and l_ 1000/o 5.500
IP. end 400 50% 200
600 E% 150
6.500 5.850

FandT 5.500 1000/o 5.500

IP, erd 400 5001, 200
600 25% 150
6.500 L850
(z)
Adtal Work Don EP-CC
IP, beoinnina 6.250
Recei\d fm.n Preaedino DemrtsrEnt 25,m0
l1-250
F!FO
IP. beqinninq. F and T 6,250 2sv6 3,750
Recet\d, F and T 20,000 100% 20,000
IP, erd 3.0m 50% 1.500
2,000 2s% 500
31.250 25t50
A
FandT 26.250 1009o 26,N0
IP, end 3.000 5090 1.500
2.000 25% 500
11.250 7R 750
(3)
Actual EP_CC
IP, beqinnino 5.000
Receircd ftom Precedinq DeDartrnent 13.000
19.000

FIFO
IP. beoinnino.F and T 6,000 700k 4,200
Received, F and T 8,000 100o/o 8-000
IP, end 3,000 50% 1,500
1,500 75% 1.125
Normal lost 1,000 0ry6 0
1q.000 14 pS

FandT 14.000 100o/o 14.000

lP, end 3,000 5@/o 1.500
1.500 750k 1:125
Nonnal lost 1,000 gqo 0
19,000 16.625
Advand Fioarrdbl A@undhg & Reprting *lub'on to Enat Ptcbrd s
24. D - refer to No. 23 for furtier compuEtflons.
-34 &.td, - Fg,c
25. B
26. D
12l01/2018: Originatforwad rate (2 months).......................................,p 1.01
12131/2018: Current (remaining) forv{ard rate (tmonth)................... .. . 99
unit........
Forex loss per ...._.._.........._..............._.p .02
lYultiplied by: Numlhr of foreign currencies......... ...... .... . ._.
__SBOOSA
Fore,qn exchanqe lqss - equity............._.
__
2'1. A
......_..p:14^L_00 (D)

laouary 1, 2018 beqinning balance offoreign exchange loss - equity

(No. 26)...........r............. .P 10,000
Settlement date oF forward @ntmct:
1213112018: Current (remaintng) forward rate (1 month).p 99
1/3V2019: Spot rate.... .98
Forex loss per onil....... ............._p-nf
Multiplied by: Number of foreign cunencjes...................._ 500 OO0
tureign exchange toss - equity. .................................... s.q0!
lanuary 31, 2019 batance - equity.....,........._....
P 1L00o (A)
28. D
Labor Rate Variance: (P9.28 p9.08) x 2,590 hours p51g
- = unfavorabte (debit balance)
Lrbor Efflciency Variante: [2,590 i
- (1,500 units x 1.75 hr/unjt)] x p9.08 C:IZ.SO fav'1cr. Oatancel
29.
30. D
Arthur: P 100,000 p
- P60,000 + (p72,000 x 1/3) = 64,000
t/3) =
Baker: P 80,000 - p40,000 , (P7?,OOO x fi,000
=
Carter: P300,000 - 120,000 + (p72,000 x r/3) 304.000
Total capital.......... ............._................._._._............ p,13?J0A
Assets=Liabitities+ealital
516,000 84,000 a32.OOO _-_-.. Given
(l-t19-?o) (s16,ooop Batancing freure

84,000 (84,000)
31- A

B c Total
5 lnterest on bo. aaDital 2.500 1,250 1,250 1.000 6,000
Salaries 5.000 3.000 8-00{'
Balance (remainder) 5.000 5.000 3,334 16,667
Mdition?l profit
1,663 1,663
12.500 6,000 32333
34- B

Add: Cost incuned in

Estirnated Gross proft

: % of comDletion (14,560 + 37 000
Gross PoRt (Loss) to date
Less: Gross Paoft
llled Gross Profit (Loss) in current

Contract Price....,...........,.........
,,,,,,,, ', ,,,,,,', ,,,..P 800,000
x: GPo,6 (14.560/52.000)..
520/r
Estimated Gmss Profrt.. .
Adarrd Fiaandrl A@ant.ng & Reportirrgt Solution to Etttl fu.da? bH, - pagc 6
35. B
35. I
I
5ince, tuth antrfiuibtts cao fu utt/ized (purpse can be lufil@) within the currcnt year (before the cut
otr date 12/31,/2019). thea both of them should also be Eclassified as unrcstictd Net Assets.

38. A i
Current Rate Method Temporal t.{ethod
LCU peso
is Functional Currency is Functional Currenc/
p15,000
P15,000 = Preadjusted foreign = Preadjusted foreign
exchange loss exchange lo55
5,000 = Foreign currency 6,000 = Foreign currency
transaction loss transaction loss
(P100,000 - P106,000) 20.000 = Remeasurement qaln
e?,L@ = Foreiqn exchange e!!pQ! = Net roreign
toss exdEnge loss
Notei The term "restatement" used by foreign subsidiary is an indication that the temporal
remeasurement method is usd.

44, c
Invest nent.l/1/20x4 P105,000
Add: Share an net income - 20x4 (P45,000 x 80o/o) 36,000
L6s: Dividefids tcd-'ivd 12.000
lnvestrnent, 12! 31/2Cx4 P129,000
Add: Share in net income - 20x5 (P60,000 x 80%) 48,000
Less: DiMdends/celvad $n0!
Investmenl 12131/20x5 el59.00!

41. C
42. C
43. C
44. C
The tnvesEnent in Dover as of December 31 is as follows:
Acquisitjon cost, January 1, 20xs P 600,000
Add (deduct):
Sh3re in net incorne (P32O000 x 25%) 80,000
Share in dividends (P80,000 x 25%1 (20,000)
Amotiration of allocated excess (P250,000 x 25%) /10 years ( 6.250)
lnvesEnent balance on December 31, 12131/20x5 Pisl,zu
45. A
Park current asse8 P 70,000
Strand current assets.. 20,000
Excess inventory fair value 15,000
Consolidated current assets P!q5,o@

46. C - .since the only auat:lzblo answet is urrder ftrll goodwil melhod, dren ignoE dre term
proptdonrto beeis wharein tha at stvct ,tould be PgZ@o (PBq@O + Pl3,ooo)
Park stockholders' eouity P80,000
NCI(full):
8V of SHE - S .............. .............................n50,000
Adjustments to reflect fair value (lnventory)...................................:15-0!0
FV of SHE - S................ ..................,-........P65,000
x: Multiplied by: NCIo/..,.............,.......... ,.. 2oo/o
NG (partial).................. ...... ....................P13,000
Add: Ncl on full{oodw (P10.,000 - P8,000)................................. 2.00!
Non-controlling interest at farr value (20olo x P75,000).................:. 15,000
Total stockholders' equaty e95@
47, A
48, C - since, the donor put no restriction on the donation, therefore, it is classified as Unrestricted Net Assets.
49. 0
CoEt (remains to be the same regardless ol upstream or downstream sates)............. .E2J@&0
Accumulated deoreciation, 12131/2018r
Accumulate{, depreciation, V112018.
Add: 2018 deore{lation - P2,000,000/20 yea6, original |ife...................: 100.000 P--g&J)00
Advand FinaDci.l A@unb@ & R.ponirrg gtutioo b fi,ral tuetuatd -54 *ad, - pge Z
s0. c

5r. B
Consolidated Cost of Sales:
Cost of sales betbre consolidation:
..............-.-...
Parcon..... ..P 800,000
5he11v................ . ....
--..-....-.-.-.......-.... .--.- --...---....-... olo.ooo
Combined Cost of Sales ......... .....,P1,440,000
Less: Interclmpany Cost of Sales (or Purch) to be eliminated..-........,..................... 400,000
Eliminatingentryforl00%RPBIofP**(EIof2017)........................ 20,000
Add: Eliminating entry for 10090 UPEI of P*'r (EI of 2018).......... . ............... ........, 25,000
Consolidated Cost of 9les.........-....-..-................ ........ ......&1950!a

Furthet, Ihe additional eliminating enti6 ara as fo ows: (Coit rrethod)

**1000/6 RPBI of P:
Retained Earnings - P, beginning (Cost Modei)/
Iflvestment in 5 Company (Equity l'4ethod)........................................ 16,000
Retained Earnings - S, beginninq............................. .......................... 4,000
Cost of Sales (Beginning Inventory in Incorne Statement}.. 20,000
1'*10090 UPEI of P'
Cost of Sales (Ending Inventory in Incorne Statement)..................... 25,000
Inventory (Ending lnventory ln Balance Sheet)..-........ .......
25,000
52, B
. Partial{oodwill(Propo(ionateBasis)
Fair value of subsidiary (80o/o):
Consideration transferred P180,000 (80%)
Less: Book value of stockholders' equity (net asseB)
- f'lustang Company: (P100,000 + P50,000) x 80o/o 120.000 (80o/o)
Altocated excess. P 60.000 (80%)
Less: Over/undervaluation of assets and liabilities:
(P10,000 x 80o/o x 70%/ net of tax) (80%)
---5.600 (80%)
Positjve excess: Goodwi,l - partiayproportionate P14400

Fulloodwill (Fair Vaiue Basis)

Fair value of subsidiary (100V0):
Consialeratlon transferred P180,000 ( 80%)
Fair value of non{ontrouinq interest (given): 35-000 ( 20%)
Fair value of subsidiary P215,000 (100%)
Less: Book value of stockholders' equjty (net assts)
- lvustang Company: (P100,000 + P50,000) x 100o/o 150.000 (100o/o)
Allocated excess P 65,000 (100o/o)
Less: Over/!ndervaluation of assets and liabilities:
(P10,000 x 100o/o x 70o , net of tax) _
7.000 (100o/o)
Positive ejrcess: Goodwlll- full/fair value basis P58.@0 (100o/o)
, highc.th.n ah. cI of Fy-St E of g,bidia,y ot P3r,t aN [Pr'O,ooO + (P|qOOO x /096)
-- PtSaOOo x 20 l.4e, r.lu. to o. 53 lb. httth.. @DpqdboD @ th. tlct

53. B
Common stock - Mustano Commnv P 100.000
Retained eaminos - Mustano Comoanv 50.000
Book value of stockholdery eouity - Musbno Commny P 150,000
Adjushents to refbct fair \.dlue (over/ undervaluauon
of assets and liaulities) - P10.000 x 70% 7.000
Fair value of stockholders esuN of subsidiary P 157-000
Multiplied by: Non-conuollinq lnterEt Dercentaqe 20%
Non-controllino interest rDartlal) P 31,400
Add: NG on fullroodwill (P58.000 - P54,4O0) 3.600
Nonontrollinq interest - tull oood\,rillt
, tdtu vith ahc .DNot gi@ pcr FobLrn, tiDc, it is highs
L l5,m0
than thc ttCI of
fv-srtE ofsulBidrb,y
54. B
Fre Lssets:
. A5sets pledged to fully secured liabilities (P150,000 - P60,000)..................P 90,000
Free4ssels................... ...... 80.000
Total FreeAsseb.......... . .. .............P170,000
Less: Unsecured liabilities with priority...:............... ........ ............ 14.000
Net Free Assets...... ...... .. ... .. .. .. ..P156,000
Divided by: Unsecured Liabilities wathout priority:
Partjally secured laabilities (P120,000 - P104,000)........ ... ... . ..P 16,000
Add: thscured liabllities without priority..................................... 224.000 240.000
Expected Recovery % of Unsecured Liabilities: Pl56,000/P240,000.......,................. 65%
Estimaed payment tD Partially secud Creditors: P104,000 + 65% (P16,000)...-...P11!EE0
55. B
Actual
IP. beqinnino 20,000
Slarted in Process 1m.000
r28_000

IP, beq., F and T 20,000 20% 4,000

S,FardT 60,000 100% 5l) filo
IP, end 48.000 50o/o 24.000
128.000
_. fla ooo
Conve6ion Cost per equivalent unit: Pl14,,100/88,000.............-.. -. .....P 1.30
IP, end (CC): 24,000 x P1.30 per unit.-............................-.-............... ...911200

56. A- IYPPV: (P25,200/6,000 = P4.20 - P4 = P.20 uno x 6,000 units = P1,200 unfavorable
57. B - MPUV: P.20 unl X 7,100 units. ...-.............P 1,420 unfavorable
58. O - Since there as a parent subsidiary relatiorEhip that exists and subsidiaries are included in the CFS, any
intercompany balances should be eliminated in full,
59. A
lob 102:
Direct rnaterials............. P 12,000
Directlabor................... -.-.-....,.....-.........-.-..-. 2.000
Overhead:
Machine Stup: P20,000/200 = P100 x 2.....................,...................P 200
Inspection: P130,000/6,500 = P20 x 10............ 200
l"laterial Moves: P80,000/8,000 = P10 x 10....... 100
Engineering: P5O000/1,000 = P50 x 50.......................,.................. 2.500 3.000
Prcduction/Manufacturing Costs...... .. P 17,000
Divided by: Units comp|eted............................ 50
Cost per unit under ABC E:tla
60. I
Franchisee frequently purciases all of the equipment, producB, and supplies from the fmnchisor
The frandrsor would account for these sales as if, it would be a product sales. Sometimes,
however, the franchise agreement granE U|e frdnchisee the right to make bargain purchases of
equipment or supplies after the initjal frdnchise fee is paid. If the barqain Orice as lower that the
normal selling price of the same prcduct or it dos not provide the franchisor the reasonabte profit.
then, a portjon of the initial franchise fee should be defend. The defened portion would be
acc(!.rnted for as adjusunent Of the selling price when the franchisee subsequenfly purchases the
eguipment or Supplies. Therefore, the amount of revenue would be t30,234 computed as follows:

Cr.h Notes Receivable

ServicEs Y6 Yes
Pcitod of Retund Yes Y6
Collectibillty R@9DaW Astutd
P25@0 t':234
Revenue except
Status P3,OO0 r@enable
profit or, sale of
quiDrnerrt
fhe ,everrue fiom franchiscwould be:
Cash........................... .............. P 25,000
PV of Note...........................................................P68,234
Less: Reasonable profit on sale of equipment
(P1s,000-P12,000)............................. 3.000 6s.234
p q0.234
Adyandi EDan irl A@,rntiDg & RcponiDg btua'on b Fit al PEboetd,4? Etd, - pge 9
Irraiderrblry, lhe EnEi6 tJot ld be:
Ul,on rEceipt of IFF:
cash.............................. ..................25,000
Notes Receivable........... .................90,000
Lrnearned lnterest Income (P90,000 - P58,234).... 21,766
Franchise Revenue........ %,234
Unearned Franchise Revenue. 3,000
Ifeouioment was sold:

6r. A

52. B

2019
12131/2018: Cur.ent (remaining) forward rate (120 days).....................,.P 1.187
4/30/2019: Spot rate.... ........,.-............................ 1.210
Forex loss per unit........ .................-......,.............P .023
Multiplied by: Number of foreign cunencies................-....................-........ 1-000 000
Foreign exchange loss due to speculation......... .PJ,@ (B)

In sFanlation one b nerely Wng lo gain - notd@te aD oli*lting Pailr'on.

ture0o eGhange lbtu/atds uN in spulations aE valud at dE drarrge in thc forward nb lor the
remaini1g life ofaE @ntract

63. D
s,300
14,000
Applied fdctory overhead (150% x P14,000)..... .. . . .. 21.000
E--30100
Since, the allowance for rework was irrcluded in the manufucturing overhead budget,
therefore, the rework cost should be charqed to factory overhead control.

64- C

20,000
493,000 a98,txlo ---------+a98,lxx)

15,000

65. B
Inci4entalty, the enty to r%otd the la1sactions relad to by-ptoduct t ou/d be as hlbw,
ShaE in ioint CosB (@rr6@ndi/M tdEtion in CEo. nain rydtct as sbd in the ombbml
work in Process - Soloc (by-product)................... .. ..-.................................... 75,000
work in Process - Coco (main product)......--.-.... 75,000
MV of by-product (P3 x 45,000)...................P 135,000
Less: FPC of by-product
(P30,000 + P22,500 + P7,500)...... 60.000
Npt aFvpnrp rprtrtinn ln arrn'(.o<t( P 75 nno
Advanad FaarchtA@urrfi ry & Rcponiog $fa6on b Finat Prebard.s{ BrH, - pge 70
Funher Pt@sslno Costs: i

work in Prccess - (brfioduct)--.-.....,,-.-....

Soloc -.- 90,0m 30,000
. Raw materials
Dlrct labor or Payrol1..............-.....-..................................................... I 22,500
Factory O!rhead - applied.. ..-,.. .. . . | 7,500

Tlansfend to l aehousc/Stnbfrm:
By-product Inventory - So1oc..............--.....-.--... ,.--.....135(x)0
Work in Process - Soloc. 13s,000

Or- alblrativclv the lollowino @rnnourd dnav would be Drada:

By-product Inventory - So1oc............................. ..........135,000
Raw Materia1s............... 30,000
Dired labor or Payroll... 22,500
7,500
work ln Process _ coco 75,000

56. C
Actual FOH......-----.....,--- P700,000\ conuollable
BASH: 38,000 units x 2 hours/unit = 76,000 hours > P a.000 uftt.
Fixed as b'rdgeEd (P3lhr. x 80,0m DL}|)........-P240,000 /
Variable; (P5lhr. x 76,000 DLH)............, ............ 456.000 696,000 \ Volume
\ P12.ooo unf.
Std. FOtl / Applied FOH: [76,000 hrs. x (P6 + P3)]....... 684,0A0 /
67. C - reler to No 66 for further computations.
68. C
The P5,000 000 are considered temporary restricted since it has a purpose which have not yet been
tulfilled.
The P2,000,000 prlncipal which had to be retalned (meaning to be held ln perpetuity - prmanent) is
ddsified as permanenw restrlcted, wlrlle the dMdends is dassified as tempordry restricted because of
purpose rcsulctlon, but t0 no avail, amount is not glven.

69. C
MV of By-product Zest. ..............................P 5
expense..........,
Less: Selling and adminlstrative 2
OpeGting protiL........... .-.......-............ I
Share in Joint aost per unit.................................. .............................P ,
* Units produced......... ..... 1.000
Share in Jolnt cost-....... .............-..................8_2J]gQ
70. A
Hvo. MV lt. Costs
Pep: 5,000 x (P50-P10)= P 200,000 x 50% = P100,000
Vim: 4,000 x (P40-P 5) = 1a0.000
LZA@o P170.000*
loint C0s6.........,........-- ..... . .......................P172,000
Less: loint costs allocated to 8y-product................ .................-........ 2.000
.loint costs to joint produd5............................... ...................,.......-.eg).@

Sales of Pep: (P50 x 5,000)..-................-............ ..,......-i. ...... ........ P 250,m0

' Less: cost of Sales:
Joint cos8.......-.....,,...... .................,.........-........1.,p100,000
Further processing cost 50.000 150,m0
GIoss profiL.....-............ ...................-...,......,P 100.m0
you6.l ,or you &nd lnq. lhon yo', thtrk you do,
IruJt
w. @ na.r qtos cu@ir6! L B.. lv. or. oV ei..n lh. oppodunlli.. ond it i! lo u. td dok thG lEsI od ol it.
'rp
Io ochieo o[ lhat L pottbl., w. dwrl ott.hpl lho i.npdtit L.
No on. bui HlMsELt con lllr th. cmpllh.r ol ou iout
roih L rh. b.!i,rnc ot hurnon {kolio.. f'thoul loilh il i Lnpo$iblG ld lden rrn in tho couto o, h& tre nol lo loil, oot lo
becom. o6ihorr, o. terLh, or unrcspohrive. for it k toilh lhot roltes lh. mi.d loyord GOOt penpe.tive on humcn lae.
When ol| .b. k lort. lhe I'Jlurc fll r.moiB.
Our d.rliny k in whol w. do .v.rydcy. bd et on whot oih.r p.opL will h@. lo 3oy.
lwllln.r..odmllob.bckolonylhlh!lor'|nyooothcllsppl,ollmyn..lroccqdntgbHbdchGtncb.ybyJBUICh,itt.'
Oppodunnbt or. utuo$y dltgult.d o. hddwod( $ n, p.opL ddl rcocnts. th.m.
 l

i ReSA
The Review School of Accounbn.Y
R. Papa con S. H, Loyola SE Sampaloq Manila
j fel fl6, 73'r-394!, & 735-98-oz

Aduand Financial Accoanb'ng & Repotting Sotution to Qaiz 2 - 34 Batch

l. c
Home Office Books Bronch Books
I {Bronch Curleni- (Home Officecunent-
Dr. boloncel Cr. bdloncel
Unodiusted bolonce P150,000 P117,120
Add (ded!rct) odiustmenh:
tn ironsit 37,500
HO A/R coLlecied by br. 10,500
Supplies returned ( 4,500)
Enor in recording Br. Nl ( 1,080)
C.ish senl to bronch
lo Genelol Expense by HO 25.000 - 25.000
Adjusted bolonce n32A -ZL92A
2. d - refer to No- I foi computotion
3.d
Billed Price Cost
Merch- lnventoN. 12l31 /20x4 .Pr2000 Pr 0.000 P 2.000
9_600 4.000 I -600
Cosl of Goods Sold P 3.600

"P2.000 / 20% = P10.000 + P2.000 = Pl 2.000.

Merchondiseinveqtory,Decemberl,20x4...........................-..-......P15,000
Less: Shlpmenh from home office ol bi,led price'.....-.......-................ 12.000
Merchondise from oulsiders..-....-................ ....P,1-000
A. b
an November 29, 20x2, the following omooots shodd be recotded by Mdnilow, ignoing
interest paydble on lhe /oon. Ihe cosh odvonce from lhe bonk is ,7dns/oled ol lhe role on
lhe dote lhoi il wos received 1J,520,0O0 yens \ P1 I 1.52 yens = P1,000,A001 ond o liobilifl
recorded for the sofie omount.
5.b
A5 the /oon wos slil, ouislonding ol the end of the period ond it is o monelory iiem, it shou/d be
refronslo'ted ol lhe exchonge rofe at the end of the repoding peiod 11,520,000 yens x
P1/l -66 yens = P915,663 ,1. 7he exchonge difference shou/d be reco gnized os o gain in p@fif
or /oss fo. fhe penbd. |Pl,000,000\ess P915,663 = P84,337).
6.b
Conecrion; Ar lhe porent enft:ty! yeor-ead exchorge role is 5 bohr: Pl
onstead of 4 boht : Pl)
The gaodwill ol the dole of ocquijilion is P|00,00A H00,A00 boht x Pl I 4 boht), Al the yeor-
end il is rciansloled to P80,000 1400,000 bohf x Plls bohlr. The d,fference ot n0,000 is
recorded os on exchonge loss ond repo,4ed in other comprehensive income.
7. c Nt Dollor I75,000 / Nt Dollor 1.298 = P134,823
-
Goodwil/ is lronsloled of ihe closing lcur.enlrotel.
8 b-N'50.000xol /Nl 1.56=P32,051
P AS2l pot- 47 requires foir volue odiuslmenls lo the cotrying omounfs of ossels ond liobi/ilies
orising on lhe ocquisilion of o foreign operolion ,o be freofed os ossels ond,obilifies of the
foreign aperofion.'lherefore lhey ore lranslofed ol the closing rote of exchonge.
9. c - 160,000 yens x P1 l2.40yens= P66,667
PAS 21 poL 23 [ol requii.es lhe foreign cunency monelor/ ifems, such os irode pqyob/et of
. dn enw to belefronsioted dl lhe closing role ol lhe end of o iepoding peiod.
10. b :
Ending invenlory in the combined income slotement:
From Home Offrce: IP50,00GP6,600) x 100/140 P 31,000
From oursideR F+ffi
Aduand Firrancbl A@untiog & ReprtiDg glation b Quiz 2-3? BaH, -pge 2
ll.o
True Bronih Nel lncome
Brqnch Net lncome P 5.000
Add (deduct):
Overvoluoiion of cost oI gooos lold/reolized profit
trom soles mode by bronch:
Shipments from home olfice. P 280.000
Less: Ending inveniory, oi billed
pdce (P50.000 - P6.600) 43.400
Cosi ol goods sold lrom itome
otfice oi billed price P 236,600
Mulliplied by: Mo*-up 10t t 10 67.M
unrecorded bronch exPenses I 2.500)
True Bronch Nel Income E70-l@
t2d
P77.5m.m0 = P 100.000.000 - lP I.5C'0.000 + P35.C\00.000 + P2.000.000i: P 10.000,000 +
P4,000,000 - P30,000,000).
13. b
P(l2.500.000) = P10.000,000- tPl.5OC.0O0 + P35,000.000 + P2.00O.000 + P10.000.0m +
P4.000,000 - P30.000.000).
l4 c
lhe meosulem ent
Ihe co[eclinq enlry, wllhrn th
Goodwill 2.000.0m
Polenis 2.000.000
15- o
The conectlhg ontry, is:
Goin on ocquisillon 2,000.000
Uobilitles 2.000.000
16. c
Goodwlll 400.000
Eslimoted Lowiuit tiobiliiy 400.000
17. b
on lowsuil
Loss 400.000
Biimoted Lowsuit liobi,ih/ 400,000
18. d - the petty cosh lund ot rhe bronch wos nol used for poymenl since poymeni wos mode
by the home oitice on beholl ol lhe bronch.
l,9.b-IlP17x12,000shores)-(P70.000+P210,000+P240,000+P270,0O0+P90,OO0-
Pa20.000 - Pl0a.C00
20. c
APIC: P20,000 + [(P,+2 - P5) x] 2,000 = Pl64,000: Reloined eornings: P160,000, porent onty
21. o
lnventory: PP230,000 + P210,000 = P440,0m; Lond: P280,000 + P240,000 = P520.000
22.b-lP1eo.cno-1P70.000+P210.000+P240.000+P270.000+P90.000-Pa20.0@)l=P20.000
23. d [P99,000 + (P45,000 - P26.000)] or (P99,000 + P45.000) = P144,000
24.o [{P330.m0/75%} - {P565,000 - P105.000)] = (P20,000) - lull-soodwillopprooch
25.o -Ponly
26. d
Tolol Assels ol P P 960,000
Less: lnveslment in S r330.000)
P 630.000
Book vql!.re of ossels of S 405.000
Book volue reportd by P ond S P r.035.000
lncieose ln inventory 1P45,000- P26,000) I9.000
lncreose in lond (P45,mO - P24,000) 2 r,000
lncreose in plonl oisets [P300,000 - {P225,000 - P45,000)] r 20.000
Goodwill (tull)
Tolol oJJels reporled Pl-.D5-000

lf portloloodwill- some onswer wilh full-goodwili opprooch, since there i9 no goin-

Advdned Financrbl A@unting & Repfting Sotutioo to Quiz 2 -34 Bad, - pge 3
27. d - No eniry should be mode in the books of lhe home otlice, since the freight should be
chorgeoble lo lhc'b.onch ond lhe poymenl of lhe freighl wor mode by the bronch-
?8. o
20x4 ond 20x5:: P12,000 x 80% = P9.600
20x6: P18.000 x B0% = P14.400

-
2Ax4: 1P84.0@ x 8A%1 = P67 ,2A0 lPi ,440 x 30% x 80%) = P66.854.40
20x5: (P102.000 x80%) + (P I ,440 x 30% x 80%) - (P4,800 x 30% x 80%l = P80,793.60
20xd: lPll2.800x80%) + [P4,800 x 30% x 80%) - (P3,600 x 3070 x 80%) = P90,258.00
30. b - {P]4,400 + P432 - P],440 = Pl3.3t2)
Anolysis: Eliminoling enkiet
Upslrcom Solcsi l
So|es........................ ............................-. 14.400
lcost of Soles lor Purchoses).................,.,.. 14,400
I 00% RPBI of P: lP L 440 x 30% =
P a32l
Retoined Eornings - P, beginning (Cost Model)/
Investrnenl in S Compony (Equily Methodl.. ...... 345.60
NCt ......................... ..........................-_... 86.,t0
'Cost oi Soles
{Eeginning lnveniory in lncome Stotement).. 432-@
100% UPEI of P: (P4.800 x 30% = P1,440)
Cost olSoes (Ending lnvenlory in lncome Slotemeni)................. 1,440
lnventory {Ending lnvenlory in Bolonce Sheei).................. 1,440
3r. o - lhere ore no intercompony profit in 20x3 (pdor yeod, so need to odjusl reloined eomings.
32. o - P720.000 = P500.000 + P100,000 - P200,000 +P 20,0ff)
33- d
Corl method: P60,000 x 80% = P48,000
Equily Melhod:
Equity ln Subsidiory lncome/lnvestment lncome

'UPElof Porent (P120,000 x 80%)

26,00!
' P200,000 x % = P I00,000 x 20% = P20,000 x I00% {downnreorn) = p20,000
3.1. d - Downskeom siluotion
I S Componv's nei income trom own/sepoaole operolions
NCI%
^:
35o
Combined buildino omounh P650,000
Less: lntercompony goin 30.000
Consolidoted buildings Pd20-000

Combined Accumuloted Deprecioiion P195,000

Less: Piecemeol recognilion of goin 3.00q
Consolidoled occumuloted depreciolion Prr2-@o
36. c
Originol cost of P__100.000

Accumuloled depreciolion, l/l/20x6 lPlm,000- P20,000) P 80,000

Add: Additionol deprec'rotion 1P100.000 - P80,000) / 5 yeoG x 2 yeors 8.000
Accumuloie.j depreciolior|,, | 2/ 31 I 2O\1 P-_ 8&000

37. c
Solet p{ice P 45.000
Lesa: Book volue
Cosl Pr 00.000
Iess: Accumuloted depreciolion _8!"0@ 20.000
Unreolized qqin on sole P 25.000
Less: Reolized gqin - depreciolion (P25,000 / 5 yeors) x 2 yeors 10.000
Net unreolized gdin, l2l31/20x7 LIJ-000
AOVArr& nt ancial,ll@arrting & Rcpfting brutbn to QaE 2 -3? hdt - page 4
38_ b
Eliriinoting entries:
l2y3l /20x7: .ubsequenl lo dote of ocquisilion
neolized Golh lotlon
Accumuloied depreciolion 5.000
Depreciolion expense 5,m0
lP,a5,00O - leloo,0oo P8O,00o) = P25.o0O / 5yeoro'P4.o@-Pr.00O=Pto@

Shourd be la CfS " Porcn

ia CfS
oep.eck lio dperuo Depr6iolirn e4nre
.,00o 9,CtCtO

1,0@ 9.000

39. b
Monoge qn cxposed polilion:
Volue lhe lorword exchonge conhoct (FEC) ol ih foir volue, meosured by chonges in lhe
forword exchonge rote (FER). Note thol ihe question osks only for lhe eftecl on income irorn
ihe forword cont,'ocl tonsoction; lhus, ony eflect on income f.om the Ioreign cunency
denominoled occount poyoL' e is nol included in the onswer.
EER. l2/12/ra P.90
FER, l2l31/xil P.r3
AJE:
Forword Contoc I Receivoble 3.000
Foreign Exchonge G(,in 3,000
Revolue forword controcl:
P3,000 = I00,000 FCU x 1P.93 - P.to) chonge in forword roles
Foreign Exchonge Loss r 0.000
Account Poyoble r0.000
' Revolue toreign cuffency poyoble:
P10,000 = 100,C00 FCU x 1P.98- P.88: chonge in spol roles
40. b
Hedge ot o Firrr Commiiment
Volue FEC bosed on chqnges in lorword aoie.
A.'E:
:orword Conlrocl Receivoble 3,000
Fore.qn Exchchge Gdin 3.000
Revolue lorwo'd conkocl. rrsing ihb lorword roter.
For6ign Exchonge Loss 3,000
Flnn Commilmenl 3.000
Recognize lost on fkm commitmenl.
Agoin. nole lhol the queslion o.ks only oboul lhe etfect on income from ihe lorword
controct, nol the undedying firm commitmenl portion of the lrdnsoclion

41. b
Speculslion:
Voluc torwoid exchongc conhocl ol loL volue bo.ed on chonges ilr lhe torl^,ord rote
AJE:
Forlvord Conlrocl Receivoble 3.000
Forcign Exchdnge Goin 3.000
42. o
The peso is lhe funclionol curency, ro o remeosuremenl ior lemporol method] is
oppropdole. Cosh ond occounh receivoble ore monelory orsels remeosured oi cunenl
exchonge rote of P47,500 ond P95.000, respectlvely. lnvenlory is o nonmonelory ossel
(cd,fied ol mdrkel vd,ue) ore remeosured ol the currenl exchonge rote of P76,000. Lond
ond equlpmeni, bolh nonmonelory ossels {conied ol cosf) ore remeosured ot lhe
hisrodcoi exchonge roie or P54.000 ond Pl35.O0O. respeclively.

43. b
Becouso ihe iunciionol curency i5 lhe locol currency, o tronslotion (or cufienl role
melhod) is required. Allossels occounls ore lronsloled ot cur.ent rotes.
Advaod Fina0cial A@untiDg & Repfir'ng glution to Quiz 2 -3e Badr -pge 5
44. o
LCU - it is ossumed thol hisloricol roie iJ nol proclicoble (despile lhe presence of it). lhen
PAS 2l requires the use of overoge rote [(2,600,000 - 0)/10 yeoa x I.8LCU per peso =
P144,411)
Peso - expense reloled 1o nonmonelory osset such os depreciotlon rhould be
remeosured using the hi toricol exchonge role lexchonge role when lhe equlpment wos
ocquired), i.e., :
20x2; [],700,000 LCU - 0)/10 yeors = 170.000 ICU /].5 LCU per peso..Pl 13,333
20x3: (900,000 LCU - 0)/l 0 yeor5 = 90,000 tCU /1.6 LCt per peso...... 56.250
,olol.-...................... ............................,...-.Pli9-583
45. o
LCU - lhe cunen'l rote method h used since the lerm "honsloted" wos used, o honslolion
(or curent role method) Ir required. lnvgnlory occounl is lrons,ofed ol cunenl rote
{25,000 LCU / 2 LCU per peso = P12,500)
Peso - ihe peso is lhe funclionol c\rrency, !o o remeosurement lor femporol melhod) is
oppropriole. lnventory is o nonmonelory ossel lcoded ot cosi) is remeosured qt the
historicol exchonge rote ot 2.2 LCU per peso {25.000 LCU / 2-2 LCU per peso = Pl1,364)
46. a
LCU Feso
is Functiono Curencv is Funcliondl Clrnencv
P15.000 = Preodjusled foreign P 15,000 : Preodjusted foreign
exchonge loss exchonge loss
6.000 = Foreign cunency 6,000 = Foreign cunency
ironsoclion lo55 lronsoclion loss
l$100,000-$106,000) -2q.@ =Rerneosuremenlgoin
P2I-QoQ Foreign exchonge
= Bll@
Nel roreion =
lols exchonge loss
Noie: The term 'testotement" used by forelgn subsidiory is on indicoiion thol
the temporol or remeosurement melhod is used.

The greolesi friend of hulh is lime, her greolesl enemy is Prejudice, ond
het cont anl componion is Humiw.

Humllity ls nolhing but ftulh, ond pride ls nothing but lying.

There is no chonce, no desliny, no ,ole, lhql cqn hinder or conlrol lhe firm
re3olve of o delermined :oul.

Unless someone con look inlo lhe core of youl heqrl. qnd rce lhe degree of youl
pqssion, or look inio ihe deplhs of your soul ond lee the extent of your will, lhen
lhey hove no business lelling you whol you con or connol ochieve.
Becouse whlle they moy know lhe odd5. lhey do not know you.

There ore only lvo things in fhe wodd lo worry ovet: lhe lhings you con coahol,
ond the things you con'l co;nhol. Fix lhe firsl, forgel lhe second.
The lnvoriobli mork of wisdom is ,o s ee lhe miroculous in the common.

No one knows whol he con do until he lries

fhere's no lroftc jom on ,he exlro mile.

Worry is lifte a rccking chatu - it will give you somelhing lo do. bul it won't gel
yov onyvherc.
lf yov haven'l oll lhings yov won| be grcteful for the things you don't hove lhdt
you didn'l wonl, .
 ReSA
The Reviewschool of Accountancy
aTel. No. 735-9aO7 & 734-39a9

FINANCIAL ACCOUNTING AND REPORTING Srturdsy, SepL 18,2017

Soluriob
1. D
Net gain P80.000 (1,000.000,9OO,0O0 - 20,000) +.et income of p150,000
Ra!io
Dishwashers P1,6OO t6o/2o0
I^srallation 350 35 /20A
Ma i.ntenance 50 s/200 x P190,000 = P4,150
Totat p2r, ooo

A Balance per bank (P37.200 + p46,'1aa - p49,700) = P34,200

outstanding check, April ( 6,00q)
Adjusted cash balance = Ba]ance per book 223-249
4,C
Book Bank
checks assued/paid- P518,800 P618,800
service charge 1.200 2,800
NSF 15,000 6,000
Outstanding check:s 300,000 255.000
Error 20.000
Error correcred 30,000
Totaf reporred disb. 922, OaA 932,6AA
Understatenen! of d.isb 18,000 0
P940,000 P932,60C

5, AP300,000 (P30-0,000 x -08) P27 6,0AO -

5. BPl0,00Q + P320,010 + P20,000 P14,000 - P336,000 = P60,00c

P49, AAa+ p224,aaa + P6,000 = P27 9.000.

P?0,000 + P320, 000 + P20, 000 = P410.000-
c
Total ooods availab_le for sale P25,500.000
Inventory end (7,000,000 + 300.000 - 800,000) l_6,i9q!!!l
cost of goods sold P19, 000,000
30,000,000
Gross profir:
4.9&
9. B
LO, D
Auctioners' fee p400,000 x 2t P 8. 000
Transport cosrs (P3, 000 + p3,000) 6,000
Total loss a! inirial recoqnition P14,000
11
P300, 000 4 years Deferred Incone P54, 000
t!s_g!q!!t (2) Realized incorne 127 ,oaoj
carrying value P150,000 carrying value P21 1AA0

D
P360,000
Grant
Net .q310,000
Less: Estimated safvage value
Depreciable anount P305,000
- Estimated usefuf life 8 vears
13. A
14_D
seI.l.i:19 price P1r200,000
Historical value
Unrealized Gain io retained earnings P 400,000

t5. c ryP: PJz(,000

EVOCI p320, 000 + p20,000 = P340, 000

16. B
t7- D
shale in the arnount of dividerd P180,000 x 209 P 36,000
Unrealized gain iP2, {00, 000 2, 15r,000 250,000
P28r6,OOa

18. B
19. C
20. c
Cost model: f,air val're nodel:
Historical cost P580,000 40 Years Historical cost P580,000
Depn-14-17 (58,00i1) ',Unrealize loss ( 30,000)
ca!rying value L2 /3r/ 71P522, AOO Eair value P550,000
rair wafue 510,000 Fair val.ue 510,000
Impaj.rment -IcsS P 12,000 Unrealized loss P 40,000
Depxeciation/r'ear 14, 500 Depreciation,/yr 0
P 26,504 Total expense P 40,000
2a. B
22. B
Beqinninq ba-Iance P860,000
Purchased during the current year 180,000
so:d during the curlen! yea! { 80,000)
Ending bafance P960,000
Less: Accmul3ted depieciation, end of year 450,000
carrying value of depreciabfe as3et P510,000

AccDmu-Iateddepreciation, beginning of P397,000

Depreciatron .juring the year (96D,000 x 10t) 96,000
Accumulated depreciation on sold asset (P80,000 - 3t,000) ( 43,000)
Accmulated depreciation, end of yea! !l!!,!! q

23. C Trenching and sanplinq P]00,000

Depreciation 1s0.000-
Professional Iees 250,000 :
In:angible - E and E asset P500- 000
24- A
25. A
Total impair$ent loss P3, 000,000
G.odw:.fI inpairne.t 2.000,000
Rsnaining inpairhent loss P1,000,000
PPE before irpairnen! Ioss P6,000,000
share ln the i.npairment Ioss:
5/ 10 x Pl, 000,000 { 600,000)
PIE afler impairnent loss P5,.100,000
26 B
21
carr)_ing arnoLrn! P5aO, OO0
Eair value ]ess cost to sell (350,000 - s8,000) 802,000
28 B
29 c
Year-eEd balance P900,000
Beginning balance P400.000 ,

Inlerest on begr-nning bal-ance 7? x P400,000 28,000 423,000

Additional provision during the year L4l?._q!9
30 D

P10,000,000 x 909 x 0 = none

P10,000/000 x 6t x 30t = P180,000
FAR . FINAL PRE-8OARD SOLUTION BATCH 34
I P10,000, 000 x 4g x 70t = P280,000
Total P460,000

1 P460,000: x 608 = P2?6,000 x .9434 (63) = p260,378

2 1460,000 x 309 = P138,000 x .8134 (?3) = 120,529
3 P460,000 x 10: = P 46,000 x.8163 (71) = 37,550
Toral provision P418.452
31_ D
32. B'fhe enployees decide whethe! to take t}eir ieave dDLL.9 the next annual
Leportinq peri'Ld. Manor Conpa)iy does .ot iave an uncanditional rjghx ta
defer set..tenent of tne lialrjljty for at .least 12 no.ths afaer t.he reiartinq

33_ D
Purchaseprice of a prani.M P e.00
Additional cost: Mailing cost 5. 00
Renirtance
Ne! .usEs ro oe sacrrf-ce in grving anay a plenLum -11_9-_9-9r
P 3-00
X totaL est:inated nwrber of preniuns to be qiven (see sch) 330.000
Preniun expense - 2 017 P990,000

I,rrappers redeened 2,8oo, ooo

Estinated nunber of Brappers to be redeemed in 201? 1,8oo, ooo
Estinated nunber of wrappe.s to be redeened in 2016 (r.300.000)
Total estanate for 2 011 3,300,000
D-vicl.d by n-ftbe: o' ^iaopers ro! every prahrm 10
Totai estimated nunber of prendums for 201? 330,000
34. C
35 - D
36. D
t/ i/ ts 1,667,518
6/30 /75 90, 000 100, 051 I0, 05I 1,617 ,569
12/3\/L5 9A, OAO 100,654 10,654 1,648 | 223
Total 200,705

37- c(P3,081,000/ 3) - (P1.000,000 x .98) = P4?,000 Sain.

38. A
39. B
4q. B
Anlount received on January 1, 2017 p].500.000
Ahount realized froh ian 1, 2013 to Dec. 31, 2016 (p1,500.000 x 4/5) 1,200,000
Unearne<t rental as ofJanuary I, 201? p 300,000
11. C
2017 (Jan) p1.000, 000
2Ol1 25a,AOA 50,000 200,000 800,000
2018 250, 000 40,000 210,000 590,000
2D79 25C,000 29,5AO 22a,5A0 369,50C
?ne a.rangerenr rs a finrn.e 1ease. At rhe ihcepaio, of the .1ease, ahe .lease rraDsfers
substa..rrt.ly all the.isks dnd re{ards incidentrt to orre.ship f.oh ahe l.issor ro rhe tessea. r,
sulst,.ce tre are assec fro, ahe inceprio, of rhe teas.. rne flnance tease
.lassifr.icion is evi.lerced by the fo)laeioq:
'sains and lDsses f.oh.ne fluctD,rion in the.esiduat va.1!e of.ne leared asset a.c!ue to the
lessee, i,- as the caso naybe, in the forn at rental rebaLe ar the patmertt in fnTfillnent of the
qlaraotee obligatia.-
rat the jn.eptio, oI ane leasd rre p.esena va)De af the hirinu, lease psynents (incl,.ring the
qoarartee.t residn.) va)re) anoDnLs to a leasr sDbst,,tr,.l.ty alt of rhe fair vdlue of t,h leased

SeILi n9 price ' p45o,0oo

Fai. value 600,000
Deferred loss -12/37/16 Pi5O,000
Afrortization ( 15,000)
. Defe, r-o l. ss - I ''.1 . Fil:,ooo
Prevailing rent rent expense P75,000
turountof rental paid 60,000
Dei-r--d pt,,ooo
 I
44 _ A
first year P2r6,a0o Y. 9/12 P 162, OOO
Second to fourth year P337.500 x 3 O 12, 500
1,
Total cash re.t P1,174,500

Annual lentaf incode - fi.nancial P 293,625

Rentaf lncome - taxaaion 762. AAO
Euture taxable amount P 131,625

OeferEed tax t iability P 42.120

45- A
2016 (P240,c00 - P45,000) x 303 = P 58,500
20ti (P210,C00 - P?5,000) r 24t - 32,400
201e {P150, O0o - P105, 000) " 24t = 10.800
ToEal DI01,700

46. A
Fai! value of shares i.ssued (200,000 shaleE x P12) P2,400,000
Less: Par value of shares issued {200,000 x P10) 2, 000, 000
share Premium P 400,000
],ess: Ilansaction Costs 80,000
Adjustd share prenjum 9_g,!qq
41 . C
Book value of liability:
PEinci.DaI P1,998, 000
,,ess: Eai! value of property L ?o-9!q-9-S
Ga-in on settlenent P 198. 000
48. B
49- B
Plan Iiabil-ity/PBo P1,140,000
( 690,000)
Accrue.i pension P 450.000
50. B
Current service cost P300,000
Intelest on actuarial benefi! obligation 164,00O
Inte:es! income on plan asset ( 80,000)
Retj.lement benefit cost to profit or toss P384- OO0

ActLraI retuh on plan asset P19s, OOO

Reheasulenent ,lain on plan asset !!st!9
Inteaest income on plan asset P 80,000
51. D

53. Dt8,500 x 80 x lP2l.50 - P22)) = P3,?40,000

54. D
55. D
56- C
Ba-Iancc P4, 500, 000
ovelstatement of depreciation 375,000
Net income 825,000
Dividends t 500, c00)
Ioss from re-issue of tleasury (P50 - P35 5,000) ( 75,000)
Adjusted !5,_LZt_qA.q
57. E
58. C
AccunuLated losses P2?.000.000)
Reduction in the value of inventory 3,500,000)
Reduct:on in the value of PPE 5,500,000)
Reduction in lhe value of Intanglbl.es 5,000,000)
unEecorded Liability 5. ooo, oo o r

TotaJ. (P45,000,000)
Elinlnatlon of deficj.l thru Share plendum 30,000. 000
Eliminatton of deltciE Lh.ru share cdpital 15, 0 oo, 000

FAR - FINAL PRE.BOARD SOLUTION BATCII 34

 Balance of accumulated profits and tosses

share capital before the quasi P?5, 000,000

ELimination of deficit thru shale capital {1s,000,000)
Share capilal after lhe quasi.-.eorganizatj.on P60,000,000
Divided by numbe. of shares oulstanding (P?5,000,000/P50) 1,500,000
Par value per share after the quasl-reorganization lLQ pelElerc
59. A
60. B
101 Ps
P500.000 P6o0, o0o P400,000 P800,000
Divadend on 10t 100,000 (100,000)
Dividend on 12* '12, oao ( 72,000)
Dividend on os (10t ) 40,000 ( 40,000)
Balance fo! parlicipalion 196,000 23!,2Q. 1!q,q q (588,000)
Shareholders' equity P?96.000 P9a1 ,2AO 595, 800
Dlvide by number of shares
B6ok value
61. C
62. B
Basic EPS = 418,000/200,000 shares = P2. 09
Increnebtaf EPs:
Inlerest expense, net of tax 1,057,830 x 7i x 63t '. P50,829
shares issued on the conversion of bonds 20,000
Inclernental EPs P 2.54
l EPS js greater than C,he Basjc E?5, the convertible
,r,hen ane rrcrefrenta
secuiiEy is considered anti-di.lLtive securixy. hence the cotupany should
onTy discLose tie Easjc EPS
63. B
64. C
Accumulated depreciation, 12 / 31/ I? P395,000
Accumu.Iated depreciation on asset sold:
cost of asset sold P125,000
Book value of asset sold:
P60, 500
4 000 64 500 60,500
Total P4s5,500
Less: Accu.rulated cleprecialion, t/ L/ r't 3?0,000
Depreciation during the year

Decrease in -inventory P300,000

Increase in recervable (100,000)
Increase in trade payables 50,000
Oecrease in accruals of expe.rses (150.000)
Net cash irlflo, Pl00,000

lnflot fro( disposal:

' . P20, OOO
of asset sold
Book walue 20,000 P 40.000
Oulfiok fron acquisition 150,000
Net outflo, Pl10,000
61. B
58. D
69. A
?0. A
ReSA REVIEW SCHOQL INC. SOLgTIOT{S GUIDE AUDmllG PROBLEII{S
FIflAL PnC-BOARD EXAI.IIN ATIOT{S BA'CH 34 IRENEO/ESPEI{ILLA

PROalEri 1: CORpOR TTON

'UCO InventorY AccouotsRecr
UoadlrEted balances 214,500 519,800 312,4b0 1,290,300
gecemb.r sales enths:
5I 20822 to consignee 15,450 (3O,9OO) (15,450)
Sl 20823 in t6nsit FoB Dest, 20,250 (40,500) (20,250)
SI 20824 in traosit FOA SP (10.300) (10,300)
January sale5 entriesj
sl 20825 in transit FOB SP (18,400) 36,800 18,400
SI 20825 in t.ansit rOB gen. 11,800 11,800
Deembe. purcha* enlri6:
RR 64136 frcm consiqno. {2O,5OO) (20,500)
RR 68137 19,900 r9,900
RR 63138 in tonsit FOts Dest. (20,800) 20,300
.)anlary pu.ch.sc eoHes:
RR 6a140 in tEosit FOB SP

1- Ac- A. 2. An.. B.

PROBIEIi 2: iICA CORPOnITIOI{

Oepre.iation - SuiLlirts
6e9inninq Balancc, Cv 3,149,280
Multiply by: Oouble declining mtr 10Ya 314,92a
B!ilding Imprcvement
850,000
l'luluply by: Double declining r?te based
on AIdq s ehaininq life (16ysr) 12,5006 r06,250
Total .leprecjation .rPens.
,ttate: Tnfluqh tial aod e@r, o.e can figurc out b.ad oo thd at.rn oeo..-abg balance that fie belldinq hasrl@dy
aee^ depreciated fot 4 yea. as of oe@nher 31, 20r5. fnrs the building's rcmahing life as of )an6ry 1, 2016 is 16 yaa6.

--f=,,,rrl
Cash gnce of new automotive equipment 800,000
l6s: Cash payfrent made __rq:9p99l
Lade in allowancey'Fair value of old eqpt. 1s0,000
Ca.rying v.lu. oroB equpment
P500,000 - (500.000118/21)
Gair oh Eadein

Oep.ciation - Hachinery and eqliphent

oeqinnin0 Balance (Dep.siable Cosd 2,160,000
Orvide by: usefu! Iife l0 216,000

New machinery (P800,000'909 ) 720,000 '

10
H!tliply by: 4Bos/12mos 4!12 24,000
Total d.p.eciaiton .xpeni. -----E0pcf,
PV ol rnstalhent payments:
959,2fA
Oivrde by: 5 ydE 5
Instdllment payment? in advance 191,853
Muilpry byr PV of 1 at 10% for 5 pedods in advance 4.169865
cash price equivalenvlnitial cost oflne new machine 800,000

Depreciatjon - Automotjve equipmnet

8e9innln9 Aalanc 152,380
Lc.s: Oep.ecbt ctn on old equgnnt trad.d ou!
P500,oo0.2/21 (47,5r9)
Add: Oepreciation on new equipment tGded in
m00,000.6/21
. Total dcp...irtioD expeBe
 cvw r.vN' l,r,lr,E AUDTrI G PBOBLFUS
FINAL PRE-BOARD EXAMINATIOIIS BATCH 34 IR"ENEO/ESPE(ILLA

PFOaIEM 3: GIIYO CORPoilTIotl

ANALYSIS
. Invoie
ejuttt"nts, loju"t"a aut.
qustom.r
o6lt2l16 127,000 127,000 G3o days
,. 29ltot!6 84,000 (14.000) __3pgl 6140 dars
------192/999- rr' e*' a'
3OtL2/r6 42,000 (42,OOO)
27/09t!6 30,000 , 30,000 91-120 daYs
2OtOAl76 53,520 r20 daYs

lOlLUt6 40,000 .-il:llove.

4O,0OO 0-30 days
oal!2176 80,000 80,000 0-30 dats
25l1rlt6 63,600 3l-60 days
183,600
---.19f!E99-
\llli6 138,840 (18,840) 120,000 31-60 days
o9ltolt6 t32,0oo 132,000 5l_90
I
days
20108l\6 71,1OO 12o .lays
. 326,400
toltut6 250,ooo (90,000)-Z!g-qle,
,,6rr,000 o.3o d.yt
12. An.. B.
12/09/t6 104,400 (104,400)
t.2t9,760 1,741,040

14,000
AR (Zinc hc.) 14,000
{84'70)a(84,000/84)

b) Sales 42,000
AR (Y.nlce Co.) 42,0OO
salE with commitmedt to lnsaall is wlid oaly wha lnttatblion is @fipler.d,

t8,440
AR (Wnrie Co,) 18,840

d) SdB(250,c00/2,5oo!)'500u 5O,OOO
commislion expense (2,c00u rP100)a20vo 40.000
aR (Vi.or Corp.) 90,000

e) Allowance fo. B.d Debt 104,400

AR (UrluL lttc.) 104,4@

ADJUS]ED AGING SCHEDULE: Requked Allow Allow.nce

l}.3O o.r
@e.ember lnvoices) ,r07,000 106 4,070
3l-60 OtYs (NoveLnber Iflvoices) tE3,n00 2"/o 3,672
61-90 Oayi (Otober Invoic6) ?02,000 5% 10,100
9l-r2o OaYs (s.ote.nber tnvoic6) 30,0@ 10,16 3,000
More Uan 120 Days (augustand @nir) t27,920 50% 53,960
frso-;ro I f-r1-31.oo;l
13- ln3. C.

15. Anr. B-
Allorence for Bld debts, beg 52,500
Add: R6.overies 24,800
'foEI 77,300
Lessr Allow.nce for aad dbts, end (84,802)
Writc-off ol aR (14,2OO)
Addluqnal Write-of Per +dit 'ro:t-,too)
8ad D.bt Exp.ns. I (156,10211

,/A
 r4 ErE .rrrt! rL lltrL. S(,LUIIOIIS GUIDE AUDITI'IG PROELEI'S;
FINAL PRE-6OARD EXAIIINATIONS BATCH 34 tREr{EOlESPENTLLA
I laaclEll:-ItsaloaL
Bank Reconciliation t2l31/2016
EANK EOOK
lJnadjuned balan<e 524,570 . 293,200
oeposit in tcnsit 54,500 250,000
Outstanding check (1sl,950) (15,600)
45,900 11,500 Boot emr (note.., undernited rceipo
22,500 Eook errcr (note b., overstated dlsb-)
Core<t aash b.l.n<. ( 15. ans. C) 577,020 581,600
____gEqqr Shortrge (17. Ans. B )
517.O2O

Total receipts per books from lan. 2 ' 10 317,5s0

Unrccorded oedit as of 12131 Eco.ded in books in l.nuary (250,0c0)
6ook erc6 in lanuary (audit note a and b) 39,000
C.sh @ll.<tion3, p. booksfrom Jan.2. 10 lO5rSSO 1A- An.. O.

lMuary deposits lrom lanuary collctions

.lanuEy bank credits 156,790
Correciion of Oec, bank charqe er.or (45,900)
oecembe. deposit I. iransit (54,500) 56,390
C.sh and Ch*ks on hand (Oerositable) 30,250
Expense vouche6
C.rh QYERAGE ,rom Jan. 2 - .ran. 10 L___l?tl9! le. ^n6. a.
20- anr. D.
:

PiOBIEM 5: MONSTER INC-

21. Ans- a-
estmateo premrums exben*:
Numbe. of Prcni!ms (a0,000'609a)/5 4,800
Multiply byr Nct etpense (95 25) ,o
336,000
Actualc6st paid:
Numbe. of P.ehiums (a,500 - 1,200) 3,100
Multiply by: Net expense (95 25)

Estim.t d p..niu'B r.vablc

42. ans. c.
WaEnty expense 2014 {P4M.8Vo) 320,000
Lss; Actual@st paid rn 2014 (127,500)
Estioated wamntis payable, 2013 192,500
Wa.ranty expens! 2015 (P4.525t{.8%) 362,000
Lessi Achralcost paid in 2015 (233,750)
Estimated wardnties payabre, 201a 320,750
Wa@.ty expense 2016 (P5.275M'8%) 422,Otlo
Less: Adual @st pard ie 2016 (285.2s0)
Enimat.d wa...rtielpayable, 2016 flr-hd
Futre deductjble amounts creainq Oere.red Tax Asels
Enimated Prefrisms payable r05,000
Estimated wamnties payable, 2016
562,500
30vo

Future taxable amount creating Defered T.r Liability

Exc6s tax dep.*iarion ove. frnancial d.pEciation

Deferrld rar li.bility

,

Ac@unts p6yable 2601000

Estimated premtums payable 105,000
' EstimaGd wamnlies payable, 2016 457,500
Accrued salaries 240,400
Notes payable, curEnt 50,000
a.crued inte.en on Note5 75,000 (5O0,00.2o%'9l12)
Curcnt liabilitics fl*8iloo I
 Oeferredt x liability 75,0OO
NoEs payable, noncurrent 450,000
Bdnds pa}?ble
Total Non curent liibilities

PROBTET4 6: HORI{IITG RUSH COHPANY

1/5: Cash. net(2.350,000'150,000) 2,2o0,ooo

o.drDary sha16 (10,000*P100) 1,000,o00
Share premium - Ordinary Shar6 540,000
2reference shaE (5,000rP50) 250,OO0
Share ptemiurn - Preference Sharer 410,t oo
comDut.tion:
Lump sum i$ue price 2,200,000
OdiDa.y Shares (10,000'140) 1,400,000 1,54o,ooo
Prefrence shares (5,000'120) 600,009 . 30% 660,000
2,000,000

2/16: Sub6oiPUon receivable 60o,o0o

Prefenc share.ubscribed 250,000
Share premium _ P.efe.ence 350,000

500,000
Ordinary shares 200,000
Sha.e premium _ Ordinary t0c,000

'220,OOO
4/20: Treasury shaB - Ordrnary
720,000

6/30: Retained eamirgs s40,ooo

Ca5h divid6nds payable/Cash s4oro0o
Ordinary Preference
lanlary, bal.nce 40,000 20,000
Jan. 5 issuan.e 10,000 5,000
. Feb. 16 subsc.iptron 5,000
Mai 25 issuance 2,000 .:
Apr. 20 t.eas'.r.y 14,000)
Outslanding a^d subs.ribed 48,000 30,000
Casn dividends 5.O0
Total c.sh dividends
----16;00 3oopoo-f-s4o,oool
7/30i Csh 310,00C
aetained ea.rlngs 5O,OOO 24. Ans. B.
Treaiury sh.e 360,000

8/l0r Relained earnings (50,000'l5o/o'P159) 1,192,500

Shar die payable/Ordinary shar6 750,000
Sh..e P.miud 441SOO 29. Ani. D,
lun 30 Outsldndinq Ordinary 48,000
lul 30 Aeissue treasury shares
aug- 30 Outstndrn! ordinary 50,000

9/15: Cash (5,000'P120"80%) 480,000

SubcriNon receivabre 480,000

Preference shar6 subscribed 200,000

Prefernce shares 200,000

1213 Retlircd carniDgs 5a7,5OO 30, ans. D.

Cash dlvidends payahle/Cash 587,500

lun 30 Outstanding and Subs. 48,000 10,000

30 Reissue treasury shares
.)ul 2,000
Ar9 30 Stck dNidends 7,500
Oec ll Outstandi.9 and Subs 57,5O0
Gsh dividends 5.O0
Iotal cash dividends

1231 Income suom.ry 3.510,000

fGtalned ear.iogs 3,510,000
Resl
The Review Schoot of Acountancy
tt6l- alo. 735-9aO7 & ,34-39a9
4ofs
ReSA REVIEW SCHOOL INC. SOLUTIOT{S GUIDE AUDTTIIIG PROBLEMS
FINAL PRE-BOARD EXAMINATIOTIS BATCH 34 IRE'{EOlESPENILLA

PROBLET' 7: GAiCTA COMPANY

2oti_!! 2srtu 2016 Nr 2016. RE_ B
A. balances
Un6djus@ 520,000 580,000 710,000
B, Endrns hventory over 2014 (50,000) 50,000
Endinq nN.ntory, ovs 2016 (4O,0OO)
C. Ending lnvmotry, uoder 2015 14,oOO (14,000) 14,OOO
Endl.g hvenotry under 20tU 8,OOO
O. AR/Sales, unde.20r4 25,000 (25,000)
Ai/Sales, under 2015 22,000 (22,000) ZZ,O0O
E. APlPurchases, under 2015 (12,000) 12,000 (12,000)
APlPuEhlsg, under 2016 (10,000)
F. Equipment, under/Expense, over pe. year 240,000 240,000
Depr ipense, unde. (2015 EqlipnEnt) (24,000) (24,000) (24,000)
G. Ove. in Misc Income ftom sale of EqOt (IOo.oOO)
Gain on sale or Eqlipment 20,000
H. UndeErateme.t in inrerest expenre in 2016" (66,243)
l. 2015 unrcorded dividend declaction (120,000)
2016 !nre.o.ded dividend decla.atlon
ATDUSTED BA!./EFFEcr oF ERFoRs ffi
31. Ans. B. 32. Aa.. B- 33. Am. A, 3a- Ans, A.
Bonds payable, FMV 1/1/16 (at S yield cte)
PdncipalAmoont(tt1,000,000.0-68058) 580,583
rnteresr {P1oo.000.l.ee27r)
payable _-__l99Jz!_ r,079,8s4
face vrlue of Bonds 1,000,000
Pr.hium/Dedlctd frcm intect expense upo. issuan.e 79,A54

'* 791854) 20,146

htErest erpense per books (100,000 -
Int re.t erpcBe per audit(L079,854.8%) !6,188
understarment n tnterst Erpn* T--6,ttl
35. Ans, C.
Amortizalion Table; 10%, Bonds Payable
lanuary r. 2016lss! date L,O79,A54
oec. 31, 2016 rnteresr paYmenr 100,000 86,383 13.612 't,066,2L
Dec. 31, 2017Interest payment 100,000 85,299 14,70! 1,051,542
Occ.31, :018 InterEst payFent r00,000 44,t23 15,477 r,0t5,655
De. 31.2019 inte.est paymenL 100,000 82,853 17,r47 1,018,519
De.. 31, 2020 l.terest payment lo0,o00 81,4a1 18,519 1,000/0OO