DE LA SALLE LIPA

CPA MOCK BOARD EXAM

PRACTICAL ACCOUNTING TWO
Direction: The following questionnaire consists of seventy-five (75) MCQs numbered 1 up to 75 contained in
EIGHTEEN (18) pages. Answer each question on the MCQ Answer Sheet by shading completely the
appropriate circle corresponding to the letter you have chosen. (Read the Marking Instruction on the Answer
Sheet) Avoid erasures on the Answer Sheet. If you need to make corrections, erase completely the answer you
want to change. Do not explain your answer in the MCQ portion of the exam. You will not earn credit for that.
Keep the Answer Sheet clean. Do not make unnecessary marks on it. Do not fold, roll, scratch, crumple or
tear it. You may write on the questionnaire and use it as scratch paper but make sure to transfer it to your
Answer Sheet. Provide ample time to transfer the answers if you choose to do this. HAND IN YOUR ANSWER
SHEET.
1. The Arrow Foundation, a non-for-profit organization, has the following cash contributions and
expenditures in 2011:

 Unrestricted cash contributions of P500,000.

 Cash contributions of P200,000 restricted by the donor to the acquisition of property.
 Cash expenditures of P200,000 to acquire property with the donation in the above item.

Arrow Foundation’s Statement of Cash Flows should include which of the following amounts?

Operating Activities Investing Activities Financing Activities

a. 700,000 (200,000) zero
b. 500,000 zero zero
c. 500,000 (200,000) 200,000
d. zero 500,000 200,000

2. The following information was available from DE LA SALLE LIPA, a non-stock non-profit educational
institution, regarding its accounting records for its current funds for the year ended March 31,2011:

Restricted gifs received Unrestricted gifts received

Expended P100,000 Expended P600,000
Not expended 300,000 Not expended 75,000

What amount should be included in current funds revenue for the year ended March 31,2011?

a. P600,000 c. P700,000
b. P775,000 d. P1,000,000

3. DOLE, a government agency, had the following account balances as of December 31,2011:

Current Assets P10,000,000 Other Assets P 5,000,000

Investments and Fixed Assets 90,000,000 Liabilities 18,000,000
Contingent Liabilities 5,000,000 Contingent Assets 3,000,000

What is the amount of Government Equity as of December 31,2011?

a. P105,000,000 c. P82,000,000
b. P85,000,000 d. P87,000,000

4. NBI, a government agency, sold a 50% depreciated motor vehicle which had an original cost of P300,000
for P200,000. The proceeds shall be deemed automatically appropriated for the purchase of replacement
higher capacity vehicle worth P500,000 net of applicable tax. The agency subsequently received a Notice of
Cash Allocation for the puchase of the said vehicle.

What is entry to record the receipt from the disposal of the motor vehicle?

a. Cash – Collecting officer 200,000

Due to Bureau of Treasury 200,000
b. Cash – Collecting officer 200,000
Gain on Sale of Disposed Assets 200,000
c. Cash – Collecting Officer 200,000
Acc. Dep. – Vehicles 150,000
Motor Vehicles 300,000
Gain on sale of Disposed Assets 50,000
d. Cash – Collecting Officer 200,000
Acc. Dep. Vehicles 150,000
Motor Vehicles 300,000
Due to Bureau of Treasury 50,000

Mock Board Exam - Practical Accounting Two Page 1 of 18

5. Suits Inc. is a manufacturing company engaged in the production of a single special product known as
“Marvel.” Production cists are accumulated with the use of a job-order-cost system. The following
information is available as of June 1,2011:

Work-in-process P10,710
Direct materials inventory 48,600

In analyzing the job-order cost sheets, the records disclosed that the composition of the work-in-
process inventory on June 1,2011 were as follows:
Direct materials used P 3,960
Direct labor (900 hours) 4,500
Factory overhead applied 2,250
P 10,710

The following manufacturing activity occurred during the month of June 2011:
 Purchased direct materials costing P60,000.
 Direct labor worked 9,900 hours at P5 per hour.
 Factory overhead of P2.50 per direct labor hour was applied to production.
 At the end of June 2011, the following information was gathered in connection with the inventories:
Inventory of work-in-process:
Direct materials used P 12,960
Direct labor (1,500 hours) 7,500
Factory overhead applied 3,750
P 24,210
Inventory of direct materials P 51,000

What is the cost of goods manufactured?

a. P142,560 c. P131,850
b. P118,350 d. P108,600

6. The following data for September were taken from the cost records of the Mixing Department of Grimm
Manufacturing Company which uses the average costing method:
Work in process, August 1 (All material, 50% converted) 1,000 units
Put into process during the month 10,000 units
Work in process, September 30 (All material, 60% converted) 1,400 units
Costs
Work in process, August 31
Material P 24,000
Labor 15,000
Factory overhead 7,600
Put into process during the month
Material P251,000
Labor 193,800
Factory overhead 149,000

What is the cost assigned to the units completed and transferred and to the work in process
inventory on September 30, respectively?
a. P576,000 and P64,400 c. P593,800 and P46,600
b. P605,400 and P35,000 d. P600,000 and P40,400

7. AIR Inc. uses a standard cost system. Overhead cost information for production for the month of October
is as follows:
Total actual overhead incurred P12,600
Fixed overhead budgeted 3,300
Total standard overhead rate per direct labor hour P4.00
Variable overhead rate per direct labor hour P3.00
Standard hours allowed for actual production 3,500 hours
What is the overall or net overhead variance?
a. P1,200 favorable c. P1,300 unfavorable
b. P1,100 unfavorable d. P1,400 favorable

8. Nike Manufacturing uses backflush costing to account for an electronic meter it makes During August
2008, the firm produced 16,000 meters, of which it sold 15,800. The standard cost for each meter is:

Mock Board Exam - Practical Accounting Two Page 2 of 18

 Direct Materials – P20 and Conversion Costs – P44. Assume that the firm had no inventory on August 1.
The following events took place in August:
 .Purchased P320,000 of direct materials.
 Incurred P708,000 of conversion costs.
 Applied P704,000 of conversion costs to Raw and In Process Inventory.
 Finished 16,000 meters.
 Sold 15,800 meters for P100 each.
What is the amount to be backflushed from RIP Account to Finished Goods?
a. P320,000 c. P1,024,000
b. P704,000 d. P1,028,000
9. WIKI Inc. has decided to institute a pilot activity-based costing project in its five-person purchasing
department. Annual departmental costs are P473,500. Because finding the best supplier takes the majority
of effort in the department, most of the costs are allocated to this area.
Activity Allocation Measure Number of People Total Cost
Find best suppliers No. of telephone calls 3 P 300,000
Issue purchase orders No. of purchases orders 1 100,000
Review receiving reports No. of receiving reports 1 73,500
During the year, the purchasing department made 150,000 telephone calls, issued 10,000 purchase
orders, and reviewed 7,000 receiving reports. Many purchase orders are received in a single shipment. One
product manufacted by WIKI Inc. required the following purchasing department activities: 125 telephone
calls, 60 purchase orders, and 15 receipts.
What amount of purchasing department cost should be assigned to the product?
a. P1,007.50 c. P921.48
b. P4,500.00 d. P327.55

10. Viva Co. produces three products, A, B and C. A and C are joint products while B is a by-product. No
joint cost is allocated to the by-product. The production data for the year 2011 were as follows:
 In Department I, 220,000 kilos of raw materials are processed at a total cost of P240,000. After
processing, 60% of the units are transferred to Department II while 40% of the units (now C) are
transferred to Department III.
 In Department II, the materials are processed further at total additional cost of P76,000. On completion
of the process, 70% of the units (now A) are transferred to Department IV while the other 30% emerge
as B, the by-product, which is sold at P1.20 per kilo. The selling expenses related to B amounted to
P16,200.
 In Department III, C is processed further at total additional cost of P330,000. In this department, a
normal loss units of C occurs during processing, which is equal to 10% of the good output. The good
output is sold at P12 per kilo.
 In Department IV, A is processed further at total additional cost of P47,320 after which it is ready for
sale at P5 per kilo.
 Market value method is used in allocating joint costs and treating the net realizable value of by product
as an addition to product A sales.
How much of the total joint cost of P240,000 is allocated to product A and C, respectively?
a. P101,564 and P138,436 c. P95,267 and P144,743
b. P91,210 and P148,790 d. P88,800 and P151,200

11. On May 1,2010, the business assets of John and Paul appear below:
John Paul
Cash P 11,000 P 22,354
Accounts receivable 234,536 567,890
Inventories 120,035 260,102
Land 603,000
Building 428,267
Furniture & Fixtures 50,345 34,789
Other assets 2,000 3,600
Total P1,020,916 P1,317,002
Accounts payable 178,940 243,650
Notes payable 200,000 345,000
John, capital 641,976
Paul, capital 728,352
Total P1,020,916 P1,317,002
John and Paul agreed to form a partnership contributing their respective assets and equities subject to the
following adjustments:
 Accounts receivable of P20,000 in John’s books and P35,000 in Paul’s are
uncollectible.
 Inventories of P5,500 and P6,700 are worthless in John’s and Paul’s respective
books.
 Other assets of P2,000 and P3,600 in John’s and Paul’s respective books are to be
written off.
Peter offered to join for a 20% ownership in the firm. How much cash should he contribute?
a. P330,870 c. P344,237
b. P337,487 d. P324,382

Mock Board Exam - Practical Accounting Two Page 3 of 18

12. On January 1,2008, A, B, C and D formed Bekha Trading Co., a partnership, with capital contributions as
follows: A – P50,000; B – P25,000; C – P25,000; and D – P20,000. The partnership contract provided that
each partner shall receive a 5% interest on contributed capital, and that A and B shall receive salaries of
P5,000 and P3,000, respectively. The contract also provided that C shall receive a minimum of P2,500 per
annum, and D a minimum of P6,000 per annum, which is inclusive of amounts representing interest and
share of remaining profits. The balance of the profits shall be distributed to A, B, C and D in a 3:3:2:2 ratio.

What amount should be earned by the partnership before any charge for interest and salaries, so that A mar
receive an aggregate of P12,500 including interest, salary and share of profit?
a. P16,667 c. P30,667
b. P30,000 d. P32,333

13. Ace, Boy and Cid are partners sharing profits in the ratio of 3:3:2. On July 31, their capital balances are
as follows:

Ace – P700,000 Boy – P500,000 Cid – P400,000

The partners agreed to admit Deo on the following terms:

a. Deo is to pay Ace P500,000 for ½ interest of Ace’s interest.

b. Deo is also to invest P400,000 in the partnership.
c. The total capital of the partnership is to be P2,400,000 of which Deo’s interest is to be 25%.

What is the capital balance of Ace, Boy and Cid, respectively?

a. P206,250 – P206,250 – P137,700 c. P556,250 – P706,250 – P537,500

b. P350,000 – P500,000 – P400,000 d. P500,000 – P400,000 – P350,000

14. On July 1,2008, the Chess Partnership has the following balance sheet:

Cash P 20,400 Accounts payable P122,400

Other assets 219,600 Rook, loan 14,400
Rook, capital(50%) 28,800
_ King, capital (50%) 74,400
Total P240,000 Total P240,000

As of July 1,2008, the partners have personal net worth as follows:

Rook King
Assets P62,400 P91,200
Liabilities 56,400 122,400

The personal net worth of each partner does not include any amounts due to or from the partnership.
Assume the other assets are sold for P123,600 after incurring liquidation expenses of P4,800.

How much should King receive?

a. P12,000 c. P24,000
b. P22,800 d. P16,800

15. Partners Art and Tone who share equally in profits and losses have the following balance sheet as of
12/31/2011:

Cash P120,000 Accounts payable P172,000

Accounts receivable 100,000 Acc. depreciation 8,000
Inventory 140,000 Art, capital 140,000
Equipment 80,000 Tony, capital; 120,000
Total P440,000 Total P 440,000

They agreed to incorporate their partnership with the new corporation absorbing the net assets after the
following adjustments: provision for bad debts of P10,000; restatement of the inventory at its fair value of
P160,000; and recognition of further depreciation on the equipment of P3,000. The corporation’s capital stock
is to have a par value of P100, and the partners are to be issued corresponding total shares equivalent to their
adjusted capital balances.

What is the total par value of the shares issued to partners Art and Tony?

a. P260,000 c. P273,000
b. P267,000 d. P280,000

Mock Board Exam - Practical Accounting Two Page 4 of 18

16. On December 18,2011, the Statement of Affairs of Down Company, which is in bankruptcy liquidation,
included the following:
Assets pledged for fully secured liabilities P 100,000
Assets pledged for partially secured liabilities 40,000
Free assets 120,000
Fully secured liabilities 80,000
Partially secured liabilities 50,000
Unsecured liabilities with priority 60,000
Unsecured liabilities without priority 90,000

Compute the estimated amount to be paid to the following classes of liabilities:

Fully Secured Unsecured with Priority Partially secured Unsecured w/out priority
a. 80,000 60,000 50,000 70,000
b. 64,000 60,000 48,000 88,000
c. 80,000 48,000 60,000 72,000
d. 80,000 60,000 48,000 72,000

17. Bankrupt Inc. is in bankruptcy and is being liquidated by a court-appointed trustee. The financial report
that follow was prepared by the trustee just before the final cash distribution:

Assets Approved Claims

Cash P100,000 Mortgage payable (secured by property that
was sold for P50,000) P80,000
Accounts payable (unsecured) 50,000
Administrative exp.payable, unsecured 8,000
Salaries payable, unsecured 2,000
Total P140,000

The administrative expenses are for trustees and other costs of administering the debtor corporation’s estate.

How should the P100,000 be distributed to the following creditors?

Unsecured with priority Partially secured Unsecured creditors
a. zero 80,000 20,000
b. 10,000 80,000 10,000
c. 5,000 65,000 25,000
d. 10,000 65,000 25,000

18. JJ, DD and AA formed a joint venture for the sale of assorted fruits during the Christmas season. Their
transactions during the two-month period are summarized below:

JOINT VENTURE
2004 2004
Nov. 6 Merchandise – JJ P 8,500 Nov, 10 Cash sales – AA P20,400
8 Merchandise – DD 7,000 12 Cash sales – AA 4,200
10 Freight in – AA 200 28 Merchandise – DD 1,210
Dec. 8 Purchases – AA 3,500 Dec. 30 Unsold merchandise charged
14 Selling expenses – AA 550 to JJ 540

The venture agreement provided for the division of gains and losses among JJ, DD and AA in the ratio of
2:3:5. The venture is to close on December 31,2004.

What is the joint venture profit/(loss) and cash to be received by JJ in final settlement, respectively?

a. P6,600 and P9,280 c. P5,200 and P9,712

b. P6,060 and P8,500 d. P5,720 and P1,212

19. The joint venture accounts in the books of the venturer X, Y, and Z, show the balances below, upon
termination of the joint venture and distribution of the profits:

Accounts with X – Dr/(CR) Y Dr/(Cr) Z Dr/(Cr)

X - P2,500 P2,500
Y P4,000 - P4,000
Z (P6,500) (P6,500) -
Final settlement of the joint venture will require payments as follows:

a. X pays P2,500 to Z and Y pays P4,000 to Z.

b. Z pays P2,500 to Z and P4,000 to Y.
c. Y pays P6,500 to X and Z pays P2,500 to Y.
d. No payment to be made.

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

Mock Board Exam - Practical Accounting Two Page 5 of 18

Site Contract price Costs incurred Estimated costs to complete Billings on Construction Collections on Contract
Batangas P500,000 P375,000 - P500,000 P500,000
Laguna P700,000 P100,000 P400,000 P100,000 P100,000
Fernando P250,000 P100,000 P100,000 P150,000 P100,000

What would be the amount of construction in progress to be reported on the year-end Statement of Financial
Position if the percentage-of-completion method and cost recovery method-construction accounting (zero-
profit) approach is used, respectively?

a. P765,000 and P700,000 c. P265,000 and P200,000

b. P765,000 and P765,000 d. P265,000 and P265,000

21. Bon-Bon Constructor’s Inc. has the following data for large jobs in its Jobs in Progress account:

Project No. Actual Cost Estimated total Cost Contract price Percent completed
101 P 8,756 P172,800 P192,000 5%
102 11,457 14,875 17,500 75%
103 53,865 61,250 87,500 80%
104 22,800 39,760 49,700 55%
105 44,500 122,310 151,000 35%
P141,378 P410,995 P497,700

The company accounts for its large jobs by the percentage of completion method – output measures. Billings
are done as follows: (a) 20% down payment upon contract signing, and (b) balance is billed according to
percentage of completion less an application of the down payment which is also according to percentage of
completion.

How much total billings were made and total revenue that should be recognized for the year 2011,
respectively?

a. P203,286 and P120,060 c. P99,540 and P120,060

b. P99,540 and P172,910 d. P203,286 and P172,910

22. The following data were taken from the records of WIN Company, before the accounts are closed for the
year 2012. The company sells exclusively on the installment basis and uses the installment method of
recognizing profit.
2010 2011 2012
Installment sales P400,000 P440,000 P420,000
Cost of installment sales 240,000 272,800 256,200
Operating expenses 100,000 94,000 104,000
Balances as of December 31:
Installment Cont. Receivable – 2010 220,000 110,000 28,000
Installment Cont. Receivable – 2011 250,000 92,000
Installment Cont. Receivable – 2012 238,000
Deferred gross profit – 2010 44,000 44,000
Deferred gross profit – 2011 95,000 95,000

During 2012, because the customers can no longer be located, the company wrote off P9,000 of the 2010
accounts and P2,800 of the 2011 accounts as uncollectible, and the entry made was:
Operating expenses 11,800
Installment contract receivable 2010 9,000
Installment contract receivable 2011 2,800

Also during 2012 a customer defaulted and the company repossessed merchandise appraised at P4,000 after
costs of reconditioning estimated at P400. The merchandise had been purchased in 2010 by a customer who
still owed P5,000 at the date of repossession. The entry made was:
Inventory of repossessed merchandise 5,000
Installment contract receivable 5,000

What is the total realized gross profit on installment for the year 2012 and the gain/(loss) on repossession,
respectively?

a. P127,156 and P(960) c. P86,176 and P(960)

b. P70,986 and P600 d. P157,156 and P600

23. These pertain to installment sales of Key Store:

 Down payment – 20%.

Mock Board Exam - Practical Accounting Two Page 6 of 18

  Installment sales: P545,000 in 2010; P785,000 in 2011; and P968,000 in 2012.
 Mark-up on cost – 35%.
 Collections after down payment: 40% in the year of sale, 35% in the year after, and 25% in the third
year.

What is the installment accounts receivable at the end of 2012 and total unrealized gross profit at the end of
2012, respectively?

a. P612,460 and P117,547 c. P621,640 and P161,166

b. P446,460 and P217,754 d. P464,640 and P116,661

24. At the beginning of the year, AJD got the franchise of Tony’s, a known steak house of upscale patronage.
The franchise agreement required a P500,000 franchise fee payable P100,000 upon signing of the franchise
and the balance in four annual installments starting at the end of the current year. At present value using
12% as discount rate, the four installments would approximate P199,650. The fees once paid are refundable.
The franchise may be cancelled subject to the provisions of the agreement. Should there be unpaid franchise
fee attributed to the balance of main fee(P500,000), same would become due and demandable upon
cancellation. Further, the franchisor is entitled to a 5% fee on gross sales payable monthly within the first ten
days of the following month. The Credit Investigation Bureau rated AJD as AAA credit rating. The balance of
the franchise was guaranteed by a commercial bank. The first year of operations yielded a gross sales of
P9,000,000. What is Tony’s earned franchised fees for the first year?
a. P550,000 c. P749,650
b. P450,000 d. P950,000

25. On December 31,2011, RR Inc. authorized GG to operate as a franchisee for an initial franchise fee of
P150,000. Of this amount, P60,000 was received upon signing the agreement ad the balance, represented by
a note is due in three annual payments of P30,000 each beginning December 31,2012. The present value on
December 31,2011, of the three annual payments appropriately discounted is P72,000. According to the
agreement, the nonrefundable down payment represents a fair measure of the services already performed by
RR, however, substantial future services are required of RR. Collectibility of the note is reasonably certain.

In RR’s December 31,2011 Statement of Financial Position, what is the amount of unearned franchise fees
from GG’s franchise to be presented?

a. P90,000 c. P72,000
b. P132,000 d. P150 ,000

26. Tweet Supply Company is engaged in merchandising both at its Home Office in Manila and at its Branch
in Davao City. Selected accounts taken from the trial balances of the Home Officer and the branch as of
December 31,2011 follow:

Debits Manila Davao Branch

Inventory, January 1,2011 P 23,000 P 11,550
Davao, Branch 58,300 -
Purchases 190,000 105,000
Freight in from Home Officer - 5,500
Sundry Expenses 52,000 28,000

Credits
Home Office P - P 53,300
Sales 155,000 140,000
Sales to Branch 110,000 -
Allowance for Overvaluation of Branch
Inventory at January 1,2011 1,000 -

Additional information:

 The Davao City branch gets all of its merchandise from the home office. The home office bills the goods
at cost plus a 10% mark-up. At December 31,2011, a shipment with a billed value of P5,000 was still
in transit. Freight on this shipment was P250 and is to be treated as part of the inventory.
 Inventories on December 31,2011, excluding the shipment in transit, follow:
o Home office, at cost P30,000
o Branch, at billed price (excluding freight of P520) 10,400
What is the net income of the home officer from own operations and the net income of the branch in so far as
the home office is concerned, respectively?

a. P20,000 and P10,470 c. P10,000 and P20,470

b. P30,470 and P870 d. P20,470 and P10,870
27. After examining on a comparative basis the interoffice account of the Bulacan Company with its suburban
Branch and the similar account carried on the latter’s books. The following discrepancies at the close of the
business on June 30,2011 were seen:
 A charge for labor by the Home Office, P500 was recorded twice by the branch.

Mock Board Exam - Practical Accounting Two Page 7 of 18

  A charge of P895 was made by the Home Officer for freight on merchandise, but the amount was
recorded by the Branch as P89.50.
 A charge of P980 (furniture and fixture) on the Home Officer books was taken up by the branch as
P890.
 A credit by the Home Office for P350 (merchandise disallowances) was taken up by the branch as P400.
 The Home Office charged the Branch P425 for interest on open account which the Branch failed to take
up in fill; instead, the Branch sent to the Home Office a wrong adjusting memo, reducing the charge by
P100 and set up a liability for the net amount.
 The Home office received P5,000 from the sale of a truck which it erroneously credited to the Branch;
the Branch did not charge the Home Office therewith.
 The Branch by mistake sent the Home Office a debit note for P370 representing its proportion of a bill
for repairs of truck; the Home Office did not record it.
 The Branch inadvertently received a copy of the Home Office entry dated July 19,2011 correcting item
regarding the sale of a truck as mentioned above and entered a credit in favor of the Home Office as of
June 30,2011.
At June 30,2011, the unadjusted balance of the Branch current account in the Home Office books showed
P175,520. At the beginning of the year, the interoffice accounts were in balance. What is the unadjusted
balance of the Home Office current account on the branch books and the adjusted balance of the reciprocal
account on June 30,2011, respectively?

a. P179,279.50 and P190,520 c. P184,279.50 and P180,520

b. P175,520 and P189,279.50 d. P189,279.50 and P175,520

28. Companies A and B decide to consolidate. Asset and estimated annual earnings contributions are as
follows:
Co. A Co. B Total
Net asset contribution P300,000 P400,000 P700,000
Estimated annual earnings
contribution 50,000 80,000 130,000

Stockholders of the two companies agree that a single class of stock be issued, that their contributions be
measured by net assets plus allowances for goodwill, and that 10% be considered as a normal rate of return.
Earnings in excess of the normal rate of return shall be capitalized at 20% in calculating goodwill. It was also
agreed that the authorized capita stock of the new corporation shall be 20,000 shares with a par value of
P100 a share.

What is the amount of goodwill credited to Co.A and the total contribution of Co. B (net assets plus goodwill),
respectively?

a. P100,000 and P500,000 c. P200,000 and P300,000

b. P150,000 and P400,000 d. P100,000 and P600,000

29. On January 1,2011, the statement of financial position of shows Con’s net assets as follows:
Current Asset P150,000
Equipment 200,000
Land 100,000
Buildings 200,000
Liabilities 80,000
On January 1,2011, Blue Company purchased the net assets of Con’s company by issuing 100,000 shares of
its P1 par value stock when the fair value of the stock was P6.20. Aside from that, blue paid P50,000 and gave
up an equipment with cost of P100,000 and accumulated depreciation of P20,000 and fair value of P50,000.
Blue company also paid P20,000 for direct cost of business combination and P30,000 for indirect cost.
P10,000 was also paid as stock issuance cost. It was further agreed that Blue would pay an additional
amount on January 1,2013 if the average income during the 2-year period of 2011-2012 exceeded P80,000
per year. The expected value of this consideration was calculated as P184,000, the measurement period is one
year. The following are the fair values of the net assets of Con Company:
Current Asset P100,000
Equipment 150,000
Land 50,000
Buildings 300,000
Liabilities 80,000
What amount will be recorded as goodwill on January 1,2011 as a result of business combination?

a. P404,000 c. P434,000
b. P384,000 d. P444,000

30. Entity Subsidiary has 40% of its share publicly traded on an exchange. Entity Parent purchases the 60%
non-publicly traded shares in one transaction, paying P6,300,000. Entity parent incurred P100,000 as direct
cost and P50,000 as indirect cost of business combination. Based on the trading price of the shares of Entity
Subsidiary at the date of gaining control a value of P4,000,000 assigned to the 40% non-controlling interest
(or fair value of non-controlling interest), indicating that Entity Subsidiary has paid a control premium of

Mock Board Exam - Practical Accounting Two Page 8 of 18

P300,000. The fair value of Entity Subsidiary’s identifiable net assets is P7,000,000 and a carrying value of
P5,000,000.

What is the goodwill (partial) arising on consolidation and the valuation of non-controlling interest assuming
the use of proportionate basis or Partial Goodwill, respectively?
a. P1,200,000 and P2,000,000 c. P2,100,000 and P2,800,000
b. P3,300,000 and P4,000,000 d. P2,120,000 and P2,120,000

31. Using the same information in No. 30, what is the amount of goodwill(total) and the valuation of non-
controlling interest assuming the use of full(fair value basis) or total goodwill, respectively?
a. P1,200,000 and P2,000,000 c. P2,120,000 and P4,120,000
b. P2,100,000 and P2,800,000 d. P3,300,000 and P4,000,000

32. Jones Corporation issues 45,000 shares of previously unissued P10 par value ordinary shares with a fair
market value of P32 per share for net assets of Dunn Corporation. Jones pays the following costs and
expenses related to the business combination:

Registering and issuing securities P15,000

Accountants’ and legal fees 8,000
Salaries of Jones’ employees assigned to the merger implementation 16,000
Cost of closing duplicate facilities 12,000
Cost of shareholders’ meeting to vote on the merger 5,000

What is the amount of costs to be expensed as incurred?

a. P21,000 c. P41,000
b. P33,000 d. P56,000

33. On January 1,2011, Parent Company acquired 90% of Subsidiary Company. In exchange for 5,400 shares
of P10 par common stock having a market value of P120,600. Parent and subsidiary condensed statements of
financial position were as follows:

Parent Company and Subsidiary Company

Statements of Financial Position at January 1,2011
(Before Combination)

ASSETS PARENT Co. SUBSIDIARY Co,

Cash P 30,900 P 37,400
Accounts receivable, net 34,200 9,100
Inventories 22,900 16,100
Equipment, net 179,000 40,000
Patents - 10,000
Total Assets P 267,000 P112,600
LIABILITIES and SHAREHOLDER’S EQUITY
Accounts payable P 4,000 P 6,600
Bonds payable, 10% 100,000 -
Common stock, P10 par 100,000 50,000
Additional paid in capital 15,000 15,000
Retained earnings 48,000 41,000
Total Liabilities and Stockholder’s Equity P 267,000 P 112,600

At the date of acquisition, all assets and liabilities of Subsidiary Company have book value approximately
equal to their respective market values except the following as determined by appraisal as follows:

Inventories (FIFO method) P17,100

Equipment (net – 4 years remaining life) 48,000
Patents (remaining life of 10 years) 13,000

On December 31,2011, the following results were given:

Dividends Paid Net Income

Parent Company P15,000 P30,200
Subsidiary Company 4,000 9,400

Note: For all the questions, use PARTIAL GOODWILL and DAYAG Computation.

Compute the following on December 31,2011:

Non-controlling interest in Net Income Profit attributable to Equity Holders of Parent Consolidated Net Income

a. P610 P32,090 P32,700

b. P540 P32,160 P32,700
c. P940 P31,760 P32,700
d. P510 P32,190 P32,700

Mock Board Exam - Practical Accounting Two Page 9 of 18

34. Using the same data in number 33, Compute the following on December 31,2011:
Non-controlling interest in Net Assets Consolidated Retained Earnings Consolidated SHE

a. P10,600 P64,760 P108,090

b. P12,010 P69,400 P312,700
c. P11,140 P65,090 P300,690
d. P12,300 P69,800 P317,410

35. The separate incomes (which do not include investment income or dividend income) of Pell Corporation
and Sell Corporation, its 80% owned subsidiary, for 2012 were determined as follows:

Pell Sell
Sales P400,000 P100,000
Less: Cost of Sales 200,000 60,000
Gross profit P200,000 P 40,000
Other expenses 100,000 30,000
Separate incomes P100,000 P 10,000

During 2012, Pell sold merchandise that cost P20,000 to Sell for P40,000 and at December 31,2012, half of
these inventory items remained unsold by Sell. Compute the following for 2012:
Noncontrolling Interest in Net Income CONSO Sales CONSO Cost of Sales CNI Attributable to Parent

a. P2,000 P460,000 P230,000 P98,000

b. P1,000 P500,000 P248,000 P108,000
c. P8,000 P480,000 P270,000 P100,000
d. P10,000 P400,000 P300,000 P80,000

36. Saul is a 90% owned subsidiary of Paul Corporation, acquired at book value several years ago.
Comparative separate company income statements for these affiliated corporations for 2012 are as follows:

Paul Corp. Saul Corp.

Sales P1,500,000 P700,000
Dividend Income 108,000 -
Gain on sale of building 30,000 -
Income credits P1,638,000 P700,000
Cost of sales P1,000,000 P400,000
Operating expenses 300,000 150,000
Income debits P1,300,000 P550,000
Net Income P 338,000 P150,000

On January 5,2012, Paul sold a building with a 10-year remaining useful life to Saul as a gain of P30,000.
Saul paid dividends of P120,000 during 2012. Compute the following:

Non-controlling interest in net income CNI Attributable to Shareholders of Parent CNI or Group Net Income

a. P12,000 P341,000 P353,000

b. P12,300 P340,700 P353,000
c. P18,000 P335,000 P353,000
d. P15,000 P338,000 P353,000

37. Manila Holdings Inc., is the parent company of a group of companies who also does its own trading. It
bought equipment from a US supplier for $10,000 on November 2,2008 and opened the corresponding letter
of credit when the exchange rate was P55.00 to $1.00. On December 31,2008 which is the company’s year
end the US supplier has not been paid and the exchange rate at that time was P57.00 to $1.00. On the
Statement of Financial Position of Manila Holdinds, Inc.

On December 31,2008 what will be the amount to be presented as Equipment and Accounts Payable,
respectively?

a. P570,000 and P570,000 c. P550,000 and P550,000

b. P570,000 and P550,000 d. P550,000 and P570,000

38. On December 31,2008, a branch in Singapore submitted the following financial statements stated in
Singaporean Dollar:

Statement of Financial Position Income Statement and Retained Earnings

Monetary assets $20,000 Sales $27,000
Non-monetary assets 15,000 Expenses (including dep.$1,000) 25,000
Monetary liabilities 18,000 Net income 2,000
Common stock 12,000 Retained earnings, 1/1 3,000

Mock Board Exam - Practical Accounting Two Page 10 of 18

 Retained earnings, 12/31 5,000 Retained earnings, 12/31 $ 5,000

The exchange rates are: Current Rate – P37; Historical Rate – P34; and Average Rate – P35

Assuming the Retained Earnings of the Singaporean Branch in Philippine Pesos is P128,100, what amount of
cumulative translation adjustment in other comprehensive income to be presented in the Consolidated
Statement of Financial Position on December 31,2008?

a. P22,900 credit c. P12,000 credit

b. P10,000 debit d. P21,900 debit

39. On September 9,2011, Selma Inc. accepted a noncancellable merchandise sales order from a Japanese
firm. The contract price was 10,000 Yens. The merchandise was delivered on December 14,2011. The invoice
was dated December 11,2011, the shipping date (FOB Shipping point). Full payment was received on January
22,2012. The spot direct exchange rates for the Japanese Yens on the respective dates are as follows:
September 9,2011 – P0.75; December 11,2011 – P0.78; December 14,2011 – P0.77; December 31,2011 –
P0.73; and January 22,2012 – P0.725.

Determine the following:

Sales for 2011 Forex Gain/Loss for 2011 Accounts Receivable,12/31/2011 Forex Gain/Loss for 2012
a. P77,000 P1,000 loss P78,000 P500 loss
b. P78,000 P5,000 loss P73,000 P500 loss
c. P75,000 P3,000 loss P78,000 P1,500 loss
d. P77,000 P1,500 loss P72,500 P2,500 gain

40. The accounts of Palawan International, a Philippine Company, show P813,000 accounts receivable and
P389,000 accounts payable at December 31,2008 before adjusting entries are made. An analysis of the
balances reveals the following:

Accounts Receivable Accounts Payable

Receivable denominated in Philippine peso P285,000 Payable denominated in Philippine peso P 68,500
Receivable denominated in 200,000 Yen 118,000 Payable denominated in 10,000 dollar 76,000
Receivable denominated in 250,000 Baht 410,000 Payable denominated in 150,000 Baht 244,500
Total P813,000 Total P389,000
Current exchange rates on December 31,2008 are:
YEN P0.66 BAHT P1.65 DOLLAR P7.00

What is the net exchange gain or loss that should be reflected in Palawan’s income statement for 2008 after
the year-end adjustments?
a. P19,500 gain c. P19,000 gain
b. P16,500 loss d. P17,500 loss

41. On December 12,2007, Davao Import Inc. entered into a forward exchange contract to purchase 100,000
foreign currencies in 90 days to hedge a purchase of inventory on November 30,2007 payable in March 2008.
The relevant exchange rates are as follows:

Spot Rate Forward Rate for March 12,2008

November 30,2007 P8.70 P8.90
December 12,2007 8.80 9.00
December 31,2007 9.20 9.30

At December 31,2007, what amount of net foreign exchange gain or loss to be presented in Davao’s Income
Statement?
a. P50,000 gain c. P30,000 gain
b. P20,000 loss d. P40,000 loss

42. On October 17,2011, Shay Inc. purchased from a Thailand firm an inventory costing 10,000 Baht.
Payment is due on January 15,2012. Also on October 17, Shay entered into a foreign exchange forward to buy
10,000 Baht on January 15,2012. The following exchange rates are given:

10/17/2011 12/31/2011 1/15/2012

Spot rate (Baht) P1.30 P1.42 P1.40
Forward rate P1.20 P1.40 P1.38

What is the net foreign exchange gain or loss to be presented for the year ended December 31,2011 as a
result of the hedged item and hedging instrument?
a. P1,200 net loss c. P200 net loss

Mock Board Exam - Practical Accounting Two Page 11 of 18

 b. P1,000 net gain d. P1,000 net loss

43. On April 4,2011, Cake Company delivered to a Pakistan Firm inventory it sold for 100,000 rupees.
Payment is due to be received on August 2,2011. The company’s fiscal year ends June 30. Also on April 4,
Cake Company entered into a foreign exchange forward to sell 100,000 rupees on August 2,2008. The
following exchange rates are given:
4/4/2011 6/30/2011 8/2/2011
Spot rate (rupee) P0.80 P0.84 P0.82
Forward rate (rupee) P0.77 P0.83 P0.80
What is the net foreign exchange gain or loss to be presented for the year ended June 30,2011 as a result of
the hedged item and hedging instrument?
a. P4,000 net gain c. P6,000 net loss
b. P2,000 net loss d. P4,000 net loss

44. On October 2,2011, AYT Co. ordered a custom-built passenger van from a Japanese firm. The purchase
order is non-cancelable. The purchase price is 1,000,000 yens with delivery and payment to be on March
31,2012. On October 2,2011, AYT entered into a forward contract to buy 1,000,000 yens on March 31,2012
for P0.57. On March 31,2012, the custom-built passenger van was delivered. The following exchange rates are
given:
10/02/2011 12/31/2011 3/31/2012
Spot rate (rupee) P0.50 P0.56 P0.57
Forward rate (rupee) P0.53 P0.58 P0.57
What is the cost or value of the van on March 31,2012 assuming there is firm commitment?
a. P500,000 c. P560,000
b. P530,000 d. P570,000

45. Using the same data in number 44, what is the cost or value of the van assuming that it is only a
forecasted transaction but not a firm commitment?
a. P500,000 c. P560,000
b. P530,000 d. P570,000

46. On December 12,2011, IMB Co. entered into a forward exchange contract for speculation for the purchase
of 100,000 foreign currencies in 90 days. The relevant exchange rates are as follows:

Spot Rate Forward Rate for March 12,2012

November 30,2011 P0.87 P0.89
December 12,2011 P0.88 P0.90
December 31,2011 P0.92 P0.93
March 12,2011 P0.91 P0.92

What is the net gain or loss as a result of this forward contract for the two years?

a. P2,000 net loss c. P3,000 net gain

b. P1,000 net gain d. P2,000 net gain

47. On January 1,2011, Book Co. paid P17,000 cash to acquire a call foreign currency option for 1,000,000
Thailand Baht, with an expiration date of December 31,2011. The option hedges 2011 forecasted importing
purchases of 1,000,000 Thailand Baht. At June 30,2011, Import purchases totaled 750,000 Thailand Baht of
which 600,000 Thailand Baht had been result to Philippine customers. The firm’s fiscal year ends June 30.
Include the time value element in assessing hedge effectiveness or nonsplit accounting is used. The following
data are given:

1/1/2011 6/30/2011 12/31/2011

Spot rate (market price) P1.15 P1.18 P1.17
Strike price (exercise price) P1.14 P1.14 P1.14
Fair value of call option 6/30/2011 P44,000

Mock Board Exam - Practical Accounting Two Page 12 of 18

What is the foreign exchange gain on option contract (hedging instrument) on June 30,2011 to be presented
on profit or loss and the foreign exchange gain on option contract (hedging instrument) on June 30,2011 to be
presented on OCI, respectively?
a. P21,600 and P5,400 c. P24,000 and P3,000
b. P30,000 and P6,000 d. P27,000 and P4,800

48. On January 1,2011, GF Inc. paid 16,00 cash to acquire a put foreign exchange option for 1,000,000
Thailand Baht, with an expiration date of December 31,2011. The option hedges 2011’s forecasted exporting
sales of 1,000,000 Baht. GF’s fiscal year ends June 30. Include the time value element in assessing hedge
effectiveness or nonsplit accounting is used. The following data are given:

1/1/2011 6/30/2011 12/31/2011

Spot rate (market price) P1.20 P1.12 P1.15
Strike price (exercise price) P1.19 P1.19 P1.19
Fair value of put option at 6/30/2011 P81,000

On June 30,2011, what is the foreign exchange gain or (loss) to be recognized in profit or loss if export sales of
1,000,000 baht – 60% of which occurred in the first six months and the foreign exchange gain or (loss) in the
OCI assuming the same percentage of sales, respectively?
a. P81,000 and P16,000 c. P39,000 and P26,000
b. P25,000 and P40,000 d. P41,000 and P24,000

49. MR Cuisine operates a chain of the fine seafood restaurants. The company makes very detailed long-term
planning. On October 1,2011, MR determined that it would need to purchase 1,000,000 pounds of deluxe fish
on January 1,2013. Because of the fluctuations in the price of deluxe fish, on October 1, the company
negotiated a special forward contract with Angel investment Bank for MR to purchase 1,000,000 pounds of
deluxe fish on January 1,2013, at a price of P16,000,000. The price of deluxe fish was P16 per pound on
October 1. Angel Investment Bank has a staff of financial analysts who specialize in forecasting fish prices.
These analysts are predicting a drop in worldwide fish prices between October 1,2011 and January 1,2013.
On December 31,2011, the price of a pound of deluxe fish is P20. On December 31,2012, the price of a pound
of deluxe is P11. The appropriate discount rate is 10%.

What is the fair value of the forward contract on December 31,2011?

a. P4,000,000 c. P5,000,000
b. P3,636,364 d. P4,545,454

50. The Glass Co. has a firm commitment dated April 1 to purchase cocoa with delivery on June 15. The
commitment is for 1,000 metric tons of cocoa at P700 per ton. In order to hedge against decreases in the spot
prices of cocoa, the company designated an option as a hedge against changes in the fair value of the
commitment. The put option was acquired on April 1 for a premium of P1,000 and has strike price of P700
per ton. The option, has a notional amount of 1,000 tons and expiration date of June 15. Spot prices per ton
and the value of the option at selected dates are as follows:

April 1 April 30 May 31 June 15

Spot price per ton P701 P696 P697 P695
Fair value of option P1,000 P4,300 P3,500 P5,000

The change in the option’s time value will be excluded from an assessment of hedge effectiveness or split
accounting is used.

What is the gain or (loss) on firm commitment (hedged item) on May 31, gain or (loss) on option contract on
May 31, gain or (loss) on firm commitment (hedged item) on June 15, and gain or loss on option contract on
June 15, respectively?

a. P1,000 – (P800) – (P2,000) – P1,500 c. P800 – P1,000 – P1,500 – (P2,000)

b. (P1,000) – P200 – P500 – (P1,500) d. (P800) – P1,000 – P2,000 – P1,000

51. Mitz, Marc and Mart are partners sharing earnings in the ratio of 5:3:2 respectively. As of December
31,2007, their capital balance showed P95,000 for Mitz, P80,000 for Marc and P60,000 for Mart. On January
1,2008, the partnership admitted Vince as a new partner and according to the partnership agreement, Vince
will contribute P80,000 in cash to the partnership and will also pay P10,000 for 15% of Marc’s share. Vince
will share 20% in the earnings while the ratio of the original partners will remain proportionately the same as
before Vince admission. After Vince’s admission, the total capital of the partnership will be P330,000 while
Vince’s capital account will be P70,000.

What is the balance of Marc’s capital account after the admission of Vince?
a. P81,100 c. P74,600
b. P79,100 d. P72,600

Mock Board Exam - Practical Accounting Two Page 13 of 18

52. The partnership of Gary, Jerome and Paul was formed on January 1,2008. The original investments were
as follows: Gary – P80,000; Jerome – P120,000; and Paul – P180,000. According to the partnership
agreement, net income or loss will be divided among the respective partners as follows:
 Salaries of P12,000 for Gary, P10,000 for Jerome, and P8,000 for Paul.
 Interest of 8% on the average capital balance during the year of Gary, Jerome and Paul.
 Remainder divided equally.
Additional information is as follows:
 Net income of the partnership for the year ended December 31,2008 was P70,000.
 Gary invested an additional P20,000 in the partnership on July 1,2008.
 Paul withdrew P30,000 from the partnership on October 1,2008.
 Gary, Jerome and Paul made regular drawings against their shares of net income during 2008 of
P10,000 each.

What is the capital balances of Gary, Jerome and Paul, respectively, on December 31,2008?
a. P102,333 – P122,733 – P154,934 c. P122,333 – P132,733 – P164,934
b. P92,000 – P102,000 – P134,934 d. P112,333 – P132,733 – P164,934

53. The Statement of Financial Position of Poe and Ping Partnership on May 1,2008 before liquidation is as
follows:
ASSETS Liabilities and Capital
Cash P14,000 Liabilities P35,000
Other assets 71,000 Poe, capital (70%) 28,000
Ping, capital (30%) 22,000
Total P85,000 Total P85,000
In May, assets with book value of P34,000 are sold for P29,000. Creditors are paid in full. Liquidation
expenses of P1,000 is paid and P3,000 is paid to creditors.

In May, how much did Ping receive?

a. zero c. P900
b. P3,000 d. P2,100

54. The follo0wing are the date for Vir Company before liquidation:
Stockholders’ equity, per books: Estimated loss on realization of assets
Capital stock P350,000 Accounts receivable P 23,100
Retained earnings (deficit) (54,250) Inventories 84,000
Estimated gain on realization of assets: Prepaid expenses 2,100
Land and Buildings P78.750 Machinery and Equipment 70,000
Goodwill 157,500
Estimated claims requiring settlement – unrecorded:
Liquidation expenses P17,500
Contingent liabilities 26,250
How much is the estimated deficiency to unsecured creditors?
a. P75,000 c. P81,550
b. P5,950 d. P7,350

55. Ramos and Santos formed a joint venture to purchase and sell a special type of merchandise. Ramos is to
manage the joint venture and to furnish the capital. The venturers contributed P10,000 each and are to share
equally any gain or loss on the joint venture. On April 1,2008, Ramos paid freight of P240 on the merchandise
purchased amounting to P10,000. On April 27, one half of the merchandise was sold for P7,200 cash. Ramos
paid the cost of delivering merchandise to customers which amounted to P260. No further transaction
occurred until the end of the month. What is the joint venture profit (loss) on April 30,2008?
a. P1,820 c. (P1,700)
b. P1,280 d. (P7,100)

56. The following data were taken from the records of Camille Appliance Company before its accounts were
closed for the year 2008. The company sells exclusively on the installment basis and it uses the installment
method of recognizing profit:
2006 2007 2008
Installment sales P400,000 P440,000 P420,000
Cost of installment sales 240,000 272,800 256,200
Operating expenses 100,000 94,000 96,000
Balances as of December 31:
Inst. Contracts Rec. – 2006 220,000 110,000 28,000
Inst. Contracts Rec. – 2007 250,000 92,000
Inst. Contracts Rec. – 2008 238,000
During 2008, because some customers can no longer be located, the company wrote off P9,000 of the 2006
installment accounts and P2,800 of the 2007 installment accounts as uncollectible. Also during 2008, a
customer defaulted and the company repossessed merchandise appraised at P2,400 after costs of

Mock Board Exam - Practical Accounting Two Page 14 of 18

reconditioning estimated at P400. The merchandise had been purchased in 2006 by a customer who still
owed P5,000 at the date of the repossession. What is the net income on December 31,2008?
a. P157,156 c. P60,156
b. P61,000 d. P59,156

57. North Construction Company uses the percentage of completion method of recognizing gross profit on
long-term construction contracts. The company started work on two contracts during 2007. Data relating to
the two contracts are given below:
Contract Price Actual Cost 12/31/2007 Estimated Cost to Complete
Contract 1 P1,800,000 P450,000 P450,000
Contract 2 P1,350,000 P262,500 P487,500
In 2008, contract 3 was started for a contract price of P2,700,000. As of December 31,2008, the following
data are available:
Actual Cost 1/1/2007 – 12/31/2008 Estimated Cost to Complete
Contract 1 P840,000 P210,000
Contract 2 540,000 360,000
Contract 3 540,000 960,000
How much income is to be recognized in 2008?
a. P1,302,000 c. P642,000
b. P432,000 d. P270,000

58. Mr. Villa is about to purchase a franchise from Pizza, Inc. The standard contract provides for a 10-year
term and an initial franchise fee of P450,000, payable as follows: P150,000 at the date of signing. The
expected date of signing is January 1,2008. A continuing fee of 2% of gross sales is also to be paid to the
franchisor. Monthly gross sales are expected to be P200,000 for the first four years and P375,000 for the
remainders of the contract. An additional P50,000 for initial services are incurred on January 17,2008. There
are no associated continuing costs. What is the net income to be recognized by Pizza Inc. for the fiscal year
ending December 31,2008 assuming that the franchisor started operations on February 1,2008?
a. P444,000 c. P240,400
b. P140,400 d. P440,800
59. Mama Inc. opened a sales agency in San Pedro Laguna in 2008. The following is a summary of the
transactions of the sales agency:
Sales order sent to home office P120,000
Sales order filled by home office in 2008 95,000
Freight on shipment of agency 2,000
Collections, net of 10% discount 81,000
Selling expenses paid from the agency working fund 5,500
Administrative expenses charged to agency 5% of gross sales
Samples shipped to agency:
Cost 8,200
Inventory, December 31,2008 4,550
The company’s gross profit rate on agency sales is 30% excluding the freight cost on shipments to agency.
What is the net income of the agency for 2008?
a. P3,600 c. P1,600
b. P5,600 d. P6,300
60. Mayan Company acquired all of Max Corporation’s assets and liabilities on January 2,2009, in a business
combination. At that date, Max reported assets with a book value of P624,000 and liabilities of P356,000.
Mayan noted that Max had P40,000 of research and development costs on its books at the acquisition date
that did not appear to be of value. Mayan also determined that patents developed by Max had a fair value of
P120,000 but had not been recorded by Max. Except for a building and equipment, Mayan determined the fair
value of all other assets and liabilities reported by Max approximated the recorded amounts. In recording the
transfer of assets and liabilities to its books, Mayan recorded goodwill of P93,000. Mayan paid P517,000 to
acquire Max’s assets and liabilities. If the book value of Maganda’s buildings and equipment was P341,000 at
the date of acquisition, what was their fair value?
a. P441,000 c. P341,000
b. P417,000 d. P427,500

61. The condensed Statement of Financial Position of Pop Corporation and Sun Company as of October
31,2009 are presented below:
Pop Corp. Sun Co.
Assets P3,800,000 P 850,000
Liabilities 1,350,000 250,000
Common stock, P100 par 1,500,000 500,000
Retained earnings 950,000 100,000
Total P3,800,000 P3,800,000
On October 31,2009, Pop Corporation acquired 4,000 shares of Sun Company at P520,000. The market price
of the 1,000 shares of Sun on October 31,2009 is P140 per share. In the Consolidated Statement of Financial
Position on October 31,2009, what is the total assets and stockholder’s equity, respectively?

a. P4,170,000 and P2,570,000 c. P4,562,000 and P2,450,000

b. P4,190,000 and P2,590,000 d. P4,562,000 and P2,500,000

Mock Board Exam - Practical Accounting Two Page 15 of 18

62. On December 31,2009, Parco Corporation purchased 80% of the outstanding common stock of Stop
Company for P395,000 cash. The condensed Statement of Financial Position of Stop Company as of the date
of the purchase is shown below:
Assets Liabilities and Stockholder’s Equity
+Cash P150,000 Liabilities P400,000
Inventories 250,000 Common stock, P1 par value 50,000
Property and equipment, net 450,000 Additional paid in capital 100,000
Retained earnings 300,000
Total P 850,000 Total P850,000
On December 31,2009, the inventories and property and equipment of Stop had a fair values of P275,000 and
P500,000 respectively. The fair value of NCI on December 31,2009 is P100,000. How much goodwill (gain on
acquisition) must be shown in the consolidated statement of financial position of Parco Corporation and its
subsidiary Stop Company on December 31,2009?

a. (P30,000) c. P20,000
b. P15,000 d. (P25,000)

63. Certain Statement of Financial Position accounts of a foreign subsidiary in Japan of Manila Corporation at
December 31,2008 have been translated into Philippine pesos as follows:
Translated at
Current Rates Historical Rates
Accounts receivable P120,000 P100,000
Prepaid expenses 55,000 50,000
Property and equipment (net) 275,000 285,000

What total amount should be included in Manila’s December 31,2008 Consolidated Statement of Financial
Position for the above translated amounts?
a. P450,000 c. P440,000
b. P425,000 d. P450,000

64. During the year, 2008 Department ZZ received a Notice of Cash Allocation of P10,000,000 out of its total
allotment of P15,000,000. Check disbursements during the year amounted to P9,000,000.

What adjustment is made for the unused NCA as of the end of the year?
a. Appropriated allotted 1,000,000
National Clearing Account 1,000,000
b. Subsidy Income from National Government 1,000,000
Cash – National Treasury – MDS 1,000,000
c. Cash – National Treasury – MDS 1,000,000
Subsidy Income from NG 1,000,000
d. Subsidy Income from National Government 6,000,000
Cash – National Treasury – MDS 6,000,000

65. On May 5,2008 Agency XX transfers cash of P200,000 to Agency MM for a land beautification project. The
project was completed by Agency MM on August 16,2008.

What is the entry of Agency XX to record the completion of the beautification project?
a. Land Development 200,000
Cash – National Treasury – MDS 200,000
b. Land Development 200,000
Due from National Government – Agency MM 200,000
c. Land Development 200,000
Cash – Check disbursements – MDS 200,000
d. No entry.

66. Albert University, a private nonprofit university, had the following cash inflows during the year ended
December 31,2008:
I. P500,0000 from students for tuition.
II. P300,000 from a donor who stipulated that the money be invested indefinitely.
III. P100,000 from a donor who stipulated that the money be spent in accordance to the wishes of
Albert’s board of directors.

On Albert University’s statement of cash flows for the year ended December 31,2008, what amount of these
cash flows should be reported as operative activities?
a. P900,000 c. P800,000
b. P400,000 d. P600,000

67. Bantay Bata Foundation, a non-profit organization, receives revenue from various sources during the year
to support its child care center. The following cash contributions were received during 2008:
 P40,000 restricted by the donor to be used for meals of children.

Mock Board Exam - Practical Accounting Two Page 16 of 18

  P15,000 received by subscriptions to a monthly child care magazine with a fair value to subscribe of
P10,000.
 P10,000 to be used upon completion of a new playroom that was 85% complete at December 31,2008.

What amount should Bantay Bata Foundation record as contribution revenues in 2008 Statement of
Activities?
a. P20,000 c. P10,000
b. P25,000 d. P11,000

68. The Apple Manufacturing Company manufactures a product exclusively to customer order, employing a
job order cost system. On August 1,2008, its work in process inventory (5 partially completed jobs) had a cost
of P3,000. During August, no additional orders were put into production and 18 orders were completed (total
cost, P24,000) of which 14 (cost P20,000) were shipped. Material requisition in August totaled P17,000 and
direct labor cost were P8,000 at the beginning of the year, 2008, a predetermined overhead rate of 150% of
expected direct labor cost was established.

What is the work in process inventory on August 31,2008?

a. P4,000 c. P16,000
b. P14,000 d. P20,000
69. Mata Inc. instituted a new process in October 2008. During October, 10,000 units were started in
Department A. Of the units started, 1,000 were lost in the process, 7,000 were transferred to Department B
and 2,000 remaining work-in-process at October 31,2008. The work-in-process at October 31,2008 was 100%
complete as to material costs and 50% complete as to conversion costs. Material costs of P27,000 and
conversion costs of P40,000 were charged to Department A in October. What were the total costs transferred
to Department B?
a. P46,900 c. P56,000
b. P53,600 d. P57,120

70. Make Inc. purchases logs from independent timber contractors and processes the logs into two joint
products, two-by-four of Narra A and four-by-eight of Yakal B. In processing the two products, sawdust
emerges and classified as by-product. The packaged sawdust can be sold for P10 per kilo. Packaging cost for
the sawdust is P0.50 per kilo and sales commission is 10% of sales price. The by-product net revenue serves
to reduce joint processing costs for joint products. Joint products are assigned joint cost based on board feet.

Additional data are provided:

Joint processing costs P 100,000

Narra A 400,000
Yakal B 200,000
Sawdust produced (kilos) 2,000

What is the cost assigned to Narra A?

a. P61,000 c. P63,000
b. P62,000 d. P60,000

71. GMA Company’s budgeted fixed factory overhead costs are P50,000 per month plus a variable factory
overhead rate of P4 per direct labor hour. The standard direct labor hours allowed for October production
were 18,000. An analysis of the factory overhead indicates that, in October, GMA had an unfavorable budget
(controllable) variance of P1,000 and a favorable volume variance of P500. GMA uses a two-way analysis of
overhead variances.

What is the actual factory overhead and applied factory overhead, respectively?
a. P121,000 and P132,500 c. P122,500 and P121,000
b. P122,000 and P122,500 d. P123,000 and P122,500
72. Basi Company has a cycle time of 3 days, uses a Raw and in Process (RIP) account, and charges all
conversion costs to Cost of Goods Sold. At the end of each month, all inventories are counted, their
conversion costs components are estimated, and inventory account balances are adjusted. Raw material cost
is backflushed from RIP to Finished Goods.
The following information is for June:
Beginning balance of RIP account, including P3,000 of conversion costs P29,250
Beginning balance of finished goods account, including P10,000 of conversion costs 30,000
Raw materials received on credit 562,500
Direct labor cost, P375,000; Factory overhead applied, P450,000 825,000
Ending RIP Inventory per physical count, including P4,500 conversion costs 32,000
Ending finished goods inventory per physical count, including P8,750 of
Conversion costs 26,250

What is the conversion costs of units sold in June?

a. P825,250 c. P840,500
b. P825,000 d. P824,750

Mock Board Exam - Practical Accounting Two Page 17 of 18

73. Yoko Inc. accumulated the following cost information for its two products, A and B.:
Product A Product B
Units produced 2,000 1,000
Total direct labor hours 5,000 20,000
Set-up cost per batch P1,000 P2,000
Batch size 100 50
Total set-up cost incurred P20,000 P40,000
Direct labor hour per unit 2 1
A traditional costing system would allocate setup costs on the basis of direct labor hours. An ABC system
would trace costs by spreading the cost per batch over the units in a batch.
What is the setup cost per unit of Product A under traditional costing system and ABC system, respectively?

a. P4.80 and P10 c. P40.00 and P200

b. P2.40 and P20 d. P4.80 and P20

74. The separate income statements of Pearl Company and its 90% owned subsidiary, Serena Company, for
the year ended December 31,2009 show the following:

Pearl Company Serena Company

Net Income P108,000 P20,000
Dividend Income 18,000 -
The following additional data apply:

 On January 1,2008, Serena Company a purchased a building with a book value of P100,000 and an
estimated 20-year life, from Pearl Company for P180,000. The building was being depreciated on a
straight-line basis with no salvage value.
 On January 1,2009, Serena Company sold a machine with a book value of P50,000 to Pearl Company
for P60,000. The machine had an expected life of 5 years and is being depreciated on a straight line
basis with no salvage value. Serena Company is a dealer for the machine.

On December 31,2009, what is the consolidated net income and consolidated net income attributable to
controlling interest, respectively?

a. P106,000 and P104,800 c. P130,000 and P117,000

b. P100,000 and P90,000 d. P142,000 and P122,000

75. Ace Corporation owns 90% of Bee Corporation’s common stock and 80% of Cee Corporation’s common
stock. The remaining common shares of Bee and Cee are owned by their respective employees. Bee sells
exclusively to Cee. Cee buys exclusively from Bee and Cee sells exclusively to unrelated companies.
Selected 2009 information for Bee and Cee follows:
Bee Corp. Cee Corp.
Sales P130,000 P91,000
Cost of sales 100,000 65,000
Beginning inventory None None
Ending inventory None 65,000
What amount should be reported as gross profit in Bee and Cee’s combined income statement for the year
ended December 31,2009?

a. P26,000 c. P47,800
b. P41,000 d. P56,000

- NOTHING FOLLOWS -

Mock Board Exam - Practical Accounting Two Page 18 of 18