PRACTICAL ACCOUNTING – Part 2 CPA Review School of the Philippines Pre-week Quizzer

(7) Partnership and a book value of P80,000. Account balances and profit and loss sharing ratios are
1. A summary balance sheet for Sol, Haidee, and Hazel partnership appears below. Sol, Haidee, summarized as follows:
and Hazel share profits and losses in a ratio of 2:3:5, respectively. Cash P198,000 Accounts payable P149,000
Cash P100,000 Inventories 80,000 Able, capital (40%) 79,000
Inventory 125,000 Plant assets 230,000 Baker, capital (40%) 140,000
Marketable securities 200,000 Charlie, capital (20%) 140,000
Land 100,000 P508,000 P508,000
Building-net 500,000 If the partners agree to distribute the available cash:
Sol, capital P425,000 A. Charlie will receive P23,000 of the cash distribution.
Haidee, capital 400,000 B. Baker will receive P40,667 of the cash distribution.
Hazel, capital 200,000 C. Immediately after the distribution of cash and inventory items, Charlie’s capital account
The partners agreed to admit Jill for a one-fifth interest. The fair market value of the land is balance will be P59,000.
appraised at P200,000 and the market value of the marketable securities is P250,000. The D. Immediately after the distribution of cash and inventory items, Charlie’s capital account
assets are to be revalued prior to the admission of Jill and there is P30,000 goodwill that attaches balance will be P30,000. CPAR 0410
to the old partnership.
How much in cash will Jill have to invest to acquire a (1) one-fifth interest? Or a (2) four-fifth 5. Assume that a partnership had assets with a book value of P240,000 and a market value of
interest? P195,000, outside liabilities of P70,000, loans payable to partner AA of P20,000 and capital
A. (1) P301,250; (2) P4,820,000 C. (1) P241,000; (2) P2,410,000 balances for partners AA, BB, and CC of P70,000, P30,000, and P50,000. The partners divide
B. (1) P205,000; (2) P1,205,000 D. (1) P300,000; (2) P1,506,250 CPAR 0410 profits and losses equally. If all outside creditors and loans to partners had been paid, how
would the balance of the assets be distributed assuming that CC had already received assets
2. MM, NN and OO have a partnership. Their capital balances are P90,000, P130,000, and with a value of P30,000?
P170,000 respectively. They share profits and losses 30%, 30% and 40%, respectively. PP A. Each of the partners would receive P25,000.
wants to become a partner with a 25% share in partnership capital. Appraisal of the partnership B. Each of the partners would receive P40,000.
reveals that the fair value of the partnership net assets (i.e. capital of MM, NN and OO after PP’s C. AA, P70,000; BB, P30,000; CC, P20,000.
admission) is P450,000. Calculate how much PP should be asked to contribute assuming the D. AA, P55,000; BB, P15,000; CC, P5,000. CPAR 0410
bonus method is to be used.
A. P150,000 C. P210,000 6. Aldo, Bert, and Chris formed a partnership on April 30, with the following assets, measured at
B. P250,000 D. P70,000 CPAR 0410 their fair market values, contributed by each partner:
Aldo Bert Chris
3. Gigi is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus a bonus
Cash P10,000 P12,000 P30,000
of 10% of net income after salaries and bonus as a means of allocating profit among the
Delivery trucks 150,000 28,000 -
partners. Salaries traceable to the other partners are estimated to be P100,000. What amount
Computers 8,500 5,100 -
of income would be necessary so that Gigi would consider the choices to be equal?
Office furniture 3,500 2,500
A. P165,000 C. P265,000
Totals P168,500 P48,600 P32,500
B. P290,000 D. P305,000 CPAR 0410
Although Chris has contributed the most cash to the partnership, he did not have the full amount
4. Able, Baker, and Charlie are in the process of liquidating their partnership. Charlie has agreed of P30,000 available and was forced to borrow P20,000. The delivery truck contributed by Aldo
to accept the inventories as part of his settlement. The inventories have a fair value of P60,000 has a mortgage of P90,000 and the partnership is to assume responsibility for the loan.

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If the profit and loss sharing agreement is 40%, 40%, and 20%, respectively, for Aldo, Bert, and (2) Installment Sales
Chris what is the total capital investment of all the partners at the opening of business on April 9. The following data were taken from the books of Pleasing Company:
30? 2002 2003
A. P249,600 C. P139,600 Installment sales P800,000 P900,000
B. P159,600 D. P166,400 CPAR 0410 Cost of installment sales 480,000 600,000
Collections
7. Phol, Archie, and Rhey formed a partnership on January 1, 2003 contributing the following 2002 Installment receivable 250,000 300,000
amounts. 2003 Installment receivable - 360,000
Phol P192,000 Defaults and repossessions
Archie 288,000 Unpaid balance of prior year’s installment
Rhey 432,000 Receivable defaulted 12,000 15,000
The partnership contract provides the following provisions in respect with partner’s Value assigned to repossessed merchandise 7,000 8,000
remuneration. Compute for the following data:
1. Interest of 12% on average capital; 1. realized gross profit on 2003 installment sales during 2003
2. Salaries of P28,800 for Phol, P24,000 for Archie, and P27,200 for Rhey to be recognized 2. gain (loss) on repossession on the defaulted 2002 contract, and
as operating expenses by the partnership. 3. deferred gross profit on the 2002 installment sales as of 12/31/03.
3. Remainder of the net income divided 40% to Phol, 30% to Archie, and 30% to Rhey. A. (1) P144,000; (2) P1,000 gain; and (3) P64,000
Income before partner’s salaries for year ended December 31, 2003 was P184,160. Phol B. (1) P120,000; (2) P1,000 loss; and (3) P94,000
invested additional P48,000 in the partnership on July 1, Rhey withdrew P72,000 from the C. (1) P180,000; (2) P3,000 loss; and (3) P94,000
partnership on October 1 and the partners each withdrew P1,500 monthly against their share of D. (1) P220,000; (2) P3,000 loss; and (3) P64,000 CPAR 0410
net income for the year.
The net income share of Phol is: 10. Rufus Company, which began operations on January 3, 2002, appropriately uses the installment
A. P11,264 C. P25,728 method of revenue recognition. The following information pertains to Rufus Company’s
B. P23,520 D. P47,880 CPAR 0410 operations for 2002 and 2003.
2002 2003
(1) Corporate Liquidation
Sales P300,000 P450,000
8. ABC Corporation has become insolvent and a statement of affairs is being prepared. The
Collections from
following figures on a statement of affairs are condensed as follows:
2002 sales 100,000 50,000
Assets Liabilities 2003 sales 0 150,000
Pledged with fully secured P71,000 With priority P3,000 Accounts write-off from
creditors 2002 sales 25,000 75,000
Pledged with partially 12,500 Fully secured 60,000 2003 sales 0 150,000
secured creditors Gross profit rates 30% 40%
Free 11,000 Unsecured without priority 18,000 What amount should Rufus Company report as deferred gross profit in its December 31, 2003
Partially secured 20,000 balance sheet for 2002 and 2003 sales
The estimated deficiency to unsecured creditors (without priority) is: A. P112,500 C. P75,000
A. P5,000 C. P15,500 B. P125,000 D. P80,000 CPAR 0410
B. P12,500 D. P6,500 CPAR 0410
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(3) Long Term Construction Contracts During 2003, the following costs were incurred:
11. The following information pertains to a river-control project of Rathaus Konstrukt Inc. in Santiago, Project A: P600,000 (estimated cost to complete as of 12/31/03 – P240,000)
Isabela that was commenced in 2002 and completed the following year: Project B: P750,000 (job completed)
At June 30, 2002 At June 30, 2003 How much is the gross profit in 2003 if Mighty Builders uses the percentage of completion
Costs incurred to date P9,750,000 15,750,000 method?
Estimated total costs at completion 19,500,000 20,250,000 A. P97,800 C. P262,200
The project is a P22,500,000 fixed price construction contract and Rathaus uses the percentage- B. P210,000 D. P360,000 CPAR 0410
of-completion method of accounting.
What is the income reported by Rathaus on its Isabela project on June 30, 2003? (1) Franchise
A. P750,000 C. P1,750,000 14. On January 1, 2003, Kimchi, Inc. signed an agreement authorizing Archie I to operate as a
B. P1,500,000 D. P250,000 CPAR 0410 franchisee for an initial franchise fee of P5,000,000. Of this amount, P2,000,000 was received
upon signing of the agreement and the balance evidenced by a 24% promissory note which is
12. The KCO Builders Company enters into a contract on January 1, 2003, to construct a 20-storey due in three annual installment payments of P1,000,000 each beginning December 31, 2003.
building for P40,000,000. During the construction period, many change orders are made to the Archie I started franchise operations on September 1, 2003 after Kimchi rendered the required
original contract. The following schedule summarizes these changes made in 2003. initial services at a total cost of P500,000. Although the first installment was collected on due
Costs Incurred Estimated costs date, collection of the balance was not now reasonably assured.
In 2003 to complete Contract Price What is the realized gross profit on franchises to be recognized by Kimchi at December 31,
2003?
Basic contract P8,000,000 P28,000,000 P40,000,000
A. P2,700,000 C. P3,000,000
Change order # 1 50,000 50,000 125,000
B. P4,500,000 D. P5,000,000 CPAR 0410
Change order # 2 - 50,000 -
Change order # 3 300,000 300,000 Still to be negotiated,
Foreign Currency Restatement
at least cost
Questions 15 thru 19 are based on the following information. CPAR 0410
Change order # 4 125,000 - 100,000
Beam Co. sold goods to a Denmark company for 1,000,000 kroner on May 11 with collection due in
Using percentage of completion method, compute for recognized: (1) revenue, and (2) gross 60 days. On the same day Beam entered into a 60-day forward contract to sell kroner at a forward
profit for the year ended December 31, 2003: CPAR 0410 rate of krone = P0.147.
A. (1) P9,382,830; and (2) P888,889 C. (1) P9,257,485; and (2) P907,830 Beam’s fiscal year ends on June 30. The direct spot rate were:
B. (1) P9,257,485; and (2) P909,063 D. (1) P9,382,830; and (2) P907,830 May 11 P0.150
June 30 P0.146
13. Mighty Builders is in the business of constructing apartment buildings. Two buildings were in July 10 P0.148
progress at the beginning of 2003. The status of these buildings at the beginning of the year 15. The discount on the forward contract would be first recorded at
were as follows: A. P4,000 C. P2,000
Project A Project B B. P3,000 D. P300
Contract Price P1,620,000 P2,520,000
Costs incurred to 01/01/03 600,000 1,560,000 16. For the fiscal year ended on June 30, what is the amount of the net foreign currency transaction
Est. costs to complete, 1/01/03 P840,000 690,000 gain or (loss)?
A. P0 C. P(3,000)
B. P2,000 D. P(4,000)

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17. What is the financial expense for the year ended June 30? Because of this commitment hedge, Filipinas, Inc. will record the merchandise at what value
A. P0 C. P2,500 when it arrives in January?
B. P1,500 D. P3,000 A. P165,000 C. P160,000
B. P164,000 D. P159,000 CPAR 0410
18. On July 10, what amount of foreign currency transaction gain (loss) would be recorded on the
accounts receivable? 22. Certain balance sheet accounts of a foreign subsidiary in a foreign country of a Philippine
A. P1,000 C. P2,000 Corporation at December 31, 2003 have been converted into Philippine pesos as follows:
B. P(1,000) D. P(2,000) Current Rate Historical Rate
Cash on hand and demand deposits P37,500 P32,500
19. On July 10, what would be received from the exchange broker? Accounts receivable 62,500 55,000
A. 147,000 FCU C. 148,000 FCU Prepaid advertising and rent 12,500 10,000
B. P147,000 D. P148,000 Goodwill 15,000 7,500
Noncurrent accounts receivable 10,000 8,750
20. On December 4, 2004, Armani Corporation, ordered equipment FOB shipping point from a Licenses and copyrights 5,000 3,750
Switzerland Company for 75,000 Swiss francs. The equipment was shipped and invoiced to Inventories 75,000 72,500
Armani Corporation on December 12, 2004. Armani paid the invoice on January 21, 2005. Land 125,000 120,000
Relevant spot rates for Swiss francs on the respective dates are as follows: What total amount of assets should be included in Philippine Corporation’s December 31, 2003
Buying Spot Rate Selling Spot Rate consolidated balance sheet for the above accounts if the functional currency of the foreign
December 4, 2004 P32.45 P32.60 subsidiary is (1) foreign currency and (2) Philippine peso? CPAR 0410
December 12, 2004 32.58 32.84 A. (1) P323,750; and (2) P342,500 C. (1) P342,500; and (2) P323,750
December 31, 2004 32.72 32.96 B. (1) P342,500; and (2) P310,000 D. (1) P310,000; and (2) P342,500
January 21, 2005 32.68 32.89
On the December 31, 2004, balance sheet of Armani Corporation, what will be the balance of (4) Home Office & Branches
the equipment? 23. Broom Corporation has one branch office, named Sweep Branch. Broom is performing the end-
A. P2,472,000 C. P2,433,500 of-period reconciliation of its Sweep Branch account whose current balance is P000,000 and
B. P2,454,000 D. P2,463,000 CPAR 0410 Sweep’s Home Office account whose current balance is P000,000. The following items are
unsettled at the end of the accounting period:
21. Filipinas, Inc. agreed to purchase merchandise from a foreign vendor on November 30, 2003. 1. Broom has agreed to remove P750 of excess freight charged to Sweep when Broom
The goods will arrive on January 31, 2004 and payment of 100,000 FC is due February 28, shipped twice as much inventory as Sweep requested.
2004. On November 30, 2003 Filipinas signed an agreement with a foreign exchange broker to 2. Sweep mailed a check for P11,000 to Broom as a payment for merchandise shipped from
buy 100,000 FC on February 28, 2004. Exchange rates to purchase 1FC are as follows: Broom to Sweep. Broom has not yet received the check.
Nov. 30, 2003 Dec. 31, 2003 Jan. 31, 2004 Feb. 28, 2004 3. Sweep returned defective merchandise to Broom. The merchandise was billed to Sweep at
Spot P1.64 P1.62 P1.59 P1.57 P4,000 when its actual cost was P3,000.
30-day 1.64 1.59 1.60 1.59 4. Advertising expense attributable to the branch office were paid for by the home office in the
60-day 1.63 1.56 1.58 1.58 amount of P5,000.
90-day 1.65 1.62 1.60 1.50 If the adjusted balances for the Sweep Branch Account and the Broom Home Office Account is
P500,000, what unadjusted balance was listed in (1) Broom’s Sweep Branch Account and (2)
Sweep’s Home Office Account?
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CPAR 0410 A. B. C. D. D. Branch sales on account were P80,000.

Broom’s Sweep Branch P510,250 P515,000 P514,000 P504,000 E. The home office allocated P2,000 in advertising expense to the branch.
Account F. Branch collections on accounts receivable were P45,000.
Sweep’s Home Office Account P505,000 P495,750 P516,000 P500,750 G. Branch operating expenses of P14,000 were incurred, none of which were paid at month-
end.
24. Home Office, Inc. established a branch in Abra to distribute part of the goods purchased by the H. The branch remitted P17,000 to the home office.
home office. The home office prices inventory shipped to the branch at 20% above cost. The I. The branch’s ending inventory (as reported in its balance sheet) is composed of:
following account balances were taken from the ledger maintained by the home office and the Acquired from outside vendors P12,000
branch: Acquired from home office (at billing price) 20,000
Home Office Inc. Abra, Branch Total 32,000
Sales P600,000 P210,000 What is the balance of the Home Office Current account in the books of the branch based from
Beginning inventory 120,000 60,000 all transactions above?
Purchases 500,000 - A. P44,000 C. P50,000
Shipment to branch 130,000 - B. P60,000 D. P16,000 CPAR 0410
Shipment from home office 156,000
Operating expenses 72,000 36,000 Business Combination/Consolidation
Ending inventory 98,000 48,000 Questions 1 thru 5 are based on the following CPAR 0410
27. On January 1, 2003, Kent Corporation purchased 75% of the common stock of Ucky Company.
All of the branch inventory is acquired from the home office.
Separate balance sheet data for the companies at the combination date are given below:
On the basis of these account balances, the combined net income of the home office and the
branch is: Kent Ucky
A. P170,000 C. P278,000 Cash P12,000 P103,000
B. P70,000 D. P132,000 CPAR 0410 Accounts receivable 72,000 13,000
Inventory 66,000 19,000
25. Sunset Company has a branch in Bulacan. On October 1, 2003, the home office accounting Land 39,000 16,000
records show a deferred profit account with a credit balance of P32,000. During October, Plant assets 350,000 150,000
merchandise costing P36,000 was shipped to the Bulacan branch and billed at a price Accumulated depreciation (120,000) (30,000)
representing 40% markup on the billed price. On October 31, the branch prepared an income Investment in Ucky 196,000 .
statement indicating a net loss of P11,500 for October and ending inventories at billed prices of Total assets P615,000 P271,000
P25,000. Accounts payable P103,000 P71,000
The true branch profit (loss) insofar as the Home Office is concerned is: Capital stock 400,000 150,000
A. (P11,500) C. P30,500 Retained earnings 112,000 50,000
B. P34,500 D. P27,757 CPAR 0410 Total equities P615,000 P271,000
At the date of combination the book values of Ucky’s net assets was equal to the fair value of
26. The following transactions pertain to a branch’s first month’s operations: the net assets except for Ucky’s inventory which has a fair value of P30,000. Indicate in each of
A. The home office sent P9,000 cash to the branch. the questions what the consolidated balance would be for the requested account.
B. The home office shipped inventory costing P40,000 to the branch; the intercompany billing
was for P50,000. 28. What amount of inventory will be reported?
C. Branch inventory purchases from outside vendors totaled P30,000. A. P66,000 C. P19,000
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B. P93,250 D. P85,000 29. What amount of goodwill will be reported?

A. P5,250 C. P21,000
B. P37,750 D. P10,000

30. What amount of total liability will be reported?

A. P284,000 C. P213,000
B. P174,000 D. P90,000

31. What is the amount of the minority interest?

A. P25,000 C. P15,000
B. P50,000 D. P10,000

32. What is the amount of total assets?

A. P611,000 C. P686,000
B. P736,000 D. P590,000

33. Trite Corporation purchased a 20% interest in Mickey Enterprises common stock on January 1,
2003 for P300,000. This investment is accounted for using the equity method and the correct
balance in the Investment in Mickey account on December 31, 2005 is P440,000. The original
purchase transaction included P60,000 of goodwill amortized at a rate of P6,000 per year. In
2006, Mickey Enterprises has net income of P4,000 per month earned uniformly throughout the
year and pays P20,000 of dividends on May 1st.
If Trite sells one-half of its investment in Mickey on August 1st, 2006 for P400,000, How much
gain or loss will be recognized on this transaction?
A. P300,000 gain C. P100,000 gain
B. P200,000 loss D. P180,950 gain CPAR 0410

34. On January 1, 2003 Joey Corp. purchased 70% of Kris Corp.’s P10 par common stock for
P875,000. On this date, the carrying amount of Kris’ net assets was P1,000,000. The fair values
of Kris’ identifiable assets and liabilities were the same as their carrying amounts except for plant
assets (net), which were P100,000 in excess of the carrying amount. For the year ended
December 31, 2003, Kris had net income of P150,000 and paid cash dividend totaling P90,000.
Excess attributable to plant assets and goodwill is amortized over 10 years.
In the December 31, 2003 consolidated balance sheet, minority interest should be reported at
A. P282,500 C. P318,000
B. P300,500 D. P345,000 CPAR 0410

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35. P purchased 100% of the common stock of the S Company on January 1, 2003 for P500,000. B. P135,000 D. P110,700 CPAR 0410
On that date the stockholders’ equity of S was P380,000. On the purchase date, inventory of S
which was sold in 2003, was understated by P20,000. Any remaining excess of cost over book
value is attributable to goodwill with a 20-year life. The reported income and dividends paid by
S Company were as follows:
2003 2004
Net income P80,000 P90,000
Dividends paid P10,000 P10,000
Using the equity method, which of the following amounts are correct?
CPAR 0410 A. B. C. D.
Investment Income 2003 P 55,000 P 55,000 P 75,000 P 80,000
Investment account bal., 555,000 545,000 565,000 570,000
12/31/03

36. Stain Corporation is an 80%-owned subsidiary of Paint Corporation. During 2003, Stain sold
merchandise that cost P120,000 to paint for P160,000. Paint’s ending inventory at December
31, 2003 contained unrealized profit of P8,000 from the intercompany sales.
During 2004, Stain sold merchandise that cost P140,000 to Paint for P190,000. One-half of this
remained unsold by Paint at December 31, 2004. For 2004, Paint’s separate income (does not
include investment income) was P250,000 and Stain’s reported net income was P190,000. The
consolidated net income for 2004 will be:
A. P377,500 C. P388,400
B. P356,000 D. P342,500 CPAR 0410

37. P Company acquired a 90% interest in S Company in 2001 at a time when S Company’s book
values and fair values were equal to one another. On January 1, 2003, S sold a machine with a
P30,000 book value to P Company for P60,000. P depreciates the machine over 10 years using
the straight line method. Separate incomes for P and S for 2005 are as follows:
P Co. S Co.
Sales P1,200,000 P700,000
Gain on sale of machinery 30,000
Cost of goods sold (500,000) (190,000)
Depreciation expense (300,000) (90,000)
Other expenses (120,000) (300,000)
Separate income P280,000 P150,000
P’s investment income from S Company for 2003 is:
A. P150,000 C. P108,000

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38. Selected information from the separate and consolidated balance sheet and income statement Assets P7,000,000 P875,000 P9,625,000
of PP, Inc. and its subsidiary, SS Company, as of December 31, 2003 and for the year then Liabilities 4,987,500 306,250 2,625,000
ended is as follows: Capital stock, P100 par 2,625,000 437,500 1,750,000
PP SS Consolidated Add’l paid in capital 218,750 700,000
Balance sheet accounts: Retained earnings (deficit) (612,500) (87,500) 4,550,000
Accounts receivable P26,000 P19,000 P39,000 Equities P7,000,000 P875,000 P9,625,000
Inventory 30,000 25,000 52,000 It was agreed that Lancer will be the continuing entry and shall issue 4,375 shares to Mitsubishi
Investment in SS Company 67,000 and 52,500 shares to Nissan.
Goodwill 22,000 To what extent will the stockholders’ equity of Lancer increase after the combination?
Minority interest 10,000 A. P7,568,750 C. P2,187,500
Stockholders’ equity 154,000 50,000 154,000 B. P5,687,500 D. P875,000 CPAR 0410
Income Statement accounts:
Revenues 200,000 140,000 308,000 40. Xery, Inc., Yoga, Inc., and Zero, Inc are to combine. The stockholders’ equity on their respective
Cost of goods sold 160,000 110,000 231,000 balance sheets immediately prior to combination show:
Gross profit 50,000 30,000 77,000 Xery Yoga Zero
Equity in earnings of SS 11,000 Common stock P300,000 P200,000 P400,000
Amortization of goodwill 2,000 Additional paid in capital 40,000 100,000 0
Net income 36,000 20,000 40,000 Retained earnings 180,000 60,000 90,000
Additional information: If Xery is the surviving entity with a stated capital of P1,100,000, what is the amount of retained
During 2003, PPs cost of goods sold to SS was at the same markup on cost that PP uses earnings after the combination?
for all sales. At December 31, 2003, SS Co. had not paid for all these goods and still held CPAR 0410 A. B. C. D.
37.5% of them in the inventory. Pooling of interests P330,000 P270,000 P270,000 P530,000
PP acquired its interest in SS on January 2, 2000, PP’s policy is to amortize goodwill by the Purchase accounting P330,000 P180,000 P330,000 P180,000
straight-line method.
From the facts above determine the (1) intercompany sales from PP to SS; (2) SS payable to
Job Order Costing
PP due to intercompany sales: (3) in the consolidated balance sheet, what was the carrying
41. Tristan Company manufactures leather bags and uses the job order cost system. Its work in
amount of inventory that SS purchased from PP; (4) the unrealized intercompany profit to be
process show:
eliminated; (5) the minority interest %; and (6) number of years that goodwill will be
Direct materials used P341,000
amortized. CPAR 0410
Direct labor incurred 324,500
A. (1) P32,000; (2) P3,000; (3) P9,000; (4) P3,000; (5) 20%; and (6) 15 years
Factory overhead 259,600
B. (1) P32,000; (2) P6,000; (3) P9,000; (4) P3,000; (5) 20%; and (6) 15 years
Transferred to finished goods 825,000
C. (1) P29,000; (2) P6,000; (3) P9,000; (4) P29,000; (5) 20%; and (6) 19 years
Two jobs are still in process, upon which direct materials of P70,400 have been expended.
D. (1) P32,000; (2) P6,000; (3) P9,000; (4) P3,000; (5) 20%; and (6) 19 years
Factory overhead is applied at a predetermined percentage of direct labor cost.
What is the (1) direct labor and (2) factory overhead component of the jobs transferred to finished
39. Lancer, Inc., Mitsubishi, Inc. and Nissan, Inc. agreed to a business combination which meets all
goods?
the requirements of pooling of interest. Their condensed balance sheets before combination
show: CPAR 0410 A. B. C. D.
Lancer Mitsubishi Nissan Direct labor P308,000 P320,500 P324,500 P341,500
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Factory overhead P246,400 P248,400 P259,600 P272,800 Activity-based Costing

42. Sweet Company has identified the following overhead activities, costs and activity drivers for the
coming year:
Activity Activity Capacity Expected Costs Activity Driver
Set-up 300 P120,000 Number of setups
Ordering 4,500 90,000 Number of orders
Machining 18,000 180,000 Machine hours
Receiving 50,000 50,000 Number of parts
The following two jobs were among those that were completed during the year:
Job #555 Job #666
Direct materials P1,500 P1,700
Direct labor (50 hours per job) 1,200 1,200
Units completed 100 50
Number of setups 1 1
Number of orders 4 2
Machine hours 20 30
Parts used 20 40
The company’s normal activity is 4,000 direct labor hours.
The differences in unit cost if the company uses activity-based-costing instead of unit-based
costing for Job #555 and Job #666 are:
CPAR 0410 A. B. C. D.
Job #555 P48.00 P 3.00 P48.00 P 3.00
Job #666 94.40 18.00 18.00 94.40

Joint Costing
43. Given the following data:
CPAR 0410 Product M Product N
Units produced 200 100
Units sold 180 40
Unit selling price at split-off P120 P60
Total separable costs if processed further P4,000 P1,000
Unit selling price if processed further P195 P80
Joint costs P18,000
A. The joint costs allocated using the physical measure method is: M, P ____; N, P ____.
B. The joint costs allocated using the sales value at split-off method is: M, P ____; N, P ____.
C. The joint costs allocated using the estimated NRV method is: M, P ____; N, P ____.

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Process Costing 46. The Joey Enterprise’s accounting records reflected the following data for October, 2003. The
44. For the month of October, Bright, Inc. reported the following production data for Finishing company accounts its production using first-in-first-out cost flow method.
Department (second department): Work-in-process, September 30, 2003, 60% completed
Transferred-in from Assembly Department 75,000 as to materials and conversion costs ? units
Transferred-out to Packaging Department 59,250 Work-in-process, October 31, 2003, 30% completed
In-process end of October (with 1/3 labor and factory overhead) 15,750 as to materials and conversion costs 48,000 units
All materials were put into process in Assembly Department. The Cost Accounting Department Equivalent units of production for October, 2003 128,000 units
collected these figures for Finishing Department. Units started and completed in October, 2003 100,000 units
Unit cost for unit transferred-in from Assembly Department P2.70 How many units were in the beginning work-in-process inventory?
Labor cost in Finishing Department 41,280.00 A. P13,600 C. P34,000
Applied factory overhead 112.5% of labor cost B. P22,667 D. P48,000 CPAR 0410
How much was the cost of Finished goods transferred out to the Packaging Department?
A. P240,555 C. P80,580 47. The Alma Company’s accounting records reflected the following data for April 2003. The
B. P260,580 D. P159,975 CPAR 0410 company accounts its production using First-in, First-out cost flow method:
Work in process, March 31, 2003, 60% completed as to
45. Basilio Company has a cycle time of 3 days, uses a raw and in process (RIP) account, and Materials and conversion costs ? units
charges all conversion costs to Cost of Goods Sold. At the end of each month, all inventories Work in process, April 30, 2003, 30% completed as to
are counted, their conversion costs components are estimated, and inventory account balances Materials and conversion costs 24,000 units
are adjusted. Raw material cost is back flushed from RIP to Finished Goods. The following Equivalent units of production for April 2003 64,000
information is for June: Units started and completed in April 50,000
Beginning balance of RIP account, including P3,000 of conversion costs P29,250 Had the company used the weighted-average method of accounting for its production, the
Beginning balance of finished goods account, including equivalent units should be
P10,000 of Conversion costs 30,000 A. 74,200 C. 57,200
Raw materials received on credit 562,500 B. 81,000 D. 53,800 CPAR 0410
Direct labor cost, P375,000; Factory overhead applied, P450,000 825,000
Ending RIP inventory per physical count, including P,4500 48. Krish Company has a Mixing Department and a Refining Department. Its process-costing
of Conversion costs 32,000 system in the Mixing Department has two direct materials cost categories (material AA and
Ending finished goods inventory per physical count, material BB) and one conversion cost pool. The company uses first-in-first-out cost flow method.
including P8,750 of Conversion costs 26,250 The following data pertain to the Mixing Department for October 2003.
The conversion costs of units sold in June is: Units
A. P825,250 C. P824,750 Work-in-process, October 1: 50% completed 30,000
B. P825,000 D. P1,388,500 CPAR 0410 Work-in-process, October 31, 70% completed 50,000
Units started 120,000
Completed and transferred 100,000
Costs
Work-in-process, October 1 P436,000
Material AA 1,440,000
Material BB 1,500,000

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Conversion costs 600,000

51. Haidee Company uses process costing in accounting for its production department, which uses
Material AA is introduced at the start of operations in the Mixing Department, and Material BB is two raw materials. Material Alpha is placed at the beginning of the process. Inspection is at the
added when the product is three-fourths completed in the Mixing Department. Conversion costs 85% completion stage. Material Beta is then added to the good units. Normal spoilage units
are added uniformly during the process. amount to 5% of good output. The company records contain the following information for April:
Calculate the costs of (1) units completed and (2) units in process at end in the Mixing Started during the period 20,000 units
Department for October, 2003. Material Alpha P26,800
CPAR 0410 A. B. C. D. Material Beta P22,500
Units P3,861,500 P2,700,000 P3,201,000 P3,101,000 Direct labor cost P75,115
completed Factory overhead P93,950
Units in process P114,500 P1,276,000 P775,000 P875,000 Transferred to finished goods 14,000
Work in process (95% complete), April 30 4,000
49. Totay Manufacturing Company uses process costing in accounting for its production Determine the costs per equivalent unit for Material Alpha, Material Beta, and conversion costs
department, which uses two raw materials. Material XX is added at the beginning of the process. CPAR 0410 A. B. C. D.
Inspection is at the 85% completion stage. Material YY is then added to the good units. Normal Material Alpha P1.40 P1.40 P1.34 P1.34
spoilage units amount to 5% of good output. The company records contain the following Material Beta 1.36 1.06 1.06 1.25
information for October 2003: Conversion costs 6.87 7.68 7.86 8.67
Started during the period 20,000 units
Material XX P26,740 Private Nonprofit Organization
Material YY 19,000 52. Bright Hope, a private not-for-profit health and welfare organization, received a cash donation
Direct labor cost 75,160 of P500,000 from a donor on November 15, 2003. The donor directed that his donation be used
Factory overhead cost 93,950 to acquire equipment for the organization. Bright hope used the donation to acquire equipment
Transferred to finished goods 14,000 units costing P500,000 in January, 2004. For the year ended December 31, 2003, Bright Hope should
Ending inventory, 95% complete 4,000 report the P500,000 contribution on its:
The number of normal and abnormal lost units, respectively, are: A. Statement of activities are permanently restricted revenue
A. 700 and 1,400 C. 900 and 1,100 B. Statement of financial position as temporarily restricted deferred revenue.
B. 1,400 and 700 D. 1,100 and 900 CPAR 0410 C. Statement of financial position as unrestricted deferred revenue
D. Statement of activities as temporarily restricted revenue. CPAR 0410
50. ABC Company uses process costing. All materials are added at the beginning of the process.
The product is inspected when it is 90 percent converted, and spoilage is identified only at that
point. Normal spoilage is expected to be 5% of good output.
The following is extracted from the production records of ABC Company for May 2003:
Units put into process 21,000
Units transferred to finished goods 14,000
In-process, May 31, 75% complete 6,000
How many are considered abnormal lost units?
A. Zero C. 15
B. 300 D. 850 CPAR 0410
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Answer Key 6. B 16. A 26. B 36. C 46. C

1. A 11. D 21. B 31. B 41. A 51. D 7. B 17. C 27. B 37. D 47. A
2. C 12. D 22. C 32. B 42. A 52. D 8. D 18. C 28. B 38. B 48. C
3. B 13. A 23. B 33. D 43. 9. B 19. B 29. B 39. A 49. C
4. A 14. A 24. A 34. C 44. A 10. C 20. D 30. B 40. B 50. B
5. D 15. B 25. B 35. B 45. C

1 . Answer A X = 290,000
Unadjusted total net assets of original partnership P 1,025,000
Add - Adjustments on Land P 100,000 4 . Answer A
Marketable securities 50,000 40% 40% 20%
Goodwill 30,000 180,000 ABLE BAKER CHARLIE
Total amount of revalued net assets P 1,205,000 Total Interests P 79,000 P140,000 P 140,000
Divide by capital share of original partners 80% Transfer of inventory (60,000)
Agreed new capital P 1,506,250
Loss on transfer of Inventory (8,000) (8,000) (4,000)
Multiply by capital share of new partner 20%
Cash contribution of Diva (for a 1/5 interest) P 301,250 Theoretical loss on undisposed
Total amount of revalued net assets (as above) P 1,205,000 Net assets of P230,000 (92,000) (92,000) (46,000)
Divide by capital share of original partners 20% Sub-totals P( 21,000) 40,000 30,000
Agreed new capital P 6,025,000 Additional losses 21,000 (14,000) ( 7,000)
Multiply by capital share of new partner 80% Free interests P 0 P 26,000 P 23,000
Cash contribution by Diva (for a 4/5 interest) P 4,820,000
5 . Answer D
2 . Answer C
A B C
Total agreed capital (P450.000 divided by 75%) P600,000
Less original partners' investment (P90,000+P130,000+P170,000) 390,000 Balance Before Liquidation 70,000 30,000 50,000
Required contribution of new partner P210,000 Loss on Realization (15,000) (15,000) (15,000)
Balances 55,000 15,000 35,000
Note: Capital credits will be: Assets Received (30,000)
Original partners (P390.000 + P60,000 bonus) = P450,000 Balances 55,000 15,000 5,000
New partner (P210,000 - P60,000 bonus) = P150,000 P600,000
6 . Answer B
Aldo (168,500 – 90,000) P 78,500
3 . Answer B Bert 48,600
40,000 – 25,000=15,000 Chris 32,500
40,000 = [25,000 + 10% (X - 125,000 - 15,000)] Total investment P159,600
40,000 = 25,000+1X-12,500-1,500
1X = 40,000-11,000 7 . Answer B
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GPRs: 2002 = P320,000 / P800,000 = 40%

Net income: 2003 = P300,000 / P900,000 = 33 – 1/3%
Before salaries P 184,160 Realized gross profit = P360,000 x 33-1/3% = P120,000
Less salaries (treated as operating expense) 80,000 Value of repossessed merchandise P8,000
Reported net income P 104,160 Less unrecovered cost: P15,000 x 60% 9,000 P (1,000)
DGP - 2002, as of December 31,2003
Distributed as follows
lAR - 2002, as of December 31, 2003 :
Phol Archie Rhey Total (P800.000 - 250,000 - (300,000 - P15,000) x 40% P 94,000
Interest 25,920 34,560 49,680 110,160
Balance ( 2,400) ( 1,800) ( 1,800) ( 6,000)
Total 23,520 32,760 47,880 104,160 10 . Answer C
2002 2003
Computation of interest: Total Sales P300,000 P450,000
Phol: P192,000 x 8/12 = P 96,000 Less: -
240,000 x 6/12 =. 120,000 Collections P100,000 P-
P 216,000 x 12% = P25,920 50,000 150,000
Write-off 25,000 -
Archie: P288,000 x 12/12 = P 288,000 x 12% = 34,560 75,000 150,000
Total P250,000 P300,000
Rhey: P432,000 x 9/12 = P324,000 IAR, 12/31/03 P 50,000 P150,000
360,000 X3/12 = 90,000 Multiply by GPR 30% 40%
P 414,000 x 12% = 49,680 DGP, 12/31/03 P 15,000 P60,000
P110,160
11 . Answer D
8 . Answer D Gross profit recognized in 2002:
Free Assets: (P22,500,0QG-P19,500,000) P3,000,000
Pledged with FSC (71,000 – 60,000) P11,000 Multiply by %{P9,750,000/P19,500,000) 50%
Free Assets 11,000 Amount recognized P1,500,000
Total P 22,000
Less: Liabilities w/ priority 3,000 Gross profit recognized in 20Q3:
Estimated net AA P 19,000 (P22,500,000 - P20,250,000) P2,250,000
Multiply by % (P15,750,000/ P20,250,000) .777777
Less: Unsecured Amounts:
Gross profit earned through end of 2003 P1,750,000
Pledged with PSC (20,000-12,500) P 7,500 Less gross profit recognized in 2002 1,500,000
Unsecured w/o priority 18,000 25,500 Gross profit recognized in 2003 P 250,000
P 6,500

9 2004
. Answer B Page 13 of 18
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15. Discount = (0.150 – 0.147) x 1,000,000 = 3,000

12 . Answer D
Actual costs (P8,000,000 + P50,000 + P300,000+ P125,000) P 8,475,000 16. Forex Gain/Loss = PO Offsetting gain / loss = P 0
Add Est. cost to complete (P28,000,000 + P50.000 +
P50,000 + P300,000 28,400,000 17. Amortization of Discount = 3,000 x 50/60 = P 2,500
Total estimated cost P36,575,000
% completed : P5,475,000 / P36,575,000 22.95305% 18. Forex Gain = (0.148 – 0.146) x 1,000,000 = 2,000
Adjusted contract price: (P40,000,000 + P125,000 +
P600,000+P100,000) P40,825,000 19. Contract Receivable = 1,000,000 x 0.147 = P147,000
Multiply by % 22.95305%
Recognized revenue P 9,382,830 20 . Answer D
Less Actual adjusted cost 8,475,000 Equipment recorded on December 12 is:
Recognized gross profit P 907,830 75,000 SF x P32.84 = P2,463,000

13 . Answer A 21 . Answer B
Project A Project B Foreign Currency amount 100,000 FC
Contract Price P1,620,000 P2,520,000 Multiply by spot rate at date of Commitment 1.64
Costs: Actual to date P1,200,000 P2,310,000 Recorded value of merchandise P164,000
Additional cost 240,000 __________
Total estimated cost P1,440,000 P2,310,000 The purpose of the hedge is to ensure that the recorded value of the merchandise conforms with the
Gross profit P 180,000 P210,000 spot rate at the date the Commitment is signed.
Multiply by % of completion 83.33% 100%
GP to date P 150,000 P 210,000 22 . Answer C
Less: GP recognized in prior years 75,000 187,200 Current rate method:
Gross profit for 2003 P 75,000 + P 22,800 (37,500 + 62,500 + 12,500 + 15,000 + 10,000 +
= P 97,800 5,000 + 75,000 + 125,000) P342,500
Temporal (Monetary/Nonmonetary) method:
(P37,500 + 62,500 + 10,000 + 7,500 + 10,000 +
@: GP recognized in prior years:
3,750 + 72,500 + 120,000) P323,750
CP Cost %
Project A: (1,620,000 - 1,440,000) x 41.67% =P 75,000
23 . Answer B
Project B: (2,520,000 - 2,250,000) x 69.33% =P187,2000
Branch Account HO Account
14 . Answer A Adjusted Balances P500,000 P500,000
Franchise Revenue P5,000,000 Add:
Franchise Cost 500,000 Unrecorded branch remittance 11,000
Franchise profit P4,500,000 Returned merchandise 4,000
GPR (4,500,000 / 5,000,000) 90% Reversed/excess freight charges 750
RGP: (2,000,000 / 1,000,000) x 90% = P2,700,000 Deduct:
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Branch expenses paid by home office (5,000) 27 .

Unadjusted Balances P515,000 P495,750
28. Inventory: P66,000 + P19,000 + 8,250 P93,250
24 . Answer A
29 Cost of Investment P196,000
HO net income (from own operation) P136,000
Less: Book value acquired: (P200,000 x 75%) 150,000
Add: True Branch net income:
Excess of cost over book value P46,000
As reported P6,000
Less: Understatement of inventory: (P30,000 – P19,000) x 75% 8,250
Adjustment for realized allowances (60,000 + P156,000
Goodwill P37,750
– P48,000) / 120% = P140,000 (Cost) x 20%
28,000 34,000
30. Total Liabilities: P103,000 + P71,000 P174,000
Combined net income P170,000
31. Minority Interest: (P150,000 + P50,000) x 25% P50,000
25 . Answer B
100% 60% 40% 32. Total Assets (P615,000 – P196,000 + 271,000 + 8,250 + 37,750 P736,000
Billed Price Cost Mark-up
Beginning Inventory P80,000 P48,000 P32,000 33 . Answer D
Shipment 60,000 36,000 24,000 BCV of Investment, 12/31/04 P440,000
Ending Inventory (25,000) (15,000) (10,000) Dividends received (P20,000 x 20% ) (4,000)
Realized allowance P46,000 Share in net income (P4,000 x 7) x 20% 5,600
Less: Net loss reported (11,500) Amortization of goodwill (P6,000 x 7/12) (3,500)
True Branch Profit P34,500 BVC, 8/01/05 P438,100

Note: GPR is Billed Price (sales) based Sales proceeds P400,000

Less: Book value sold: P438,100 x 50% 219,050
26 . Answer B Gain on sale in P180,950
Cash sent by HO to Branch P9,000
Merchandise shipment at billed price 50,000 34 . Answer C
Branch expense allocated by H.O. 2,000 Net assets, date of acquisition P1,000,000
Cash remittance by branch to H.O. (17,000) Add: Net income in 2003 150,000
Net Income reported by branch 16,000 Less: P Dividends (90,000)
HO Account, end P60,000 Net assets, 12/31/03 P1,060,000
Multiply by Minority interest % 30%
Sales P80,000 Minority interest – Net assets P318,000
Less: Cost of Sales 48,000
Gross profit P32,000 35 . Answer B
Less: expenses 16,000 Cost of investment P500,000
Net income P16,000
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Total market values of net assets (P380,000 + P20,000) 400,000 39 . Answer A

Goodwill P100,000 The increase in the stockholders equity of the combinor will come from the total net assets
Amortization of goodwill (P100,000 / 20 years) P5,000/yr contributed by the combines:
Investment income: Mitsubishi: (P875,000 – P306,250) = P568,750
Net income P80,000 Nissan: (P9,625,000 – P2,625,000) = P7,000,000
Less: Adjustment for: Total P7,568,750
Amortization of GW P5,000
Understated inventory 20,000 25,000 P55,000 40 . Answer B
BCV of investment, 12/31/03 New pair value of stock issued (P,100,000 – P300,000) P800,000
Cost P500,000 Less old par values (P200,000 + P400,000) 600,000
Dividend received (10,000) Reduction in APIC of Y & Z P200,000
Investment income (as above) 55,000 P545,000 APIC of Y & Z 100,000
Reduction in APIC of X P100,000
36 . Answer C APIC of X 40,000
Reduction in RE of Y & Z P60,000
Paint’s Separate Income P250,000
Retained Earnings of Y & Z 150,000
Add: Income from Stain:
Balance of RE of Y & Z to be transferred P 90,000
Income as reported P190,000
RE after combination = (1) P180,000 + P90,000 = P270,000
Realized Gross Profit 8,000
(2) No component of SHE of Y & Z
Unrealized Gross Profit ( 25,000)
enters the books of X, hence P180,000
Adjusted Subsidiary Income P173,000
Multiply by 80% 138,400
41 . Answer A
Consolidated Net Income P388,400
Cost of completed units P825,000
Less: Materials Cost of Completed Units:
37 . Total DM used P341,000
S Co. reported net income P150,000
Less: DM used of WIP 70,400 270,600
Deferred gain on sale (30,000) Conversion Cost of Completed Units: P554,400
Recognized deferred gain (30,000 / 10 years) 3,000 Allocated to:
S Co. adjusted net income P123,000 Labor: 554,400 / 1.8 308,000
Majority % 90%
Overhead: 308,000 x .8 246,400
Equity in subsidiary income P110,700

38 . Answer B 42 . Answer A
1. Intercompany sales: 200,000 + 140,000 – 308,000 = =32,000 ABC Costing: #555 #666
2. SS Payable: 26,000 + 19,000 – 39,000 = = 6,000 Direct materials 1,500 1,700
3. Inventory BCV: (32,000 x 37.5%) – 3,000 = = 9,000 Direct labor 1,200 1,200
4. U.I.I.P.: (32,000 x 25%) x 37.5% = = 3,000 Factory overhead:
5. MI% 10,000 / 50,000 = = 20% Set-up 400 400
2004 6. Amortization years (22,000 / 2,000) + 4 years = 15 yrs. Page 16 of 18
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EUP:
Ordering 80 40 Transferred out of Packing Dept. 59,250
Machining 200 300 In process, end 15,750 x 1/3 5,250
Receiving 20 40 Total 64,500
Total Costs P3,400 P3,680 Unit Cost:
Divide by units produced 100 50 Transferred in 2.70
Unit Costs P34.00 P73.60 Labor and overhead 87,720/64,500 1.36
Total 4.06
Unit-Based (Traditional) Cost of finished goods transferred out 59,250 x 4.06 P240,555
Predetermined rate = P440,000 / 4,000 = P110/DLH
45 . Answer C
Total conversion cost in current month P825,000
#555 #666
Adjustments: Increase in conversion cost of RIP, end (1,500)
Direct Materials P1,500 P1,700 Decrease in conversion cost of FG, end 1,250
Direct Labor 1,200 1,200 Conversion cost of units sold in June P824,750
Factory overhead 5,500 5,500
Total costs P8,200 P8,400 46 . Answer C
Divide by units produced 100 50
Equivalent units for October 128,000
Unit cost P82.00 P168.00
Less: EU – started and completed during October 100,000
Work-in-process, end 48,000 x 30% 14,400 114,400
ABC TRAD. Diff. Equivalent units – work-in-process end Sept.30 13,600
#555 34.00 82.00 P48 Number of units in process as of Sept. 30 13,600 / 40% 34,000
#666 73.60 168.00 94.40
47 . Answer A
43 .
Equivalent units – FIFO 64,000
A. Physical Output Method
Add equivalent units on March 31 (17,000 x .6) 10,200
M: 200 / 300 x 18,000 = P12,000
EUP – Average 74,200
N: 100 / 300 x 18,000 = 6,000
48 . Answer C
B. Relative Sales Value at Split-off-Point
M: (200 x 120) = 24,000 / 30,000 x 18,000 = 14,400 Mat. AA Mat. BB Conversion On
N: (100 x 60) = 6,000 / 30,000 x 18,000 = 3,600 WD EUP WD EUP WD EUP
30,000 18,000 C&T.IP Beg. 30,000 - - 100% 30,000 50% 15,000
Started 70,000 100% 70,000 100% 70,000 100% 70,000
C. Net Realizable Value at Split-off-point IP. End 50,000 100% 50,000 - - 70% 35,000
M: 200 (3,900 – 4,000) = 35,000: 35/42 x 18,000 = 15,000 Total 150,000 120,000 100,000 120,000
N: 100 (8,000 – 1,000) = 7,000: 7/42 x 18,000 = 3,000
42,000 Unit cost: MAT AA: P1,440,000 / 120,000 P12.00
MAT BB: 1,500,000 / 100,000 15.00
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. Answer A Page 17 of 18
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Total lost units (21,000 – 20,000) 1,000

Conversion: 600,000 / 120,000 5.00 Less normal lost units 5% of 14,000 700
Total P32.00 Abnormal lost units 300

Cost allocation to: 51 . Answer D

1. Completed: Equivalent units
From IP beg. Alpha Beta C.C.
Cost last month P436,000 Transferred to F.G. 14,000 14,000 14,000
Cost added this month: End Process 4,000 4,000 3,800
Mat. BB: 30,000 x 5 450,000 Normal lost units 900 765
Conversion: 15,000 x 5 75,000 P961,000 Abnormal lost unit 1,100 935
From started (70,000 x P32) 2,240,000 Total 20,000 18,000 19,500
Total lost of completed units P3,201,000
Unit cost
2. IP End: Alpha P26,800 / 20,000 = P1.34
Mat. AA: 50,000 x P12 P600,000 Beta P22,500 / 18,000 = P1.25
Conversion: 35,000 x P5 175,000 P775,000 CC P169.065 / 19,500 = P8.67

49 . Answer C 52 . Answer D
Total lost units (20,000 – 18,000) 2,000 Because it is a Contribution Received during the Current period it must be reported in the Statement
Normal lost units 5% x 18,000 900 of Activities for the Current period under Temporarily Restricted Net Assets because of the use
Abnormal lost units 1,100 restriction.

50 . Answer B

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