CPA REVIEW SCHOOL OF THE PHILIPPINES

MANILA

ADVANCED FINANCIAL ACCOUNTING AND REPORTING Sunday, May 1, 2022

Final Preboard Examination 12:00 n.n. to 3:00 p.m.

Numbers 1, 2 and 3

A construction contractor has a fixed price contract for P100,000 to construct a building (the
project). The contractor’s initial estimate of total contract costs is P60,000. It will take two years to
construct the building. At the end of the first year of the project (31 December 2022) the contractor
has incurred costs of P20,000 on the contract, including P2,000 on cement that is held offsite. The
entity’s estimate of total contract costs has stayed the same.

The contractor determines the stage of completion of the construction contract by reference to the
proportion that costs incurred for work performed to date bear to the estimated total costs.

1. Determine the revenues, expenses, and profit for the year 2022
A. REVENUES-30,000; EXPENSES-18,000; PROFIT-12,000
B. REVENUES-32,000; EXPENSES-20,000; PROFIT-12,000
C. REVENUES-31,333; EXPENSES-18,000; PROFIT-13,333
D. REVENUES-33,333; EXPENSES-20,000; PROFIT-13,333

2. Assuming the contractor determines the stage of completion of the construction contract
by reference to independent surveys of work performed. At the end of 2022 the project
was certified to be 28% complete. Determine the revenue, expenses, and profit for the
year 2022
A. REVENUES-28,000; EXPENSES-18,000; PROFIT-10,000
B. REVENUES-28,000; EXPENSES-20,000; PROFIT-8,000
C. REVENUES-29,200; EXPENSES-18,000; PROFIT-11,200
D. REVENUES-31,200; EXPENSES-20,000; PROFIT-11,200

3. If the contractor determines the stage of completion of the construction contract by

reference to independent surveys of work performed. At the end of 2022 the project was
certified to be 32% complete. Progress billings of P30,000 have been made at the end of
2022 and the customer has paid P20,000 of these progress billings. Determine the revenue,
expenses, and profit for the year 2022
A. REVENUES-32,000; EXPENSES-18,000; PROFIT-14,000
B. REVENUES-30,000; EXPENSES-20,000; PROFIT-10,000
C. REVENUES-30,800; EXPENSES-18,000; PROFIT-12,800
D. REVENUES-32,800; EXPENSES-20,000; PROFIT-12,800

Number 4

Under IFRS 15, where the standalone selling prices of the different performance obligations in a
contract with a customer are not available, what methods or approaches may be used to allocate
the transaction price?
A. Adjusted market assessment approach
B. Expected cost plus a margin approach
C. Residual approach but only permissible in limited circumstances
D. Any of the above
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Number 5

XYZ Corporation, a trading company located in Manila, imports merchandise from foreign suppliers
and exports its own products to other foreign customers. The unadjusted accounts denominated in
foreign currencies at December 31, 2021 were as follows:
a. Accounts receivable from the sale of merchandise on December 10 to RST Corporation and
due on January 15, 2022. Billing is for 750,000 foreign currencies amounting to P517,500
b. Accounts payable to JKL Corporation for merchandise received December 5 and payable on
January 20, 2022. Billing is for 1,375,000 foreign currencies amounting to P976,250
Applicable exchange rates on the above transactions were as follows:
2021 Closing rate…………………… P 0.680
January 2022 selling spot rate…….. 0.685
January 2022 buying spot rate …….. 0.675

The net exchange gain (loss) from the two transactions that will be included in the income
statement of XYZ Corporation for 2021 and 2022 respectively

A. 41,250 ; (3,125)
B. 48,750 ; (6,875)
C. 33,750 ; (10,625)
D. (33,750) ; 10,625

Number 6

On November 1, 2021, NOP Company sold merchandise to a foreign customer. The account will be
settled on March 1, 2022 with the receipt of 200,000 foreign currency units. On November 1, NOP
also entered into a forward contract with a bank to mitigate the risk on the exposed asset. The
contracted forward rate is P0.80 per unit of foreign currency. NOP has a December 31 fiscal year-end.
Spot rates on relevant dates were:

Date Per unit of Foreign Currency

November 1 P0.83
December 31 0.81
March 1, 2022 0.84

Using the gross position approach, compute the amount of the Receivable from the bank account
on December 31, 2021 and the gain or loss on the hedged item in 2021?

Receivable account Gain/Loss recorded

A. 160, 000 4, 000 loss
B. 162, 000 4, 000 loss
C. 168, 000 2, 000 gain
D. 162, 000 4, 000 gain
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Numbers 7 and 8

On November 1, 2021, HIJ entered into a forward contract to buy $7,000 from a LMN bank to
speculate on the changes in the value of the US Dollar. It will be delivered on January 31, 2022. The
following direct exchange rates are provided by the bank:

11/1/2021 12/31/2021 1/31/2022

Bid spot rate P40 P37 P38
Offer spot rate P45 P50 P48
Buying forward-30 days P38 P32 P35
Selling forward-30 days P34 P41 P36
Buying forward-60 days P43 P35 P46
Selling forward-60 days P40 P41 P43
Buying forward-90 days P42 P40 P38
Selling forward-90 days P43 P40 P36

7. Compute the fair value of the derivative instrument to LMN on December 31, 2021
A. 7,000 negative
B. 14,000 negative
C. 7,000 positive
D. 14,000 positive

8. Under the gross position approach, compute the amount credited by HIJ to the foreign
currency denominated payable account at the inception date
A. 301,000
B. 294,000
C. 0
D. 280,000

Number 9

Under IFRS 15, where a contract with a customer has multiple performance obligations, what will be
the accounting treatment to the transaction price?
A. The transaction price shall be recognized as revenue to the most important performance
obligation.
B. The transaction price shall be allocated equally to the different performance obligations.
C. The transaction price shall be allocated to the different performance obligations by reference to
their relative standalone selling prices.
D. The transaction price shall be recognized as revenue only at the end of completion of all
performance obligations

Number 10

According to IFRS 15, when should franchise revenue be recognized?

A. When operation commences
B. When the contract was signed
C. When the performance obligations are met
D. When the franchise fee is paid to the franchisor
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Numbers 11 and 12

STU Inc. imports machinery from a foreign supplier. On June 1, the company received delivery of the
machinery with six years useful life and with a cost of FCU 1,125,000 when the spot rate was 1 FCU =
P 1.370. STU paid 125,000 FCU upon delivery, with the balance due in 60 days after delivery. On
June 15, STU purchased an option to buy FCU on July 31 at a strike price of 1 FCU = P 1.375. The
hedge was designated as a fair value hedge. At the time of the purchase the out-of-the-money option
had a value of P 3,500 and a value of P 6,500 at June 30. FCU spot rate as follows:
June 15 1 FCU = P 1.373
June 30 1 FCU = P 1.381
July 31 1 FCU = P 1.385
On July 31, the option was settled and the foreign currency was remitted to the foreign supplier.

11. Compute the total gain (loss) of STU Inc. on the option contract
A. 7,750
B. ( 3,500)
C. ( 6,500)
D. 6,500

12. Compute the carrying value of the machinery in the Statement of Financial Position on July
31
A. 1,544,625.00
B. 1,546,875.00
C. 1,541,250.00
D. 1,498,437.50

Number 13

QRS Builders Inc. started construction in 2021 with a fixed contract price of P15,000,000 and was
completed in 2023. The accounting records disclosed the following:
2021 2022
Cumulative cost incurred 9,750,000 15,000,000
Estimated cost at completion 19,500,000 20,000,000
Under IFRS 15, compute the balance of the Inventory account in 2022
A. 16,250,000
B. 10,000,000
C. 11,250,000
D. 15,000,000

Number 14

Consignor consigned 10 items to the consignee and the items had a cost of P27,000 each. The freight
from consignor to consignee amounting to P18,000 was paid by the consignor. The sales price of each
item was P45,000. They also agreed that the consignee shall have a 15% commission based on the
sales. The following costs were paid by the consignee on behalf of the consignor: Selling expense
P22,500; cartage cost upon receipt of the consigned goods P2,250. At the end of the year, the
consignee sold 6 items to customers.
Compute the net income of the consigner at the end of the year
A. 32,850
B. 31,950
C. 41,850
D. 65,250
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Number 15

On January 1, 2022, an entity granted a franchise agreement to a franchisee. The contract provided that
the franchisee shall pay an initial franchise fee of P3,000,000 and on-going payment of royalties
equivalent to 8% of the sales of the franchisee. On January 1, 2022, the franchisee paid down payment
of P1,200,000 and issued a 3-year 12% interest bearing note for the balance payable in three equal
annual installments starting December 31, 2022.

On June 30, 2022, the entity completed the performance obligation of the franchise at a cost of
P1,800,000. Aside from that, the entity incurred an indirect cost of P150,000. The franchisee started
operation on July 1, 2022 and reported sales revenue amounting to P300,000 for the year ended
December 31, 2022.

Under IFRS 15, compute the net income for the year end December 31, 2022
A. 1,434,000
B. 1,218,000
C. 1,290,000
D. 1,074,000

Number 16

Which of the following statements is TRUE?

A. A holder and its writer can tailor option contracts in other currencies and for a customized time
period to meet the needs of the firm with a minimal to none up-front cost.
B. The ability to lock in a value today at which a foreign currency can be purchased or sold at some
future date may be done by entering into derivative instruments.
C. On the transaction date, in the books of a Philippine Company with an export transaction and a
forward contract to sell a given amount of foreign currency at a specified price and at a specified
date, under the gross position approach the holder credits Forward Contract Payable that is
denominated in the foreign currency.
D. A forward contract is composed of the contract value of the currency involved which is a variable
amount and the current value of the currency which is the fixed obligation.

Number 17

Which of the following statements is TRUE?

A. Depreciation in a foreign currency results in a foreign exchange loss when the foreign currency is
to be paid and a foreign exchange gain when the foreign currency is to be received.

B. A call option is purchased to limit the price it will have to pay for a commodity while a put option
is purchased to limit a decline in the value of a financial asset or commodity.

C. Intrinsic value is never less than zero. Nevertheless, even with zero intrinsic value, an option can
still be worth something because of its time value.

D. Assuming the holder prepares a journal entry on the inception date, if the forward selling rate
decreased from transaction date to the reporting date on December 31, the trade receivable account
is credited to recognize a loss on derivative instrument
 Page 6

Number 18
On December 1, 2022, Marcus Inc. authorized Peter to operate as a franchisee for an initial franchise
fee of P3,400,000. P900,000 was received upon signing of the contract, and the balance is to be paid
by a non-interest-bearing note, due in five equal annual installments beginning December 31, 2023.
Prevailing market rate is 12%. PV factor is 3.60478. The down payment is nonrefundable and
represents a fair measure of the services already performed by Marcus, however, with regards to the
balance, substantial future services are still required.

How much is the deferred franchise revenue to be recognized as of December 31, 2022?
A. 1,802,390
B. 2,500,000
C. 1,518,677
D. 2,702,390

Numbers 19 and 20
On January 1, 2022, CC Co. acquired the identifiable net asset of DD, Inc. On this date, the identifiable
assets acquired and liabilities assumed have fair values of P7,680,000 and P4,320,000, respectively.
CC Co. incurred the following acquisition-related costs: legal fees, P48,000, due diligence costs,
P480,000; general and administrative costs of maintaining an internal acquisition, P96,000.

As consideration, CC Co. transferred 9,600 of its own shares with par value and fair value per share of
P400 and P500, respectively, to DD’s former owners. Costs of registering the shares (previously issued
and newly issued) amounted to P192,000 (P24,000 pertains to listing fees of previously issued shares).

19. How much is the goodwill (gain on bargain purchase) on the business combination?
A. 667,200
B. 720,000
C. 1,440,000
D. 1,300,000

20. How much is the total amount charged to profit or loss in relation to the transaction above?
A. 624,200
B. 648,000
C. 816,000
D. 750,000

Number 21
Which of the following accounts is a reciprocal account to the Investment in Branch Account?
A. Branch Income
B. Shipments from HO
C. Home Office
D. Shipments to branch

Number 22
How should accounting fees for an acquisition be treated?
A. Expensed in the period of acquisition
B. Capitalized as part of the acquisition cost
C. Deferred and amortized
D. Deferred until the company is disposed of wound-up
 Page 7
Numbers 23 and 24

On December 31, 2022, Add-On Company acquired 100 percent of Venus Corporation common stock
for P300,000. Balance sheet information of Venus just prior to the acquisitions is given here:

Cash and receivables 35,000

Inventory 75,000
Land 100,000
Buildings and Equipment (net) 220,000
Total assets 430,000

Accounts payable 65,000

Bonds payable 150,000
Common stock (P1 par) 100,000
Retained earnings 115,000
Total liabilities and equity 430,000

At the date of the acquisition, Venus’ net assets and liabilities approximated fair value, except for
inventory, which had a fair value of P60,000, land which had a fair value of P125,000, and building
and equipment (net), which had a fair value of P250,000.

23. What amount of inventory will be included in the consolidated balance sheet immediately
following the acquisition?
A. 15,000
B. 45,000
C. 60,000
D. 75,000

24. What amount of goodwill will be included in the consolidated balance sheet immediately
following the acquisition?
A. 15,000
B. 30,000
C. 45,000
D. 85,000

Numbers 25 and 26

On January 1, 2022, RR Corporation acquired 80% of SS Corporation’s P10 par common stock for
P956,000. On this date, the fair value of the non-controlling interest was P239,000, and the carrying
amount of SS’s net assets was P1,000,000. The fair values of SS’s identifiable assets and liabilities
were the same as their carrying amounts except for plant assets (net) with a remaining life of 20 years,
which were P100,000 in excess of the carrying amount. For the year-ended December 31, 2022, SS
had net income of P190,000 and paid cash dividends totaling P125,000.

25. In the January 1, 2022, consolidated balance sheet, the amount of goodwill reported should
be
A. None
B. 76,000
C. 95,000
D. 156,000

26. In the December 31, 2022, consolidated balance sheet, the amount of non-controlling interest
reported should be
A. 200,000
B. 239,000
C. 251,000
D. 252,000
 Page 8
Numbers 27 and 28
Pilfer Company acquired 90% ownership of Scrooge Corporation in 2022, at underlying book value.
On that date, the fair value of non-controlling interest was equal to 10% of the book value of Scrooge
Corporation. Pilfer purchased inventory from Scrooge for P90,000 on August 20, 2022, and resold
70% if the inventory to unaffiliated companies on December 1, 2022, for P100,000. Scrooge produced
the inventory sold to Pilfer for P67,000. The companies had no other transactions during 2022.

27. What amount of sales will be reported in the 2022 consolidated income statement?
A. 90,000
B. 120,000
C. 100,000
D. 67,000

28. What amount of consolidated net income will be assigned to the controlling interest for
2022?
A. 51,490
B. 53,100
C. 37,000
D. 20,100

Numbers 29, 30 and 31

On January 1, 2022, Shrimp Corporation purchased a delivery truck with an expected useful life of five
years. On January 1, 2024, Shrimp sold the truck to Avocet Corporation and recorded the following
journal entry:
Cash 50,000
Accumulated depreciation 18,000
Truck 53,000
Gain on sale of truck 15,000
Avocet holds 60% of Shrimp. Shrimp reported net income of P55,000 in 2024, and Avocet’s separate
income for 2024 was P98,000.

29. In the consolidated working papers, the Truck account would be debited for
A. 3,000
B. 50,000
C. 53,000
D. 68,000

30. Controlling interest in consolidated net income for 2024 was

A. 121,000
B. 125,000
C. 131,000
D. 143,000

31. The non-controlling interest in consolidated net income for 2024 was
A. 18,000
B. 22,000
C. 23,000
D. 27,000

Number 32
Eliminating entries are made to cancel the effects of intercompany transactions and are made in
A. Books of the parent company
B. Books of the subsidiary company
C. Neither the books of the parent nor the subsidiary
D. Both the books of the parent and the subsidiary
 Page 9

Numbers 33 and 34

Pasig Garment Company operates a branch in Cabanatuan City. At the end of the year, the Branch
account in the books of the home office at Manila shows a balance of P150,000. The following
information are ascertained:

 The home office billed the branch the amount of P37,500 for the merchandise, which was in
transit on December 31.
 A home office accounts receivable for P10,500 was collected by the branch. Said collection
was not reported to the home office by the branch.
 Supplies of P4,500 was returned by the branch to the home office but the home office has not
yet reflected in its records the receipt of the supplies.
 The branch made profit of P10,100 for the month of December but the home office erroneously
recorded it as P11,180.
 The branch has not received the cash in the amount of P25,000 sent by the home office on
December 31. This was charged to General Expense account.

All accounts are presumed to have been properly recorded.

33. What is the balance of the Home Office account on the books of the branch as of December
31, before adjustments?
A. 121,920
B. 123,000
C. 117,420
D. 106,920

34. What is the adjusted balance of the reciprocal accounts?

A. 96,420
B. 106,920
C. 117,420
D. 179,920

Number 35
P Corp. owns 90% of the outstanding stock of S Company. On December 31, 2022, S sold equipment
to P for an amount greater than the equipment’s book value but less than its original cost. The
equipment should be reported on the December 31, 2022 consolidated balance sheet at
A. P’s original cost less 90% of S’s recorded gain
B. P’s original cost less S’s recorded gain
C. S’s original cost
D. P’s original cost

Number 36
Any intercompany gain or loss on a downstream sale of land should be recognized in consolidated net
income
A. In the year of the downstream sale
B. Over the period of time the subsidiary uses the land
C. In the year the subsidiary sells the land to an unrelated party
D. None of the above
 Page 10

Numbers 37, 38 and 39

Autoplus Corporation is to be liquidated and has the following data available:

Book Value Fair Value

Current Assets P800,000 P330,000
Land P1,000,000 P900,000
Equipment P1,000,000 P1,100,000

Admin. expenses for liquidation P200,000

Bonds payable P700,000
Salaries payable P60,000
Accounts payable P830,000
Notes payable (secured by Land) P1,200,000
Tax payable P80,000

Round estimate recovery percentage to 4 decimal places (ex. .12345 = 12.35%)

37. What is the amount of the net free assets?

A. 1,430,000
B. 1,090,000
C. 1,290,000
D. 1,150,000

38. What is the amount paid to the holder of the note payable?
A. 1,078,680
B. 900,000
C. 1,113,720
D. 1,134,420

39. What is the amount paid to the unsecured liabilities without priority?
A. 911,268
B. 1,089,948
C. 1,195,542
D. 1,429,962

Number 40

In accounting for corporate liquidation, which of the following statements is incorrect?

A. Fully secured creditors no longer share in the remaining free assets after payment of unsecured
liabilities without priority.
B. Assets used as security for partially secured liabilities are offsetted to their secured debts and can
no longer be used to pay unsecured liabilities.
C. Unsecured credits with priority such as liabilities to employees and taxes due to government can
always be fully recovered by the said creditors in every corporate liquidation.
D. The unsecured portion of the liabilities to partially secured creditors are added to unsecured credits
without priority in the computation of recovery percentage of the unsecured creditors without
priority.
 Page 11

Number 41
When computing variances from standard costs, the difference between actual and standard price
multiplied by actual quantity used yields a
A. combined price-quantity variance
B. price variance
C. quantity variance
D. mix variance

Numbers 42 and 43
Isabel Company used a job-order costing system. During April, the following costs appeared in the
Work in Process Inventory account:
Beginning balance P24,000
Direct material used P70,000
Direct labor incurred P60,000
Applied overhead P48,000
Cost of goods manufactured P185,000

Isabel Company applies overhead on the basis of direct labor cost. There was only one job left in Work
in Process at the end of April which contained P5,600 of overhead.

42. What is the amount of the work in process at the end of April?
A. 7,000
B. 387,000
C. 17,000
D. 202,000

43. What is the amount of direct materials included in the work in process at the end of April?
A. 11,400
B. 7,000
C. 10,000
D. 4,400

Number 44
A company wishing to isolate variances at the point closest to the point of responsibility will determine
its material price variance when
A. material is purchased
B. material is issued into production
C. material is used in production
D. production is complete

Number 45
Each of the following is a method to allocate joint costs except
A. relative sales value
B. relative net realizable value
C. relative weight, volume, or linear measure
D. average unit cost
 Page 12

Number 46
Susan Corporation has three production departments A, B, and C. Susan Corporation also has two
service departments, Administration and Personnel. Administration costs are allocated based on value
of assets employed, and Personnel costs are allocated based on number of employees. Assume that
Administration provides more service to the other departments than does the Personnel Department.

Dept. Direct Costs Employees Asset Value

Admin. P900,000 25 P450,000
Personnel 350,000 10 600,000
A 700,000 15 300,000
B 200,000 5 150,000
C 250,000 10 800,000

Using the direct method, what amount of Personnel costs is allocated to B?

A. 50,000
B. 43,750
C. 26,923
D. 58,333

Number 47
Falken Company produced two products from a joint process: X and Z. Joint processing costs for this
production cycle were P8,000.

Disposal
Sales price cost per Further Final sale
per yard at yard at processing price per
Yards split-off split-off per yard yard
X 1,500 P6.00 P3.50 P1.00 P 7.50
Z 2,200 P9.00 5.00 3.00 11.25

If X and Z were processed further, the same disposal cost will be incurred as in the split-off point.
Falken Company opted to use the approximated net realizable value method in allocating its joint cost.

If Product X is processed further, what is the net income of Product X?

A. 500
B. 6,660
C. 8,160
D. 1,410

Number 48

The primary difference between the FIFO and weighted average methods of process costing is
A. in the treatment of beginning work in process inventory
B. in the treatment of current period production cost
C. in the treatment of spoiled units
D. none of the above
 Page 13

Numbers 49, 50, 51 and 52

RAV Company had the following data for the manufacture of a series of homogeneous products. The
company used process costing system to account the cost.

Beginning inventory units 5,000

Started units 60,000
Ending inventory units 7,000
Completed units 56,500

Direct materials Conversion

Beginning inventory P25,000 P35,000
Current period P300,000 P326,200

The beginning inventory units was 30% complete as to conversion and the ending inventory units was
60% to complete as to conversion. All materials were added at the beginning of the process. Based on
previous processes, the company normally experienced a 2% loss based on the started units during the
year. The policy of the company to inspect the units was at the 60% completion mark. RAV Company
opted to use the weighted average method to account to cost.

Round cost per EUP to 2 decimal places (ex. 12.345 = 12.35)

49. What is the amount of the conversion cost EUP?

A. 61,600
B. 59,900
C. 60,200
D. 59,300

50. What is the amount of the cost of goods manufactured?

A. 631,820
B. 621,500
C. 613,590
D. 622,949

51. What is the amount of the ending inventory?

A. 59,612
B. 51,884
C. 51,800
D. 52,892

52. What is the amount of the period cost?

A. 2,555
B. 2,580
C. 2,224
D. 0
 Page 14

Number 53
When a National Government Agency remits its collections to the Bureau of Treasury, which of the
following will most likely be credited by the NGA?
A. Cash – Tax Remittance Advice (TRA)
B. Cash – Modified Disbursement System (MDS), Regular
C. Cash – Treasury/Agency Deposit, Regular
D. Cash – Collecting Officer

Number 54
The Notice of Cash Allocation is posted in the
A. Registry of Allotments and Notice of Cash Allocation (RANCA)
B. Registry of Appropriations and Allotments (RAPAL)
C. Obligation Request and Status (ORS)
D. All of the above

Number 55
The entry of a National Government Agency to record the accrual of salaries and wages after approval
of payroll will include a debit to
A. Personal Economic Relief Allowance (PERA)
B. Due to GSIS
C. Due to Officers and Employees
D. All of the above

Number 56
A National Government Agency had the following transactions during the year:
 A Notice of Cash Allocations (NCA) amounting to P600,000 was received
 Various expenses totaling P240,000 was incurred
 Earned P100,000 revenue through billings and collections of unbilled income.
 Remitted the taxes withheld of P50,000 to the Bureau of Internal Revenue through a Tax
Remittance Advice (TRA)
 At the end of the period, the Cash-Modified Disbursement System (MDS), Regular account
has an unused balance of P40,000
How much is the surplus/(deficit) for the period?
A. 510,000
B. 470,000
C. 410,000
D. 370,000

Number 57
A non-profit educational institution received a P500,000 grant for a faculty research in 2022. The grant
money was not spent until 2023. For the year ended December 31, 2022, the educational institution
should
A. Report the grant as unrestricted revenue
B. Report the grant as temporarily restricted revenue
C. Report the grant as a liability under an agency fund
D. Report the grant through disclosures in the notes to FS only
 Page 15

Number 58
A non-profit hospital provided the following information:

Amount charged to patients P1,000,000

Salaries expense – nurses 200,000
Undesignated gifts 150,000
Contractual adjustments 100,000
Revenue from newsstand 50,000
Bad debts 20,000
Interest income 10,000
How much is the net patient revenue?
A. 1,000,000
B. 900,000
C. 950,000
D. 800,000

Number 59
A donor made an unconditional pledge to provide P100,000 cash contributions every year for three
years to a not-for-profit organization. The effective rate in the market is 10%. The entry of the NPO
would include a credit to
A. Contribution revenue – unrestricted
B. Contribution revenue – temporarily restricted
C. Liability – agency fund
D. Subsidy Income from National Government

Number 60
A non-profit organization had the following transactions during the year:
 Received unrestricted cash contributions totaling P500,000.
 Received cash contribution amounting to P100,000 restricted by the donor to be used to acquire a
piece of equipment
 Purchased a piece of equipment for P100,000 by releasing the fund from restriction.
How much is the net cash flows from operating, financing, and operating activities, respectively?
A. 600,000 ; 0 ; (100,000)
B. 500,000; 100,000 ; (100,000)
C. 500,000 ; 0; 0
D. 500,000 ; 100,000 ; 0

Number 61
NS Incorporated, a joint operator, has a contractual right to 40% of the revenues and expenses of a
joint operation, together with CP Corporation which owns the rest of the 60%.
The joint operation earned P4,000,000 sales revenue during the same year when it sold a total of
P500,000 worth of goods to NS Incorporated and another P500,000 to CP Corporation. As of the end
of that year, NS Incorporated was only able to sell 75%, while CP Corporation was only able to sell
80% of these goods to third parties.
How much is the share of NS Incorporated in the sales revenue of the joint operation?
A. 1,550,000
B. 1,510,000
C. 1,400,000
D. 1,200,000
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Number 62
On January 1, 2022, DNF Corporation acquired 50% interest in a company for a total cost of
P1,100,000, gaining joint control in the process. The investee is properly classified as a Joint Venture
under IFRS 11.

In its statement of comprehensive income for the year ended December 31, 2022, the joint venture
reported a net profit of P2,500,000 and other comprehensive income of P500,000.

On November 10, 2022, the joint venture declared P300,000 cash dividends to DNF Corporation, to be
paid on January 2, 2023.

How much is the balance of the investment in joint venture account of DNF as of December 31,
2022?
A. 2,200,000
B. 2,450,000
C. 2,300,000
D. 3,800,000

Number 63
TPDM COMPANY, a business classified as SME, purchased 5,000 shares of BTSB COMPANY for
P100 per share, and paid 1% broker’s commission. The shares purchased represent 50% of BTSB
COMPANY’s equity, which granted TPDM COMPANY joint control over BTSB COMPANY
together with another entity.

During the year, BTSB COMPANY earned P200,000 net income and declared P50,000 cash
dividends. The fair value of the shares of BTSB COMPANY at the end of the year amounted to P110
per share, and estimated cost to sell of P12 per share. The value in use cannot be determined reliably.
TPDM COMPANY elected to use the cost method to account for its investment in joint venture in
accordance with the PFRS for SMEs.

Which of the following is false?

A. The initial recognition of the investment in joint venture is P505,000
B. The balance of the investment in joint venture at the end of the year is P505,000
C. Dividend income of P25,000 will be recognized by TPDM COMPANY during the year
D. None of the above

Number 64
Joint operations are accounted for using
A. cost method, equity method, or fair value method
B. acquisition method
C. the relevant IFRS
D. equity method

Number 65
Statement 1: Profits and losses are always divided equally among partners unless there is an agreed
profit and loss ratio.
Statement 2: Skills of a partner can be considered a contribution to the mutual fund.
A. Both statements are true
B. Both statements are false
C. Only statement 1 is true
D. Only statement 2 is true
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Number 66

Statement 1: All partners, whether capitalist or industrialist or both, must be included in the share of
net income.
Statement 2: In bonus method in partnership formation, the initial total capital of the partnership will
not change after the bonus has been distributed.
A. Both statements are true
B. Both statements are false
C. Only statement 1 is true
D. Only statement 2 is true

Numbers 67 and 68

On 2021, two partners, Lucas and Luna, of TRIPLE L Partnership decided to withdraw from the
partnership. The following are the list of events that happened during the year:
 The beginning capital balance of Lucas, Luna and Lance were P150,000, P300,000 and
P175,000, with a profit and loss ratio of 2:5:3, respectively.
 On March 1, 2021, Lucas, decided to withdraw from the partnership by taking an equipment
with a fair market value of P135,000 which its value was 0.35x higher than its book value.
Upon retirement, the partners decided to revalue the assets of the partnership.
 On November 30, 2021, Luna agreed to withdraw her capital investment in the partnership in
an amount 20% lower than her book balance.
 Net income for the year amounted to P240,000. It was realized evenly during the year.
 A permanent withdrawal of P5,000 monthly was made by the partners.

67. How much is the cash settlement for Luna?

A. 276,000
B. 345,000
C. 308,500
D. 296,800

68. What is the balance of Lance capital at the end of 2021?

A. 284,800
B. 264,000
C. 249,000
D. 296,500
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Numbers 69 and 70

On 2022, Dianne, Daniel and Dale decided to liquidate their partnership. The facts of the partnership
balances were as follows:
 The capital balance of Dianne, Daniel and Dale at the beginning of liquidation process were
P100,000, P150,000 and P110,000, respectively. The partner’s capital ratio was 45:35:20.
 The Total Assets of the partnership has a debt and equity component of 1:3.
 All non-cash assets were realized and the partnership recorded gain of P30,000.
 Liquidation expense paid amounting to P50,000.
 The ending balance of cash before distribution of cash to partners was P110,000 lower
compared to the book value of non-cash assets.

69. How much is the beginning balance of cash?

A. 30,000
B. 50,000
C. 0
D. None of the above

70. Which of the following is correct?

A. Daniel’s share in liquidation expense was P10,000
B. The cash settlement for the capital interest of Dianne is P91,000
C. The cash proceeds from sale of non-cash assets was P450,000
D. The cash balance at the beginning of liquidation process was nil

END