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Rmbe Afar For Printing
National Federation of
Junior Institute of Accountants
Region 1 and Cordillera
In partnership with:
2. Petmalu, Lodi, Werpa and Petmalodi own a publishing company that they
operate as a partnership. Their agreement includes the following:
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Advanced Financial Accounting and Reporting
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Advanced Financial Accounting and Reporting
a. P4,284,800 c. P2,678,000
b. P2,112,000 d. P1,320,000
8. GX Builders Corp. and JQ Progress Co. are two companies whose businesses are
the construction of many types of public and private construction services. They
set up a contractual arrangement to work together for the purpose of fulfilling a
contract with the government for the construction of a motor way between two
cities for ₱144 million fixed price contract.
The contractual arrangement determines the participation of GX and JQ and
establishes:
Joint control of the arrangement
The rights to all the assets needed to undertake the activities of the
arrangement are shared by the parties on the basis of their participation
shares in the arrangement
The parties have joint responsibility for all operating and financial obligations
relating to the activities of the arrangement on the basis of their participation
shares in the arrangement; and
The profit and loss resulting from the activities of the arrangement is shared
by GX and JQ on the basis of their participation shares in the arrangement.
In 2016, in accordance with the agreement between GX and JQ:
GX and JQ each used their own equipment and employees in the construction
activity
GX constructed three bridges needed to cross rivers on the route at a cost of
₱48 million
JQ constructed all of the other elements of the motorway at a cost of ₱60
million
GX and JQ shares equally in the ₱144 million jointly invoiced to and received
from the government
What is the gross profit earned by GX in 2016?
a. ₱36 million c. ₱84 million
b. ₱24 million d. ₱12 million
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Advanced Financial Accounting and Reporting
The two methods will give similar results even if physical inventory levels and
the production costs (material and conversion costs) fluctuate greatly from
period to period.
b. The weighted-average method is more precise than the FIFO method
because the weighted-average method is based only on the work completed
in the current period.
c. The FIFO method tends to smooth costs out more over time than the
weighted-average method.
10.ESCALA Park, a private not-for-profit zoological society, received contributions
restricted for research totaling ₱175,000 in 2015. None of the contributions was
used on research in 2015. In 2016, ₱122,500 of the contributions were used to
support the research activities of the society. The net effect on the statement of
activities for the year ended December 31, 2015, for Wild Mark Park would be a
a. ₱52,500 increase in temporarily restricted net assets.
b. ₱122,500 decrease in temporarily restricted net assets.
c. ₱175,000 increase in temporarily restricted net assets.
d. ₱122,500 decrease in unrestricted net assets.
11.Banggawan Company presented the following cost data for the manufacture of
2,200 units of its only product during January, 2016; Direct materials, ₱10; Direct
labor ₱9; Factory overhead (including allowance of ₱0.50 for spoiled work), ₱9.
Final inspection of the job disclosed 200 spoiled units which were sold to an
interested customer for ₱3,000. What would be the unit cost of the remaining
good units of the job if spoilage less is charged to (1) all production (2) specific
job
a. (1) ₱28,00; (2) ₱28.75 c. (1) ₱26.50; (2) ₱28.75
b. (1) ₱28.00; (2) ₱28.00 d. (1) ₱26.50; (2) ₱27.50
12.BWIP was 60% complete as to conversion cost and EWIP was 45% complete as
to conversion cost. The peso amount of the conversion cost included in the BWIP
(using average) is determined by multiplying the average unit conversion cost by
what percentage of the total units in BWIP?
a. 100% b. 60% c. 40% d. 45%
13.PFRS 4 applies to
a. Life insurance contracts only
b. Non-life insurance contracts only
c. Both life and non-life insurance contracts
d. Service concession arrangement
14.A contract under which one party (the insurer) accepts significant insurance risk
from another party (the policyholder) by agreeing to compensate the policyholder
if a specified uncertain future event (the insured event) adversely affects the
policyholder.
a. Assurance contract c. Insurance contract
b. Reinsurance contract d. Adversity contract
15. A government non-profit organization should prepare its financial statements in
accordance with
a. PAS 1 b. PFRS 1 c. SFAS 117 d. GAM
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Advanced Financial Accounting and Reporting
16.In a reverse acquisition (takeover), the asset and liabilities of the parent and
subsidiary is measured at
Legal subsidiary Legal parent
a. Fair value Carrying value
b. Fair value Fair value
c. Carrying value Fair value
d. Carrying value Carrying value
17. NCPAR Company has several investments and reported the following dividends
from its affiliates:
Equity Securities Classification Amount
Investment in Mark Associate ₱100,000
Investment in Raymund Joint venture 150,000
Investment in Rex FVTPL 149,500
Investment in Darrell FVTOCI 151,200
Investment in Zeus Subsidiary @ cost method 181,250
Investment in
Renante Joint venture 145,290
Investment in Rhad Subsidiary @ equity method 51,000
What amount will be reported as dividend income in the consolidated financial statement?
a. ₱481,950 b. ₱300,700 c. ₱151,200 d. 532,950
18.If the NCI is measured at fair value, goodwill arising from business combination
is attributable to the
a. Subsidiary and noncontrolling interest.
b. Parent and subsidiary.
c. Parent only.
d. Parent and noncontrolling interest.
19.On January 1, 2016 Mang Inasar, Inc. entered into a franchise agreement with a
company allowing the company to do business under Mang Inasar's name. Mang
Inasar had performed substantially all required services by January 1, 2016, and
the franchisee paid the initial franchise fee of ₱1,050,000 in full on that date. The
franchise agreement specifies that the franchisee must pay a continuing franchise
fee of ₱90,000 annually, of which 20% must be spent on advertising by
Mang Inasar. What entry should Mang Inasar make on January 1, 2016 to
record receipt of the
initial franchise fee and the continuing franchise fee for 2016?
a. Cash 1,140,000
Franchise Fee Revenue 1,050,000
Revenue from Continuing Franchise Fees 90,000
b. Cash 1,140,000
Unearned Franchise Fees 1,140,000
c. Cash 1,140,000
Franchise Fee Revenue 1,050,000
Revenue from Continuing Franchise Fees 72,000
Unearned Franchise Fees 18,000
d. Prepaid Advertising 18,000
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Advanced Financial Accounting and Reporting
Cash 1,140,000
Franchise Fee Revenue 1,050,000
Revenue from Continuing Franchise Fees 90,000
Unearned Franchise Fees 18,000
20.All of the following are characteristics of not-for-profit organizations that
distinguish them from business organizations except:
a. Ability to impose taxes on citizens.
b. Contributions by resource providers who do not expect a return on
investment.
c. Operating purposes other than to earn a profit.
d. Absence of ownership interests.
21.The Potato Society, a nongovernmental not-for-profit organization, receives
numerous contributed hours from volunteers during its busy season. Mark, a clerk
at the local tax collector's office, volunteered ten hours per week for 24 weeks
transferring turtle food from the port to the turtle shelter. His rate of pay at the
tax office is ₱100.00 per hour, and the prevailing wage rate for laborers is ₱65.00
per hour. What amount of contribution revenue should Potato Society record for
this service?
a. Nil b. ₱8,400 c. ₱15,600 d. ₱24,000
22.The Munda Twins manufactures toys for the big boys. One order from Mr. Bern
for 2,000 units showed the following costs per unit:
Direct Materials ₱3.50
Direct Labor ₱1.25
Manufacturing overhead is applied at 140% of direct labor cost if defective work
is charged to the job, 150% if it is not.
Final inspection revealed that 100 of the units were improperly manufactured.
These units were disassembled, and properly manufactured. The per unit cost of
correcting the defective products consists of ₱0.15 for materials, ₱0.25 for direct
labor; and manufacturing overhead at the predetermined rate. What is the cost
per unit produced, assuming that the rework costs is charged to the customer,
Mr. Bern?
a. ₱6.5375 b. ₱6.5385 c. ₱6.6250 d. ₱6.66375
The next two questions are based on the following data:
On December 1, 2013, Geogracia Company paid cash to purchase 90-day “at-the-
money” call option for 500,000 Thailand Baht. The option’s purpose is to protect
an exposed liability of 500,000 Thailand Baht relating to an inventory purchase
receive on December 1, 2013 and to be paid on March 1, 2014.
12/1/2013 12/31/2013 3/1/2014
Spot rate (market price) P1.20 P 1.28 P 1.27
Strike price (exercise price) 1.20 1.20 1.20
Fair value of call option P 3,000 P42,000 P35,000
23. The notional amount of the option should be:
a. 500,000 Thailand Baht c. P35,000
b. P3,000 d. P42,000
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Advanced Financial Accounting and Reporting
24. What is the intrinsic value and time value of the option on March 1,
2014?
Intrinsic
Value Time Value
a. P42,000 P0
b. P40,000 P2,000
c. P35,000 P0
d. P0 P35,000
25.On November 2, 2015, Magsaysay Stairways to Heaven Company entered into a
firm commitment with a Japanese supplier to purchase a machine, delivery and
passage of title on March 31, 2016, at a price of 2,600,000 yen. On the same
date, to hedge against unfavorable changes in the exchange rate of the yen,
Magsaysay Stairways to Heaven Corporation entered into a 150-day forward
contract with Metro Bank for 2,600,000 yen. The relevant exchange rates were as
follows:
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Advanced Financial Accounting and Reporting
d. Some other
a. ₱7,860,000 b. ₱7,760,000 c. ₱7,670,000
answer
28. On July 1, 2015 Magna Company acquired 100% of Koma Company for a
consideration transferred of ₱1,600,000. At the acquisition date the carrying
amount of Koma's net assets was ₱1,000,000. At the acquisition date a provisional
fair value of ₱1,200,000 was attributed to the net assets. An additional valuation
received on May 31, 2016 increased this provisional fair value to ₱1,350,000 and
on July 30, 2016 this fair value was finalized at ₱1,400,000.
What amount should Magna present for goodwill in its statement of financial
position at December
31, 2016, according to PFRS3 Business combinations?
a. ₱200,000 b. ₱400,000 c. ₱250,000 d. ₱600,000
The next two questions are based on the following data:
29.On January 1, 2016, David Corporation paid ₱800,000 and issued 18,000 shares
of ₱50 par ordinary shares with market value of ₱1,320,000 for all the net assets
of Goliath Corporation. In addition, David paid ₱12,000 for registering and issuing
the 18,000 shares and ₱20,000 for indirect costs of the business combination.
Summary statement of financial position information for the companies
immediately before the merger is as follows:
David
Corporation Goliath Corporation
Book Value Book Value Fair Value
Cash ₱1,400,000 ₱160,000 ₱160,000
Inventories 480,000 320,000 400,000
Other current assets 120,000 80,000 80,000
Plant assets – net 1,040,000 720,000 1,120,000
Current liabilities 640,000 120,000 120,000
Other liabilities 320,000 200,000 160,000
Ordinary shares, ₱50
par 1,680,000 800,000
Retained earnings 400,000 160,000
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Advanced Financial Accounting and Reporting
What are the equivalent units of production for the month of May, 2017?
FIFO Average FIFO Average
Method Method Method Method
a. 12,500 units 13,000 units c. 12,500 units 14,000 units
b. 17,000 units 12,500 units d. 15,000 units 14,000 units
35.With the following data for a company using the FIFO process cost system,
calculate the equivalent units for materials and conversion cost?
Whole Units Materials Conversion cost
Beginning inventory 10 100% 30%
Transferred in 100
Transferred out 80
Ending inventory 30 100% 40%
a. 89 materials 100 conversion cost
b. 100 materials 89 conversion cost
c. 110 materials 99 conversion cost
d. 130 materials 199 conversion cost
36.Batanes Manufacturing Company uses a raw and in process (RIP) inventory
account and expense all conversion cost to cost of goods sold account. At the end
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Advanced Financial Accounting and Reporting
of each month, all inventories are counted, their conversion cost components are
estimated, and inventory account balances are adjusted accordingly. Raw
materials cost is backflushed from RIP to finished goods. The following information
is for the month of April:
RIP, beg. (exclusive of ₱1,400 conversion cost) ₱ 31,000
Raw materials received on credit 367,000
RIP, ending (exclusive of ₱1,800 conversion
cost) 33,000
Compute the amount to be backflushed from RIP to cost of goods sold:
a. ₱365,000 b. ₱368,600 c. ₱367,000 d. ₱365,400
37. Some units of output failed to pass final inspection at the end of the
manufacturing process. The production and inspection supervisors determined
that the estimated incremental revenue from reworking the units exceeded the
cost of rework. The rework of the defective units was authorized, and the following
costs were incurred in reworking the units: [CIA]
Materials requisitioned from stores:
Direct materials ₱ 5,000
Miscellaneous supplies ₱ 300
Direct labor ₱ 14,000
The manufacturing overhead budget includes an allowance for rework. The
predetermined manufacturing overhead rate is 150% of direct labor cost. The
account(s) to be charged and the appropriate charges for the rework cost would
be
a. Work-in-process inventory control for ₱19,000.
b. Work-in-process inventory control for ₱40,300.
c. Work-in-process inventory control for ₱5,000 and factory overhead control
for ₱35,300.
d. Factory overhead control for ₱40,300.
38.Regarding plant-wide overhead rates, departmental overhead rates, and
activity-based costing (ABC) overhead costing, which of the following is true?
a. ABC overhead rates are the best selection for processes that are very
homogeneous.
b. Cost drivers (allocation base) for all three methods are selected because of
assumed or determined cause-and-effect relationships with costs.
c. Each method uses only one cost driver (allocation base) but multiple cost
pools.
d. Departmental overhead is the most accurate of the methods.
39.Overhead costs usually includes
a. Prime costs.
b. Overtime premiums.
c. Abnormal spoilage.
d. Materials price variances.
40.The operator under a service concession arrangement must account for the
arrangement under
a. IFRIC 12 b. IFRIC 15 c. IFRIC pacboi 69 d. PPSAS 32
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Advanced Financial Accounting and Reporting
Buying Selling
October 20, 2017 P0.50 P0.55
November 20, 2017 P0.52 P0.56
How much did Alexander Company paid its supplier on November 20, 2017?
a. P56,560 b. P52,520 c. P50,500 d. P55,550
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Advanced Financial Accounting and Reporting
₱47,000. The joint venture account has a debit balance of ₱68,000 before
adjustment for venture inventory and profit, no separate set of books is
maintained for the joint venture and the participants record in their individual
books all venture transactions.
Before profit or loss distribution, assuming Y has a credit capital balance of
₱9,450, in the final settlement, what is the amount due to (from) Y?
a. ₱12,600 due to c. ₱6,300 due to
b. ₱6,300 due from d. ₱12,600 due from
46.You were engaged to audit the books of accounts of MMN contractors which had
a 3 year construction contract in 2017 for ₱9,000,000. MMN uses the percentage
of completion method for financial statement purposes. Revenue recognized for
each year is based on the ration of cost incurred to total estimate cost to complete
the contract. Data on this contract follows:
The Bulacan Branch sells 40% of the merchandise to outside customers during
the rest of the period. Books are closed every year-end. On January 10, 2017, the
Bulacan Branch transfers half of the original shipment to Baguio Branch, and the
Bulacan Branch pay ₱1,000 freight for the shipment. If the shipment had been
made by the home office to Baguio Branch, the freight charges would have been
₱1,500. What amount should the 60% of the merchandise remaining unsold at
December 31, 2016 be included in the inventory of Bulacan Branch?
a. ₱31,200 b. ₱36,000 c. ₱36,800 d. ₱34,800
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Advanced Financial Accounting and Reporting
All sales, collections, and expenses are handled at the branch. All cash received
from sales and collections are sent directly to the Home Office. Expenses are paid
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Advanced Financial Accounting and Reporting
by the branch from the imprest fund and immediately reimbursed by the Home
Office and credited to the Home Office account. All expenses paid by the branch
are recorded in the books of the branch.
Compute the balance of the Home Office account on January 1, 2016.
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Advanced Financial Accounting and Reporting
a. Consolidate Entity C.
b. Account for its investment in Entity C using the equity method.
c. Account for its investment in Entity C using the policy it has adopted to
account for associates.
d. Account for its investment in Entity C using fair value.
57.Sherrie Company has a subsidiary that operates in a country where the exchange
rate fluctuates wildly and there are seasonal variations in the income and
expenditure patterns. Which of the following rates of exchange would probably be
used to translate the foreign subsidiary’s income statement?
a. Year-end spot rate
b. Average of the quarter-end rates.
c. Average for the year.
d. Average rates for each individual month of the year.
58.An appreciation of the U.S. dollar against the Japanese yen would:
a. Increase the translated earnings of U.S. subsidiaries domiciled in Japan.
b. Increase the cost of buying supplies for U.S. firms.
c. Make travel in Japan more expensive for U.S. citizens.
d. Make U.S. goods more expensive to Japanese consumers.
59.This government agency that have exclusive authority to define the scope of its
audit and examination, establish the techniques and methods required therefor,
and promulgate accounting and auditing rules and regulations, including those for
the prevention and disallowance of irregular, unnecessary, excessive,
extravagant, or unconscionable expenditures, or uses of
government funds and properties
a. College of Accountancy (COA) c. Department of Budget and
Management (DBM)
b. Commission on Audit (COA) d. Bureau of Treasury (BTr)
60. It contains documents which are intended to assist the Congress in their review
and deliberation of the proposed national budget
a. President’s watch list c. President’s budget
b. Final budget d. President’s narco list
61.PPSAS stands for
a. Philippine Pacboi Sector Accounting Standard
b. Philippine Public Statement of Accounting Standard
c. Philippine Pakopya Sana Ang Sagot
d. Philippine Public Sector Accounting Standard
62.D, E and F formed a joint venture to sell personalized shirts during the campaign
period. Their transactions during the two-month period are summarized below.
The book of F being the manager is used by the joint venture.
June 12 Investment of merchandise by D ₱119,000
14 Investment of cash by E 45,000
17 Investment of cash by F 30,000
19 Investment of merchandise by E 98,000
20 Freight-in 9,000
20 Cash sales 285,000
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Advanced Financial Accounting and Reporting
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Advanced Financial Accounting and Reporting
68.Insurer Insurance Co. offers life insurance. On March 28, 2018, Insurer receives
notification of the death of Marlou, a policyholder. The sum insured is ₱1,500,000.
The beneficiaries submitted the death certificate and other required documents
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Advanced Financial Accounting and Reporting
and the claim is settled on June 29, 2018. The journal entry on June 29, 2018 will
include a
a. Debit to Claims Expense, ₱1,500,000
b. Credit to Claims Expense, ₱1,500,000
c. Debit to Cash, ₱1,500,000
d. Debit to Claims Payable, ₱1,500,000
69.On April 1, 2018, Phil Insurance Company issues a one-year, fire insurance
contract for a total premium of ₱36,000.
Using the 24th method, the earned portion of the premium for the year ended
December 31, 2018
a. ₱36,000 b. ₱27,000 c. ₱25,500 d. ₱24,000
70.Parent Corporation purchased land from S1 Corporation for ₱2,200,000 on
December 26, 2015.
This purchase followed a series of transactions between P-controlled
subsidiaries. On February 15,
2015, S3 Corporation purchased the land from a nonaffiliate for ₱1,600,000. It
sold the land to S2 Company for ₱1,450,000 on October 19, 2015, and S2 sold
the land to S1 for ₱1,970,000 on November 27, 2015. Parent has control of the
following companies:
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