Rmbe Afar

Advanced Financial Accounting and Reporting
National Federation of
Junior Institute of Accountants
Region 1 and Cordillera
In partnership with:
REGIONAL MOCK BOARD EXAMINATIONS

ADVANCED FINANCIAL ACOUNTING
AND REPORTING
1. Under the build-operate-transfer (BOT) scheme covered by IFRIC 12, any borrowing costs incurred
by the private operator for infrastructure projects shall be:
a. Expensed (Financial Asset model); Capitalized (Intangible Asset Model)
b. Expensed (Financial Asset model); Expensed (Intangible Asset Model)
c. Capitalized (Financial Asset model); Expensed (Intangible Asset Model)
d. Capitalized (Financial Asset model); Capitalize (Intangible Asset Model)
2. Petmalu, Lodi, Werpa and Petmalodi own a publishing company that they operate as a
partnership. Their agreement includes the following:
 Petmalu will receive a salaries of ₱20,000 and a bonus of 3% of income after all the bonuses
 OPEN USING ADOBE READER AND PC.
Lodi will receive a salary of ₱10,000 and a bonus of 2% of income after all the bonuses
 All partners are to receive the following: Petmalu - ₱5,000: Lodi - ₱4,500: Werpa - ₱2,000:
and Petmalodi - ₱4,700 representing 10% interest on their average capital balances.
 Any remaining profits are to be divided equally among partners
 Partnership reports a profit of ₱40,000.
How much is Lodi’s share in the profit if the profit is distributed in the following order of priority:
interest on invested capital, then bonuses, then salary and then according to profit and loss
percentage?
a. ₱14,117 c. ₱12,560
b. ₱12,830.75 d. ₱13,235.75
3. Banggawan, Millan and Ngina share profits and losses from their partnership in the ratio of 35%,
45% and 20% respectively. Capital and loan balances related to each partner are as follows:
Loan to Partner Loan to
from the Partnership
Partners Partnership from Partner Capital
Banggawan P100,000 P500,000
Millan P70,000 P280,000
Ngina 200,000 250,000
In addition to loan to partner, assets of the partnership includes cash of P110,000, inventory of
P360,000, receivable of P260,000 and plant and equipment of P710,000. Partnership liabilities to
non-partners amount to P180,000.
If Banggawan receives already P450,000, how much Ngina receives at this point?
a. P364,286 c. P321,155
b. P375,000 d. P450,000
4. Which one of the following would be subject to the acquisition accounting requirements of PFRS 3,
"Business Combinations?"
a. Formation of a joint venture
nd
NFJPIA-R1CAR 2 Regional Mock Board Examinations · Nation’s Foremost CPA Review · SGV & Co. | 1
b. Acquisition of a manufacturing entity by a holding company

c. Acquisition of a for-profit entity by a not-for-profit organization
d. Combination of entities under common control
5. The NCPAR Manufacturing Company uses the RIP Inventory account. At the end of each month, all
inventories are counted, their conversion costs components are estimated, and inventory account
balances are adjusted accordingly. Raw material is backflushed from RIP account to finished goods
account. The following data is for the month of January:
Beginning balance of RIP account 23,220
Conversion cost incurred 2,880
Raw materials purchased 408,000
Conversion cost allocated 3,180
Ending balance of RIP account 25,140
The amount of direct materials and conversion costs to be backflushed to finished goods,
respectively, are:
a. 408,000 and 2,880
b. 406,080 and 3,180
c. 406,080 and 2,880
d. 406,000 and 3,180
6. Durian Company acquired 65% of the share capital of a foreign entity on August 31, 2013. The
fair value of the net assets of the foreign entity at that date was 8.24 million yen. This value was
2.64 million higher than the carrying value of the net assets of the foreign entity. The excess was
due to the increase in value of non-depreciable land. The functional currency of Durian is
Philippine Peso. The financial year-end of the company is December 31, 2013. The exchange rates
at August 31, 2013 and December 31, 2013 were Yen 2 = Php 1 and Yen 1.25 = Php 1,
respectively. What figure for the fair value adjustment should be included in the group financial
statements for the year ended December 31, 2013?
a. P4,284,800 c. P2,678,000
b. P2,112,000 d. P1,320,000
OPEN USING ADOBE READER AND PC.
7. When compared with normal spoilage, abnormal spoilage
a. Arises more frequently from factors that are inherent in the manufacturing process.
b. Is not typically influenced by the "tightness" of production standards.
c. Is generally thought to be more controllable by production management than normal spoilage.
d. Is given the same accounting treatment as normal spoilage.
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
nd
9. In comparing the FIFO (first-in, first-out) and weighted-average methods for calculating
equivalent units:
a. The FIFO method is better than the weighted-average method for judging the performance in
a period independently from performance in preceding periods.
b. 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.
c. 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.
d. 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
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
nd
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
Unearned Franchise Fees 18,000
d. Prepaid Advertising 18,000
Cash 1,140,000
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.
nd
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
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:
11/02/15 12/31/15 03/31/16
Spot rate ₱.4020 ₱.4250 ₱.3840
Forward rate ₱.4325 ₱.4170 ₱.3840
What is net effect of the firm commitment in income statement of 2015 and 2016?
a. ₱40,300 gain b. ₱85,500 loss c. ₱85,500 gain d. Nil
26. Ngork, Inc. placed an order for inventory costing 500,000 foreign currency (FC) with a foreign
vendor on April 15 when the spot rate was 1 FC =P0.683. Ngork received the goods on May 1
when the spot rate was 1 FC=P0.687. Also on May 1, Ngork entered into a 90-day forward
contract to purchase 500,000 FC at a forward rate of 1 FC=P0.693. Payment was made to the
foreign vendor on August 1, when the spot rate was 1 FC=P0.696. Ngork has a June 30 year-end.
In that date, the spot rate was 1 FC=P0.691, and the forward rate on the contract was 1
FC=P0.695. Changes in the current value of the forward contract are measured as the present
value of the changes in the forward rates over time. The relevant discount rate is 6%.
The net income effect on June 30 amounted to:
a. P2,000 b. P1,000 c. P1,005 d. P505
27. Dawn Company is large multi-national company with many affiliates. During the year, Dawn
Company acquired 100% of the preferred stock of Zeus Company for ₱913,000. The following are
reported by both companies that is considered in preparing the financial statement:
ZEUS DAWN
Book value Fair value Book value Fair value
Land ₱ 670,000 ₱ 760,000 ₱1,000,000 ₱1,300,000
Building (net) ₱2,500,000 ₱2,600,000 ₱3,400,000 ₱3,200,000
What amount land and building will be presented in the consolidated financial statement?
a. ₱7,860,000 b. ₱7,760,000 c. ₱7,670,000 d. Some other 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
nd
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
The total assets immediately after the merger is
a. ₱ 4,488,000 b. ₱ 4,608,000 c. ₱ 4,008,000 d. ₱ 5,440,000
30. The total stockholders’ equity after the merger is
a. ₱ 3,368,000 b. ₱ 3,370,000 c. ₱ 3,400,000 d. ₱ 3,460,000
31. What method should be used to account for business combination under the following?
Full PFRS PFRS for SMEs
a. Acquisition method Acquisition method
b. Purchase method Acquisition method
c. Acquisition method Purchase method
d. Purchase method Purchase method
32. Jeson, a Philippine based corporation, has a number of importing transactions with companies
based in US. Importing activities result in payables. If the settlement currency is the US dollars,
which of the following will happen by changes in the direct or indirect exchange rates?
Direct Exchange Rate Indirect Exchange Rate
Increases Decreases Increases Decreases
a. N/A N/A N/A N/A
b. Loss Gain Gain Loss
c. Loss Gain N/A N/A
d. Gain Loss Loss Gain
33. IFRIC 12 applies to service concession arrangements in which the grantor controls the use of the
concession asset. Because of this, the operator:
a. Cannot recognize the concession assets as its property, plant and equipment.
b. May recognize the concession assets as property, plant and equipment.
c. May recognize the concession assets as property, plant and equipment if the grantor is to pay
for the residual interest at fair value by the end of the contract.
d. May recognize property, plant and equipment or may not, at its option.
34. Department II of Charity Manufacturing Company presents the following production data for the
month of May, 2017:
Opening inventory, 3/8 completed 4,000 units
Started in process 13,000 units
Transferred 9,000 units
Closing inventory, ½ completed 4,000 units
¾ completed 4,000 units
nd
What are the equivalent units of production for the month of May, 2017?
FIFO Method Average Method FIFO Method Average 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 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
nd
41. Jesica Chemical Company manufactures two industrial chemical products in a joint process. In
May, 10,000 gallons of input costing ₱60,000 were processed at a cost of ₱150,000. The joint
process resulted in 8,000 pounds of Resoline and 2,000 pounds of Krypto. Resoline sells at ₱25
per pound and Krypto sells for ₱50 per pound. Management generally processes each of these
chemicals further in separable processes to produce more refined chemical products. Resoline is
processed separately at a cost of ₱5 per pound. The resulting product, Resoline, sells for ₱35 per
pound. Krypto is processed separately at a cost of ₱15 per pound. The resulting product, Kryptite,
sells for ₱95 per pound. The joint cost share of product Kryptite using the net realizable value
method must be:
a. ₱126,000 b. ₱84,000 c. ₱140,000 d. ₱90,000
42. Monetary item do not include
a. Cash b. Receivables c. Loans d. Deferred income
43. On October 20, 2017, Alexander Company purchased merchandise worth ¥100,000 payable n/30
under an open account arrangement. Alexander Company issued a 30-day 12% note payable in
Yen. On November 20, 2017, Alexander Company paid the note in full. The following exchange
rates for the yen are provided:
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
44. The following “equity” relates to an entity operating in a hyperinflationary economy (in millions):
Before PAS 29 After restatement
Share capital ₱100 ₱170
Revaluation reserve 20 ?
Retained earnings 30 ?
₱150 ₱270
What would be the balances on the revaluation reserve and retained earnings after the
restatement for PAS 29?
a. Revaluation reserve ₱0, retained earnings ₱100.
b. Revaluation reserve ₱100, retained earnings ₱0.
c. Revaluation reserve ₱20, retained earnings ₱80.
d. Revaluation reserve ₱70, retained earnings ₱30.
45. On October 1, 2017, X, Y, and Z formed a joint venture for the sale of merchandise. X was
designated as the managing venturer. Profits and losses are to be divided as follows: X, 60%; Y,
15% and Z, 25%. On December 15, 2017, the venture was terminated, the participants agreed to
recognize profit or loss on the venture to date. The cost of inventory on hand is determined at
₱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:
Accounts receivable-construction contract billings ₱ 300,000
Construction in Progress ₱ 937,500
Less: Account Billed 843,750 93,750
Net Income recognized in 2017 (before tax) 150,000
MMN Contractors maintain a separate bank account for each construction contract. Bank deposits
to this contract amounted to ₱500,000.
How much cash collected on the contract was not yet deposited at December 31, 2017?
nd
a. ₱43,750 b. ₱37,500 c. ₱193,750 d. ₱287,500

47. What was the estimated total income before tax on this contract?
a. ₱450,000 b. ₱840,000 c. ₱1,440,000 d. ₱287,500
48. On November 2, 2016, the home office of the Toby Sports Corporation recorded a shipment of
merchandise to its Bulacan Branch as follows:
Debit Credit
Investment in Branch – Bulacan ₱ 60,000
Shipments to Branch ₱ 50,000
Allowance for Overvaluation 8,000
Cash 2,000
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
49. Examination of the reciprocal accounts between Pangasinan Home Office and Ilocos Branch shows
the following:
 ₱10,000 advertising expense of another branch was erroneously charged by the Home Office
to Ilocos Branch.
 Ilocos recorded shipments of merchandise from Home Office amounting to ₱75,000 twice.
 Home Office recorded cash transfer of ₱65,700 from Ilocos Branch as coming from Abra
Branch.
 Transfer of equipment from Home Office amounting to ₱53,000 was not recorded by the
branch.
 Ilocos recorded a debit memo from Home Office of ₱5,540 as ₱5,450.

How much is the net adjustments to Ilocos Branch Current Account and to the Home Office
Current Account?
Ilocos Branch
Current Account Home Office Account
a. ₱75,700 (₱20,910)
b. (₱75,700) ₱21,910
c. ₱75,700 (₱21,910)
d. (₱75,500) (₱21,910)
50. On October 1, 2015 The Tingling Company acquired 100% of The Greenbank Company when the
fair value of Greenbank's net assets was ₱1,160,000 and their carrying amount was ₱1,200,000.
The consideration transferred comprised ₱2,000,000 in cash transferred at the acquisition date,
plus another ₱600,000 in cash to be transferred 11 months after the acquisition date if a specified
profit target was met by Greenbank. At the acquisition date there was only a low probability of the
profit target being met, so the fair value of the additional consideration liability was ₱100,000. In
the event, the profit target was met and the ₱600,000 cash was transferred. What amount should
Tingling present for goodwill in its statement of consolidated financial position at December 31,
2016, according to PFRS3 Business combinations?
a. ₱940,000 b. ₱800,000 c. ₱840,000 d. ₱1,440,000
51. Selected balances from the Taloy Company’s Branch A and B are as follows:
Branch A Branch B
Inventory, Jan. 1, 2016 ₱ 210,000 ₱ 190,000
Imprest Branch Fund 20,000 15,000
Inventory, Dec. 31, 2016 190,000 120,000
A/Receivable, Jan. 1, 2016 550,000 435,000
Merchandise from Home Office 610,000 470,000
A/Receivable, Dec. 31, 2016 700,000 535,000
Cash Collections 850,000 700,000
Sales 1,000,000 800,000
Cash Expenses 210,000 143,000
nd
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 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.
Branch A Books Branch B Books
a. ₱780,000 ₱670,000
b. 750,000 640,000
c. 640,000 780,000
d. 780,000 640,000
52. As compared to a high-volume product, a low-volume product
a. Usually requires less special handling.
b. Is usually responsible for more overhead costs per unit.
c. Requires relatively fewer machine setups.
d. Requires use of direct labor hours as the primary cost driver to ensure proper allocation of
overhead.
53. A firm wants a simple method to allocate costs from service departments to production
departments but never needs to allocate costs from one service department to another. Which of
the following methods would satisfy these requirements?
a. Reciprocal method c. Activity-based method
b. Step-down method d. Direct method
54. In the absence of agreement as to distribution of loss, how shall the partnership loss be
distributed to the partners?
a. The loss shall be distributed equally to all partners including the industrial partner.
b. The industrial partner shall be exempted from partnership loss while the capitalist shall share
equally.
c. The industrial partner shall be exempted from partnership loss while the capitalist partners
shall distributed on the basis of capital contribution ratio.
d. The industrial partner shall be exempted from partnership loss while the capitalist partners
shall be distributed in accordance of profit agreement ratio.
55. Under PFRS 15, an entity recognizes revenue in accordance with that core principle by applying
five steps.
A. Determine the transaction price
B. Identify the performance obligations in the contract
C. Recognize revenue when (or as) the entity satisfies a performance obligation.
D. Allocate the transaction price to the performance obligations in the contract
E. Identify the contract(s) with a customer
Which of the following is the correct order of the five step model framework of PFRS 15?
a. E, B, A, D, C b. E, A, D, B, C c. B, A, D, E, C d. B, E, A, D, C
56. Entity A owns a 60 per cent voting interest in Entity B. Entity B owns a 70 per cent voting interest
in Entity C. How should Entity A account for its investment in Entity C in its consolidated financial
statements?
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.
nd
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
20
Investment of merchandise by E
Freight-in
98,000
9,000
20 Cash sales 285,000
21 Cash sales 78,000
29 Withdrawal of merchandise by E 18,000
July 5 Purchases 49,000
10 Withdrawal of cash by D 16,000
21 Selling expenses 7,000
31 Unsold merchandise charged to D 10,000
The contractual arrangements include distribution of gains and losses as follows: D, 25%; E, 35%;
and F, 40%. The venture is completed and terminated on July 31, 2017.
In the final settlement, how much would each venturer receive?
D E F
a. ₱93,000 ₱125,000 ₱30,000
b. ₱120,250 ₱163,150 ₱73,600
c. ₱130,250 ₱163,150 ₱43,600
d. ₱120,250 ₱163,150 ₱43,600
63. Pam Company purchased 75% of the capital stock of Sam Company on January 1, 2014 at
₱400,000 more than the 75% of the book value of its net assets. The excess was allocated to
equipment in the amount of ₱150,000 and to goodwill for the rest of the balance. The equipment
has an estimated useful life of 10 years and goodwill was not impaired. For four years, Sam
Company reported cumulative earnings of ₱1,800,000 and paid ₱520,000 in dividends. On
December 31, 2017, non-controlling interest in net assets of Sam Company amounts to ₱705,000.
How much is the acquisition cost/ price paid for the investment in Sam Company?
a. ₱2,500,000 b. ₱1,690,000 c. ₱1,540,000 d. ₱1,600,000
nd
64. On January 1, 2016, P Company purchased 32,000 shares of the 40,000 outstanding shares of S
Company at a cost of ₱1,000,000, with an excess of ₱40,000 over the book value of S Company’s
net assets. Such excess is attributed to goodwill.
For the year 2016, P Company reported a net income of ₱500,000 and paid dividends of
₱200,000. While S Company reported a net income of ₱150,000 and paid dividends to P Company
amounting to ₱40,000. Goodwill was not impaired in 2016. P Company uses the cost method to
account for its investment in S Company.
Compute for the following for 2016: noncontrolling interest in net income; noncontrolling interest;
consolidated net income
a. ₱30,000; ₱260,000; ₱580,000
b. ₱30,000; ₱220,000; ₱580,000
c. ₱30,000; ₱212,000; ₱580,000
d. ₱30,000; ₱262,000; ₱588,000
65. On December 1, 2017, Batch 75, a Philippine firm estimates or forecasted the purchase of 5,000
units of inventory from Taiwan. The purchase would probably occur on January of 2018 and
require the payment of 500,000 Nt dollars. The transaction is probable, and it is to be
denominated in Nt dollar. It is anticipated that the inventory could be further processed and
delivered to customers within six months.
Batch 75 Company enters into a forward contract to purchase 500,000 Nt dollars on January 31,
2018 for ₱1.01.
Spot and forward rates at the January 31, 2018, settlement were as follows (pesos per Nt dollar):
Spot Rate Forward Rate
December 1, 2017 ₱1.03 ₱1.01
December 31, 2017 1.00 0.99
January 31, 2018 0.98
The December 31, 2017, foreign exchange loss on forward contract amounted to:
a. ₱30,000 currently in earnings
b. ₱10,000 currently in earnings
c. ₱10,000 separately component of equity
d. ₱30,000 separately component of equity
66. On September 1, 2016, Bontoc, Inc. entered into a foreign exchange contract for speculative
purposes by purchasing 5,000 European euros for delivery in 60 days. The rates to exchange
Philippine peso for euros is as follows:
09/01/2016 09/30/2016
Spot rates ₱75 ₱70
30-day forward rate 73 72
60-day forward rate 74 73
On September 30, 2016, income statement, what amount should Bontoc report as foreign
exchange loss?
a. ₱25,000 b. ₱15,000 c. ₱10,000 d. Nil
67. On June 18, Penduko Corporation entered into a firm commitment to purchase specialized
equipment from the Okazaki Trading Company for ¥80,000,000 on August 20. The exchange rate
on June 18 is ¥100= ₱1. To reduce the exchange rate risk that could increase the cost of the
equipment in pesos, Penduko pays ₱12,000 for a call option contract. This contract gives Penduko
the option to purchase ¥80,000,000 at an exchange rate of ¥100= ₱1 on August 20. On August
20, the exchange rate is ¥93= ₱1.
How much did Penduko save by purchasing the call option (answers rounded to the nearest peso)?
a. ₱12,000
b. ₱48,215
c. ₱60,215
d. Penduko would have been better off not to have purchased the call option.
nd
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 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:
Subsidiary Level of Ownership 2015 Net Income
S3 80 percent ₱1,000,000
S2 70 percent 700,000
S1 90 percent 950,000
Parent reported income from its separate operations of ₱2,000,000 for 2015.
What amount of gain or loss on sale of land should be reported in the consolidated income
statement for 2015?
a. ₱600,000 c. Nil
b. ₱750,000 d. ₱230,000
71. Accountancy student ka ba? Naranasan mo na ba ‘yung
a. feeling na binigay mo na ang lahat pero kulang pa rin?;
b. hindi mo pa rin maintindihan kung bakit ang volume variance ay parang love life mo lang:
zero?;
c. sa sobrang antok mo, pati third eye mo ‘eh may eye bags na?;
d. lagi kang bagsak at nangangakong magsisipag na pero hanggang ngayon ay wala pa ring
nangyayari? O
e. All of the above?
 -- END -- 
nd

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Advanced Financial Accounting and Reporting

REGIONAL MOCK BOARD EXAMINATIONS

b. Acquisition of a manufacturing entity by a holding company

Investment in Zeus Subsidiary @ cost method 181,250

a. ₱43,750 b. ₱37,500 c. ₱193,750 d. ₱287,500

OPEN USING ADOBE READER AND PC.

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