AB Corporation filed a voluntary bankruptcy petition on August 1, 2009, and the

statement of affairs reflects the following information:

The amount that will be paid to creditors with priority is

ANS: P70,000
The amount that will be paid to creditors with priority is
Ans: 10,000

The amount to be paid to partially secured creditors is

Ans: 60,500

The expected recovery rate is

Ans: 55%

AB Corporation filed a voluntary bankruptcy petition on August 1, 2009, and the statement of affairs reflects the
following information:
Book value Fair MV
Assets pledged for fully
secured liabilities
P100,000 P85,000
Assets pledged for partially
secured liabilities
85,000 55,000
Free assets 90,000 50,000
Unsecured liabilities with
priority
10,000
Fully secured liabilities 70,000
Partially secured liabilities 65,000
Unsecured liabilities without 90,000
priority

he amount to be paid to unsecured creditors is

Ans: P49,500
Partner A and Partner B operate Gourmet Restaurant as a partnership. Their
partnership agreement has the following provisions for sharing profits and losses.

A. Partner A, who is the chef, gets a salary of P25,000 a year; Partner B, who is still
learning, gets a salary of P10,000.
B. Interest is imputed on the average capital balances at 15%.
C. Any remaining profits or losses are to be shared equally.

The average capital balances during the year were P20,000 and P50,000 for Partner A
and Partner B, respectively.

The net income was distributed to the partners as follows:

ANS: Partner A, P14,000; Partner B, P 3,500

On June 1, S and T pooled their assets to form a partnership, with the firm to take over
their business assets and assume the liabilities. Partners’ capitals are to be based on
net assets transferred after the following adjustments:
1. Tyler’s inventory is to be increased by P3,000.
2. An allowance for doubtful accounts of P1,000 and P1,500 are to be set up on the
books of S and T, respectively.
3. Accts. payable of P4,000 is to be recognized on the books of S.

The individual trial balances on June 1, before adjustments follow:

S, Capital T, Capital

Assets 75,000 113,000

Liabilities 5,000 34,500

Capital 70,000 78,500

What is the capital balance of T after adjustments

ANS: P80,000

Greenbelt is very financially distressed and the Securities and Exchange Commission
ordered its prompt liquidation. The company has the following assets at this point:

Book Value Fair Value

Current assets P 64,000 P 28,000

Land 80,000 72,000

Buildings 56,000 61,600

Equipment 24,000 26,400

The company’s liabilities at the same date are as follows:

Income taxes P 6,400

Notes payable, secured by land 96,000

Accounts payable 68,000

Salaries payable 4,800

Bonds payable 56,000

Administrative expenses for liquidation 16,000

Calculate the estimated net amount available for the payment of non-priority claims
ANS: P88,800
Calculate the amount of estimated payment to holders of note payable in the event of
liquidation
Ans: P86,400

Ramil and Bobby agreed to form a partnership. Ramil is to contribute net assets from
his old proprietorship, and Bobby is to contribute sufficient cash for a 1/3 interest in the
firm. They agree to divide profits and losses on a 6:4 ratio to Ramil and Bobby,
respectively. Ramil’s net assets at this point are as follows:

Book Value Fair Value

Cash P 52,000 P 52,000
Accounts receivable 140,000 137,200
Inventory 360,000 404,000
Prepaid expenses - 13,000
Accounts payable (124,000) (124,000)
Accrued expenses - (8,000)
Net asset P 428,000 P474,200

How much cash must Bobby contribute?

ANS: P237,100

How much is the total agreed capital upon formation?

Ans:711,300

Which of the following is a characteristic of a joint arrangement

Select one:
A.
Both of the choices

B.
The contractual agreement gives two or more parties joint control over the arrangement

C.
The parties are not bound by a contractual agreement

D.
Neither of the choices

ANS: he contractual agreement gives two or more parties joint control over the
arrangement

Platt Company has been forced into bankruptcy and liquidity. Unsecured claims will be
paid at the rate of P0.50 on the peso. Maga Company holds a noninterest-bearing not
receivable from Platt in the amount of P50,000, collateralized by machinery with a
liquidation value of P10,000.
The total amount to be realized by Maga on this note receivable is:
ANS: P 30,000

When an investment of a new partner exceeds the new partners’ initial capital balance
and goodwill is not recorded, who will receive the bonus?

ANS: The old partners in their old profit or loss ratio

MENCHU and OSANG in a joint venture, contributed P24,000 each in order to purchase
canned goods which were sold by lots at a closing-out sale. They agreed to divide their
profits equally and each shall record his purchases, sales and expenses in his own
books. After selling almost all the canned goods, they wind up their venture. The
following are the venture transactions:

Joint Venture credit balances were OSANG, (P19,200) and MENCHU, (P16,800).
Expenses paid from Joint Venture cash were P2,400 by OSANG and P3,120 by
MENCHU. Cost of unsold canned goods which OSANG and MENCHU agreed to
assume were P720 and P1,120 respectively
In the final settlement, the amount due to OSANG including her investment was
ANS: P42,200

The following data were taken from the Statement of Affairs of Greenfield Corporation.

Pledged Assets : BCV ERV

Plant, property, and P72,000 P60,000
equipment (PPE)

Merchandise inventory 59,200 41,600

Free assets 56,000 32,000

Total assets P187200 P133,600

Secured liabilities

Bonds payable (secured by

PPE)
P24,000

Notes payable (secured by

merchandise inventory)
48,000

Unsecured liabilities:

Taxes P 3,000

Salaries and wages 2,600 5,600

Accounts payable 89,600

What is the estimated amount the holders of the notes payable will receive in the event
of liquidation?
ANS: P45,760

What is the estimated amount holders of the accounts payable will receive upon liquidation? Ans: P58,240
When eliminating an unrealized gain arising when a joint operator sells or contributes a
nonmonetary asset to a joint operation the deferred gain is eliminated against
ANS: The fair market value of the asset recognized by the joint operator

On January 1, 2017, AA and BB formed a partnership by contributing cash of P50,000

and P40,000, respectively. They have agreed to give AA 60% interest in capital and BB
50% interest in profits and losses.
Since January 1, 2017, the following events have occurred for the partnership:

Event 1: On April 1, 2019, after charging the old partners’ capital their share from a loss
of P15,000 for the 1st quarter, CC was taken in as a partner by purchasing 20%
partnership interest, proportionately from AA and BB as agreed among the partners. CC
paid a total of P12,000 for the purchased interest and was given a 20% interest in
profits. The old partners have agreed to maintain their old profit and loss ratios.

Event 2: On July 1, 2019, to improve sales and profitability, the partnership merged with
another firm owned by DD, after crediting the partners for a profit of P10,000 for the 2 nd
quarter. DD’s net assets had a fair value of P30,000 when contributed and DD was
given a 30% interest in capital and in profits. The old partners have agreed to maintain
their old profit and loss ratios.

Event 3: On October 1, 2019, BB, whose family was to immigrate to Vancouver,

Canada, withdrew from the partnership. The partnership recognized a profit of P15,000
for the 3rd quarter. It was agreed that the partnership net assets were fairly valued at
that date and thus no revaluation had taken place upon BB’s withdrawal. BB was paid
P30,000 from the partnership cash.

Event 4: On November 15, 2019, DD, a CPA-MBA gave notice of withdrawing from the
partnership by the year-end. He was appointed a member of the Board of Accountancy
and had to devote his time fully to this exciting new endeavor. The partners have
decided to liquidate the partnership instead on December 31, 2019. The partnership
recognized a profit of P20,000 for the 4th quarter. The loss on realization of assets was
P8,000 and liquidation expenses paid were P4,000.

How much is the capital of AA upon formation of the partnership on January 1, 2019?
ANS: P54,000
How much is the capital of CC upon his admission by purchased interest on April 1,
2019?
Ans; : P15,000

The following condensed balance sheet is presented for the partnership of Baser,
Justine, and Kyrie, who share profits and losses in the ratio of 4:3:3, respectively.
Cash P 4,500 Accounts payable P
10,500
Other assets 41,500 Justine, loan
1,500
Baser, loan 1,000 Baser, capital
15,500
Justine, capital
10,000
Kyrie, capital
9,500
Total P 47,000 Total P
47,000
The assets and liabilities are fairly valued and the partnership decides to admit Nicholas
as a partner with a 20% share in capital and profits for a consideration of P9,000.
Assume Nicholas is admitted by purchasing 20% of each of the old partners’ capital:
Calculate the amount received by Justine from the sale of part of her interest to
Nicholas.
ANS: P2,600

When a secured claim is not fully settled by the selling of the underlying collateral, the
remaining portion
ANS: s classified as an unsecured without priority claim.

Partner A and Partner B operate Gourmet Restaurant as a partnership. Their

partnership agreement has the following provisions for sharing profits and losses.
A. Partner A, who is the chef, gets a salary of P25,000 a year; Partner B, who is still
learning, gets a salary of P10,000.
B. Interest is imputed on the average capital balances at 15%.
C. Any remaining profits or losses are to be shared equally.
The average capital balances during the year were P20,000 and P50,000 for Partner A
and Partner B, respectively.
The net income was distributed to the partners as follows:
Ans: Partner A, P14,000; Partner B, P 3,500
If the partnership net income for the year is P17,500, calculate the amount by which the
net income was over-allocated.
ANS: P28,000

On November 1, 2015, Goodbye To You (GTY) Inc.’s trustee prepares a Statement of

Affairs with the following information:
· P340,000 cash will be received by the unsecured creditors whose claims totaled
P1,360,000

· A received a 12% note of P124000 from GTY on March 1, 2015, secured with
machinery with a market value of P115,000

· GTY issued to B a 12%, 1-year note of P136,000 on January 1, 2015. Nothing

has been pledged to this note.
· C holds a note of P137,500 on which interest of P7,452 is accrued, secured with
equipment with a book value of P153,000. The fair value of the equipment is determined
to be P173,250

· GTY still owes D, its cashier, with her salary worth P12,220
Which of the following statements about the creditors of Goodbye To You is false?

ANS: The unsecured creditor with priority will receive P3,055

BRAVADO ELECTRONICS has one branch office. The home office bills its branch at
25% above its acquisition cost of merchandise shipped later to the branch. Selected
balances from the Home Office books and the Branch books follow:
The ending inventory of the Home Office is P281,250; the Branch Office, P135,000. The
cost of sales in the branch is P95,250 more than its actual cost.
The entry recorded in the books of the home office to recognize the branch reported net
income will include
ANS: A debit to Investment in Branch., P101,250

On January 1, 2017, AA and BB formed a partnership by contributing cash of P50,000

and P40,000, respectively. They have agreed to give AA 60% interest in capital and BB
50% interest in profits and losses.
Since January 1, 2017, the following events have occurred for the partnership:

Event 1: On April 1, 2019, after charging the old partners’ capital their share from a loss
of P15,000 for the 1st quarter, CC was taken in as a partner by purchasing 20%
partnership interest, proportionately from AA and BB as agreed among the partners. CC
paid a total of P12,000 for the purchased interest and was given a 20% interest in
profits. The old partners have agreed to maintain their old profit and loss ratios.

Event 2: On July 1, 2019, to improve sales and profitability, the partnership merged with
another firm owned by DD, after crediting the partners for a profit of P10,000 for the 2 nd
quarter. DD’s net assets had a fair value of P30,000 when contributed and DD was
given a 30% interest in capital and in profits. The old partners have agreed to maintain
their old profit and loss ratios.

Event 3: On October 1, 2019, BB, whose family was to immigrate to Vancouver,

Canada, withdrew from the partnership. The partnership recognized a profit of P15,000
for the 3rd quarter. It was agreed that the partnership net assets were fairly valued at
that date and thus no revaluation had taken place upon BB’s withdrawal. BB was paid
P30,000 from the partnership cash.

Event 4: On November 15, 2019, DD, a CPA-MBA gave notice of withdrawing from the
partnership by the year-end. He was appointed a member of the Board of Accountancy
and had to devote his time fully to this exciting new endeavor. The partners have
decided to liquidate the partnership instead on December 31, 2019. The partnership
recognized a profit of P20,000 for the 4th quarter. The loss on realization of assets was
P8,000 and liquidation expenses paid were P4,000.

How much is the capital of CC upon his admission by purchased interest on April 1,
2019?
ANS: P15,000

A simple partnership liquidation requires

ANS: Partnership assets be converted into cash with full payment made to outside
creditors before remaining cash is distributed to partners in a lump sum payment

I LEAD Corporation, a joint venture with a 50% equity in Joint Venture ABC Company,
prepared the following draft of its combined financial statements at December 31, 2019
before the year-end adjustments under the equity method.

Joint venture ABC reported a net profit of P115,000 for the year ended December 31,
2019.
Under the acquisition method, the retained earnings of the acquirer after the
combination is equal to
ANS: The retained earnings of the acquirer plus any income from acquisition

When as asset is transferred to a branch from its head office, which of the following
occurs?
A.
A credit to Home Office account

B.
A debit to Home Office account

C.
A credit to Investment in Branch account

D.
Only a memo entry is mad

ANS: A credit to Home Office account

On March 31, 2019, Emong, Bobby, and Ramil formed the POGI Partnership to operate
a CPA review center. The following is a list of their contributions at that date:

Emong Bobby Ramil

Book Fair Book Fair Book Fair

Value value Value value Value Value

Cash P132,000 P132,00 P100,000 P100,000 P120,00 P120,000

0 0

Inventory 80,000 75,000

Land 150,000 188,000

Equipment,
net
_____ _____ ______ ______ 90,000 90,000
Totals P282,000 P320,00 P180,000 P175,000 P210,00 P210,000
0 0

Bobby has an accounts payable of P50,000 on the inventory and Ramil has a mortgage
payable of P60,000 on the equipment. The partners have agreed to assume only the
mortgage payable but not the accounts payable. They further agreed for the capital
ratio to be 50%, 20%, and 30% to Emong, Bobby, and Ramil, respectively.:

The partnership starts operation on April 1, 2019 and on December 31, 2019 reported a
net income of P305,400.

The following is the profit and loss agreement among the partners
· 10% interest to each partner’s beginning capital
· Salaries of P30,000 per quarter will be given to Emong and Ramil
· Bonus of 10% of net income after interest, salaries, and bonus will be given to
Emong.
· Residual profit/(loss) will be divided equally.

How much is the net asset contribution of Ramil?

ANS: P150,000

Which of the following is not a general objective of bankruptcy proceedings?

ANS: Assurance that all obligations of the debtor will be satisfied completely

Menchu and Osang formed a joint venture to purchase and sell a special type of
merchandise. The venturers agreed to contribute cash of P27,000 each to be used in
purchasing the merchandise and to share profits and losses equally. They also agreed
that each shall record in their own books all the transactions of the joint undertaking,
which are all in cash.
Upon termination of the joint venture, the following data are made available:
Menchu Osang
Joint venture P23,400 cr P17,060cr
Inventory taken 1,800 3,375
Expenses paid from JV Cash 540 990

Calculate the joint venture sales

ANS: P95,990

PFRS 11 – Joint Arrangements, provides that joint control exists where under a
contractual agreement

Select one:
A.
No single party is in a position to control the activity unilaterally

B.
One party alone has power to control the strategic operating decisions of the joint
arrangement

C.
No one party may be appointed as the manager of the joint arrangement.

D.
The decisions in areas essential to the goals of the joint arrangement do not require the
consent of the parties

ANS: No single party is in a position to control the activity unilaterally

Kash Hospital, a private sector nonprofit entity, has gross patient service revenue of
P750,000, charity care of P75,000, amounts disallowed by third party payors of
P63,000, and donor-unrestricted contributions P110,000. What is the amount of net
patient service revenue?
ANS: P687,000

IFRS 4 says that insurance contracts should

ANS: Be covered by existing accounting policies during phase one

Glen L. presented a certificate of appearance and authentic receipts to support a total

cost of P16,425. Glen L. refunded to the Agency the unused cash advance of P3,575.
What would be the entry to be recorded?
A.
Cash-Collecting Officer P 3,575

Cash – NT – MDS P 3,575

B.
Cash – NT –MDS P 3,575

Employee Benefits P 3,575

C.
Seminar Expenses P16,425 Cash-Collecting Officer 3,575

Due from Officers P 20,000

D.
Employee Benefits P 16,425 Cash – NT- MDS 3,575

Due from Officers P 20,000

ANS: Seminar Expenses P16,425 Cash-Collecting Officer 3,575

Due from Officers P 20,000

Papaya Corporation issued 100,000 shares of P28.50 par ordinary shares for all the
outstanding shares of Pine Enterprises on August 5, 2018. It also paid cash of
P30,000 at the acquisition date and transferred used equipment with a carrying value of
P50,000 and a current value of 70% thereof. Papaya’s ordinary stock was selling at P30
when the business combination was consummated. Pine Enterprises was to be
liquidated.
Out of pocket costs for the acquisition follows:

Finder’s fee P 50,000

Accountants’ fee (advisory) 10,000

Legal fees (advisory) 20,000

Indirect acquisition costs 5,000

SEC registration costs and fees 12,000

If Papaya Corporation is an SME, the acquisition cost of the combination will be:

ANS: P3,145,000

If Papaya Corporation is a non-SME, the acquisition cost of the combination will be:
Ans: P3,065,000

The net increase (decrease) in Papaya’s share premium from the above-mentioned
information will be: 138,000

Rambutan Company issues 400,000 shares of its own P10 par common stock for all the
net assets of Coconut. Inc. on August 4, 2018. On this date Rambutan’s stock is quoted
at P20 per share. Summary balance sheet data for the two companies at August 4, just
before the merger are as follows:

Out of pocket costs for the acquisition are as follows:

Direct acquisition costs P 120,000

Indirect acquisition costs 15,000

Stock registration and issuance costs 10,000

Assume the fair value of Rambutan’s net assets is P30,000,000 and Coconut’s net
assets is P9,000,000.
The amount of retained profit shown on the balance sheet just after the business
combination will be
ANS: P5,865,000

he balance sheet of Piedmont Enterprises and Skelton Company at December 31, 2018
are summarized as follows:

At the date of acquisition, Skelton’s assets are understated while its liabilities are fairly
valued.

On January 1, 2019, Piedmont purchased 80% of Skelton Company’s outstanding

shares for P2,000,000 when the fair value of Skelton’s net assets was P2,200,000.
Piedmont issued 10,000 previously unissued shares in consideration of the acquisition.
Piedmont is to assign an amount to the non-controlling interests at the date of
acquisition based on the total fair value of Skelton’s outstanding shares.

How much is the consolidated assets at the date of acquisition?

ANS: P8,000,000

The Carl Company will issue P10 par value common stock for the net assets of PBA
Company. The fair market value per share of Carl’s common stock is P40. The
following is the list of accounts of PBA Company on the date of the acquisition.

To have an income from acquisition of P120,000, the number of shares to be issued by

Carl Company should be”

ANS: 29,000 shares

Hamilton Company uses a job order costing. Factory overhead is applied to production
at a budgeted rate of 150% of direct labor costs. Any overapplied or underapplied
factory overhead is closed to the cost of goods sold account at the end of the month.
Additional information is available as follows: Job 101 was the only job in process at
January 31, 2020 with accumulated costs as follows:
Direct materials P4,000
Direct labor 2,000
Factory overhead applied 3,000

Jobs 102, 103 and 104 were started during February. Direct materials requisitions for
February totaled P26,000. Direct labor costs of P20,000 were incurred for February.
Actual factory overhead was P32,000 for February. The only job still in process at the
end of February was Job 104, with costs of P2,800 for direct materials and P1,800 for
direct labor.

The cost of goods manufactured for February was:

ANS:
P77,700

HONEY CORPORATION acquired 60% of the issued share capital of LEN COMPANY
on December 31, 2018 for a total consideration of P2,000,000. At this date, the
identifiable net assets of LEN COMPANY which were carried in its books at P1,500,000,
were deemed to have a fair value of P2,500,000. Share capital of LEN COMPANY
comprised 100,000 shares having a par value of P22, which were traded at the stock
exchange on 31 December 2018 at P25.00 per share. Assume that HONEY
CORPORATION will assign the value to the NCI based on fair value of identifiable net
assets of the subsidiary

ANS; 1,000,000

What is the amount of control premium paid by HONEY CORPORATION?

Ans: 500,000
Romeo Company issued 120,000 shares of P10 par ordinary shares with a fair value of
P3,160,000 for all the net assets of Juliet Company and a deferred cash payment of
P500,000 payable one year after the acquisition date. Market rate of interest is 10%.
Romeo’s retained earnings prior to business combination amounted to P600,000.
Romeo incurred the following additional costs:
Legal fees to arrange the business
combination P30,000
Accounting and consultancy fees related
with the business combination 15,000
Cost of printing and issuing new stock
certificates 3,000
Indirect costs of combining, including
allocated overhead and Executive salaries 25,000
Broker’s and Finder’s fees related with
the business combination 28,000

Immediately before the business combination in which Juliet Company was dissolved,
Juliet’s assets and equities were as follows

Book Value Fair Value

Current assets P1,000,000 P1,100,000

Plant assets 1,500,000 2,200,000

Liabilities 300,000

Ordinary shares 2,000,000

Retained 200,000
earnings

Determine the goodwill as a result of the business combination.

ANS: P614,546

Lally Inc. acquired on January 1, 2019 all of the issued and outstanding common shares
of Lenlen Co. for P310,000. On this day, the assets and liabilities of Lenlen Co. show:

Cash P30,000

Merchandise inventory 90,000

Plant and equipment 160,000

Goodwill, net 50,000

Liabilities 60,000

Net assets 270,000

How much is the goodwill, to be recorded by Lally Inc.?

ANS:P90,000

Romeo Company issued 120,000 shares of P10 par ordinary shares with a fair value of
P3,160,000 for all the net assets of Juliet Company and a deferred cash payment of
P500,000 payable one year after the acquisition date. Market rate of interest is 10%.
Romeo’s retained earnings prior to business combination amounted to P600,000.
Romeo incurred the following additional costs:
Legal fees to arrange the business
combination P30,000
Accounting and consultancy fees related
with the business combination 15,000
Cost of printing and issuing new stock
certificates 3,000
Indirect costs of combining, including
allocated overhead and Executive salaries 25,000
Broker’s and Finder’s fees related with
the business combination 28,000

Immediately before the business combination in which Juliet Company was dissolved,
Juliet’s assets and equities were as follows

Book Value Fair Value

Current assets P1,000,000 P1,100,000

Plant assets 1,500,000 2,200,000

Liabilities 300,000

Ordinary shares 2,000,000

Retained 200,000
earnings

How much is the retained earnings of Romeo Company after the business combination
ANS: P502,000

The Carl Company will issue P10 par value common stock for the net assets of PBA
Company. The fair market value per share of Carl’s common stock is P40. The
following is the list of accounts of PBA Company on the date of the acquisition.
Book Value Fair Market Value
Current assets P280,000 P 320,000
Plant assets (net) 680,000 1,280,000
Liabilities 320,000 320,000
Common stock 64,000
Additional paid-in capital 256,000
Retained earnings 320,000

to have a goodwill of P 120,000, the number of shares to be issued by Carl Company

should be

ANS: 35,000 shares

Quad Corporation purchases all of the net assets of Chrome, Inc., for P320,000.
Immediately prior to the combination, Chrome’s net assets were carried on the books at
P180,000, and Chrome had retained earnings of P24,000. The fair value of Chrome’s
net assets at the date of combination is P248,000. Quad Corporation had retained
earnings of P40,000 and no goodwill immediately prior to the combination

Immediately after the combination, the combined company reports goodwill and
retained earnings of:

Goodwill Retained Earnings

A.
P0 P 40,000

B.
P0 P 64,000

C.
P 72,000 P 64,000

D.
P 72,000 P 40,000

ANS: P 72,000 P 40,000

Sun Corporation on June 30, 2018, has assets with fair values as follows: current
assets, P90,000; and non-current assets, P110,000. It had liabilities with fair value of
P20,000. On July 1, 2018, Rise Corporation purchased the net assets of Sun
Corporation for P160,000 cash.
How should the P20,000 difference between the fair value of the net assets acquired
and the acquisition cost be accounted for by Sun Corporation?
ANS ;Gain on acquisition

P Company acquired a 90% interest in S Company in 2016 at a time when S

Company's book values and fair values were equal to one another. On January 1, 2018,
S sold a machine with a P24,000 book value to P Company for P48,000. P depreciates
the machine over 10 years using the straight line method. Separate incomes for P and
S for 2018 are as follows:

P Co. S. Co.

Sales P960,000 P560,000

Gain on sale of machinery 24,000

Cost of goods sold (400,000) (152,000)

Depreciation expense (240, 000) (72,000)

Other expenses (96,000) (240,000)

Separate incomes P224,000 P120,000

The consolidated net income for 2018 is:

ANS:

P322,400
Philacor consigned 12 refrigerator units to Ocampo Emporium. The cost is P6,000 each and the consignor paid
P720 for the freight to Ocampo. The consignee rendered an account sales for the 5 refrigerator units it sold at
P7,700 per unit. It deducted the following items:
Commissions at 10% of sales net of commission
Marketing expense of 10% of commission
Delivery and installation cost of P30 per unit.

How much is the net remittance of the consignee?

Ans: P34,500
On January 1, 2018, P Company purchased 80% of S Company’s outstanding stock for P2,000,000, an
amount equal to the book value of interest acquired. Appraisal of S Company’s net assets revealed that land is
undervalued by P80,000 while Plant Assets with remaining life of 5 years is overvalued by P200,000.
Substantial portion of S Company’s inventories came from P Company. Summary of inter-company shipments
are given below:
Jan. 1 Merchandise costing P420,000 are
shipped at 25% gross profit based on
cost.
May 1 Merchandise costing P660,000 are
shipped at the same gross profit rate
used on Jan.1
Nov. 1 Merchandise costing P209,600 are
shipped at the same gross profit rate
used on Jan.1 of which 1/5 is on hand
at December 31, 2018.

The amount of inter-company sales to be eliminated

Ans: 1,612,000
On January 1, 2016, Subsidiary Company purchased a delivery truck with an expected useful life of 5 years
and scrap value of P6,400. On January 1, 2018, Subsidiary Company sold the truck to Parent Company and
recorded the following entry:

Parent holds 60% of Subsidiary's voting shares. Subsidiary reported net income of P44,000, and Parent
reported separate net income of P78,400 for 2018.
In preparing the consolidated financial statements for 2018, depreciation expense will be:

Ans: credited for P4,000 in the elimination entries

Stain Corporation is an 80%-owned subsidiary of Paint Corporation. During 2017 Stain sold merchandise that
cost P96,000 to Paint for P128,000. Paint's ending inventory at December 31, 2017 contained unrealized profit
of P6,400 from the intercompany sales. During 2018 Stain sold merchandise that cost P112,000 to Paint for
P152,000. One-half of this remained unsold by Paint at December 31, 2018 For 2018 Paint's separate income
was P200,000 and Stain's reported net income was P152,000.

The consolidated net income for 2018 will be:

Ans: P338,400

The balance sheet of Piedmont Enterprises and Skelton Company at December 31, 2018 are summarized as
follows:
Piedmont Skelton
Assets P5,000,000 P 2,000,000
Liabilities P 500,000
P1,500,000
Capital stock , P40 par 2,500,000
Capital stock, P25 par 1,000,000
Retained earnings 1,000,000 500,000

At the date of acquisition, Skelton’s assets are understated while its liabilities are fairly valued.

On January 1, 2019, Piedmont purchased 80% of Skelton Company’s outstanding shares for P2,000,000 when
the fair value of Skelton’s net assets was P2,200,000. Piedmont issued 10,000 previously unissued shares in
consideration of the acquisition. Piedmont is to assign an amount to the non-controlling interests at the date of
acquisition based on the total fair value of Skelton’s outstanding shares.
Assume the amount assigned to the non-controlling interest at the date of acquisition is based on the total fair
value of identifiable net assets at that date, calculate the amount of goodwill recognized at January 1, 2019
Ans: 240,000
How much is the consolidated assets at the date of acquisition?

Ans: P8,000,000

How much is the consolidated liability at the date of acquisition?

Ans; P2,000,000

Vanessa Corporation exchanged its common stock, worth P350,000, for all the net assets of Cee Company in a
business combination. At the date of combination, Vanessa’s net assets had a book value of P600, and a fair
value of P850,000. Cee’s net assets had a book value of P325,000 and a fair value of P340,000.
Immediately following the combination, the net assets of the combined company should have been reported at
what amount?
Ans: 950,000

P Company acquired a 90% interest in S Company in 2016 at a time when S Company's book values and fair
values were equal to one another. On January 1, 2018, S sold a machine with a P24,000 book value to P
Company for P48,000. P depreciates the machine over 10 years using the straight line method. Separate
incomes for P and S for 2018 are as follows:
 PS. Co.
Co.

Sales P960,00 P560,

0 000
Gain on sale of 24,00
machinery 0

Cost of goods sold (400,00 (152,

0) 000)
Depreciation expense (240, (72,0
000) 00)
Other expenses (96,000 (240,
) 000)
Separate incomes P224,00 P120,
0 000

The consolidated net income for 2018 is:

Ans: P322,400

Martha Corporation issued 120,000 shares of P25 par common stock for all the net assets of Ronald
Corporation in business combination consummated on July 1, 2005. Martha Corporation common stock was
selling at P40 per share at the time of the consummation of the combination. Ronald Corporation’s net assets
are P3.8 million at book value. Out of the pocket costs of the combination were as follows: Legal fees for the
business combination P12,000 and for SEC registration P14,500; a contingent consideration which are
probable and can be reasonably estimated at P18,200; Printing cost for stock certificates were P9,400; Finder’s
fee of P27,000 ad CPA audit fees for business combination P19,000.

What is the total cost of the acquisition?

Ans:4,818,200

On July 1, 2018 Pyramid Company paid P755,000 cash for the net assets of Stir Company. The recorded
assets and liabilities of Stir are: Cash, P74,000; Inventory, P215,000; Land, P200,000; Building (net),
P208,000; and liabilities of P220,000. At the same date Stir’s inventories had a fair value of P184,000; the land,
P271,500; and the building (net) , P187,500. Determine the amount of goodwill resulting from the
business combination.
Ans;258,000

On December 31, 2011 entity A (an SME) acquired 30 per cent of the ordinary shares that carry voting rights of
entity Z for CU100,000. In acquiring those shares entity A incurred transaction costs of CU1,000.
Entity A has entered into a contractual arrangement with another party (entity C) that owns
25 per cent of the ordinary shares of entity Z, whereby entities A and C jointly control entity Z.
Entity A uses the cost model to account for its investments in jointly controlled entities. A published price
quotation does not exist for entity Z.
In January 2012 entity Z declared and paid a dividend of CU20,000 out of profits earned in
20X1. No further dividends were paid in 2012, 2013 or 2014.
At December 31, 2011, 2012 and 2013, in accordance with Section 27 Impairment of Assets, management
assessed the fair values of its investment in entity Z as CU102,000, CU110,000 and CU90,000 respectively.
Costs to sell are estimated at CU4,000 throughout. Entity A measures its investment in entity Z on 31
December 20X1, 20X2 and 20X3 respectively at:
Ans: P98,000, P101,000, P86,000

The admission of a new partner under the bonus method will result in a bonus to
Ans: Either the old partners or the new partner

Because of inability to pay its debts, the Nopay Manufacturing Company has been forced into bankruptcy as of
April 1, 2009. The balance sheet on the date shows:
Assets Liabilities & Equity
Cash P 2,700 Accounts P 52,500
Payable
Accounts 39,350 Notes Payable- 15,000
Receivable Bank
Notes 18,500 Notes Payable- 51,250
Receivable Suppliers
Merchandise 87,850 Accrued Wages 1,850
Invty.
Prepaid 950 Accrued Taxes 4,650
Insurance
Land and 61,250 Mortgage Bonds 90,000
Buildings Payable
Equipment 48,800 Common Stock- 75,000
P100 par
Retained (30,850)
Earnings
Total P259,400 Total P259,400

Additional information:
a. Accounts receivable of P16,950 and notes receivable of P12,500 are expected to be collectible. The good
notes are pledged to the bank.
b. Merchandise inventory are expected to bring in P45,100 when sold under bankruptcy conditions.
c. Land and buildings have an appraised value of P95,000. They serve as security on the bonds.
d. The current value of the equipment, net of disposal cost is P9,000.

The estimated net loss/net gain on asset disposal is:

Ans: 78,150
The estimated payment to partially secured liabilities
Ans: P14,200
E, F, and G invest P40,000, P30,000 and P25,000 respectively, in a partnership on June 30, 2019. They agree
to divide net income or loss as follows:
a. Interest at 10% on beginning capital account balances
b. Salaries of P10,000, P8,000 and P6,000, respectively to E, F and G
c. Remaining net income or loss divided equally
d. A minimum of P18,000 of income guaranteed to G

4. If the net income for the year ended June 30,2019 before interest and salary allowances to partners was
P44,000, the amount of the net income credited to E is:
Ans: 14,500

On January 1, 2020, SME Voltex 5 Company has a 30% equity of Takuza 4 Enterprises for P92,800. The latter
company is a joint venture undertaking. Transaction costs of 3% of the purchase price of the shares were
incurred by SME Voltex 5 Company.
On December 31, 2010, Takuza 4 declared and paid dividends of P24,000 and reported a profit of P67,200
Published price quotations do not exist for Takuza shares but appropriate valuation techniques determined the
fair value of the investment at P104,000. Costs to sell are estimated at P5,200

What is the amount of Investment in JV to be recognized by Voltex 5 in its 2020 balance sheet under the equity
method
Ans: 98,800

The following balances as of the end of 2019 for the partnership of P, Q, and R, together with their
respective profit and loss percentage, were as follows:
Assets P 200,000
Liabilities P 20,000
P, loan 9,000
P, capital (20%) 42,000
Q, capital (20%) 39,000
R, capital (60%) 90,000

P decided to retire from the partnership. Parties agreed to adjust to adjust the assets to their fair market value
of P216,000 as of December 31, 2019. P will be paid P61,200 for P’s partnership interest inclusive of P’s loan
which is to be repaid in full.
What will be the balance of Q’s capital account after P’s retirement?
Ans: 40,450

On March 1, 2019, Candace and Noreen formed a partnership with each contributing the following assets:
Candice Noreen
Cash 60,000 140,000
Office Equipment 50,000 150,000
Building - 450,000
Furnitures & Fixtures 20,000 -
The building is subject to a mortgage loan of P180,000, which is to be assumed by the partnership. The
partnership agreement provides that Candace and Noreen share profits and losses at 30% and 70%
respectively. Assuming that the partners agreed to bring their respective capital in proportion to their P & L
ratios, and using Noreen capital as the base.
Compute (1) the capital account balance of Noreen on March 1, 2019 and (2) additional cash to be invested by
Candace.
Ans: (1) P560,000; (2) P110,000

Partnership of COCO, PIOLO, and DANIEL and their profit and loss ratios were as follows:
Assets P 1,200,000
Coco, loan P 60,000
Coco, capital (30%) 280,000
Piolo, capital (30%) 260,000
Daniel, capital (40%) 600,000
Total equities P 1,200,000

COCO decided to retire from the partnership and by mutual agreement, the assets were adjusted to their
current fair value of P1,440,000. The partnership paid P408,000 cash for COCO’s equity in the partnership,
exclusive of the loan which was repaid in full.
The capital balances of PIOLO and DANIEL, respectively, after COCO’s retirement from the partnership was:
Ans: P308,000; P664,000

On December 31, 2019, the balance sheet for the XYZ Partnership follows:
Cash P 10,000Accounts
payable
P 17,500
Accounts Loan from Zoilo 12,500
receivable
15,000
Inventory 35,000Xander,
capital (20%)
35,000
Plant assets, Ysabel,
net capital (20%)
30,000 25,000
Loan to Xander 15,000Zoilo,
capital(60%)
15,000
Total assets P105,000Total
liability/equity
P105,000
The percentages shown are for the residual profit and loss sharing ratios. The partners dissolved the
partnership on January 1, 2020 and began the liquidation process. During January the following events
occurred:
· Receivables of P7,500 were collected.
· All inventory was sold for P10,000.
· All available cash was distributed on January 31, 2020, except for P5,000 that was set aside for
contingent expenses.

The cash available for distribution to the partners on January 31, 2020 is ___________
Ans: P10,000

Menchu and Osang formed a joint venture to purchase and sell a special type of merchandise. The venturers
agreed to contribute cash of P27,000 each to be used in purchasing the merchandise and to share profits and
losses equally. They also agreed that each shall record in their own books all the transactions of the joint
undertaking, which are all in cash.
Upon termination of the joint venture, the following data are made available:
Menchu Osang
Joint venture P23,400 cr P17,060cr
Inventory taken 1,800 3,375
Expenses paid from JV Cash 540 990

Calculate the joint venture sales

Ans: 95,990

Alma and Bella formed a partnership in the Philippines, which uses PFRS based on IASB accounting
principles. The two partners agree on a profit and loss ratio of 60% and 40% to Alma and Bella, respectively. At
a later date, the partners agree to admit Clara into the partnership for a 50%interestin capital and in earnings.
Capital accounts of the partners immediately before the admission of Clara are: Alma, P300,000 and Bella,
P300,000.
Clara invested P400,000 for the partnership interest and that this is a fair price for the share of partnership
interest to be acquired. Clara paid the money directly to Alma and Bella for 50% each of their existing interests.
The partners have decided to revalue partnership interest to current fair value through the non-cash assets
prior to Clara’s admission.
How much will be the capital balances of Alma and Bella after the admission of Clara?
Ans:210,000 and P190,000

Determine the true statement under PFRS11

Ans: Joint arrangement is either a joint operation or a joint venture

partnership. Their partnership agreement

Partner A and Partner B operate Gourmet Restaurant as a
has the following provisions for sharing profits and losses.
A. Partner A, who is the chef, gets a salary of P25,000 a year; Partner B, who is still learning, gets a salary
of P10,000.
B. Interest is imputed on the average capital balances at 15%.
C. Any remaining profits or losses are to be shared equally.
The average capital balances during the year were P20,000 and P50,000 for Partner A and Partner B,
respectively.

The net income was distributed to the partners as follows:

Ans: Partner A, P14,000; Partner B, P 3,500

Three parties establish a separate legal entity (Entity X) in which the three participants
have different shares of voting rights, as follows: Entity A, 50%; Entity B, 25%; and
Entity C, 25%. Entity X’s activities constitute a business.

A contractual agreement entered into by the three parties specifies that at least 75% of
the voting rights are required to make decisions about Entity X’x relevant activities.
Which statement is true?
Ans;None of the participating entities acquired control in Entity X

When an investment of a new partner exceeds the new partners’ initial capital balance and goodwill is not
recorded, who will receive the bonus?
Ans: The old partners in their old profit or loss ratio

Ramil and Bobby agreed to form a partnership. Ramil is to contribute net assets from his old proprietorship,
and Bobby is to contribute sufficient cash for a 1/3 interest in the firm. They agree to divide profits and losses
on a 6:4 ratio to Ramil and Bobby, respectively. Ramil’s net assets at this point are as follows:

Book Value Fair Value

Cash P 52,000 P 52,000
Accounts receivable 140,000 137,200
Inventory 360,000 404,000
Prepaid expenses - 13,000
Accounts payable (124,000) (124,000)
Accrued expenses - (8,000)
Net asset P 428,000 P474,200

How much cash must Bobby contribute?

Ans: 237,100

Alma and Bella formed a partnership in the Philippines, which uses PFRS based on IASB accounting
principles. The two partners agree on a profit and loss ratio of 60% and 40% to Alma and Bella, respectively. At
a later date, the partners agree to admit Clara into the partnership for a 50% interest in capital and in earnings.

Capital accounts of the partners immediately before the admission of Clara are: Alma, P300,000 and Bella,
P300,000.

Clara invested P400,000 for the partnership interest and that this is a fair price for the share of partnership
interest to be acquired. Clara paid the money directly to Alma and Bella for 50% each of their existing interests.
The partners have decided to revalue partnership interest to current fair value through the non-cash assets
prior to Clara’s admission.

The entry to record the admission of Clara will not include

Ans: A debit to Cash of P400,000

Drake Company filed a voluntary bankruptcy petition on July 15, 2009 and the statement of affairs reflects the
following amounts:
BookEst.Value Current Value
Assets
Assets pledged with
fully secured creditors

P 160,000 P190,000
Assets pledged with
partially secured
creditors
90,000 60,000
Free assets 200,000 140,000

Liabilities
Liabilities with priority
20,000
Fully secured
creditors
130,000
Partially secured
creditors
100,000
Unsecured creditors 260,000

Assume that the assets are converted into cash at the estimated current values.
What amount of cash should the partially secured creditors receive
Ans: P84,000

On June 1, S and T pooled their assets to form a partnership, with the firm to take over their business assets
and assume the liabilities. Partners’ capitals are to be based on net assets transferred after the following
adjustments:
1. Tyler’s inventory is to be increased by P3,000.
2. An allowance for doubtful accounts of P1,000 and P1,500 are to be set up on the books of S and T,
respectively.
3. Accts. payable of P4,000 is to be recognized on the books of S.

The individual trial balances on June 1, before adjustments follow:

S, Capital T, Capital
Assets 75,000 113,000
Liabilities 5,000 34,500
Capital 70,000 78,500

What is the capital balance of T after adjustments

Ans:P80,000

On December 31, 2019, the balance sheet for the XYZ Partnership follows:
Cash P 10,000Accounts
payable
P 17,500
Accounts Loan from Zoilo 12,500
receivable
15,000
Inventory 35,000Xander,
capital (20%)
35,000
Plant assets, Ysabel,
net capital (20%)
30,000 25,000
Loan to Xander 15,000Zoilo,
capital(60%)
15,000
Total assets P105,000Total
liability/equity
P105,000

The percentages shown are for the residual profit and loss sharing ratios. The partners dissolved the
partnership on January 1, 2020 and began the liquidation process. During January the following events
occurred:
· Receivables of P7,500 were collected.
· All inventory was sold for P10,000.
· All available cash was distributed on January 31, 2020, except for P5,000 that was set aside for
contingent expenses.
The book value of the partnership equity, i.e. total equity of the partners on December 31, 2019 is
Ans: 72,500

The partnership agreement between Mac, Ken, and Tosh provide for the following profit sharing arrangement:
bonus of 20% on net income before bonus to Mac, interest of 15% on average capital balances, remainder,
equally. The average capital balances of Mac, Ken and Tosh are P3,000,000, P6,000,000 and P9,000,000
respectively.
The respective shares of Ken and Tosh in the net income of P2,700,000 should be
Ans: P720,000 and P1,170,000

On January 1, 2019 Artic Company, an SME, acquired a 25% equity of Temperate Corporation for P102,400.
Transaction costs of 2% of the purchase price of the shares were incurred.

On December 31, 2019, Temperate Corporation declared dividends of P14,400 and reported a net profit of
P48,000. By appropriate valuation techniques, Artic Company determined the fair value of its investment in
Temperate at December 31, 2019 is P112,000. Costs to sell are estimated at 5% of the fair value of the
investment.
At what amount would Artic show its Investment in Joint Venture account in its balance sheet at December 31,
2019 under the equity model?
Ans: P106,400

At what amount would Artic show its Investment in Joint Venture account in its balance sheet at December 31,
2019 under the fair value method?
Ans; P112,000

The Statement of Affairs of Jeremiah Corporation shows the following:

The estimated amount recoverable by stockholders is

Ans: P894,000

Canyon Enterprises filed a voluntary bankruptcy petition on July 31, 2019 and its Statement of Affairs reflects
the following amounts:

The estimated recovery rate for unsecured amounts is

Ans: 50.40%

The estimated deficiency to unsecured creditors is

Ans: P187,250
The estimated amount to be recovered by fully secured creditors is
Ans: P402,250

On January 1, 2019, A, B, and C (all are corporations) established an unincorporated joint operation under a
contractual agreement for equal sharing of control. They will also contribute equally, and share profits and
losses under the same terms.
A contributes cash of P201,000; B an equipment with a cost of P186,000; and C machinery at a carrying cost of
P216,000. Both fixed assets have an estimated remaining life of 10 years.
At what amount would C record the machinery in its balance sheet at December 31, 2019?
Ans: P60,300

At what amount would B record the equipment in its books at January 1, 2019?
Ans; P62,000

At what amount would B record the equipment in its balance sheet at December 31, 2019?
Ans: P55,800

On January 1, 2019, Automated Corporation assigned a joint venture agreement with another venturer, Lucky,
Inc. Each venturer contributed P1,250,000 for equal share in equity and profits.
For 2019, the joint venture arrangement reported a net profit of P115,000 and declared and paid dividends of
P38,400.
For 2019, Automated Corporation reported a net profit of P1,520,000 and declared and paid dividends of
P40,000. It’s retained earnings at January 1, 2019 was P920,000.
At what amount will Automated’s Retained earnings be shown on its balance sheet at December 31, 2019?
Ans: P2,457,500
How much will be Automated Corporation’s net profit
Ans: P1,577,500
If the joint arrangement is a joint operation, rather than a joint venture, how much will the Investment in Joint
Venture account be shown in Lucky’s own balance sheet at December 31, 2019?
Ans: 0

An insurance contract can contain both deposit and insurance elements. An example might be a reinsurance
contract where the cedent receives a repayment of the premiums at a future time if there are no claims under
the contract. Effectively this constitutes a loan by the cedent that will be repaid in the future. IFRS 4 requires
that
Ans: Each payment by the cedent is accounted for as a loan advance and as a payment for insurance cover.

Which International Financial Reporting Standard will apply to those contracts that principally transfer financial
risk, such as a credit derivative?
Ans; IAS 39

P Corporation acquired 70% of the voting common stock of S Company at a time when S Company’s book
values and fair values were equal. Separate incomes of P Corporation and S Company for 2018 are as
follows:
Intercompany sales from P to S for 2017 and 2018 are summarized as follows:

The 2018 consolidated income statement will show cost of goods sold of
Ans: P310,080
The stockholders’ equities of Sweet Corporation and Sour Corporation at January 1, 2018, were as follows:

Sweet Corp. Sour Corp.

Capital stock, P10 par P1,500,000 P 800,000
Additional paid-in capital 200,000 400,000
Retained Earnings 600,000 300,000
P2,300,000 P1,500,000

On January 2, 2018, Sweet issued 150,000 of its shares with a market value of P20 per share for all of Sour’s
shares, and Sour was dissolved.
The stockholders’ equity after the business combination is
Ans: P5,300,000

On January 1, 2020, A Company signed an agreement with B Corporation to form a new corporation (AABB)
for the production of special gadgets. They contributed P1,000,000 each and will share in equity and profits
equally.
During 2020 AABB Corporation reported a net profit of P92,000 and declared dividends of P30,000 at year-
end. On the other hand, A Company reported a net profit of P1,216,000 for year 2020. At January 1, 2020, its
share capital and retained earnings were P2,400,000 and P736,000, respectively.
Before adjustments for its share of AABB’s profit and the recognition of the dividend receivable, the balance
sheet draft of A Company shows a total assets of P5,024,000.
Determine the balance of the Investment in JV account to be reported by A Company in its balance sheet at
December 31, 2020
Ans: P1,031,000

Which of the following would be least likely to be used as a means of allocating profits among partners who are
active in the management of the partnership?
Ans; Interest on average capital balances
The balance sheet of Abby, Blanche, and Celia partnership on January 1, 2019, the date of partnership
dissolution, was as follows:
Cash P 4,000Liabilities P 8,000
Other assets 26,000Abby, loan 1,000
Celia, loan 2,000Abby, capital (20 2,000
% P/L)
Blanche,
capital(40 % P/L)
9,000
Celia, capital (40
% P/L)
________ 12,000
P 32,000 P 32,000

In January, other assets with a book value of P16,000 were sold for P10,000.
How much will each partner receive from the cash distribution after the liabilities had been paid
Ans: Abby, P 0; Blanche, P2,500; and Celia P3,500

The following were found in your examination of the interplant accounts between the Bulacan Home Office and
its Laguna Branch.
a. Transfer of fixed assets from Home Office amounting to P67,450 was not booked by the branch.
b. P12,500 covering marketing expense of another branch was charged by Home Office to Laguna.
c. Laguna recorded a debit note on inventory transfers from Home Office of P93,750 twice.
d. Home Office recorded cash transfer of P82,125 from Laguna Branch as coming from Tagum City Branch.
e. Laguna reversed a previous debit memo from Cagayan de Oro Branch amounting to P13,125. Home
Office decided that this charge is appropriately Tagum City Branch's cost.
f. Laguna recorded a debit memo from Home Office of P5,812.50 as P5,700.

The net adjustment in the Home Office books related to the Laguna Branch Current account is
Ans: P94,625

The USJR Company bills its UC branch for merchandise at 135% of cost. On December 31 the following
information were reported by the branch:
Assuming that the branch has a net income of P20,000 and had returned to the home office merchandise
originally acquired at a billed price of P540. The true branch profit as far as the USJR Company is concerned
is:
Ans: P24,410

Swathmore Hospital, a nonprofit hospital affiliated with a private university, reported the following cash
contributions from donors during the year ended December 31, 2015.
Contributions restricted by donors for research P50,000
Contributions restricted by donors for capital acquisitions 250,000
Neither of the contributions were spent during 2015; however, during 2016, the hospital spent the entire
P50,000 contribution on research and the entire P250,000 contribution on a capital asset that was placed into
service during the year. The hospital has adopted an accounting policy that does not imply a time restriction on
gifts of long-lived assets. On the hospital’s statement of operations for the year ended December 31, 2016,
what total amount should be reported for “net assets released from restrictions?”
Ans: P300,000

Albay Agency in Central Bicol had the following account balances for the fiscal year ended June 30, 2016:
Current Assets P10,000,000 Plant assets 90,000,000 Other assets 5,000,000 Liabilities 18,000,000 Contingent
liabilities 5,000,000 Contingent Assets 3,000,000 Determine the balance of Government Equity at June 30,
2015
Ans; 87,000,000

Daniel Company paid P110,000 for the net assets of EG Corp. at the time of the acquisition the following
information was available related to EG’s balance sheet:
Book Value Fair Value
Current assets P50,000 P 50,000
Building 80,000 100,000
Equipment 40,000 50,000
Liabilities 30,000 30,000

What is the amount recorded by Daniel for the Building?

Ans: P100,000

RRR issued 120,000 shares of its P25 par ordinary shares for all the net assets of CCC Company on July 1,
2017. RRR’s ordinary shares were selling at P30 per share at the acquisition date. In addition a cash payment
of P200,000 was made plus an agreed deferred cash payment of P990,000 payable on July 1, 2018. The
market rate of interest at the time is 10%.
RRR also agreed to pay additional cash consideration of P250,000 in the event RRR’s net income falls below
the current level within the next 2 years. RRR’s financial officers were 99% sure the current level of income will
at least be sustained during the prescribed period.

The following out-of-pocket costs were paid in cash by RRR:

Legal and accounting fees paid to advisers P 8,000

Broker’s fees 4,000
Indirect acquisition costs 3,000
 Costs to issue and register the shares 10,400
Total P25,400

Assume that RRR is an SME, determine the cost of the investment for SME RRR
Ans;P4,714,500

Determine the cost of the investment for RRR

Ans: P4,702,500

On December 31, 2019, the balance sheet for the XYZ Partnership follows:
Cash P 10,000Accounts
payable
P 17,500
Accounts Loan from Zoilo 12,500
receivable
15,000
Inventory 35,000Xander,
capital (20%)
35,000
Plant assets, Ysabel,
net capital (20%)
30,000 25,000
Loan to Xander 15,000Zoilo,
capital(60%)
15,000
Total assets P105,000Total
liability/equity
P105,000

The percentages shown are for the residual profit and loss sharing ratios. The partners dissolved the
partnership on January 1, 2020 and began the liquidation process. During January the following events
occurred:
· Receivables of P7,500 were collected.
· All inventory was sold for P10,000.
· All available cash was distributed on January 31, 2020, except for P5,000 that was set aside for
contingent expenses.
The book value of the partnership equity, i.e. total equity of the partners on December 31, 2019 is
Ans: P72,500

On January 1, 2019, E, F, and G establish a joint arrangement to manufacture a product that they will share
equally. They will each contribute P400,000. E and F are to contribute cash while G is to contribute a piece of
equipment with a fair value of P400,000. In the books of G, the carrying value of the equipment is P370,000.
Assume a ten-year life for the equipment from this date.
1. On January 1, 2019, in G’s balance sheet, the Equipment in JO account will be presented at
Ans: P123,333

In the cash distribution program, which partner gets the first cash distribution
Ans; The partner with the largest loss absorption potential
Sarangani Agency contracted an obligation for the construction of an office building for a total cost of
P10,000,000. The entry to record this transaction would be
Ans: Memorandum entry in RAOCO

Lego Plastics, Inc. has two joint products, ABBA and ADDA, and uses the net realizable value method of
allocating joint costs. The total joint costs for the year 2000 amounted to P300,000. During the year, additional
processing costs after split-off were P160,000 for ABBA and P240,000 for ADDA. Lego produced 16,000 units
of ABBA and 8,000 units of ADDA during the year. The selling price for ABBA is P20.00 and for ADDA is
P50.00.

The portion of joint costs allocated to ADDA during the year is

Ans: P150,000

On December 1, 2005, Leafy Corporation was merged in Dahon Corporation. In the business combination
Dahon issued 200,000 shares of its P10 par common stock, with a market price of P18 a share, for all of
Leafy’s common stock. The stockholders’ equity section of each company’s balance sheet before the
combination was:
Dahon Corp. Leafy Corp.
Common stock P3,000,000 P1,500,000
Additional paid in 1,300,000 150,000
capital
Retained earnings 2,500,000 850,000
P6,800,000 P2,500,000
In the December 1, 2005 consolidated balance sheet, additional paid in capital should be reported at:

Ans: P2,900,000

Which of the following statements is not true in relation to joint control in a joint arrangement?
Ans: Entities over which a party has joint control are accounted for in accordance with PFRS 11 Joint
Arrangements

The following balances as of the end of 2019 for the partnership of P, Q, and R, together with their
respective profit and loss percentage, were as follows:
Assets P 200,000
Liabilities P 20,000
P, loan 9,000
P, capital (20%) 42,000
Q, capital (20%) 39,000
R, capital (60%) 90,000

P decided to retire from the partnership. Parties agreed to adjust to adjust the assets to their fair market value
of P216,000 as of December 31, 2019. P will be paid P61,200 for P’s partnership interest inclusive of P’s loan
which is to be repaid in full.
What will be the balance of Q’s capital account after P’s retirement?
Ans: P40,450
Presented below are items taken from the unadjusted trial balances of NCR Company and its Manila Branch on
December 31, 2016:

Assuming that the branch ending inventory acquired from other vendors (OV) is P73,125
What is the net income (loss) of the branch insofar as the home office is concerned?
Ans: P534,000