Afar Problems Quizzer With Answers

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AFAR Problems Quizzer with Answers
Accountancy (National University (Philippines))
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ADVANCED FINANCIAL ACCOUNTING & REPORTING - PROBLEMS

PROBLEM 1 (ACTIVITY-BASED COSTING)
Gion Corporation has identified activity centers to which overhead
costs are assigned. The cost pool amounts for these centers and their
selected activity drivers for 2019 follows:
Activity Centers Costs Activity Drivers

Set-ups P620,000 24,800 set-ups
Utilities P950,000 125,000 machine hours
No. of parts P320,000 16,000 parts
Direct costs of producing product GG amounted to P75,000. The said

product took 17,000 direct labor hours and 15,000 machine hours to
finish. Also, the product needed 7,500 set-ups and 550 parts to
complete. 25,000 units of product GG were produced during 2019.
How much was the full cost per unit of product GG using ABC?
A. P12.50
B. P15.50
C. P16.07
D. P19.07
PROBLEMS 2 – 3 (JOB ORDER COSTING)

Problem 2. During April 2019, Faithfully Inc. incurred the following
costs for Job 522 (450 drum sets):
Direct materials P 42,500
Direct labor P 65,250
Factory overhead P 78,300
45 units of drum sets were found to be defective and Faithfully Inc.

had to incur the following to remedy the said defects:
Direct materials P 13,550
Direct Labor P 15,250
If the rework cost is normal but specific to Job 522, the cost per
finished unit is:
A. P497.75
B. P484.22
C. P518.11
D. P575.68
Problem 3. Superhuman Co. provided the following data:

Direct materials P450,000
Direct labor P520,000
Overhead rate without spoilage P5.50 per unit
Overhead rate with spoilage P7.50 per unit
Units produced 120,000
Superhuman do not typically expect spoilage in its production process.

On Job 912, the cost of the spoiled units is P52,200, but the disposal
value of these units were determined to be P24,000 and P17,000 were
found to be abnormal costs of spoilage.
How much is the total cost of good units?
A. P1,846,000
B. P1,577,800
C. P1,817,800
D. P1,606,000
Problems 4 – 5 (PROCESS COSTING)

Problem 4. IDOL Inc. adds materials at the beginning of the process in
department UST. Conversion costs were 70% complete as to the 9,500
work-in-process units on September 1 and 40% incomplete as to the
7,000 work-in-process units on September 30. During September, 12,000
units were completed and transferred to the next department. An
analysis of the cost relating to work-in-process on September 1 and to
production activity for September is as follows:

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Costs
Materials Conversion
Work-in-process, September 1 P10,000 P7,500
Costs incurred during September P42,750 P52,525
The total cost per equivalent unit for September under FIFO and
average:
A. P11.84 ; P5.49
B. P10.00 ; P5.49
C. P10.00 ; P6.49
D. P11.84 ; P6.49
Problem 5. Silent Sanctuary Corporation manufactures a product

through a continuous process in different departments. As their cost
accountant, you are given the production data of Department A to
accumulate costs and prepare the necessary reports:
Units
Work-in-process, May 1, 2018 (30% to complete) 15,000
Units started and completed 60,000
Work-in-process, May 31, 2018 (50% complete) 3,000
Normal lost units discovered at the end of process 2,000
Costs
Materials P 78,000
Conversion P 85,000
Work-in-process cost, May 1, 2018 P 45,000
Materials are added at the start of the production while conversion

costs are evenly distributed during the production process.
Compute the current total unit cost for materials and conversion:
A. P2.45
B. P2.53
C. P3.14
D. P2.23
Compute the cost per unit of completed units as of May 1, 2018:

A. P2.56
B. P2.34
C. P2.70
D. P2.64
PROBLEMS 6 – 7 (JOINT AND BY-PRODUCTS)

Problem 6. Analog Heart Inc. makes three products from mangoes it
harvests:
Units of Selling Incremental Final selling
output price at processing price
split-off costs
Mango shake 5,250 P3 P2 P7.50
Dried mangoes 2,000 P1.50 P2.50 P3
Ice candy 750 P2.50 P0.50 P3
Which of the following is false regarding processing the three

products beyond split-off point?
A. The company can either sell the ice candy at split-off or process it
further and sell it at P3 because the incremental profit is zero
B. If the dried mangoes are processed beyond split-off, the company
will have an incremental profit of P1
C. The company should process the mango shake further because an
incremental profit of P2.50 would be realized
D. None of the statements is false
Problem 7. Breakout Co. produces two products which go through a

single process. The same amount of disposal cost is incurred whether
the products are sold at split-off or after further processing. On May
2015, the joint cost of the production process amounted to P105,000

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Products Units produced Net realizable value

A 4,000 P 5
B 12,000 P 2.50
Remnants 4,000 P 4
Remnants are considered a by-product of the process and are sold to

other factories. If the company accounts for the by-product using the
NRV method, and if it costs the company an additional P1.50/unit to
process product A, how much is the total cost of producing product A?
A. P41,600
B. P59,400
C. P53,400
D. P35,600
PROBLEMS 8 – 9 (STANDARD COSTING)

Problem 8. Ganaremos Inc.’s capacity for a month is 40,000 machine
hours. Overhead is 40% variable and 60% fixed. During June 2018,
Ganaremos produced 3,500 units of its product and incurred 38,000
machine hours. Each unit of a product requires 12 machine hours.
Unfavorable non-controllable variance for the month of June is
P28,500.
What is the company’s variable overhead rate?

A. P23.75
B. P19.75
C. P14.25
D. P 9.50
Problem 9. Emoted Inc. purchased 80,000 ounces of materials needed to

produce its perfume at a cost of P5 per ounce. During April, Emoted
used 70,000 ounces to produce 3,500 bottles of perfume. The standard
price of the materials used is P4.75 per ounce and Emoted expects to
use 15 ounces of the material to produce 1 bottle of perfume.
How much is the (1) material price variance and (2) material quantity
variance?
A. P 20,000 F ; P 130,625 U
B. P 20,000 U ; P 83,125 U
C. P 20,000 U ; P 130,625 F
D. P 17,500 U ; P 83,125 U
PROBLEMS 10 – 11 (INSTALLMENT SALES)

Problem 10. The following data were taken from the records of Sweet
Serendipity Co. before the accounts are closed for the year ended
December 31, 2018. The company uses the installment method of
recognizing revenue and it sells goods exclusively on installment
basis.
For the year ended:
Dec. 31, 2016 Dec. 31, 2017 Dec. 31, 2018
Installment Sales ? P 500,000 P 600,000
Cost of Goods Sold P 300,000 ? ?
Balances as of:
Dec. 31, 2016 Dec. 31, 2017 Dec. 31, 2018
Installment AR, 2016 P 350,000 P 125,000 P 35,000
Installment AR, 2017 P 307,500 P 140,000
Installment AR, 2018 P 490,000
DGP, 2016 P 122,500 P 43,750 P 43,750
DGP, 2017 P 123,000 P 120,000
DGP, 2018 P 210,000
On January 2018, a customer defaulted and Sweet Serendipity

repossessed the merchandise. The merchandise was assessed to have a
cost of P4,200 after costs of reconditioning amounting to P800. The
repossessed merchandise was purchased by the customer in 2017 and the
said customer still owed the company a certain amount at the date of
repossession.

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How much was the realized gross profit and loss on repossession in
2018?
A. P 134,000 ; P 300
B. P 134,000 ; P 1,100
C. P 137,000 ; P 3,300
D. P 137,000 ; P 4,100
Problem 11. Muro Co. is a dealer of refrigerators. The company gives

trade discounts of 25%. On May 1, 2018, Ami purchased a refrigerator
with an invoice price of P97,500. The refrigerator costs P65,000. Muro
granted an allowance of P15,000 to Ami’s old refrigerator as trade-in,
the current market value of which is P17,500. The balance is payable
as follows: 30% at the time of purchase, while the rest is payable in
five installments at the end of each month commencing at the end of
the month of sale. Ami defaulted on her payments starting August 31,
2018 and the refrigerator sold to her was repossessed. The fair value
of the repossessed refrigerator is P15,000 before reconditioning costs
of P2,500.
What is the resulting net income from the foregoing transactions?

A. P26,915
B. P24,875
C. P26,900
D. P24,400
PROBLEMS 12 – 13 (LONG TERM CONSTRUCTION CONTRACTS)

Problem 12. BREAKEVEN Corp. was contracted to construct a warehouse
for a price of P34,000,000. Information below were provided by
BREAKEVEN:
2016 2017 2018
Costs incurred to date P14,625,000 P25,687,500 P33,750,000
Estimated cost at completion P32,500,000 P34,250,000 -
How much is the realized gross profit/loss during 2017?

A. P(925,000)
B. P250,000
C. P(250,000)
D. P925,000
Problem 13. Mabi Corp. was contracted by Mr. Tristan P. to construct

35 condominium units. The estimated total cost of construction was
P28,000,000. Mabi bills its clients at 120% of total costs estimated
to complete a project. Details regarding the contract are given below:
Units Costs incurred Estimated cost

finished to date at completion
2017 10 P8,412,500 P33,650,000

2018 18 P20,735,000 P31,900,000
2019 7 P31,500,000 ?
What is the RGP during 2018 using the output measures?

A. P1,700,000
B. P1,360,000
C. P1,410,000
D. P1,105,000
PROBLEMS 14 – 15 (FRANCHISE ACCOUNTING)

Problem 14. On August 28, 2018, Mabeth Inc. entered into a franchise
agreement with HP Inc., franchisee. The initial franchise fee agreed
upon is P1,750,000, of which, P850,000 is payable upon signing the
contract and the balance to be covered by a 12% interest bearing note
payable in five equal annual installments starting December 31,
2018.Initial services by Mabeth amounted to P912,100 direct costs and
P50,000 indirect costs. The collectability of the note is not
reasonably assured. A 5% continuing franchise fee is to be paid
monthly by HP based on its monthly gross sales. The franchisee’s
operations commenced on September 28, 2018 and gross sales for the
first months amounted to P575,000.

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How much is the net income for the year ended December 1, 2018?
A. P498,914
B. P412,730
C. P507,914
D. P462,730
Problem 15. On December 31, 2018, Dewyze Inc. authorized Cook to

operate as a franchise for an initial franchise fee of P3,400,000.
P900,000 was received upon signing the contract, and the balance is to
be paid by a non-interest bearing note, due in five equal annual
installments beginning December 31, 2019. Prevailing market rate is
12%. PV factor is 3.60478. The down payment is nonrefundable and it
represents a fair measure of the services already performed by Dewyze,
however, with regards to the balance, substantial future services are
still required.
How much is the deferred revenue to be recognized as of December 31,

2018?
A. P1,802,390
B. P1,518,677
C. P2,500,000
D. P2,702,390
PROBLEM 16 (SALES-AGENCY TRANSACTIONS)

On June 1, 2018, Infatuation Co. established an agency in Manila,
sending samples costing P80,000 which are useful until May 31, 2019
and have a salvage value of 10% of cost. A working fund of P65,000 is
to be maintained using the imprest basis. During 2018, the agency
submitted to the home office sales order amounting to P675,000. Sales
per invoice were P525,000 which were duly approved by the home office.
Collections during the year amounted to P280,330, net of 3% sales
discount. The cost of merchandise sold during the year is equal to 75%
of the selling gross selling price. Vouchers for expenses amounted to
P35,000.
How much net income would be reported by the Manila agency on December
31, 2018?
A. P51,580
B. P(13,420)
C. P83,080
D. P45,580
Problem 17 (HOME OFFICE – INTER-BRANCH TRANSACTIONS)

On September 1, 2018, BETTER IN TIME Co. established two branches:
Manila and Quezon City branches. The home office transferred P80,000
worth of cash and P350,000 worth of inventory to its Manila branch and
instructed Manila to transfer 75% of the goods and cash received to
Quezon City. In addition, on November 1, 2015, shipments from home
office were received by Manila amounting to P125,000 and the branch
paid freight costs amounting to P6,500. 3/5 of the said shipments were
sold to outsiders. On December 1, 2018, Manila transferred half of the
remaining November shipments from the home office to Quezon City, with
Quezon City branch paying freight costs of P2,500. Had the merchandise
been shipped from the home office to Quezon City branch, only P1,900
worth of freight would have been incurred.
How much is the balance of the Quezon City branch account in the home
office books?
A. P206,200
B. P348,800
C. P346,900
D. P349,400
Problem 18 (HOME OFFICE – RECONCILIATION)

Artemus Co. operates a branch in Manila City. On December 31, 2018,
the Manila branch in the home office books showed a debit balance of
P522,110. The interoffice accounts were in agreement at the beginning
of the year. For purposes of reconciling the interoffice accounts, the
following facts were given:

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a. Shipments from home office to Manila branch costing P72,500 were

in transit as of year-end. Manila recorded the said transfer
twice at cost: one on December 31, 2018 and the other on January
1, 2018.
b. The home office allocated to the Manila branch 75% of the rent
expenses it paid for the year ended 2018. The rent expense was
P24,000. The home office sent a debit memo to Manila for the
allocated amount, but the branch recorded the said debit memo by
debiting the home office – current account and crediting rent
payable.
c. The branch wrote-off uncollectible accounts amounting to P10,120.

The allowance for doubtful accounts is maintained in the books of
the home office. The home office recorded the write-off as a
write-off of its own accounts receivable.
d. The branch collected accounts receivable from home office’s

customers amounting to P52,920, net of 2% cash discount. The
branch treated the said transaction as if it was a collection
from its own customers. The home office was not yet notified of
the said collection.
It is the policy of the home office to bill its branches at 20% above
cost. What is the unadjusted balance of the home office-current
account in the books of Manila branch on December 31, 2018?
A. P463,650
B. P461,490
C. P459,070
D. P475,990
PROBLEMS 19 – 20 (HOME OFFICE – BILLED PRICE)

Problem 19. PROF Co. operates a branch in Manila. The following are
selected accounts taken from December 31, 2018 financial statements of
PROF and its branch:
HOME OFFICE BRANCH
Sales P 7,500,000 P 3,750,000
Shipments to branch P 1,250,000
Shipments from home office P 1,562,500
Inventory, Jan. 1, 2018 P 750,000 P 375,000
Inventory, Dec. 31, 2018 P 630,000 P 270,000
Purchases P 6,200,000 P 950,000
Allowance for overvaluation before P 337,500
adjustment
Operating expenses P 300,000 P 270,000
The ending inventory of the branch includes P120,000 purchased from

outside suppliers.
What is the combined cost of ending inventory?

A. P942,500
B. P900,000
C. P868,110
D. P870,000
The combined net income is:

A. P3,300,000
B. P2,962,500
C. P2,992,500
D. P3,305,000

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Problem 20. The home office bills AMV branch at a mark-up above cost.
During the year 2018, goods costing P225,000 were shipped from the
home office. The unrealized mark-up account has a balance of P78,750
before any adjustments. The net income of the branch is understated by
P35,000.
How much is the ending inventory of the branch to be reported in its

separate books? AMV gets its inventories exclusively from its home
office.
A. P135,000
B. P168,750
C. P125,000
D. P138,750
PROBLEM 21 (PARTNERSHIP FORMATION)

On January 1, 2018, 4A1 and Quadribatch agreed to form a partnership.
The following are their assets and liabilities:
Accounts 4A1 Quadribatch
Cash P34,000 P19,000
Accounts Receivable P22,000 P12,000
Inventories P76,000 P91,000
Machinery P120,000 P110,000
Accounts Payable P54,000 P36,000
Notes Payable P35,000 P15,000
4A1 decided to pay-off his notes payable from his personal assets. It
was also agreed that Quadribatch’s inventories were overstated by
P6,000 and 4A1’s machinery was over depreciated by P5000. Quadribatch
is to invest/withdraw cash in order to receive a capital credit that
is 20% more than 4A1’s total net investment in the partnership.
How much cash will be presented in the partnership’s statement of

financial position?
A. P 90,600
B. P112,600
C. P102,600
D. P121,600
PROBLEMS 22 – 23 (PARTNERSHIP OPERATIONS)

Problem 22. CC Partnership began operations on June 1, 2018. On that
date, Caloy and Chris have capital credits of P35,000 and P48,000,
respectively. The partnership has the following profit-sharing plan:
a. 10% interest on partners’ capital balances at the end of the
year
b. P12,000 and P15,000 annual salaries for Caloy and Chris,
respectively
c. Remaining profit will be divided to Caloy and Chris on a 3:2
ratio, respectively
During the year, Caloy invested P30,000 worth of merchandise and
withdrew P8,000 cash, while Chris invested P24,000 cash. The
partnership earned a profit of P53,275 during the year.
How much is Caloy’s capital balance at the end of 2018?

A. P84,475
B. P88,965
C. P85,325
D. P82,725
Problem 23. Aubrey and Ann are partners who have the agreement to
share profit and loss in the following manner:
Aubrey Ann
Annual Salaries P 52,200 P 51,800
Interest on average balances 5% 10%
Bonus (based on net income after 10%
salaries and interest)
Remainder 50% 50%

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During the year ended December 31, 2018, the partnership generated a
profit of P115,000 before any deductions. Aubrey’s and Ann’s average
capital balances for the year are P120,000 and P60,000, respectively.
Income is distributed to the partners only as far as it is available.
How much is the total share of Ann in the net income for the year
ended 2018?
A. P57,300
B. P57,700
C. P57,500
D. P59,133
PROBLEMS 24 – 25 (PARTNERSHIP DISSOLUTION)

Problem 24. Thaddeus decided to withdraw from his partnership with
Simon and Mari. Before his withdrawal, Thaddeus’ capital balance was
P58,000, while Simon’s was P64,000 and Mari’s was P77,000. Also, the
partnership’s total assets amounted to P450,000, but the partners
agreed that a fixed asset was under depreciated by P15,000. Thaddeus,
Simon and Mari share profits and losses in the ration of 2:4:4,
respectively.
If Thaddeus was paid P53,200 upon his retirement, how much is the
remaining partnership net assets after Thaddeus’ withdrawal?
A. P 182,800
B. P 160,800
C. P 197,800
D. P 130,800
Problem 25. James and Patrick, having capital balances of P140,000

and P75,000 respectively, decided to admit Castle into their
partnership. Castle is to invest sufficient amount in order to have a
25% interest in the partnership. If James and Patrick share profit in
a proportion of 3:1, respectively, and Patrick’s capital balance after
Castle’s investment is P84,250, how much was invested by Castle?
A. P 121,000
B. P 121,250
C. P 167,750
D. P 84,000
Problem 26 (LUMPSUM LIQUIDATION)

Elaine, Bee, and Chua share profits and losses as follows: Elaine 20%,
Bee 30%, and Chua 50%. The partnership’s Statement of Financial
Position is presented below:
EBC Company
Statement of Financial Position
As of December 31, 2018
Assets Liabilities and
Equity
Cash P 91,200 Liabilities P 153,500
Non-cash Assets P 450,800 Loan from Bee P 15,000
Elaine, Capital P 60,000
Bee, Capital P 88,500
Chua, Capital P 225,000
Total Assets P 542,000 Total Liabilities P 542,000
and Equity
The partners decided to liquidate on January 2, 2019. All partners are

personally solvent except for Elaine.
If Chua received P52,500 for her interest, how much were the non-cash
assets sold for?
A. P105,800
B. P336,000
C. P345,000
D. P114,800

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PROBLEM 27 (INSTALLMENT LIQUIDATION)

The Statement of Financial Position of RRD’s partnership as of
December 31, 2018 is given below:
RRD Company
As of December 31, 2018
Equity
Cash P 30,000 Liabilities P 80,000
Noncash Assets P520,000 Loan from Din P 10,000
Loan to Rae P 10,000 Rom, Capital (50%) P123,400
Rae, Capital (30%) P203,000
Din, Capital (20%) P143,600
Total Assets P560,000 Total Liabilities P560,000
and Equity
On January 1, 2019, the partners decided to liquidate. For the month

of January, assets with a book value of P250,000 were sold and
liabilities to outsiders were fully paid.
How much were the noncash assets sold if Din received the amount
priority to him?
A. P223,200
B. P296,800
C. P273,200
D. P269,800
PROBLEMS 28 – 29 (JOINT VENTURE)

Problem 28. Ruvi, Kris, and Jeremy formed a joint venture during 2018
to sell beauty products. Ruvi is assigned to manage the venture. The
three of them agreed to divide profits and losses equally. After seven
months, the joint venture was terminated and there were unsold beauty
products. Ruvi’s trial balance contains the following:
Dr(Cr)
Joint Venture cash P 34,000
Joint Venture P 15,000
Kris, Capital P 9,000
Jeremy, Capital P (21,000)
Jeremy received P22,200 as settlement for her interest in the venture

while Ruvi agreed to be charged for the unsold products.
What is the cost of the unsold merchandise at the termination of the
venture?
A. P3,600
B. P11,400
C. P18,600
D. P12,000
Problem 29. Alyzza and Bravo formed a merchandising joint venture. The
following transactions occurred during 2018:
Cash investment by the venturers:

Alyzza (55%) P 135,000
Bravo (45%) P 65,000
Sales on account (70% was not yet collected, GP rate = 30%) P 312,000
Purchases of merchandise on account P 250,000
Expenses paid P 31,000
Under the proportionate method, how much is the proportionate share of

Alyzza in the joint venture’s assets?
A. P281,600
B. P264,550
C. P402,050
D. P281,930

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PROBLEMS 30 – 31 (CORPORATE LIQUIDATION)
Problem 30. The ELI Corporation is undergoing liquidation and its

Statement of Financial Position as of January 2, 2019 is as follows:
ELI Corporation
As of January 2, 2019
Equity
Cash P124,200 Accounts Payable P118,500
Receivables, net P340,800 Salaries Payable P 50,000
Inventory P 70,000 Bank Loan Payable P222,000
Prepaid Expenses P 22,500 Note Payable P 80,000
PPE, net P360,000 Bonds Payable P450,000
Goodwill P 82,000 Ordinary Shares P120,000
Capital Deficit P (41,000)
Total Assets P999,500 Total Liabilities P999,500
and Equity
The inventory has a realizable value of P53,000. Of the accounts

payable, P60,000 is secured by 25% of the receivable which is 70%
collectible. The balance in the book value of the receivables which
has a realizable value of P235,000 is used to secure the bank loan
payable. The bonds payable is secured by the PPE having a book value
of P360,000 and a realizable value of P375,000.
Unrecognized liabilities as of Jan. 2, 2019 are as follows: accrued

interest on bonds payable and taxes amounting to P4,000 each, and
trustee’s salary amounting to P9,500. (Use two decimal places for the
recovery percentage)
How much will be paid to the partially secured creditors of ELI

corporation?
A. P478,349
B. P480,669
C. P477,595
D. P479,102
Problem 31. On November 1, 2018, 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, 2018, 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, 2018.

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?
A. The unsecured creditor without priority will receive P37,400

B. The unsecured creditor with priority will receive P3,055
C. The fully secured creditor will be paid an amount of P144,952
D. The partially secured creditor will be paid an amount of P119,730

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PROBLEMS 32 - 33 (GOVERNMENT ACCOUNTING)

Problem 32. Agency AA’s allotment and Notice of Cash Allocation (NCA)
for the year were P5,000,000 and P3,000,000, respectively. Checks
issued amounted to P1,500,000.
What closing entry should be made for the unused NCA as of year-end?
A. Cash – National Treasury, MDS P (1,000,000)
Subsidy income from National Government P (1,000,000)
B. Subsidy income from National Government P 1,500,000
Cash – National Treasury, MDS P 1,500,000
C. Subsidy income from National Government P 3,500,000
Cash – National Treasury, MDS P 3,500,000
D. Memorandum entry
Problem 33. LTO collected motor vehicles registration fees amounting

to P1,250. These were remitted to the Bureau of Treasury. To record
the remittance by LTO in the National Government books, the entry
would be:
A. Cash – National Treasury, MDS P 1,250
Registration fees P 1,250
B. Registration fees P 1,250
Cash – National Treasury, MDS P 1,250
C. Registration fees P 1,250
Cash – Collecting Officer P 1,250
D. Cash – Disbursing Officer P 1,250
Cash – Collecting Officer P 1,250
PROBLEMS 34 – 35 (NONPROFIT ORGANIZATIONS)

Problem 34. Bleeding Love Hospital has the following account
balances:
Interest income P 25,000
Bad debt expense P 15,000
Unrestricted gifts P 70,000
Charity care P 75,000
Amounts charged to patients P 384,000
Contractual adjustments P 90,000
Revenue from parking spaces P 52,000
What is the hospital’s net patient service revenue?

A. P 271,000
B. P 219,000
C. P 294,000
D. P 204,000
Problem 35. Broken Heart University, a nonprofit university,

received the following cash contributions from donors during the year
2018:
Unrestricted contributions P 250,000
Contributions restricted by donors for scholarship programs P 100,000
Contributions from a donor who stipulated that the money be spent P 75,000
in accordance to the wishes of the hospital’s board of trustees
Contributions restricted by donors for equipment acquisitions P 125,000
Assuming the university spent P75,000 of the donors’ contributions for

scholarship programs on financing this year’s scholars, how much
should be included in its current funds revenue for the year ended
December 31, 2018?
A. P 350,000
B. P 400,000
C. P 325,000
D. P 250,000

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PROBLEMS 36-41 - (FOREX AND HEDGING)

Problem 36. Cinco Corp. owns a subsidiary in Japan whose balance
sheet in Japanese Yen for the last years follow:
December 31, 2018 December 31, 2019

Assets
Cash and Cash equivalents ¥ 30,000 ¥ 25,000
Receivables 122,500 147,500
Inventory 160,000 170,000
Property and Equipment, net 255,000 230,000
Total Assets ¥ 567,500 ¥ 572,500
Liabilities and Equity
Accounts Payable ¥ 55,000 ¥ 75,000
Long-term debt 322,500 285,000
Common stock 115,000 115,000
Retained earnings 75,000 97,500
Total Liabilities and Equity ¥ 567,500 ¥ 572,500
Relevant exchange rates are:

January 1, 2018 ¥ 1 = P 45
December 31, 2018 ¥ 1 = P 42.50
December 31, 2019 ¥ 1 = P 47.50
September 12, 2018 ¥ 1 = P 40
Cinco formed the subsidiary on January 1, 2018. Income of the

subsidiary was earned evenly throughout the years and the subsidiary
declared dividends worth ¥15,000 on September 12, 2018 and none were
declared during 2019.
How much is the cumulative translation adjustment for 2019?

A. P 568,750
B. P 625,000
C. P 1,006,250
D. P 875,000
Problem 37. On December 1, 2018, The Script Co. entered into a

futures contract to sell 7,850 pieces of door knobs on January 1,
2019. The futures price is P11.50 per piece. The future contract is
managed through an exchange so The Script does not know the party on
the other side of the contract. This derivative contract will be
settled by an exchange of cash on January 1, 2019 based on the price
of door knobs on that date. If the price of a door knob on January 1,
2019 is P10.75, what is the gain or loss in relation with this futures
contract on December 31, 2018?
A. P 5,887.50
B. P (7,850)
C. P (5,887.50)
D. No gain/loss
Problem 38. On October 31, 2018, Pyramid Philippines took delivery

from a British firm of inventory costing £725,000. Payment is due on
January 31, 2019. At the same time, Pyramid paid P8,250 cash to
acquire a 90-day call option for £725,000.
10/31/2018 12/31/2019 01/31/2020

Strike Price P 3.60 P 3.60 P 3.60
Spot Rate 3.61 3.62 3.64
Forward Rate 3.72 3.77 3.78
Fair Value of Call Option P 8,250 P 17,000 ?
Given the information above, compute for the following:
Foreign exchange gain or loss on option contract due to change in time

value on December 31, 2018 if changes in the time value will be
excluded from the assessment of hedge effectiveness, and foreign
exchange gain or loss due to change in intrinsic value on January 31,
2019 if changes in the time value will be excluded from the assessment
of hedge effectiveness.

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A. P 1,500 gain ; P 14,500 gain

B. P 5,500 loss ; P 7,250 gain
C. P 5,250 loss ; P 14,500 gain
D. P 1,500 gain ; P 7,250 gain
Problem 39. On May 1, 2019, PERFECT Co. anticipated the purchase of

85,000 units of merchandise from a foreign vendor. The purchase would
probably occur on October 28, 2019 and require the payment of
1,250,000 foreign currencies (FC). On May 1, 2019, the company
purchased a call option to buy 1,250,000FC at a strike price of 1FC =
P0.27. An option premium of P14,000 was paid. Changes in the value of
the option will be excluded from the assessment of hedge
effectiveness. For the year 2019, the following rates are as follows:
May 1 May 31 June 30 October 28

Spot Rate P 0.25 P 0.28 P 0.30 P 0.32
Strike Price 0.27 0.27 0.27 0.27
FV of call option P14,000 P17,500 P39,000 ?
The foreign exchange gain (loss) on option contract to be recognized

in (1) equity and (2) earnings on June 30:
A. P(37,500) ; P21,500
B. P(25,000) ; P3,500
C. P25,000 ; P(21,500)
D. P37,500 ; P(3,500)
Problem 40. UST Company bought merchandise for €125,000 from a French
company on December 1, 2018. Payment in Euros was due on February 28,
2019. On the same date, UST entered into a 90-day futures contract to
buy €125,000 from a bank. Exchange rates for Euros on different dates
are as follows:
Dec. 1, 2018 Dec. 31, 2018 Feb. 28, 2019
Spot Rate P 91.40 P 92.70 P 91.90

30-day futures 92.30 92.50 93.20
60-day futures 91.80 92.20 92.60
90-day futures 90.60 92.60 93.40
How much is the Forex gain/loss on the forward contract on February

28, 2019?
A. P 100,000 loss
B. P 37,500 gain
C. P 37,500 loss
D. P 100,000 gain
Problem 41. Given the following information (For ¥1):

SPOT RATES
Bid Rate Offer Rate
Inception Date P 43 P 45
Reporting Date 48 49
Maturity Date 49 55
FORWARD RATES
120-day 90-day 60-day 30-day
futures futures futures futures
Inception Date P 43 P 45 P 44 P 46
Reporting Date 42 46 47 49
Maturity Date 45 48 49 52
On October 1, 2018, KEL Co. sold merchandise worth ¥2,750 to a

Japanese company, payable on January 31, 2019. To hedge this foreign
currency exposure, KEL contracted to sell ¥2,750 on October 1, 2018 to
be delivered on January 31, 2019.

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On the reporting date, how much is the net forex gain/loss from this
hedging activity?
A. P 2,750 loss
B. P 2,750 gain
C. P 30,250 gain
D. P 30,250 loss
Problems 42 – 43 (BUSINESS COMBINATION – ACQUISITION OF NET ASSETS)
Problem 42. Condensed statements of financial position of Love Corp.

and You Corp. as of December 31, 2018 are as follows:
Love You
Current assets P 175,000 P 65,000
Noncurrent assets P 725,000 P 425,000
Total assets P 900,000 P 490,000
Liabilities P 65,000 P 35,000

Ordinary Shares, P20 par P 550,000 P 300,000
Retained Earnings P 35,000 P 25,000
Retained earnings P 250,000 P 130,000
On January 1, 2018, Love Corp. issued 35,000 stocks with a market

value of P25/share for the assets and liabilities of You Corp. The
book value reflects the fair value of the assets and liabilities,
except that the noncurrent assets of You have fair value of P630,000
and the noncurrent assets of Love are overstated by P30,000.
Contingent consideration, which is determinable, is equal to P15,000.
Love also paid for the stock issuance costs worth P34,000 and other
acquisition costs amounting to P19,000.
How much is the combined total assets after the merger?

A. P 1,742,000
B. P 1,825,000
C. P 1,772,000
D. P 1,567,000
Problem 43. The following are the condensed statement of financial

position of Ayiziel and Vianney on January 1, 2019:
Ayiziel Vianney
Total Assets P4,100,000 P1,223,000
Liabilities P1,110,000 P 320,000

Ordinary Shares P1,240,000 P 518,000
Share Premium P 500,000 P 40,000
Retained Earnings P1,250,000 P 345,000
Cido Corp. acquired the net assets of both Ayiziel and Vianney by
issuing 81,250 shares to Ayiziel and 22,550 shares to Vianney. The par
value of these shares is P35/share and market value as of January 1,
2019 is P40/share. Cido also paid for the following expenses:
Ayiziel Vianney
Indirect costs P 37,500 P 40,500
Finder’s fee P 26,500 P 14,000
Acctg. and legal fees for SEC P 137,500 P 145,000
registration
Printing costs of stock certificates P 50,000 P 37,500
If Cido’s retained earnings has a balance of P4,300,000 on January 1,

2019, how much is the (1) goodwill and (2) adjusted retained earnings
to be presented in the statement of financial position of Cido?
A. P 260,000 ; P 4,112,750
B. P -0- ; P 4,112,750
C. P 260,000 ; P 4,182,500
D. P 259,000 ; P 4,181,500

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PROBLEM 44 (BUSINESS COMBINATION – ACQUISITION OF STOCKS)

On April 1, 2018, Añonuevo Corp. acquired 80% of the outstanding
stocks of Sy Corp. for P2,500,000. Sy Corp.’s stockholders’ equity at
the end of 2018 is as follows:
Ordinary shares, P80 par P2,000,000, Share premium P500,000, and

Retained Earnings P750,000. The fair value of the non-controlling
interest is P685,000. All the assets of Sy were fairly valued except
for its inventories which are overvalued by P90,000, Land which is
undervalued by P50,000, and Patent which is undervalued by P125,000.
The said patent has a remaining useful life of five years. Both
companies use the straight line method for depreciation and
amortization. Shareholders’ equity of Añonuevo Corp. on December 31,
2018 is composed of: Ordinary shares, P50 par P3,500,000, Share
premium P750,000, and Retained Earnings P2,460,000. Goodwill, if any,
should be decreased by P22,500 every year-end. No additional issuance
of capital stocks occurred.
For the two years ended, December 31, 2018 and 2019, Añonuevo Corp.
and Sy Corp. reported the following:
Añonuevo Corp. Sy Corp.

2018 2019 2018 2019
Net income from own P 525,000 P 550,000 P 485,000 (from P520,000
operations date of
acquisition)
Dividends declared at P 50,000 P 35,000 P 35,000 P 50,000
year-end
On December 31, 2019, compute for Non-controlling interest in net

assets of subsidiary
A. P 781,150
B. P 701,320
C. P 781,150
D. P 718,510
PROBLEM 45 - 46 (JOINT ARRANGEMENT)

On December 31, 2015 entity A 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 2016 entity Z declared and paid a dividend of CU20,000 out of
profits earned in 2015. No further dividends were paid in 2016, 2017
or 2018.
Problem 45. At December 31, 2015, 2016 and 2017, 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 2015, 2016

and 2017 respectively at:
A. P102,000, P110,000, P90,000.
B. P101,000, P101,000, P90,000.
C. P98,000, P106,000, P86,000.
D. P98,000, P101,000, P86,000.
Problem 46. Assuming, a published price quotation exists for entity

Z. Entity A measures its investment in entity Z on 31 December 2015,
2016 and 2017 respectively at:
A. P102,000, P110,000, P90,000.
B. P101,000, P101,000, P90,000.
C. P98,000, P106,000, P86,000.
D. P98,000, P101,000, P86,000.

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PROBLEM 47 (BUSINESS COMBINATION)

The statements of financial position of Entity A and Entity B
immediately before the business combination are (in thousands):
Entity A Entity B
Current assets P 500 P 700

Non-current assets 1,300 3,000
Total assets 1,800 3,700
Current liabilities P 300 P 600

Non-current liabilities 400 1,100
Total liabilities 700 1,700
Equity
Retained earnings 800 1,400
Issued equity
100,000 ordinary shares 300
60,000 ordinary shares 600
Total shareholders’ equity 1,100 2,000
Total liabilities and Equity 1,800 3,700
On September 30, 2018 Entity A issues 2.5 shares in exchange for each
ordinary share of Entity B. All of Entity B’s shareholders exchange
their shares in Entity B. Therefore, Entity A issues 150 ordinary
shares in exchange for all 60 ordinary shares of Entity B. The fair
value of each ordinary share of Entity B at September 30, 2018 is P40.
The quoted market price of Entity A’s ordinary shares at that date is
P16. The fair values of Entity A’s identifiable assets and liabilities
at September 30, 2018 are the same as their carrying amounts, except
that the fair value of Entity A’s non-current assets at September 30,
2018 is P1,500,000. Entity A is the legal parent and accounting
acquiree. While Entity B is the legal subsidiary and accounting
acquirer.
What is the amount of goodwill to be reported in the consolidated

financial statements?
A. P 200,000
B. P 300,000
C. P 400,000
D. P 500,000
PROBLEM 48 (DECONSOLIDATION)
Entity P has a 90% controlling interest in Entity S. On December 31,
2018, the carrying value of Entity S’s net assets in Entity P’s
consolidated financial statements is P450,000 and the carrying amount
attributable to the non-controlling interest’s in Entity S (including
the non-controlling interest’s share of accumulated other
comprehensive income) is 45,000. On January 1, 2019, Entity P sells
80% of the share in Entity S to a third party for cash proceeds of
P540,000. As a result of the sale, Entity P loses control of Entity
S but retains a 10% non-controlling interest in Entity S. The fair
value of the retained interest on that date is P54,000.
Determine the gain or loss on disposal (deconsolidation)
A. P144,000 gain
B. P144,000 loss
C. P189,000 gain
D. P189,000 loss

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PROBLEM 49 (INSURANCE CONTRACTS)

An insurance contract can contain both deposit and insurance elements.
An example might be a reinsurance contract where the cedant 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 cedant
that will be repaid in the future. IFRS 4 requires that
A. Each payment by the cedant is accounted for as a loan advance and as
a payment for insurance cover.
B. The insurance premium is accounted for as a revenue item in the
statement of income
C. The premium is accounted for under PAS 18
D. The premium paid is treated purely as a loan, and it is accounted
for under PAS 39
PROBLEM 50 (SERVICE CONCESSION ARRANGEMENT)

An operator builds a road at a cost of P100 M, the fair value of
construction services is P110 M, the total operating costs of the road
are P70 M and total cash inflows over the life of the concession are
P200 M. Applying IFRIC 12, Service Concession Arrangement, by how much
is total revenue under the intangible asset model higher or lower than
the total revenue under the financial asset model over the life of the
concession?
A. No difference
B. P10 M
C. P110 M
D. (P110M)

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SOLUTIONS
ACTIVITY-BASED COSTING
PROBLEM 1 ANSWER B GION CORPORATION
Direct Cost 75,000
Set-up (25 x 7,500) 187,500
Utilities (7.60 x 15,000) 114,000
No. of parts (20 x 550) 11,000
Total Cost 387,500
Cost per Unit (387,500/25,000) 15.50
JOB ORDER COSTING

PROBLEM 2 ANSWER C FAITHFULLY INC.
Direct materials 42,500
Direct labor 65,250
FOH 78,300
Direct materials – rework 13,550
Direct labor – rework 15,250
FOH – rework 18,300
Total cost 233,150
Cost per unit (233,150/450) 518.11
PROBLEM 3 ANSWER D SUPERHUMAN CO.

Direct materials 450,000
Direct labor 520,000
OH (5.50 x 120,000) 660,000
Less: Disposal value (24,000)
Total cost of good units 160,6000
PROCESS COSTING
PROBLEM 4 ANSWER A IDOL CO.
AVERAGE Units Materials Conversion
Completed and 12,000 12,000 12,000
Transferred
WIP end 7,000 7,000 4,200
Total 19,000 19,000 16,200
Cost per EUP 2.78 3.71
(52,750/19,000) (60,025/16,200)
FIFO Units Materials Conversion

WIP beg. 9,500 - 2,850
Started and 2,500 2,500 2,500
Completed
WIP end 7,000 7,000 4,200
Total 19,000 9,500 9,550
Cost per EUP 4.50 5.50
(42,750/9,500) (52525/9550)
PROBLEM 5 ANSWER C SILENT SANCTUARY CORPORATION

Units Materials Conversion
WIP beg. 15,000 - 4,500
Started and 60,000 60000 60,000
Completed
WIP end 3,000 3000 1,500
Lost units 2,000 2000 2,000
Total 80,000 65000 68,000
Cost per EUP P 1.20 P 1.25
(78000/65000) (85000/68000)
Total current P 2.45
cost per EUP

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Cost of WIP beg, May 1, 2018 P 45,000

Additional conversion cost (4,500 x 1.25) 5,625
Cost of started and completed units (60,000 x 2.45) 147,000
Cost of lost units (2,000 x 2.45) 4,900
Total cost of completed units P 202,525
Cost per unit (202,525/75,000) 2.70
JOINT AND BY PRODUCTS

PROBLEM 6 ANSWER B ANALOG HEART INC.
(Final selling price – Selling price at split-off) – Additional
processing cost = Incremental profit
(3 – 1.50) – 2.50 = (1)
PROBLEM 7 ANSWER A BREAKOUT CO.

Joint cost 105,000
Less: NRV of by-product (4,000 x 4) (16,000)
Joint cost to be allocated to joint products 89,000
Product NRV Share in the Addt’l TOTAL

joint cost processing cost
A 20,000 35,600 6,000 41,600
B 30,000 53,400 - -
Total 50,000 89,000 - -
STANDARD COSTING
PROBLEM 8 ANSWER D GANAREMOS INC.
Let x = Fixed Overhead rate per machine hour
40000x = 42000x – 28500 14.25/60% = 23.75 total OH rate per machine hour
28500 = 2000x 23.75 x 40% = 9.50 Variable overhead rate per MH
x = 14.25 per machine hour
PROBLEM 9 ANSWER B EMOTED INC.
Material price variance:

80,000 x (5 – 4.75) = 20,000 unfavorable
Material quantity variance:

4.75 x (70,000 – 52,500) = 83,125 unfavorable
INSTALLMENT SALES
PROBLEM 10 ANSWER B SWEET SERENDIPITY CO.
GP rates: Repossessed merchandise 3,400

2010 = 35% Deferred gross profit 3,000
2011 = 40% Loss on repossession 1,100
2012 = 35% Installment AR – 2011(3000/40%) 7,500
Realized gross profit

2010: 90000 x 35% = 33,250
2011: (167500-7500)x 40% = 64,000
2012: (600000 – 490000)x 35% = 38,500
TOTAL RGP 134,000
PROBLEM 11 ANSWER C MURO. CO.

Invoice price 97,500
Add: Under allowance (17,500-15,000) 2,500
Adjusted Installment Sales 100,000
CGS 65,000
Gross profit 35,000 (35%)

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Journal entry:
Repossessed merchandise 15,000
DGP 8,085
Loss on repossession 15
Installment AR 23,100
Net income:
RGP [(24,750 + 17,500) + (11,550 x 3)] x 35% 26,915
Loss on repossession __(15)__
Net income 26,900
LONG TERM CONSTRUCTION CONTRACTS

PROBLEM 12 ANSWER A BREAKEVEN CORP
2016: 14,625,000/32,500,000 = 45%
2016 RGP:
Construction price 34,000,000
Est. total cost (32,500,000)
GP 1,500,000
Percentage of Completion x 45%
RGP, 2016 675,000
2017:
Est. total cost (34,250,000)
Anticipated total loss (250,000)
Less: RGP, 2016 675,000
RGP, 2017 (925,000)
PROBLEM 13 ANSWER C MABI CORP.
2017: Anticipated total loss 50,000
2018: 28/35 = 80% Percentage of completion

Estimated total cost 31,900,000
Gross profit 1,700,000
Percentage of completion x 80%
RGP to date 1,360,000
Less: RGP, 2017 (50,000)
RGP, 2018 1,410,000
FRANCHISE
PROBLEM 14 ANSWER B MABETH INC.
Initial franchise fee 1,750,000
Initial direct costs (912,100)
Gross profit 837,900 (47.88%)
RGP (850,000 x 47.88%) 406,980
Continuing franchise fee 28,750
Interest income 27,000
Indirect costs (50,000)
Net income 412,730
PROBLEM 15 ANSWER A DEWYZE INC.

Deferred revenue:
500,000 x 3.60478 = 1,802,390
SALES AGENCY
PROBLEM 16 ANSWER D INFATUATION CO.
Sales, net of discount 516,330
CGS (393,750)
Samples (42,000)
Expenses (35,000)
Net income 45,580

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HOME OFFICE – INTERBRANCH

PROBLEM 17 ANSWER C BETTER IN TIME CO.
Branch Current – Manila Branch Current – Quezon City
9/1 322,500 9/1
430,000 9/1 322,500
11/1 26,300 12/1
125,000 12/1 24,400
Bal Bal
206,200 346,900
HOME OFFICE – RECON

PROBLEM 18 ANSWER B ARTEMUS CO.
Branch Current – Manila Home Office Current
Unadjusted balance 522,110 461,490
a. - 14,500
b. - 36,000
c. (10,120) -
d. 52,920 52,920
Adjusted balance 564,910 564,910
HOME OFFICE – BILLED PRICE

PROBLEM 19 ANSWER D PROF CO.
Mark-up above cost = 25%

Ending inventory, Home office 630,000
Ending inventory, Branch, at cost 240,000
Total ending inventory 870,000
Sales 11,250,000
CGS
Beginning inventory 1,100,000
Purchases 7,150,000
Less: ending inventory (870,000) (7,380,000)
Expenses (570,000)
Net income 3,300,000
PROBLEM 20 ANSWER B AMV BRANCH

Mark-up above cost = 35%
Cost of ending inventory (43,750/35%) 125,000
Add: mark-up 43,750
Ending inventory, billed price 168,750
PARTNERSHIP FORMATION
PROBLEM 21 ANSWER D4A1 AND QUADRIBATCH
4A1 Quadribatch
Net investments before Quadribatch’s cash 203,000 175,000
investment/withdrawal
Capital Credit of Quadribatch (203,000 x 1.20) 243,600
Additional Cash investment 68,600
Total Cash (34000 + 19000 + 68600) = 121,600

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PARTNERSHIP OPERATIONS
PROBLEM 22 ANSWER C
CC PARTNERSHIP
Caloy Chris
Balance 35,000 48,000
Additional Investments 30,000 24,000
Withdrawals (8,000)
Ending balance before share in profit 57,000 72,000
Interest (7 mos.) 3,325 4,200

Salaries (7 mos.) 7,000 8,750
Remaining (53,275 – 23,275) 18,000 12,000
Share in profit 28,325 24,950
Capital balance, end 85,325 96,950
PROBLEM 23 ANSWER A AUBREY AND ANN

Aubrey Ann
Salaries 52,200 51,800

Remaining (115,000 – 104,000)
Based on interest:
Aubrey 6,000 (50%) 5,500
Ann 6,000 (50%) 5,500
Share in profit 57,700 57,300
PARTNERSHIP DISSOLUTION
PROBLEM 24 ANSWER D THADDEUS, SIMON AND MARI
Net assets before Thaddeus’ withdrawal 199,000 (450000 – 251000)
Adjustment for depreciation (15,000)
Net assets, adjusted 184,000
Payment to Thaddeus (53,200)
Net assets after Thaddeus’ withdrawal 130,800
PROBLEM 25 ANSWER A JAMES, PATRICK, AND CASTLE

Patrick’s capital before Castle’s admission 75,000
Patrick’s capital after Castle’s admission (84,250)
Increase of 9,250
Total bonus to old partners (9,250/25%) 37,000
Old partners’ capital, adjusted 252,000

Castle’s capital credit (252,000/75%)x 25% 84,000
Add: bonus to old partners 37,000
Cash invested by Castle 121,000
LUMPSUM LIQUIDATION
PROBLEM 26 ANSWER D ELAINE, BEE, AND CHUA
Chua’s interest before liquidation 225,000
Cash received for settlement (52,500)
Total deduction from Chua’s interest 172,500
Total loss = 172500/50% 345,000
CHECK:
Elaine’s interest 60,000
Share in the total loss (69,000)
Elaine’s interest, after loss (9,000)
Bee’s interest 103,500

Share in the total loss (103,500)
Bee’s interest after loss -0-
Book value of noncash assets 450,800

Total loss from sale of noncash assets (345,000 – 9,000) 336,000
Cash received from sale of noncash assets 114,800

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PROBLEM 27 ANSWER C INSTALLMENT LIQUIDATION

Rom Rae Din
Loss absorption potential 246,800 643,333 768,000
Priority I – Din (124,667)
Excess of loss absorption
potential of Din over Rae
Balances 246,800 643,333 643,333
Priority II – Rae and Din (396,533) (396,533)
Excess of loss absorption
potential of Rae and Din over Rom
Balances 246,800 246,800 246,800
Priority I – Din (124,667 x 20%) 24,933

Priority II – Rae (396,533 x 30%) 118,960
Din (396,533 x 20%) 79,307 198,267
Total 223,200
CASH:
Let x = cash received from sale of noncash assets during January
30,000 + x – 80,000 – 223,200 = 0
x = 273,200
JOINT VENTURE
PROBLEM 28 ANSWER C RUVI, KRIS, AND JEREMY
Jeremy’s capital balance before share in profit 21,000
Cash received by Jeremy (22,200)
Share in profit 1,200
Joint Venture
Balance before adjustments 15,000 18,600 Cost of unsold merchandise

Joint venture profit (1,200*3) 3,600
PROBLEM 29 ANSWER D ALYZZA AND BRAVO

Cash (135,000 + 65,000 + 93,600 – 31,000) 262,600
AR (312,000 x 70%) 218,400
Merchandise (250,000 – 218,400) 31,600
Total assets 512,600
Alyzza’s share in the total assets (512,600 x 55%) 281,930
CORPORATE LIQUIDATION
PROBLEM 30 ANSWER B ELI CORPORATION
Fully Partially Unsecured
secured secured
Cash 124,200 222,000 59,640 360
Inventory 53,000 375,000 79,000
Receivable 13,000
Less: Unsecured with priority
Trustee’s salary (9,500) 58,500
Salaries payable (50,000) 80,000
Taxes (4,000)
Net free assets 126,700
Total unsecured without 217,860
priority
Recovery percentage: 126700/217860 = 58%

Partially secured: 434640 + 79360(58%) = 480,669
PROBLEM 31 ANSWER B GOODBYE TO YOU INC.

Recovery percentage = 25%
A: 124,000 + 9,920 = 133,920; 133,920 – 115,000 = 18,920; 18,920 x 25%
= 4,730 TOTAL PAYMENT = 119,730
B: 136,000 + 13,600 = 149,600; 149,600 x 25% = 37,400
C: 137,500 + 7,452 = 144,952
D: 12,220

lOMoARcPSD|28367708
A = partially secured;
B = unsecured w/o priority;
C = fully secured;
D = unsecured with priority
NONPROFIT ORGANIZATIONS
PROBLEM 34 ANSWER C BLEEDING LOVE HOSPITAL
Amounts charged to patients 384,000
Contractual Adjustments (90,000)
Net patient service revenue 294,000
PROBLEM 35 ANSWER B BROKEN HEART UNIVERSITY

Unrestricted contributions 250,000
Contributions from a donor who stipulated that
the money be spent in accordance to the wishes
of the hospital’s board of trustees 75,000
Contributions used for scholarship 75,000
Current fund revenue 400,000
FOREX
PROBLEM 36 ANSWER A CINCO CORP.
¥ Exchange Peso
rate
Net assets, 1/1/18 115,000 45 5,175,000
Net income, 2018 90,000 43.75 3,937,500
Div. declared, 9/1/18 (15,000) 40 (600,000)
Net income, 2019 22,500 45 1,012,500
9,525,000
Net assets translated using the rate 212,500 47.50 10,093,750
at the end of the year
Exchange difference (Translation 568,750
adjustment)
PROBLEM 37 ANSWER D THE SCRIPT CO.

7,850 (11.50 – 10.75) = (5,887.50)
PROBLEM 38 ANSWER A PYRAMID PHILIPPINES

Oct. 31, 2018 Dec. 31, 2018 Jan. 31, 2019
Intrinsic Value 7,250 14,500 29,000
Time Value 1,000 2,500 -
12/31/18 Time value = 1,500 gain

1/31/19 Intrinsic value = 14,500 gain
PROBLEM 39 ANSWER D PERFECT CO.

May 1 May 31 June 30
Intrinsic value 0 12500 37500
Time Value 14000 5000 1500
Equity 37,500 gain

Earnings (5,000 – 1,500) 3,500 loss
PROBLEM 40 ANSWER C UST COMPANY

125,000 x (92.20 – 91.90) = 37,500 loss
PROBLEM 41 ANSWER A KEL CO.
Hedged item:
2750 (48 – 43) 13,750 gain
Hedging instrument:
2750 (43 – 49) 16,500 loss
Net Forex loss 2,750

lOMoARcPSD|28367708
BUSINESS COMBINATION – ACQUISITION OF NET ASSETS

PROBLEM 42 ANSWER C LOVE AND YOU CORP.
Cost of You Corp.
investment
MV of stocks 875,000 Net assets at FV 660,000
issued
Contingent 15,000
consideration
Total 890,000 660,000
Goodwill 230,000
Assets:
Love’s assets at BV 900,000
Add: Goodwill 230,000
Less: Cash payments (53,000)
You’s assets at FV 695,000_
Total assets 1,772,000
PROBLEM 43 ANSWER D CIDO, AYIZIEL, AND VIANNEY

Ayiziel Vianney
FV of net assets 2,990,000 903,000
Common stocks issued, at par 2,843,750 789,250

Related APIC 406,250 112750
Cost of investment 3,250,000 902,000
Goodwill/(income from acquisition) 260,000 (1,000)
Retained earnings:
Acquirer’s RE + income from acquisition – related costs – stock
issuance costs in excess of related APIC
4,300,000 + 1,000 – 118,500 – 69,750 = 4,112,750
BUSINESS COMBINATION – ACQUISITION OF STOCKS

PROBLEM 44 ANSWER A Añonuevo Corp. and Sy Corp.
Cost of Sy Corp.
investment
Cash 2,500,000 BV of net assets 2,800,000
FV of NCI 685,000 Inventory (90,000)
Land 50,000
Patent 125,000
Total 3,185,000 FV of net assets 2,885,000
Goodwill 300,000
Goodwill:
Controlling (2,500,000 – 2,308,000) 192,000
Non-controlling (685,000 – 577,000) 108,000
Amortization 2018 2019

Inventory 90,000 -
Patent (18,750) (25,000)
Total 71,250 (25,000)
Impairment of Goodwill 2011 2012

Controlling (192/300) * 22,500 14,400 14,400
Non-controlling (108/300) *22,500 8,100 8,100
Total 22,500 22,500

lOMoARcPSD|28367708
NCINAS Computation
SHE at date of acquisition 2,800,000
Excess 85,000
Net income, 2011 (from date of acquisition) 485,000
Amortization 71,250
Dividends declared (35,000)
SHE as adjusted (before adj. for goodwill and impairment) 3,406,250
NCI before adjustments (3,406,250 * 20%) 681,250
Share in the goodwill 108,000
Share in the impairment of goodwill (8,100)
NCINAS 781,150
JOINT ARRANGEMENT
Problem 45 Answer D
2015: 98,000 (recoverable amount less cost to sell)
2016: 101,000 cost
2017: 86,000 (recoverable amount less cost to sell)
Problem 46 Answer: A (at fair value) – no need for

impairment testing
BUSINESS COMBINATION
Problem 47 Answer B
CT* 1,600,000
FV of net identifiable assets** (1,300,000)
Goodwill 300,000
*CT = P16 x 100,000 shares = 1,600,000

**FV of the accounting acquiree = 500,000 + 1,500,000 – 300,000 –
400,000 = 1,300,000
DECONSOLIDATION
Problem 48 Answer C
FV of Proceeds 540,000
FV of Retained Interest 54,000
CA of NCI 45,000
CA of Net Assets (450,000)
Gain 189,000
INSURANCE CONTRACTS
Problem 49 Answer A
SERVICE CONCESSION ARRANGEMENT

Problem 50 Answer C
Intangible asset – 310M (110M + 200M)
Financial asset – 200M (110M + 90M)

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AFAR Problems Quizzer with Answers

Accountancy (National University (Philippines))

Studocu is not sponsored or endorsed by any college or university

ADVANCED FINANCIAL ACCOUNTING & REPORTING - PROBLEMS

Activity Centers Costs Activity Drivers

Direct costs of producing product GG amounted to P75,000. The said

PROBLEMS 2 – 3 (JOB ORDER COSTING)

45 units of drum sets were found to be defective and Faithfully Inc.

Problem 3. Superhuman Co. provided the following data:

Superhuman do not typically expect spoilage in its production process.

Problems 4 – 5 (PROCESS COSTING)

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Problem 5. Silent Sanctuary Corporation manufactures a product

Materials are added at the start of the production while conversion

Compute the cost per unit of completed units as of May 1, 2018:

PROBLEMS 6 – 7 (JOINT AND BY-PRODUCTS)

Which of the following is false regarding processing the three

Problem 7. Breakout Co. produces two products which go through a

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Products Units produced Net realizable value

Remnants are considered a by-product of the process and are sold to

PROBLEMS 8 – 9 (STANDARD COSTING)

What is the company’s variable overhead rate?

Problem 9. Emoted Inc. purchased 80,000 ounces of materials needed to

PROBLEMS 10 – 11 (INSTALLMENT SALES)

On January 2018, a customer defaulted and Sweet Serendipity

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Problem 11. Muro Co. is a dealer of refrigerators. The company gives

What is the resulting net income from the foregoing transactions?

PROBLEMS 12 – 13 (LONG TERM CONSTRUCTION CONTRACTS)

How much is the realized gross profit/loss during 2017?

Problem 13. Mabi Corp. was contracted by Mr. Tristan P. to construct

Units Costs incurred Estimated cost

2017 10 P8,412,500 P33,650,000

What is the RGP during 2018 using the output measures?

PROBLEMS 14 – 15 (FRANCHISE ACCOUNTING)

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Problem 15. On December 31, 2018, Dewyze Inc. authorized Cook to

How much is the deferred revenue to be recognized as of December 31,

PROBLEM 16 (SALES-AGENCY TRANSACTIONS)

Problem 17 (HOME OFFICE – INTER-BRANCH TRANSACTIONS)

Problem 18 (HOME OFFICE – RECONCILIATION)

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a. Shipments from home office to Manila branch costing P72,500 were

c. The branch wrote-off uncollectible accounts amounting to P10,120.

d. The branch collected accounts receivable from home office’s

PROBLEMS 19 – 20 (HOME OFFICE – BILLED PRICE)

The ending inventory of the branch includes P120,000 purchased from

What is the combined cost of ending inventory?

The combined net income is:

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How much is the ending inventory of the branch to be reported in its

PROBLEM 21 (PARTNERSHIP FORMATION)

How much cash will be presented in the partnership’s statement of

PROBLEMS 22 – 23 (PARTNERSHIP OPERATIONS)

How much is Caloy’s capital balance at the end of 2018?

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