CPA REVIEW SCHOOL OF THE PHILIPPINES

ADVANCED FINANCIAL ACCOUNTING AND REPORTING GERMAN and VALIX

PREWEEK October 2023

Number 1

On January 1, 2023, Parent Corp. and Subsidiary Corp. had the following condensed statements of
financial position:
Parent Subsidiary
Current assets 140,000 40,000
Noncurrent assets 180,000 80,000
Total assets 320,000 120,000
Current liabilities 60,000 20,000
Long-term debt 100,000 -
Stockholders’ equity 160,000 100,000
Total liabilities and stockholders’ equity 320,000 120,000
On January 2, 2023, Parent borrowed P120,000 and used the proceeds to purchase 90% of the outstanding
common shares of Subsidiary. This debt is payable in ten equal annual principal payments, plus interest,
beginning December 30, 2023. The excess cost of the investment over Subsidiary’ book value of acquired
net assets should be allocated 60% to inventory and 40% to goodwill. On January 1, 2023, the fair value
of Subsidiary shares held by noncontrolling parties was P20,000.
On January 2, 2023, stockholders’ equity including noncontrolling interests should be
A. 160,000
B. 170,000
C. 180,000
D. 260,000

Number 2

On January 1, 2023, Parent, Inc. purchased 80% of the stock of Subsidiary Corp. for P8,000,000 Cash.
Prior to the acquisition, Subsidiary had 100,000 shares of stock outstanding. On the date of acquisition,
Subsidiary's stock had a fair value of P104 per share. During the year Subsidiary reported P560,000 in net
income and paid dividends of P100,000.
What is the balance in the noncontrolling interest account on Parent's statement of financial
position on December 31, 2023?
A. 2,000,000
B. 2,080,000
C. 2,172,000
D. 2,192,000
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Number 3

On January 2, 2023, Parent Co. purchased 75% of Subsidiary Co.'s outstanding common stock. On that
date, the fair value of the 25% noncontrolling interest was P70,000. During 2023, Subsidiary had net
income of P40,000. Selected data at December 31, 2023, are:
Parent Subsidiary
Total assets 840,000 360,000
Liabilities 240,000 120,000
Common stock 200,000 100,000
Retained earnings 400,000 140,000
During 2023 Parent and Subsidiary paid cash dividends of P50,000 and P10,000, respectively, to their
shareholders. There were no other intercompany transactions.
In its December 31, 2023 consolidated statement of retained earnings, what amount should Pare
report as dividends paid?
A. 10,000
B. 50,000
C. 52,500
D. 60,000

Number 4

Parent Company acquired goods for resale from its manufacturing subsidiary at Subsidiary's cost to
manufacture of P24,000. Parent subsequently resold the goods to a nonaffiliate for P36,000.
Which one of the following is the amount of the elimination that will be needed as a result of the
intercompany inventory transaction?
A. 0
B. 12,000
C. 24,000
D. 36,000

Number 5

Parent Co. owns 100% of Subsidiary Co.'s outstanding common stock. Parent's cost of goods sold for the
year totals P300,000, and Subsidiary's cost of goods sold totals P200,000. During the year, Parent sold
inventory costing P30,000 to Subsidiary for P50,000. By the end of the year, all transferred inventory was
sold to third parties.
What amount should be reported as cost of goods sold in the consolidated statement of income?
A. 450,000
B. 470,000
C. 480,000
D. 500,000

Number 6

Parent Co. owns 100% of Subsidiary, Inc. On January 2, 2023, Parent sold equipment with an original
cost of P160,000 and a carrying amount of P96,000 to Subsidiary for P144,000. Parent had been
depreciating the equipment over a five-year period using straight-line depreciation with no residual value.
Subsidiary is using straight-line depreciation over three years with no residual value.
In Parent's December 31, 2023, consolidating worksheet, by what amount should depreciation
expense be decreased?
A. 0
B. 16,000
C. 32,000
D. 48,000
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Number 7
Parent corp. has several subsidiaries that are included in its consolidated financial statements. In its
December 31, 2023 trial balance, Parent had the following Intercompany balances before eliminations.
Debit Credit
Current receivable due from M Co. 64,000
Noncurrent receivable from M Co. 228,000
Cash advance to C Corp 12,000
Cash advance from K Co. 30,000
Intercompany payable to K Co. 202,000
In its December 31, 2023 consolidated statement of financial position, what amount should Parent
report as intercompany receivables?
A. 304,000
B. 292,000
C. 72,000
D. 0

Number 8
A company acquires another company for P1,500,000 in cash, P5,000,000 in stock, and the following
contingent consideration:
• P500,000 after 2023, P500,000 after 2024, and P250,000 after 2025, if earnings of the subsidiary
exceed P5,000,000 in each of the three years.
The fair value of the contingent-based consideration portion is P1,050,000.
What is the total consideration transferred for this business combination?
A. 7,750,000
B. 7,550,000
C. 6,500,000
D. 2,550,000

Number 9
Parent, Inc. acquired 100% of the voting common stock of Subsidiary Inc. by transferring the following
consideration to Subsidiary’s shareholders:
Cash P200,000
5,000 new shares of Parent’s P20 par common stock (which 100,000 (par)
is less than 1% of Parent’s outstanding stock)
In addition, Parent paid P24,000 direct cost of carrying out the combination.
At the date of the acquisition, Parent's for common stock was selling in an active market for P18 per
share. Also, at the date of the acquisition, Subsidiary had the following assets and liabilities with the book
values and fair values shown:
Book Value Market value
Accounts Receivable 40,000 40,000
Property and Equipment 160,000 200,000
Land 120,000 160,000
Other Assets 80,000 80,000
Total Assets 400,000 480,000
Accounts Payable 30,000 30,000
Other short-term Debt 20,000 20,000
Long-term Debt 70,000 70,000
Total Liabilities 120,000 120,000
Which one of the following is the fair value of Subsidiary’s net assets at the date of the business
combination?
A. 280,000
B. 360,000
C. 384,000
D. 480,000
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Number 10

Parent Co. issued 200,000 shares of 10 par value common stock to acquire Subsidiary Co. in an
acquisition-business combination. The market value of Parent's common stock is P24 per share. Legal
and consulting fees incurred in relation to the acquisition are P220,000 paid in cash. Registration and
issuance costs for the common stock are P70,000.
What should be recorded in Parent's additional paid-in capital account for this business
combination?
A. 3,090,000
B. 2,800,000
C. 2,730,000
D. 2,510,000

Number 11

On December 12, 2023, Entity A entered into a forward exchange contract to purchase 200,000 units of a
foreign currency in 90 days.
The contract was designated and qualified as a fair value hedge of a purchase of inventory made that day
and payable in March 2024. The relevant direct exchange rates between the foreign currency and the
dollar are as follows.
Spot Rate Forward Rate (for March 12, 2024)
December 1, 2023 $0.88 $0.90
December 31, 2023 0.98 0.93
At December 31, 2024, what amount of foreign currency transaction net gain or loss should Entity
A recognize in income as a result of its foreign currency obligation and related hedge contract?
A. 0
B. 6,000
C. 14,000
D. 20,000

Number 12, 13 and 14

Cebu Company, a Philippine company acquired inventory items from a supplier in Singapore on
December 1, 2023 for 250,000 SGD due on February 28, 2024, when the selling spot rate was P33.60. On
December 31, 2023, the selling spot rate was P33.10. On the due date, on February 28, 2024, the selling
spot rate was P33.20.

12. Compute the amount Cebu Company should report as forex gain or loss for the year ended
December 31, 2023
A. 125,000 gain
B. 125,000 loss
C. 100,000 gain
D. 0

13. Compute the amount Cebu Company should report as liability on December 31, 2023
A. 8,275,000
B. 8,400,000
C. 8,300,000
D. 8,250,000

14. Compute the amount Cebu Company should report as forex gain or loss for the year ended
December 31, 2024
A. 25,000 loss
B. 25,000 gain
C. 100,000 gain
D. 0
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Number 15

On January 1, 2023, ABC Inc. paid a premium to acquire a put option from a writer. This is in relation to
a forecasted sale of merchandise worth $130,000. (option price = P4.965)
1/1/2023 3/31/2023 6/20/2023
Spot rate P4.934 P4.908 P4.750
Fair value of option P19,600 P22,800 P27,950
Compute the gain/loss affecting earnings for the first quarter of 2023?
A. 3,380
B. (3,380)
C. 3,200
D. (180)

Number 16
Ortigas Company sold merchandise for 105,000 pounds to a customer in London on October 01, 2023.
Collection in British pounds was due on January 30, 2024. On the same date, Ortigas entered into a 120-
day forward contract to sell 105,000 pounds to a writer. Direct exchange rate for pound on different
dates are as follows:
Oct. 1 Dec. 31 Jan. 30
Spot rate 52.6 52.1 51.8
30-day forward 50.2 52.3 50.4
60-day forward 52.2 52.4 53.1
90-day forward 51.7 52.1 52.5
120-day forward 52.5 52.5 53.3
Compute the fair value of the derivative instrument on December 31, 2023?
A. 21,000 negative
B. 21,000 positive
C. 42,000 negative
D. 42,000 positive

Numbers 17, 18 and 19

SGT Foundation received the following donations:

• Cash of P1,500,000 internally restricted by the board of trustees
• Cash of P2,200,000 restricted by the donor for acquisition of a piece of machinery
• Trust fund of P3,000,000 to be invested perpetually in equity instruments
SGT Foundation acquired the piece of machinery using P2,200,000. The trust fund yielded an investment
income of P100,000 cash for the year.

17. Under a fund accounting system, the entry to record the receipt of the trust fund in the
permanently restricted fund records will include a debit to an investment account and a credit
to
A. Contribution revenue, P3,000,000
B. Agency fund liability, P3,000,000
C. Cash P3,000,000
D. Net assets released from restriction, P3,000,000

18. Under a fund accounting system, the entry to record the funds released from restriction will
include a debit to “net assets released from restriction” account for P2,200,000, and credit cash
P2,200,000 in the
A. Unrestricted fund
B. Temporarily restricted fund
C. Permanently restricted fund
D. None of the above
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19. Under a fund accounting system, the entry to record the receipt of P100,000 dividends will
include a debit to cash P100,000 and credit to dividend income P100,000 in the
A. Unrestricted fund
B. Temporarily restricted fund
C. Permanently restricted fund
D. None of the above

Number 20

ABL Medical Clinic, a non-profit hospital, had the following transactions:

• P300,000 sales of hospital cafeteria
• P50,000 fees of hospital parking lot
• A professional consultant rendered services to the hospital worth P500,000. The consultant waived
80% of this fee.
• A pharmaceutical company donated P400,000 worth of medicine to the hospital.
How much is treated as “other revenue” in the hospital’s statement of activities?
A. 1,250,000
B. 1,150,000
C. 900,000
D. 800,000

Number 21

Which of the following will allow the NPO to recognize revenue?

A. Receipt of services from a non-professional
B. Receipt of a work of art to be held for public exhibition
C. Receipt of relief goods to be distributed to fire victims
D. Receipt of services that enhance an existing asset

Number 22

The keeping of the general accounts of the government, supporting vouchers, and other documents is
tasked to the
A. Department of Budget and Management
B. House of Representatives
C. Commission on Audit
D. Senate of the Philippines

Number 23

Which of the following is the most common payment medium used by NGA’s and GOCC’s?
A. Cash
B. Credit Card
C. Cryptocurrency
D. Modified Disbursement System Checks
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Number 24

The entry of a NGA to record a receipt of P1,000,000 NCA will include a debit to Cash - Modified
Disbursement System (MDS), Regular and a credit to
A. Accounts receivable
B. Cash – Tax Remittance Advice (TRA)
C. Subsidy Income from National Government
D. Advances from the Department of Budget and Management

Number 25

A receipt of a P1,000,000 allotment by a NGA will be:

A. Debited to Cash – Modified Disbursement System (MDS), Regular
B. Credited to Subsidy Income from National Government
C. Recorded in the RAPAL only
D. Recorded in the RAPAL and RAOD

Numbers 26 and 27

A National Government Agency in the Philippines paid one of its accounts payable and withheld cash of
P9,000, which represents the 5% withholding VAT in accordance with relevant tax laws.

26. The entry of the NGA will include a debit to

A. Accounts payable P180,000
B. Accounts payable P171,000
C. Cash - Modified Disbursement System (MDS), Regular P171,000
D. Cash - Modified Disbursement System (MDS), Regular P180,000

27. The entry of the NGA will include a credit to

A. Accounts payable P180,000
B. Accounts payable P171,000
C. Cash - Modified Disbursement System (MDS), Regular P171,000
D. Cash - Modified Disbursement System (MDS), Regular P180,000

Numbers 28 and 29
During the first year of operations, the books of Bacolod Branch showed the following balances:
Sales 1,200,000
Shipments from home office 1,120,000
Purchases 120,000
Ending inventory 200,000
Operating expenses 150,000
Shipments to branch were billed at 140% of cost. The ending inventory of the branch included P26,400
from outside purchases.

28. What amount should be reported as ending inventory of the Bacolod branch at cost?
A. 200,000
B. 173,600
C. 150,400
D. 269,440

29. What amount should be reported as true net income of Bacolod branch?
A. 280,400
B. 10,000
C. 254,000
D. 270,400
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Numbers 30 and 31
On October 1, 2023 the Home Office established a branch and on December 31, 2023, in the books of the
Home Office, the balance of the Investment in Branch account was P132,000. However, there were some
errors in recording the reciprocal accounts. The following were the relevant transactions that were
investigated:
a) The branch purchased for cash P30,000 machine for its use. The policy of the home office was that
the fixed asset accounts were maintained by the home office. Notification was sent to the home office
by the branch, but the home office did not record the transaction.
b) Cash of P4,000 was received by the branch from the home office, and was erroneously recorded by
the branch as P40,000.
c) Notification was sent by the home office to the branch, informing the branch of P10,000 worth of
expenses were paid on behalf of the branch. However, the branch did not receive the said notification
and the branch had not recorded the transaction.
d) Merchandise costing P16,000 was sent by the home office to the branch at a billed price of P18,000.
The merchandise is still in transit.
e) Cash of P20,000 was remitted or forwarded to the home office by the branch. However, the home
office did not record the transaction.

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

A. 82,000
B. 182,000
C. 122,000
D. 142,000

31. What is the unadjusted balance of the home office account in the branch books?
A. 174,000
B. 82,000
C. 124,000
D. 90,000

Number 32
The unadjusted balance in the allowance for overvaluation account at the end of the year represents
A. The mark-up on the merchandise shipped to the branch during the year
B. The mark-up on cost of goods sold by the branch for the year
C. The mark-up on the merchandise available for sale by the branch for the year
D. The mark-up on the merchandise shipped to the branch during the year less the mark-up on the
merchandise returned by the branch during the year

Number 33
Which of the following reconciling transactions will require a credit to the home office account in Branch
X's books?
A. Credit memo received by Branch X from the home office
B. Collection by Branch X of Branch Y's accounts receivable
C. Reshipment of goods received by Branch X to Branch Y
D. Payment of Branch X of home office's accounts payable
 Page 9

Number 34
Neither Branch A nor the Home Office had any intracompany transactions for the month of October.
However, the balance of the Home Office Current account in the books of Branch A was greater than the
Investment in Branch account in the books of the Home Office. What is the most likely reason for the
discrepancy?
A. The branch reported a net income for the month of October
B. The home office reported a net loss for the month of October
C. The branch returned merchandise to the home office
D. The branch reported a net loss for the month of October

Number 35

If the under or over applied factory overhead is significant, it shall be closed to

A. Cost of goods sold only
B. Finished goods and cost of goods sold proportionately
C. Work in process, finished goods and cost of goods sold proportionately
D. Raw materials, work in process, finished goods, and cost of goods sold proportionately

Numbers 36 and 37
Boeing Company used a job order costing system. The entity had three jobs in process: #7, #10, and #13.
The entity provided the following information:

Raw material used P130,000

Direct labor per hour P9.50
Overhead applied based on direct labor cost 125%

Direct material was requisitioned for each job respectively: 25 percent, 30 percent, and 30 percent. The
balance of the requisitions was considered indirect. Direct labor hours per job are 2,800, 3,300 and 4,000,
respectively for Job #7, Job #10 and Job #13. Indirect labor is P45,000. Other actual overhead costs
totaled P50,000.

36. What amount should Boeing Company report as prime cost for Job #7?
A. 59,100
B. 59,850
C. 32,500
D. 65,750

37. What amount should Boeing Company report as overhead applied for Job #13?
A. 45,000
B. 47,500
C. 50,000
D. 62,500
 Page 10
Numbers 38 and 39
Bacolod Manufacturing Corp. has the following cost of production data for the month of October:
Work-in-process October 1:
Job 03 Job 04
Direct materials 2,400 1,500
Direct labor 3,600 2,880
Applied overhead 2,340 1,872
Finished goods October 1:
Job 01 Job 02
Direct materials 18,000 6,720
Direct labor 24,000 8,400
Applied overhead 15,600 5,460
Total manufacturing cost added during the month of October:
Job 03 Job 04 Job 05 Job 06
Direct materials 10,920 13,200 36,000 4,800
Direct labor 14,400 16,800 42,000 7,200
Applied overhead 9,360 10,920 27,300 ?
During the month of October, Job 03, Job 04, Job 05, were completed. The predetermined overhead rate
was 65% of direct labor cost. Actual overhead at the end of the year was P33,000.

38. What is the cost of goods manufactured for the month of October?
A. 195,492
B. 180,900
C. 143,700
D. 180,912

39. Assuming Job 06 was also completed, what is the cost of goods manufactured of Job 06?
A. 6,252
B. 20,580
C. 40,920
D. 16,680

Numbers 40 and 41
Airbus Company produces two products from a joint process: X and Z. Joint processing costs for this
production cycle are P8,000.
Yards Sale price per Disposal cost per Further processing Final sale price
yard at split off yard at split off per yard per yard
X 1,000 P6.00 P4.00 P1.00 P 7.00
Z 2,000 9.00 5.00 3.00 10.00

40. What amount of joint cost should be allocated to product Z if the company opted to use the
relative sales value at split off method?
A. 4,800
B. 6,400
C. 6,000
D. 5,200

41. Assuming that after further processing, Product X yielded 800 yards of Final Product X. What
is the approximated / estimated net realizable value of the Final Product X at the split -off
point?
A. 6,000
B. 4,800
C. 1,600
D. 2,000
 Page 11

Numbers 42 and 43

C17 Company provided the following information for June of the current year:
Beginning work in process inventory (20% complete as to conversion) 12,000 units
Started 150,000 units
Ending work in process inventory (25% done as to conversion) 35,000 units
Beginning work in process inventory costs:
Direct materials P2,500
Conversion P2,650
Costs added during the year:
Direct materials P36,000
Conversion P112,750
All materials were added at the beginning of production.

42. Under FIFO, what is the Conversion EUP?

A. 135,750
B. 126,150
C. 133,350
D. 150,850

43. Under Weighted Average, what is the Direct material EUP?

A. 150,000
B. 162,000
C. 153,250
D. 185,000

Number 44

Which of the following formulas would calculate the net realizable value of a product?
A. Final sales value less cost of goods sold
B. Sales value multiplied by the constant gross margin
C. Sales value at the split-off point less cost to produce up to the split-off point
D. Final sales value less separable cost

Number 45

Under IFRS 15, how shall an entity recognize revenue from contracts with customers?
A. An entity shall recognize revenue when (or as) the entity satisfies a performance obligation by
transferring a promised good or service (i.e. an asset) to a customer.
B. An entity shall recognize revenue when it is probable that future economic benefits will flow to the
entity and it can be measured reliably.
C. An entity shall recognize revenue at the time of collection of cash.
D. An entity shall recognize revenue at the time of signing of contract.
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Number 46

J and K decided to form a Partnership and provided the following transactions:

• J invested P250,000 cash and equipment with a fair value of P150,000.
• K invested P350,000 cash, merchandise with an agreed value of P550,000, and Land with an
appraised value of P500,000 subject to a mortgage payable of P250,000 which the partnership will
assume.
• The partners also agreed to an equal interest in the partnership capital.
Compute the amount reported as total capital of the partners after formation
A. 1,800,000
B. 1,550,000
C. 1,750,000
D. 1,500,000

Number 47

On January 1, 2023, Q and R were partners with capital balances of P1,500,000 and P1,150,000
respectively. The profit and loss agreement of the partners included the following:
• Monthly salaries of P30,000 and P25,000 respectively for Q and R
• 6% interest based on their January 1, 2023 capital balances
• Remainder to be shared equally
At the end of 2023, the partnership generated a net income of P500,000.
Compute the share of Partner R in the net income
A. 250,000
B. 227,500
C. 209,500
D. 217,000

Number 48

On December 31, 2023, the Statement of Financial Position of LMN Partnership provided the following
data with profit or loss ratio of 1:6:3:

Current Assets 2,500,000 Total Liabilities 1,500,000

Noncurrent Assets 5,000,000 L, Capital 2,250,000
M, Capital 2,000,000
N, Capital 1,750,000

On January 1, 2024, O was admitted to the partnership by purchasing 40% of the capital interest of M at a
price of P1,250,000.
Compute the capital balance of M after the admission of O on January 1, 2024
A. 1,350,000
B. 1,200,000
C. 1,050,000
D. 750,000
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Number 49
O and P have capital balances of P1,400,000 and P1,540,000 respectively before admission of N. Their
profit and loss agreement was 35:65. On January 1, N was to be admitted for 40% interest in the
partnership and 20% in the profits and losses by contributing used equipment which had a cost of
P1,435,000 and a fair value of P1,260,000. After the admission of N, O and P agreed to share profits and
losses equally. At the end of the year the new partnership generated net income of P910,000.
Assuming there is an implied undervaluation or (overvaluation) of an asset, compute the capital
balance of P at the end of the year
A. 3,269,000
B. 539,000
C. 2,586,500
D. 1,221,500

Number 50
On December 31, 2023, the Statement of Financial Position of TUV Partnership provided the following
data with profit or loss ratio of 5:1:4:
Current Assets 3,750,000 Total Liabilities 1,250,000
Noncurrent Assets 5,000,000 T, Capital 2,750,000
U, Capital 3,000,000
V, Capital 1,750,000
On January 1, 2024, S was admitted to the partnership by investing P1,250,000 to the partnership for 10%
capital interest. The total agreed capitalization of the new partnership is P7,500,000.
Compute the capital balance of V after the admission of S to the Partnership
A. 1,450,000
B. 2,050,000
C. 1,250,000
D. 1,950,000

Number 51

On December 31, 2023, the Statement of Financial Position of DEF Partnership with profit or loss ratio of
5:2:3 of partners D, E and F respectively revealed the following data:
Cash 2,500,000 Liabilities 5,000,000
Non Cash assets 6,250,000 D, Capital 1,750,000
E, Capital 1,250,000
F, Capital 750,000
On January 1, 2024, the partners decided to liquidate the partnership. All partners are legally declared to
be personally insolvent. The noncash assets were sold for P4,500,000. Liquidation expenses amounting to
P750,000 were incurred and paid.
Compute the amount of cash received by Partner D after liquidation
A. 1,750,000
B. 875,000
C. 1,375,000
D. 500,000
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Number 52
On September 30, 2023, The R, S, and T Partnership had the following fiscal year-end Statement of
Financial Position.
Cash P 48,000 Accounts Payable P 84,000
Accounts Receivable 72,000 Loan from T 60,000
Merchandise Inventory 168,000 R, Capital (20%) 168,000
Fixed Assets, net 144,000 S, Capital (20%) 120,000
Loan to R 72,000 T, Capital (60%) 72,000
P504,000 P504,000
The partners dissolved the partnership on October 1, 2023 and began the liquidation process. During
October the following events occurred:
a. Accounts receivables of P36,000 were collected
b. All the merchandise inventory was sold for P48,000.
c. Cash withheld for anticipated expenses amount to P24,000
Compute the amount of cash S would receive in the first distribution
A. 24,000
B. 4,800
C. 14,400
D. 0

Numbers 53, 54 and 55

On January 1, 2023, Cindy Company accepted a long-term construction project for an initial contract
price of P2,000,000 to be completed on November 30, 2024. On January 1, 2024, the contract price was
increased by P1,000,000 by reason of change in the design of the project. The outcome of the
construction contract can be estimated reliably. The project was completed on December 31, 2024 which
resulted to penalty amounting to P400,000. The entity provided the following data concerning the direct
costs related to the said project for 2023 and 2024:
2023 2024
Costs incurred to date 880,000 2,240,000
Remaining estimated costs to complete at year-end 1,320,000 560,000

53. What is the construction revenue for the year ended December 31, 2024?
A. 800,000
B. 1,600,000
C. 2,400,000
D. 1,200,000

54. What is the realized gross profit for the year ended December 31, 2024?
A. 400,000
B. 160,000
C. 360,000
D. 200,000

55. What is the balance of construction in progress on December 31, 2024?

A. 2,400,000
B. 2,040,000
C. 2,240,000
D. 1,800,000
 Page 15

Numbers 56, 57 and 58

On January 1, 2023, SDC Company granted a franchise to a franchisee. The franchise agreement required
the franchisee to pay a nonrefundable upfront fee in the amount of P1,600,000 and on-going payment of
royalties equivalent to 10% of the sales of the franchisee. The franchisee paid the nonrefundable upfront
fee on January 1, 2023.
In relation to the nonrefundable upfront fee, the franchise agreement required the entity to render the
following performance obligations which were separate and distinct from each other:
• To construct the franchisee’s stall with stand-alone selling price of P400,000.
• To deliver 20,000 units of raw materials to the franchisee with stand-alone selling price of P500,000.
• To allow the franchisee to use the entity's tradename for a period of 5 years starting January 1, 2023.
The stand-alone selling price of the use of the tradename was P100,000.

On July 31, 2023, the entity completed the construction of the franchisee’s stall. On December 31, 2023,
the entity was able to deliver 15,000 units of raw materials to the franchisee. For the year ended
December 31, 2023, the franchisee reported sales revenue amounting to P1,000,000.

56. Under IFRS 15, what amount should SDC Company recognize as revenue in relation to the
delivery of the raw materials on December 31, 2023?
A. 800,000
B. 500,000
C. 600,000
D. 375,000

57. Under IFRS 15, what amount should SDC Company recognize as revenue in relation to the
construction of the franchisee's stall on December 31, 2023?
A. 640,000
B. 400,000
C. 1,600,000
D. 0

58. Under IFRS 15, what amount should SDC Company recognize as total revenue for the year
ended December 31, 2023?
A. 1,600,000
B. 1,372,000
C. 1,700,000
D. 1,276,000
 Page 16

Numbers 59 and 60

JKL Corporation provided the following balances in May 1, 2023: Statement of Financial Position:

Cash 400,000 Accounts payable 700,000

Accounts receivable 100,000 Wages payable 180,000
Inventories 400,000 Tax payable 120,000
Furnitures 300,000 Notes payable 600,000
Equipment 600,000 Ordinary shares 300,000
Deficit/(RE) (100,000)

Total 1,800,000 Total 1,800,000

In the Statement of Realization and Liquidation the following data were ascertained for the month of
May:
▪ Interests not accrued for the month were for the notes payable P90,000.
▪ P40,000 of the existing accounts receivable at the beginning of the month was collected for
only P25,000.
▪ P240,000 of the total inventories were sold for P300,000 cash.
▪ Furniture was sold for P220,000.
▪ Administrative expenses of P50,000 were paid.
▪ Additional sales on account amounting to P190,000 were made for the remaining inventories.
▪ Remaining non-cash assets are to be realized and remaining liabilities are to be paid in the next
period(s) of liquidating JKL Corporation.

59. Compute the profit or (loss) of the trustee for the month of May
A. 55,000
B. (145,000)
C. (100,000)
D. 200,000

60. Compute the estate equity(deficit) at the end of May

A. 55,000
B. (145,000)
C. (100,000)
D. 200,000

Number 61

JKL Company is currently experiencing severe financial difficulties and is considering the possibility
of liquidation. At this time, the company has the following assets at estimated realizable value and
liabilities:
Assets (pledged against liabilities of P350,000) 580,000
Assets (pledged against liabilities of P650,000) 250,000
Other Assets 400,000
Liabilities with priority 210,000
Unsecured without priority 1,000,000
Compute the estimated payment to partially secured creditors
A. 650,000
B. 250,000
C. 370,000
D. 1,000,000
 Page 17
Number 62

XY Company has filed for liquidation. The following data is available:

Total free assets at realizable value 500,000
Unsecured liabilities per books 800,000
Unrecorded liabilities:
Trustee expense 30,000
Wages 50,000
Compute the expected percentage claim of the unsecured creditors
A. 52.50%
B. 62.50%
C. 69.36%
D. 56.82%

Number 63

Statement 1. The current and noncurrent classification of assets and liabilities are considered relevant to
companies undergoing liquidation.
Statement 2. In the Statement of Affairs, the expected recovery percentage may be relevant in some
circumstances to creditors who are fully secured.
A. Both statements are true
B. Both statements are false
C. Only statement 1 is true
D. Only statement 2 is true

Number 64

Statement 1. The expected recovery percentage for unsecured liabilities with priority is always 100
percent.
Statement 2. Interest payable on bonds may be categorized as unsecured liabilities with priority claims as
long as the related principal is fully secured.
A. Both statements are true
B. Both statements are false
C. Only statement 1 is true
D. Only statement 2 is true

Number 65

On January 1, 2023, Entity X, a public entity, and Entity Y, a public entity, incorporated Entity Z which
has its fiscal and operational autonomy. The contractual agreement of the incorporating entities provided
that the decisions on relevant activities of Entity Z will require the unanimous consent of both entities.
Entity X and Entity Y will have rights to the net assets of Entity Z.
Entity X and Entity Y invested P4,000,000 and P6,000,000, respectively, equivalent to 40:60 capital
interest of Entity Z. The financial statements of Entity C provided the following data for its two -year
operation:
Net income / (Net loss) Dividends declared

2023 800,000 400,000

2024 (2,000,000) -
What amount should Entity X report as Investment in Entity Z on December 31, 2023?
A. 4,000,000
B. 4,320,000
C. 4,160,000
D. 4,480,000
 Page 18

Numbers 66 and 67

On January 1, 2023, Entity X and Entity Y, both SMEs, incorporated Entity Z, a jointly controlled entity
by investing P10,000,000 each in exchange for 100,000 ordinary shares representing 50% interest each of
Entity Z. Entity X and Entity Y each incurred P400,000 transaction costs.
The contractual agreement of the incorporating entities provided that the decisions on relevant activities
of Entity Z will require the unanimous consent of both entities. Entity X and Entity Y will have rights to
the net assets of Entity Z.
For the year ended December 31, 2023, Entity C reported net income of P2,000,000 and declared
dividends in the amount of P600,000.
On December 31, 2023, the ordinary shares of Entity C are quoted at P112.

66. If Entity X elected fair value model to account for its investment in Entity Z, what is the net
effect on Entity X’s profit or loss for the year ended December 31, 2023?
A. 1,100,000 net income
B. 1,200,000 net income
C. 300,000 net income
D. 800,000 net income

67. If Entity Y elected equity method to account for its investment in Entity Z, what is the carrying
amount of Entity Y’s Investment in Entity C on December 31, 2023?
A. 10,400,000
B. 10,900,000
C. 10,700,000
D. 11,100,000

Number 68

Under IFRS for SMEs, the income of the SME-venturer for its investment in joint venture under fair
value model consists of
A. Share in net income of joint venture
B. Dividend income
C. Gain on changes in fair value of investment
D. Dividend income and gain on changes in a fair value of investment

Number 69

Which is not a requirement of IFRS 17 Insurance Contract?

A. Nonoffsetting of reinsurance assets against related insurance liabilities
B. An annual assessment of the adequacy of recognized insurance liabilities
C. An impairment test for reinsurance assets
D. Recognition of provisions for future claims relating to a catastrophe

Number 70

The Philippine Government granted a concession arrangement to MRT Company which shall construct
the mass train transportation. MRT Company was authorized to operate it for 50 years. The arrangement
provided that MRT Company shall receive a right or license to charge users of the public service but there
is no unconditional right to receive cash because the amounts shall be contingent on the extent that the
public uses the service. How should MRT Company account for the infrastructure asset?
A. Property, plant and equipment
B. Financial asset at fair value
C. Financial asset at amortized cost
D. Intangible asset
END