ADVANCED FINANCIAL ACCOUNTING AND REPORTING OCTOBER 2018 BATCH

PREWEEK QUIZZER

PROBLEM 1
The partnership of Sala and Hula began business on January 1 2018. The following assets were
contributed by each partner (the noncash assets are stated at their fair values on January 1, 2018):
Sala Hula
Cash P 30,000 P 20,000
Inventories 50,000 -
Land - 200,000
Equipment 100,000 -

The land was a subject to a P 65,000 mortgage, which the partnership assumed on January 1, 2018. The
equipment was subject to an instalment note payable that had an unpaid principal amount of P 35,000
on January 1, 2018. The partnership also assumed this note payable. According to the partnership
agreement, each partner was to have a 50 percent capital interest on January 1, 2018, with total
partnership capital being P 300,000. Sala and Hula agreed to share partnership income and losses in the
following manner:
Sala Hula
Interest on beginning capital balances 4% 4%
Salaries P 15,000 P 10,000
Remainder 60% 40%

During 2018, the following events occurred:

 Inventory was acquired at a cost of P 30,000. At December 31, 2018, the partnership owed P
6,000 to its suppliers.
 Principal of P 10,000 was paid on the mortgage. Interest expense incurred on the mortgage
was P 4,000, all of which was paid by December 31, 2018.
 Principal of P 7,500 was paid on the instalment note. Interest expense incurred on the
instalment note was P 2,500, all of which was paid by December 31, 2018.
 Sales on account amounted to P 115,000. At December, customers owed the partnership
P 10,000.
 The partnership inventory at December 31, 2018 was P 20,000.
 Selling and general expenses, excluding depreciation, amounted to P 21,000. At December
31, 2018, the partnership owed P 3,000 of accrued expenses. Depreciation expenses was P
5,000.
 Each partner withdrew P 225 each week in anticipation of partnership profits.
 The partners allocated net income for 2018 and closed accounts.
Additional information:
On January 1, 2019, the partnership decided to admit Sobra to the partnership. On that date, Sobra
invested P 100, 900 of cash into the partnership for a 20 percent capital interest.

1. The capital balance of Bala after Sobra’s admission must be:

A. P 167,300 B. P 175,040 C. P 163,140 D. 181,340

PROBLEM 2
Cecilla, Rachel, and Dolores, a partnership formed on January 1, 2018 had the following initial
installment:
Cecilla P 1,000,000
Rachel 1,500,000
Dolores 2,250,000

The partnership agreement stated that the profits and losses are to be shared equally by the partners
after consideration is made for the following:

P a g e 1 | 20
 - Salaries allowed to partners: P 500,000 for Cecilla, P 480,000 for Rachel, and P 360,000 for
Dolores.
- Average partners’ capital balances during the year shall be allowed 10%.
Additional information:
- On June 30, 2018, A invested an additional P 600,000.
- Dolores withdrew P 700,000 from the partnership on September 30, 2018.
- Share the remaining partnership profit was P 50,000 for each partner.

2. Partnership net profit at December 31, 2018 before salaries, interests and partners’ share on the
remainder was:
A. P 1,997,500 B. P 2,077,500 C. P 2,116,250 D. 2,227,500

PROBLEM 3
Partners Fredo, Lino, Marvin, and Joaquin have been operating FLMJ Partnership for ten years. Due to a
significant reduction in the demand for their product over recent years, the partners have agreed to
liquidate the partnership. At the time of liquidation, balance sheet accounts consisted cash, P 103, 500;
noncash assets, P 300,000; liabilities to outsiders P 60,000; capital credit balances for partners Fredo,
Lino, and Marvin, P 90,000, P 150,000, and P 120,000, respectively; and a debit capital balance for
partner Joaquin of P 16,500.
Partners share equally in income and loss. It is estimated that the administrative cost of liquidation will
total P 4,500. While preparing for liquidation, an unrecorded liability of P 7,500 was discovered.

3. Assuming the available cash of P 103,500 was distributed, how much must be the share of partner
Lino?
A. P 31,500 B. P 30,750 C. P 65,167 D. None
4. In order for partner Joaquin to receive at least P 5,000, how much should the noncash assets be sold
for?
A. P 429,500 B. P 501,500 C. P 398,000 D. P 386,000

PROBLEM 4
The partnership of FWB find it financially infeasible to continue operations and have agreed to liquidate
the partnership. The balance sheet just prior to the start of liquidation appears as follows. Partners
Fredie, Willy, and Bobby share income and loss in the ratio 5:3:2, respectively.
Assets Liabilities and Capital
Cash P 200,000 Accounts Payable P 300,000
Noncash assets 1,300,000 Loan from Fredie 50,000
Fredie, Capital 350,000

Willy, Capital 600,000

Bobby, Capital 200,000
P 1,500,000 P 1,500,000

5. If the first sale of noncash assets having a book value of P 750,000 realizes P 500,000 and all
available cash is distributed, determine the amount of cash distributed to Fredie.
A. P 50,000 B. P 360,000 C. P 40,000 D. P 0

PROBLEM 5
A, B, and C are partners in a business and share in its earning at the respective rates of 50%, 30%, AND
20%. At the beginning of the new fiscal year, they admit D, who is to invest in the firm sufficient cash
funds to give him a one-third interest in the capital and in the earnings. The following closing trial
balance is taken from the old firm’s books:

Cash P 100,000 Accounts Payable P 50,000

Marketable Securities 75,000 Bank Loan 30,000
Accounts receivable 225,000 A, Capital 175,000
B, Capital 100,000
C, Capital 45,000
P 400,000 P 400,000

P a g e 2 | 20
The securities have a market value of P 50,000 and an allowance of P 25,000 is required to cover bad
debts. No other adjustment of net assets is necessary, but the three old partners must among
themselves bring the balances in their capital accounts into agreement with their interests in the
earnings.

6. The amount that must be invested by D is

A. P 135,000 B. P 90,000 C. P 160,000 D. P 150,000

PROBLEM 6
A, B, and C have a capital balances of P 112,000, P 130,000 and P 58,000, respectively, and share profits
in the ratio 3:2:1. D invest cash in the partnership for a one-fourth interest.

7. D receives a one-fourth interest in the assets of the partnership, which includes credit for P 25,000
of goodwill that is recognized upon admission. How much cash D invest?
A. P 100,000 B. P 75,000 C. P 125,000 D. P 50,000

8. D receives a one-fourth interest in the assets of the partnership and B is credited with P 15,000 of
the bonus from D, how much D invest?
A. P 115,000 B. P 105,000 C. P 160,000 D. P 120,000

PROBLEM 7
The controller for Victor Supply Company has established the following activity cost pools and cost
drivers.

Budgeted Budgeted
Overhead Level for Cost
Activity Cost Pool Cost Cost Driver Driver Pool Rate
Machine setups P 200,000 Number of setups 100 P 2,000/setup
Material handling 100,000 Weight of raw materials 50,000 pounds P 2/pound
Hazardous waste control 50,000 Weight of hazardous 10,000 pounds P 5/pound
chemical used
Quality control 75,000 Number of inspections 1,000 P 75/inspection
Other overhead costs 200,000 Machine hours 20,000 P 10/machine hr.
Total P 625,000

An order for 2,000 boxes of film development chemicals has the following production requirements:
Machine setups 4 setups
Raw Materials 10,000 pounds
Hazardous materials 2,000 pounds
Inspections 10 inspections
Machine hours 500 machine hours

9. Under the activity based cost system, how much is the overhead cost per box of chemicals?
A. P 21.875 B. P 43.75 C. P 15.625 D. P 7.8125

10. Using a single predetermined overhead rate based on machine hours, compute the rate per box of
chemicals.
A. P 21.875 B. P 43.75 C. P 15.625 D. P 7.8125

PROBLEM 8
Andrea Textiles Company manufactures a variety of natural fabrics for the clothing industry. The
following data pertain to the Weaving Department for the month of September.
Weighted Average FIFO

P a g e 3 | 20
 Equivalent units of direct materials 60,000 40,000
Equivalent units of conversion 52,000 44,000
Units completed and transferred out 50,000 50,000
during September
The cost data for September is as follows:
Work in process, September 1 20,000 units
Direct material P 94,000
Conversion 44,000
Cost incurred during September
Direct material P 164,000
Conversion 272,800

11. If average method is used, how much is the cost of units transferred out during September?
A. P 520,000 B. P 515,000 C. P 521,800 D. P 447,400

12. If FIFO method is used, what is the cost of work in process ending inventory during September?
A. P 55,200 B. P 53,400 C. P 60,200 D. P 127, 800

PROBLEM 9
On January 1, 2018, G&G Corporation issued 6,000 shares of its P 10 par value common stock to acquire
the assets and liabilities of Ford Company. G&G Corporation shares were selling at P 90 on that date.
Historical cost and fair value balance sheet data for Ford Company at the time of acquisition were as
follows:
Balance Sheet Item Historical Cost Fair Value
Cash and Receivables P 50,000 P 50,000
Inventory 120,000 200,000
Building & Equipment 400,000 300,000
Less: Accumulate Depreciation (150,000) -
Total Assets P 420,000 P 550,000
Accounts Payable P 50,000 P 50,000
Common Stock (P 20 par value) 200,000
Retained Earnings 170,000
Total Liabilities and Equities 420,000

13. G&G Corporation incurred but not paid listing fees of P 10,000 and audit fees of P 5,000 in issuing
the new shares and paid a finder’s fee of P 25,000 in locating the merger candidate. Under the
purchase of interest combination, how much goodwill must be recognized in the books?
A. P 40,000 B. P 55,000 C. P 65,000 D. P 80,000

PROBLEM 10
On January 1, 2018. Masunurin Products Corp. issues 12,000 shares of its P 10 par value to acquire
the net assets of Pasaway Steel Company. Underlying book value and fair value information for the
balance sheet items of Pasaway Steel Company at the time of acquisition are as follows:
Balance Sheet Item Book Value Fair Value
Cash P 60,000 P 60,000
Accounts Receivable 100,000 100,000
Inventory 60,000 115,000
Land 50,000 70,000
Buildings and Equipment 400,000 350,000
Less Accumulated Depreciation (150,000) -
Total Assets P 520,000 P 695,000
Accounts Payable P 10,000 P 10,000
Bonds Payable 200,000 180,000
Common Stock (P 5 par value) 150,000
Additional Paid in Capital 70,000
Retained Earnings 90,000

P a g e 4 | 20
 Total Liabilities and Equities 520,000

Pasaway Steel shares were selling at P 18 and Masunurin Products shares were selling at P 50 just before
the merger announcement. Additional cash payments made by Masunurin Corporation in completing
the acquisition were:
Finder’s fee paid to firm that located Pasaway Steel P 10,000
Audit fee for stock issued by Masunurin Products 3,000
Stock registration fee for new shares of Masunurin Products 5,000
Legal fees paid to assist in transfer of net assets 9,000
Cost of SEC registration of Masunurin Products shares 1,000

14. How much is the increase in the total net assets recorded by Masunurin Products?
A. P 310,000 B. P 572,000 C. P 591,000 D. P 487,000

PROBLEM 11
Under de Saya Company acquired 60 percent of Batas Company for P 300,000 when Batas’ book value
was P 400,000. The newly comprised 40 percent non-controlling interest had an assessed fair value of P
180,000. Also that date of acquisition, Batas’ had a trademark (with a 10 year life) that was undervalued
in the financial records by P 60,000. Also, patented technology (with a 5 year life) was undervalued by
P 40,000. Two years later, the following figures are reported by these two companies (stockholders’
equity accounts have been omitted)
Under de Saya Company Batas’ Company Batas’ Company
Book Value Book Value Fair Value
Current assets P 620,000 P 300,000 P 320,000
Trademarks 260,000 200,000 280,000
Patented Technology 410,000 150,000 150,000
Liabilities (390,000) (120,000) (120,000)
Revenues (900,000) (400,000)
Expenses 500,000 300,000
Investment income Not given

15. What is the consolidated net income prior to the reduction for the non-controlling interest’s share
of the subsidiary’s income?
A. P 400,000 B. P 486,000 C. P 491,600 D. P 500,000

PROBLEM 12
Saming Company acquired the assets (except for cash) and assumed the liabilities of Moshie Company
on January 2, 2018 and Moshie Company is dissolved. As compensation, Saming Company gave 24,000
shares of its common stock, 12,000 shares of its 8% preferred stock, and cash of P 240,000 to the
stockholders of Moshie Company. On the date of acquisition, Saming Company had the following
characteristics:
Common, par value P 5; fair value, P 20 Preferred, par value P 100; fair value, P 100
Immediately prior to acquisition, Moshie Company’s balance sheet was as follows:
Cash P 132,000 Current Liabilities P 228,000
Accounts receivable Bonds payable, 10% 400,000
(net of P 4,000 allowance) 170,000 Common stock, P 5 par value 600,000
Inventory – LIFO cost 200,000 Additional paid-in capital 380,000
Land 384,000 Retained earnings 310,000
Buildings and equipt. (net) 1,032,000
P 1,918,000 P 1,918,000
An appraisal of Moshie company showed that the fair values of its assets and liabilities were equal to
their book values except for the following, which had fair values as indicated:
Accounts receivable P 158,000 Land P 540,000
Inventory 412,000 Bonds payable 448,000

16. How much must be he goodwill recognized as a result of this business combination?

P a g e 5 | 20
 A. P 322,000 B. P 454,000 C. P 94,000 D. P0

PROBLEM 14
On January 1, 2018, Topingping Company acquired all the net assets of Rizaling Company in exchange
for P 9,000 newly assumed common shares of Topingping with a par value of P 100 and a market value
of P 250. Immediately prior to the purchase combination, on January 1, 2018, the book values and fair
values of Rizaling were presented in the following balance sheet:
Book Value Fair Value
Cash P 100,000 P 100,000
Inventory 300,000 300,000
Plant and equipment (net) 1,650,000 2,000,000
Total assets P 2,050,000 P 2,400,000
Notes Payable P 200,000 P 200,000
Common stock 1,000,000
Excess over par 250,000
Retained earnings 600,000
P 2,050,000

As part of the combination plan, Topingping agreed to give additional consideration to Rizaling if
certain future events or transactions occur.

17. Assume that Topingping agreed to issue 1,000 additional shares of common stock to the former
stockholders of Rizaling if Topingping’s total net income for the next two years exceeds a specified
amount. Assume the contingency is met and that the market price of Topingping’s common shares
at the end of the contingency period is P 300 per share. What entry is to be recorded by Topingping
Company to record the contingency met?
A. Goodwill 300,000 C. Goodwill 300,000
Capital stock 100,000 Cash 300,000
Additional paid-in capital 200,000
B. Additional paid-in capital 300,000 D. Additional paid-in capital 100,000
Cash 300,000 Capital stock 100,000

18. Assume that Topingping agreed to pay P 250,000 cash to the former stockholders of Rizaling if
Topingping’s total net income for the next three years exceeds a specified amount. Assume the
contingency is met, what entry is to be recorded on the books of Topingping’s Company?
A. Goodwill 250,000 C. Goodwill 250,000
Capital stock 100,000 Cash 250,000
Additional paid-in capital 150,000

B. Additional paid-in capital 250,000 D. P/L Summary 250,000

Cash 250,000 Capital stock 250,000

PROBLEM 15
Moshiana Products Corporation has two branches, Pampanga and Baguio, to which merchandise is
billed at 20% above cost. Partial trial balance accounts of the three entities at December 31, 2018 are
summarized as follows:
Home office Pampanga Branch Baguio Branch
Inventory P 800,000 P 180,000 P 240,000
Pampanga branch 450,000
Baguio branch 420,000
Shipments from home office 600,000 360,000
Purchases 1,600,000
Expenses 900,000 250,000 200,000
Home office 450,000 300,000
Loading – Pampanga branch 130,000
Loading – Baguio branch 120,000

P a g e 6 | 20
 Sales 1,950,000 900,000 750,000
Shipments to Pampanga branch 500,000
Shipments to Baguio branch 400,000
Additional information:
Physical inventories on hand at December 31, 2018 were as follows:
Home office P 700,000 at cost
Pampanga branch 210,000 at billed prices
Baguio 150,000 at billed prices

19. The ending inventory of Moshiana Products Corporation must be:

A. P 1,000,000 B. P 1,100,000 C. P 1,150,000 D. P 1,220,000

20. Correct net income of branches for 2018 must be:

A. P 430,000 B. P 250,000 C. P 600,000 D. P 350,000

PROBLEM 16
Comparative trial balance of the home office and the two branches of Wenceslao Corporation at
December 31, 2018 were as follows:
Home office Branch A Branch B
Cash P 5,000 P 15,000 P 22,000
Accounts receivable (net) 80,000 30,000 40,000
Inventories 150,000 60,000 48,000
Branch No. 1 170,000
Branch No. 2 165,000
Plant assets (net) 730,000 250,000 200,000
Purchases 900,000
Shipments from home office 300,000 240,000
Expenses 300,000 75,000 50,000
Total P 2,500,000 P 730,000 P 600,000
Accounts payable P 100,000 P 45,000 P 30,000
Other liabilities 80,000 15,000 5,000
Loading in branch inventories 108,000
Capital stock, P 10 par 500,000
Retainied earnings 262,000
Home office 170,000 165,000
Sales 1,000,000 500,000 400,000
Shipments to branches 450,000 0 0
Total P 2,500,000 P 730,000 P 600,000

Additional information:
Home office and Branch inventories at December 31, 2018 were:
Home office (at cost) P 120,000
Branch No. A (at billed price) 72,000
Branch No. B (at billed price) 96,000

21. What is the mark-up rate on merchandise transfers to branch?

A. 20% of billed price C. 16-2/3% of billed price
B. 25% percent cost D. 25% of billed price

22. How much is the beginning inventory of Wenceslao Corporation?

A. P 150,000 B. P 258,000 C. P 240,000 D. P 90,000

23. How much is the correct net income of Branch No. 2 as far as home office is concerned?
A. P 190,000 B. P 158,000 C. P 185,000 D. P 94,000

PROBLEM 17

P a g e 7 | 20
The pre-closing general ledger trial balance at December 31, 2018 for the WALANG SUKUAN Company
and its Pampanga branch office are shown below:
Trial Balance
Home office Branch office
Dr. (Cr.) Dr. (Cr.)
Cash P 36,000 P 8,000
Accounts receivable 35,000 12,000
Inventory 70,000 15,000
Plant assets – net 90,000
Branch office 20,000
Accounts payable (360,000) (135,000)
Accrued expenses (140,000) (25,000)
Home office (90,000)
Capital stock (500,000)
Retained earnings (450,000)
Sales (4,400,000) (950,000)
Purchases 2,900,000 240,000
Purchases from home office 450,000
Expenses 440,000 160,000

Your audit disclosed the following data:

1) On December 23, the branch office manager purchased P 40,000 of furniture and
fixtures but failed to notify the home office. The bookkeeper, knowing that all fixed
assets are carried on the home office recorded the proper entry on the branch office
records. It is the company’s policy not to take any depreciation on assets acquired in the
last half of a year.
2) On December 27, a branch office customer erroneously paid his account of P 20,000 to
the home office. The bookkeeper made the correct entry on the home office books but
did not notify the branch office.
3) On December 30, the branch office remitted cash of P 50,000, which was received by
the home office in January, 2019.
4) On December 31, the branch office erroneously recorded the December allocated
expenses from the home office as P 5,000 instead of P 15,000.
5) On December 31, the home office shipped merchandise billed at P 30,000 to the branch
office, which was received in January, 2019.
6) The entire opening inventory of the branch office had been purchased from the office.
Home office 20187 shipments to the branch office were purchased by the home office
in 2018. The physical inventories at December 31, 2018, excluding the shipment in
transit, are:
Home office - P 550,000 (at cost)
Branch office - P 200,000 (comprised at P 180,000 from home office
and P 20,000 from outside vendors.)
7) The home office consistently bills shipments to the branch office at 20% above cost. The
sales account is credited for the invoice price.

24. How much is the correct ending inventory of WALANG SUKUAN Company?
A. P 750,000 B. P 720,000 C. P 745,000 D. P 738,000

25. How much is the adjusted balance of reciprocal account before net income of branch?
A. P 110,000 B. P 190,000 C. P 80,000 D. P 130,000

26. How much is the correct net income of the branch?

A. P 220,000 B. P 210,000 C. P 234,000 D. 224,000

P a g e 8 | 20
PROBLEM 18
Otatay and Onanay are partners with capital balances of P 32,000 and P 68,000, respectively, as of July
1, 2018. Otatay has a 30% interest in profits and losses. All assets of the partnership are at fair market
value except as follows:
Book value Market value Book value Market value
Equipment P 150,000 P 142,000 Bldg. P 274,000 P 250,000
Inventory 43,000 50,000 Land 60,000 105,000

The partnership has decided to admit Syunga and Tililing as new partners. Syunga contributes cash of
P 55,000 for a 20% interest in capital and a 30% interest profits and losses. Tililing contributes cash of
P 10,000 and equipment with a fair market value of P 50,000 for a 25% interest in capital and a 35%
interest in profits and losses. Tililing is also bringing special expertise and client contacts to the new
partnership.
27. The capital balance of Otatay after Syunga and Tililing’s admission under the bonus method is:
A. P 40,775 B. P 34,775 C. P 38,000 D. P 70,500

28. The method (bonus or goodwill) advantageous to Syunga and Tililing and the total amount of
advantage is:
A. Bonus method for an advantage of P 2,055
B. Bonus method for an advantage of P 5,944
C. Bonus method for an advantage of P 12,750
D. Bonus method for an advantage of P 4,111

PROBLEM 19
DYLAN WANG and SHEN YUE entered into a partnership as of March 1, 2018 by investing P 1,250,000
and P 750,000, respectively. They agreed DYLAN WANG that SHEN YUE, as the managing partner, was to
receive a salary of P 300,000 per year and a bonus computed at 10% of the net profit after adjustment
for the salary: the balance of the profit was to be distributed in the ratio of their original capital
balances. On December 31, 2018, account balances were as follows:

Cash P 700,000 Accounts Payable P 600,000

Accounts receivable 670,000 DYLAN WANG, Capital 1,250,000
Fur. & Fix. 450,000 SHEN YUE, Capital 750,000
Sales returns 50,000 DYLAN WANG, Drawing (200,000)
Purchases 1,960,000 SHEN YUE, Drawing (300,000)
Operating expense 600,000 Sales 2,330,000

29. Inventories on December 31, 2018 were as follows: Supplies, P 25,000; Merchandise P 730,000;
Prepaid insurance was P 9,500 while occurred expenses were P 15,500. Depreciation rate was 20%
per year. The partner’s capital balances on December 31, 2018, after closing the net profit and
drawing accounts were:
DYLAN WANG SHEN YUE DYLAN WANG SHEN YUE
A. P 1,359,400 P 479,600 C. P 1,396,800 P 486,800
B. P 1,395,400 P 498,600 D. P 1,423,500 P 476,700

PROBLEM 20
In 2017, G&G Builders Corp., successfully bided on a fixed-price contract for a factory building at a price
of P 26,000,000. G&G uses the percentage-of-completing method and the following data are obtained
on the project.
Percentage of Estimated total Income recognized
Completion cost of completion to-date
December 31, 2018 60% P 20,800,000 P 3,120,000
December 31, 2017 20% 19,500,000 1,300,000

30. What is the contract cost incurred in 2018 assuming that costs incurred are used to measure the
extent of progress toward project completion?

P a g e 9 | 20
 A. P 12,480,000 B. P 9,100,000 C. P 8,580,000 D. P 8,320,000

PROBLEM 21
DORAEMON Construction Company entered into two construction jobs which both commenced in 2018
(in thousands).
Project 1 Project 2
Contract Price P 52,500,000 P 37,500,000
Costs incurred during 2018 30,000,000 35,000,000
Estimated cost to complete 15,000,000 8,700,000
General administrative
Expenses 2,500,000 1,250,000
Billings for clients during 2018 31,500,000 30,000,000
Collections during 2018 28,000,000 25,000,000

31. Based on the information give, how much is the gross profit would DORAEMON Construction Co.
report in its 2018 income statement?
Percentage of completion Zero Profit
A. P (6,200,000) P (1,200,000)
B. 5,000,000 (6,200,000)
C. (1,200,000) (6,200,000)
D. 1,300,000 (1,200,000)

PROBLEM 22
JOWABLE Construction Corporation contracted with the province of Pampanga to construct a bridge at a
contract price of P 16,000. JOWABLE Corporation expects to earn P 1,520 on the contract. The
percentage of completion method is to be used and the completion stage is to be determined by
estimates made by the engineer. The following schedule summarizes the activities of the contract for
years 2017-2019.
Estimate Engineer’s
Cost Cost to Estimate of Billings Collection
Year Incurred Complete Completion on Contract on Billings
2017 P 4,600 P 9,640 31% P 5,000 P 4,500*
2018 4,500 5,100 58% 6,000 5,400*
2019 5,250 -0- 100% 5,000 6,100

*A 10% retainer accounts for the difference between billings and collections.

32. Under the percentage of completion method, using the engineer’s estimate as the measure of
completion to be applied to revenues and costs, how much is the gross profit earned each year?
2017 2018 2019 2017 2018 2019
A. P 545.6; P 498.4; P 606 C. P 1,760; P 6,400; P 1,650
B. P545.6; P 1,044; P 1,044 D. P 1,760; P 1,800; P 1,650

PROBLEM 23
PAVIVO Enterprise entered into construction agreement in 2017 that called for a contract price of P
9,600. At the beginning of 2018, a change order increase the initial contract price by P 480. In relation to
the project, the following data were obtained:

2017 2018
Cost incurred to date P 4,920 P 8,640
Estimated cost to complete 4,920 2,160
Billing made to date 5,280 8,700
Collections made to date 4,920 8,700

P a g e 10 | 20
33. Compute the amount of construction in progress (net) – due from customers or progress billings
(net) – due to customers for the year 2018:
Percentage – of - Cost Recovery Method of
Completion Method Construction Accounting
A. P 780 – liability P 780,000 – liability
B. 780 – asset 780 – asset
C. 60 – liability 60 – liability
D. 636 – liability 636 – liability

PROBLEM 24
The following selected accounts appeared in the trial balance of Hulugan Sales as of December 31, 2018.

Debit Credit
Installment Accounts Receivable – 2017 P 15,000
Installment Accounts Receivable – 2018 200,000
Inventory, December 31, 2017 70,000
Purchases 555,000
Repossessions 3,000
Installment Sales P 425,000
Sales 385,000
Unrealized Gross Profit – 2017 54,000

Additional information as of December 31, 2017:

Installment Accounts Receivable – 2016 as of December 31, 2017 P 135,000
Inventory of new and repossessed merchandise as of December 31, 2018 95,000
Gross profit percentage on regular sales during the year 30%

Repossession was made during the year. It was a 2017 sale, and the corresponding uncollected amount
at the time of repossession was 7,800.

34. The total realized gross profit in 2018, net loss on repossession is
A. P 130, 380 B. P 201,000 C. P 244,200 D. P 245,880

PROBLEM 25
CarGel Corporation, which began business on January 1, 2017, appropriately uses the installment sales
method of accounting for tax purposes, but records net income under the accrual method. The following
data were obtained for the years 2017 and 2018:
2017 2018
Installment Sales P 7,500,000 P 8,400,000
Cost of installment sales 5,250,000 6,048,000
General & administrative expenses 700,000 840,000
Outstanding accounts on sales of 2017 4,400,000 1,400,000
Outstanding accounts on sales of 2018 -0- 4,000,000

35. A 2017 sale resulted in default in 2018. At the date of default, the balance on the installment
receivable was P 120,000, and the repossessed merchandise had a fair value of P 80,000. Determine
the net income for the year 2018 under the installment method and full accrual method.

A. Installment method, P 1,252,000, Full accrual method, P 1,472,000

B. Installment method, P 1,472,000, Full accrual method, P 1,252,000
C. Installment method, P 2,132,000, Full accrual method, P 2,352,000
D. Installment method, P 1,288,000, Full accrual method, P 1,392,000

P a g e 11 | 20
PROBLEM 26
On January 1, 2018, Cha Eun Woo sells 20 acres of farmland for P 6,000,000 taking in exchange a 10%
interest-bearing note. Cha Eun Woo purchased the farmland in 1984 at a cost of P 5,000,000. The note
will be paid in three installments of P 2,412,690 each December 31, 2018, 2019, and 2020.

36. How much must be the deferred gross profit at the end of 2018 under the installment method of
revenue recognition?
A. P 1,000,000 B. P 697,885 C. P 637,462 D. P 597,885

PROBLEM 27
On November 30, 2017, Matako Company authorized Shipped-line Corp. to operate as a franchisee for
an initial franchise fee of P 1,950,000. O this amount, P 750,000 was received upon signing the
agreement and the balance, represented by a note, is due in four annual payments starting November
30, 2018. Present value of P 1 at 12% for 4 periods is 0. 6355. Present value of an ordinary annuity of P 1
at 12% for 4 periods is 3.0374. The period of refund will elapsed on January 31, 2018. The franchisor has
performed substantially all of the initial services but the operations of the store have yet to start.
Collectibility of the note is reasonable certain.

37. How much is the unearned franchisee fee?

A. P 1,661,220 B. P 750,000 C. P 911,220 D. P0

PROBLEM 28
UHAW sells franchises to independent operators throughout the northwestern part of the United States
and some other countries. The contract with four (4) franchisees includes the following provisions:
1) The franchisee is charged an initial fee of P 800,000. Of this amount, P 300,000 is
payable when the agreement is signed, and a P 100,000, non-interest bearing note at
the end of each five subsequent years.
2) All of the initial franchise fee collected by UHAW is to be refunded and the remaining
obligation canceled if, for any reason, the franchisee fails to open his or her franchise.
3) In return for the initial franchise fee, UHAW agrees to (a) assist the franchisee in
selecting the location for the business, (b) negotiate the lease for the land, (c) obtain
financing and assist with building design, (d) supervise construction, (e) establish
accounting and tax records, and (f) provide expert advice over a 5-year period relating
to such matters as employee and management training, quality control, and promotion.
4) In addition to the initial franchise fee, the franchisee is required to pay to UHAW a
monthly fee of 2% of sales for menu planning, recipe innovations, and the privilege of
purchasing ingredients from UHAW at or below prevailing market prices.
5) The franchisees will replace all equipments at the end of the 10th year and agree to buy
them from UWAH at a discount of P 50,000.
Management of UHAW estimates that the value of the services rendered to each franchisee at the time
the contract is signed amounts to at least P 300,000. All franchisees to date have opened their locations
at the scheduled time and none have defaulted on any of the notes receivable. The credit ratings of all
franchisees would entitle them to borrow at the current interest rate of 10%.

38. The franchise revenue earned during the year must be:
A. P 2,716,000 B. P 1,200,000 C. P 1,516,000 D. P 1,440,000

39. A franchisor signed a contract with a franchisee on September 1, 2016. The franchisor receives a
partial payment of the initial franchise fee. It changes to its franchisee and the balance of the
franchise fee is due in the next several years. The franchisor does not recognize revenue from
franchise fee in 2016 when –
A. The period of refund has elapsed, collection of the note is certain, the franchisor has a fair
measure of services already period performed, but substantial services remain to be performed.
B. The refundability period has expired and no future services are required by the franchisor but
collection of the note is highly uncertain.

P a g e 12 | 20
 C. The down payment is refundable and substantial future services remain to be performed by the
franchisor.
D. The down payment is non-refundable, collection of the note is reasonably assured, and the
franchisor has performed substantially all of the services required by the initial fee.

40. RAVALRO Corporation transfers merchandise inventory from its home office to its branch at an
amount above cost. The average gross margin on the transfers is 40 percent. At the beginning of the
year, the branch held merchandise purchased from the home office in the amount of P 35,000.
During the year, the home office made three shipments of inventory to the branch at transfer prices
of P 30,000, P 64,000, and P 50,000. At the end of the year, the branch had on hand inventory
purchased from the home office at an amount of P 40,000.

What entry should the home office make to record intracompany profit realized during the year?
A. Unrealized Intracompany profit 41,600
Branch Income Summary 41,600
B. Unrealized Intracompany profit 55,600
Branch Income Summary 55,600
C. Branch Income Summary 55,600
Unrealized Intracompany profit 55,600
D. Investment in Branch 55,600
Branch Income Summary 55,600

PROBLEM 29
Partial list of accounts from the trial balances of the MAGASTOS Corporation, Branch A and Branch B
at December 31, 2018 are as follows:
Home office Branch A Branch B
Inventory, Jan. 2018 P 3,400 P 550 P 880
Branch A 10,000 - -
Branch B 8,100 - -
Purchases 50,000 - -
Expenses 12,000 3,500 3,800
Shipments from home office - 6,820 4,180
Home office 9,400 7,500
Sales 50,000 15,000 12,000
Shipments to Branch A 7,370
Shipments to Branch B 4,620
Loadings in Branch Inventory – Jan. 1 130
Additional information:
Shipments to the branches are made at billed prices. Inventory on hand on December 31, 2018 – Home
office – P 3,100; Branch A – P 726; Branch B – P 825

41. Combined cost of goods sold

A. P 60, 190 B. P 50,300 C. P 48,200 D. P 38,310

42. The merchandise inventory on the combined balance sheet as of December 31, 2018.
A. P 6,840 B. P 6,500 C. P 4,650 D. P 4,510

PROBLEM 30
On December 1, MAPANGOPYA Company opened a branch in Pampanga to which merchandise billed at
P 30,000 was shipped. During the month, additional shipments were made at billed prices of P 12,000.
During December, Pampanga branch returned merchandise that was defective and received credits of
P 750 on the returns. At the end of the month, the branch record its inventory at P 18,500, which is from
the following sources:
Merchandise acquired from home office at billed price P 16,500
Merchandise acquired from outsiders 2,000
Total inventory P 18,500

P a g e 13 | 20
A branch loss for December is calculated at P 2,600. The home office has followed the practice of billing
the branch at 20% above merchandise cost.

43. Compute: 1) the balance of the allowance for overvaluation of branch inventory at December 31,
before adjustments, and 20 the net income (loss) of the branch in so far as the home office is
concerned:
A. (1) P 4,125; (2) P (2,600) C. (1) P 7,000; (2) P 1,525
B. (1) P 6,875; (2) P 1,525 D. (1) P 6,875; (2) P (2,600)

PROBLEM 31
SUNAKO NAKAHARANG Company has a branch in Sulu, Shipments of merchandise to the branch totaled
P 297,000 for the year, which included a 25% mark-up on cost.
The following data summarizing branch operations for the period ended December 31, 2017:
Sales on account P 407,000
Sales on cash basis 121,000
Collections of accounts 330,000
Expenses paid 149,000
Expenses unpaid 41,000
Purchase of merchandise for cash 143,000
Inventory on hand, January 1 (60% from outside purchases) 114,000
Inventory on hand, December 31 (70% from home office) 165,000
Remittances to home office 302,500

Allowances for overvaluation of branch inventory amounted to P 67,000 in the home office books.
44. In the home office books, the branch net income (loss) is:
A. P 16,000 B. P (51,000) C. P (7,100) D. P (5,580)

PROBLEM 32
The following information were taken from the records of ASSUMING Corporation.
Units Costs
Work in process inventory (50% complete) 300,000 P 660,960
Finished goods inventory 200,000 1,009,800

Materials are added to production at the beginning of the manufacturing process and overhead is
applied to each product at the rate of 60% of direct labor costs. There was no finished goods inventory
on Jan. 1. A review of ASSUMING inventory cost records, disclosed the following information:
Costs
Units Materials Labor
Work in process, January 1 (80% complete) 200,000 P 200,000 P 315,000
Units started - production 1,000,000
materials costs 1,300,000
labor costs 1,995,000
Units completed 900,000

45. Using weighted average method, the correct cost assigned to the 300,000 units in the ending
inventory work in process is
A. P900,000 B. P 875,000 C. P 918,000 D. P 903,000

PROBLEM 33
Assume that process conversion costs are uniform but a number of materials are added at different
points in process. Material 1 is added at the beginning of the process. The transferred-in costs are added
at the 20% point in the process. Material 2 is added uniformly from the 50% to 70% points in the
process. Material 3 is added at the 75% point in the process, and Material 4 is added uniformly at the
90% to the 100 points in the process.

The beginning work in process, was 10,000 units 60% complete, 60,000 units were added, and ending
work in process was 20,000 units 95% complete.

P a g e 14 | 20
46. What was the Material 2 equivalent units for the month?
FIFO Weighted Average FIFO Weighted Average
A. 50,000 60,000 C. 65,000 70,000
B. 60,000 70,000 D. 63,000 67,000

PROBLEM 34
BDO has two service departments, the Personnel department, and the Computing Department. The
bank has two other departments that directly service customers, the Deposit Department and the Loan
Department. The usage of the two service departments’ output in 2018 is as follows:
Provider of Service
User of service Personnel Computing
Personnel 15%
Computing 10%
Deposit 60% 50%
Loan 30% 35%

The budgeted cost in two service departments in 2018 were as follows:

Personnel P 153,000
Computing P 229,500

47. Under the direct method of allocating service department cost, the amount allocated to Deposit
Department must be:
A. P 237,000 B. P238,431 C. P 235,800 D. P 191,250

48. Under the step method of allocating service department cost, the amount allocated to Loan
Department must be (BDO allocates Personnel Department first):
A. P 145,500 B. 146,700 C. P 144,069 D. 191,250

PROBLEM 35
Kahoy-kahoyan Furniture Company, a local company, bought furniture from All Woods Corporation, a
US Company, for 35,000 US Dollars in 2017. Pertinent exchange rates relating to this transaction are as
follows:
Buying rate Selling rate
Receipt order P 47.10 P 47.20
Date of shipment 47.25 47.45
Balance sheet date 49.50 49.60
Settlement date 49.45 49.50

49. What is the foreign exchange gain or loss of Kahuy-kahoyan Funiture Company for 2017?
A. P 78,750 loss C. P 78,750 gain
B. P 75,250 loss D. P 75,250 gain

PROBLEM 36
GLOWENA Corporation acquired a 90 percent interest in S1 Corporation and 80 percent interest in S2
Corporation both at book value on January 1, 2018. GLOWENA Corporation exclusively sells
merchandise to S1 and S1 exclusively sells merchandise to S2. Comparative income statement for the
year ended December 31, 2018 are as follows:
GLOWENA Corp. S1 Corp. S2 Corp.
Sales P 1,000 P 600 P 800
Cost of sales 800 400 300
Gross Profit 200 200 500
Operating expenses 80 60 160

P a g e 15 | 20
 Net Income P 120 P 140 P 340
Inventory, Dec. 31, 2018 P 400 P 600 P 300

50. The consolidated cost of sales for 2018 should be:

A. P 1,500 B. P 300 C. P 160 D. P 120

PROBLEM 37
On January 2, 2018, BPI Company acquired 80% interest in PSBANK Company for P 4,125,000 cash. On
this date, the outstanding capital stock and retained earnings of BPI Company and PSBANK Company are
as follows:
BPI PSBANK
Common shares P 2,250,000 P 1,312,000
Share premium 1,500,000 -
Retained earnings 5,250,000 3,187,500

There was no issuance of capital during the year. Non-controlling interest is initially measured at fair
value. Fair values of the following assets of PSBANK exceeded their book values as follows: Inventories, P
210,000; Property and equipment (useful life, 10yrs) P 127,500. All other assets and liabilities are fairly
valued. Goodwill if any is not impaired. On December 31, 2018, the two companies reported the
following operating results:
BPI PSBANK
Net income P 1,785,000 P 975,000
Dividend paid 525,000 262,500

51. What is the consolidated stockholders’ equity to be reported in the consolidated statement of
financial position on December 31, 2018?
A. P 10,651,800 B. P 13,500,000 C. P 7,035,000 D. P 11,781,000

52. Domino Pizza grants a franchise to KM for an initial fee of P 1,000,000. The agreement provides that
Domino has the option within one year to acquire franchisee business, and it seems certain that
Domino will exercise this option. On Domino’s books, how should the initial fee be recorded?
A. realized revenue
B. deferred revenue to be amortized
C. extraordinary revenue
D. deferred and treated as reduction in Domino’s investment

53. In accounting for corporate liquidation, which of the following statement is incorrect?
A. Fully secured creditors no longer share in the remaining free assets after payment of an secured
liabilities without priority.
B. Assets used as security for partially secured liabilities are offsetted to their secured debts and
can no longer be used to pay unsecured liabilities.
C. Unsecured credits with priority such as liabilities to employees and taxes due to government can
always be fully recovered by the said creditors in every corporate liquidation.
D. The unsecured portion of the liabilities to partially secured creditors are added to unsecured
credits without priority in the computation of recovery percentage of the unsecured creditors
without priority.

54. Kerry College, a private not-for-profit college, received $ 25,000 from Ms. Mary Smith on April 30,
2018. Ms. Smith stipulated that her contribution be used to support faculty research during the
fiscal year beginning on July 1, 2018. On July 15, 2018, administrators of Kerry awarded research
grants totaling $ 25,000 to several faculty in accordance with the wishes of Ms. Smith. For the year
ended June 30, 2018, Kerry College should report the $ 25,000 contribution as
A. Temporarily restricted revenues on the statement of activities.
B. Unrestricted revenue on the statement of activities.
C. Temporarily restricted deferred revenue on the statement of activities.
D. An increase in fund balance on the statement of financial position.

P a g e 16 | 20
55. Chicago museum, a private not-for-profit organization, has both regular and term endowments. On
the museum’s statement of financial position (balance sheet), how should the net assets of each
type of endowments be reported?
Term endowments Regular endowments
A. Temporarily restricted Permanently restricted
B. Permanently restricted Permanently restricted
C. Unrestricted Temporarily restricted
D. Temporarily restricted Temporarily restricted

56. This financial statement is submitted by government accountants to the Commission on Audit. It
shows the excess (deficit) of income over expenditures for the fiscal period then ended.
A. Statement of financial position C. Statement of financial performance
B. Preliminary trial balance D. Final trial balance

57. The following data are provided by Worldwide Corporation which is undergoing liquidation process:
I. Total liabilities amounts to P 692,000. 35% is fully secured by assets amounting to P 270,000
with fair market value of P 250,000; 40% is partially secured by assets amounting to P
300,000 with realizable value of P 225,000; and the remaining balance is unsecured.
II. Total assets amounts to P 890,000 and has a total fair market value of P 690,000.
III. Unpaid income taxes amounts to P 35,000. Additional salaries payable and administrative
expenses totaled P 28,000.
IV. Deficit amounts to P 79,000

Which of the following statements is correct?

A. Assets available to all unsecured creditors with and without priority is P 227,800.
B. The amount paid to partially secured creditors is P 225,000.
C. The estate deficit amount to P 60,000.
D. The amount paid to all secured creditors is P 695,000.

 Electricity companies A and B (involved in electricity sales but not distribution) jointly establish a
power generation entity (company C) to build and operate a CCGT power plant. Companies A and B
each have a 50% ownership interest in the company C, which is structured as a corporation. The
incorporation enables the separation of company C from companies A and B and, as a consequence
the assets and liabilities held in company C are the assets and liabilities of company C. The
contractual arrangement between the parties does not specify that the parties have rights to the
assets or obligations for the liabilities of Company C.

However, the parties also enter into an-off-take agreement requiring the following:
 Companies A and B agree to purchase all the power generated by Company C in a ratio of
50:50. Company C cannot sell any of the output to third parties, unless this is approved by
companies A and B. Because the purpose of the arrangement is to provide companies A and
B with power they require, such sales to third parties are expected to be uncommon and not
material.
 The price of the power sold to companies A and B is set forth in the off-take agreement at a
level that is designed to cover the costs of production and administrative expenses incurred
by the company. The arrangement is intended to operate at a break-even level.

Given the relevant data, what is the proper classification of this joint arrangement?
A. It is classified as joint venture because the arrangement is established through a separate
vehicle, an incorporated entity Company C.
B. It is classified as joint venture because the incorporation enables the separation of company C
from companies A and B and, as a consequence, the assets and liabilities held in company C are the
assets and liabilities of company C.
C. It is classified as joint operation because the off-take agreement reflects the exclusive
dependence of Company C upon companies A and B for generation of cash flows and the rights of
Company A and B to all of the economic benefits of the assets of company C.

P a g e 17 | 20
D. It is classified as joint operation because IFRS 11 provides that in case of doubt, a joint
arrangement shall be classified as joint operation instead of joint venture.

 S, Inc., and 80 percent owned subsidiary of P, Inc., began operation on January 1, 2018. The
following information is from the condensed 2018 income statements of P and S:
P, Inc. S, Inc.
Sales to S P 100,000
Sales to others 400,000 P 300,000
500,000 300,000
Cost of goods sold:
Acquired from P 80,000
Acquired from others 350,000 190,000
Gross profit 150,000 30,000
Depreciation 40,000 10,000
Other expenses 60,000 15,000
Income from operations 50,000 5,000
Gain on sale of equipment from S 12,000 -
Income before income taxes P 62,000 P 5,000

Additional information:
 Sales by P to S are made on the same terms as those made to third parties.
 Equipment purchased by S from P for P 36,000 on January 1, 2018, is depreciated using the straight-
line method over four years.
Determine the consolidated net income for the year 2018 attributable to the owners of the parent.
A. P 62,000 B. P 51,000 C. P 67,000 D. P 52,000

60. Which of the following statements is TRUE?

A. A term endowment fund and board designated funds are classified as unrestricted and
temporary restricted funds respectively.
B. In the Statement of Cash Flow, all types of contributions/donations that are unrestricted will be
classified as operating activity and contributions/donations that are restricted will be classified as
financing activity.
C. A not for profit organization receives P 12,500 from a donor. The donor receives two tickets to a
theatre show and an acknowledgement in the theatre program. The tickets have a fair value of P
8,750. The amount recorded as contribution revenues is P 12,500.
D. In 2016, the Board of Trustee of Ayala Foundation designated an amount of P 175,000 of its
current funds for college scholarships. Also in 2016, the foundation received a bequest of P 225,000
from an estate of a benefactor who specified that the bequest was to be used for hiring teachers to
tutor handicapped students. The amount of P 225,000 should be accounted for in the current
restricted fund.

61. The account of Hotel Venice, a Filipino corporation, show P8,130,000 accounts receivable and
P3,890,000 accounts payable at December 31, 2001, before adjusting entries were made. Analysis of
the balances reveals the following:
Accounts Receivable
Receivables denominated in Philippine pesos P 2,850,000
Receivables denominated in 57,000 German marks 1,180,000
Receivables denominated in 61,000 British pounds 4,100,000
Total P 8,130,000
Accounts Payable
Payable denominated in Philippine pesos P 685,000
Payable denominated in 25,500 Canadian dollars 760,000
Payables denominated in 36,000 British pounds 2,445,000
Total P 3,890,000
Current exchange rates for German marks, British pounds, and Canadian dollars at December 31,
2001 are P20.604, P66.943; and P31.038, respectively.

P a g e 18 | 20
 The net exchange gain or loss that should be reflected in Hotel Venice’s income statement for 2001
from year-end exchange adjustments must be:
a. P88,570 loss b. P88,570 gain c. P18,466 loss d. P18,466 gain
62. The amount at which the accounts receivable should be included in Hotel Venice’s December 31,
2001 balance sheet must be
a. P8,107,951 b. P4,221,534 c. P3,886,417 d. P5,257,951

63. Herma Corporation buys goods from Japanee, Inc. in Japan at terms n/30. The contract requires
settlement in Yen. The unadjusted trial balance of Herma Corporation reflects a payable
representing purchase of goods worth P400,000 when the Japanese Yen was selling for ¥2 for P1.
What should be the foreign exchange transaction gain or loss to be included in an intervening
income statement if the spot rate at the intervening balance sheet is P.40 for ¥1?
a. P80,000 loss b. P80,000 gain c. P120,000 gain d. P120,000
loss
64. XFH, Inc. purchased an equipment to a British manufacturer for P2,000,000. The spot rate at the
time of transaction was P125 for £1. At the 12/31/7 balance sheet date, the spot rate was P135 for
£1. Upon payment, the spot rate was P132 for £1. What is the gain or loss to be reported at 12/31/8
income statement?
a. P0 b. P160,000 c. P48,000 d. P112,000

65. The accounting for derivative instruments

a. is primarily determined by management’s purpose for holding the derivatives.
b. involves recognition of the derivative instrument at fair value with changes in fair value
recognized in profit or loss.
c. involves set-off of the changes in fair values or cash flows of the hedged risk and the derivative
instruments
d. is required where changes in fair value of the hedged item is reflected in current earnings.

66. A Philippine firm entering into a speculative purpose in anticipation for a gain, enters into a contract
on March 1, 2008 to acquire US $1,000 on March 1, 2009, a currency in which the company has no
receivables, payables or commitments. The following exchange rates were available:

March 1, 2008 September 31, 2008 March 1, 2009

Spot rate P48:$1 P49:$1 P49.1:$1
Forward rate P50:$1 P48.6:$1 -
The September 31, 2008 profit and loss statement, foreign exchange gain or loss due to hedging
instrument (forward contract) amounted to:
a. P14,000 loss c. P5,000 loss
b. P5,000 gain d. P14,000 gain
67. On March 1, 2009, foreign exchange gains or loss on forward contract amounted to:
a. P14,000 gain c. P5,000 gain
b. P5,000 loss d. P14,000 loss

On December 31, 2007, Panther Corporation issued 57,000 shares of its P1 par common stock
(ordinary share) with a current fair market value of P20 a share to stockholders of Skunk Company
in exchange for 38,000 of the 40,000 outstanding share’s of Skunk’s P10 par common stock
(ordinary share). There was no contingent consideration. Out-of-pocket costs of the combination
paid in cash by Panther on December 31, 2007, were as follows:
Finder’s fee and legal fees relating to business combinationP 52,250
Cost associated with SEC registration statement 72,750
Total out-of-pocket costs of business combination P125,000

On December 31, 2007, prior to the business combination, the following data are available:
Panther Skunk
Corporation Company
Common stock/ordinary share, P1 par P1,000,000
P a g e 19 | 20
 Common stock/ordinary share, P10 par P400,000
Additional paid-in capital/share premium 550,000 235,000
Retained earnings/Accumulated profits 1,050,000 334,000

On the same date, the current fair values of Skunk Company’s identifiable assets and liabilities were
the same as their carrying values except for the following assets:
Increase
Inventories (first-in, first-out method) P 26,000
Plant assets (net):
Land P 60,000
Building (economic life, 20 years) 80,000
Machinery (economic life, 5 years) 50,000 190,000
Leasehold (economic life, 6 years) 30,000

The following results of operations under cost method were as follows:

2008 2009
Panther Skunk Panther Skunk
Net income P 458,000 P 90,000 P 319,350 P 105,000
Dividend declared 158,550 40,000 158,550 50,000

Goodwill was not impaired for the year 2008 and 2009.
68. Compute the Investment account balance on December 31, 2009:
a. P1,140,000 b. P1,192,250 c. P1,212,750 d. P1,265,000
69. Compute the Equity Holders of Parent – Retained Earnings on December 31, 2008:
a. P1,050,000 b. P1,349,450 c. P1,354,200 d. P1,512,150
70. Compute the Equity Holders of Parent – Retained Earnings on December 31, 2009:
a. P1,354,200 b. P1,510,250 c. P1,549,200 d. P1,707,750

P a g e 20 | 20