AFAR Pre-Board – Set C

1. Brenda and Carla share profits and losses in a ratio of 3:2, respectively. Brenda and Carla receive salary allowances of
8,000 and 16,000 respectively and both partners receive 10% interest based upon the balance in their capital accounts on
January 1. Partners’ drawings are not used in determining the average capital balances. Total net income for 2020 is
48,000. If net income after deducting the interest and salary allocations is greater than 16,000, Carla receives a bonus of
5% of the original amount f net income.
Brenda Carla
January 1 capital balances 160,000 240,000
Yearly drawings (1,200 a month) 14,400 14,400

What are the total amounts for the allocation of interest, salary and bonus and how much over-allocation is present?
a. 48,000 and P 0 c. 66,400 and P 0
b. 64,000 and 16,000 d. 66,400 and 18,400

2. In 2020, JayR and Royskie agreed to contribute equal amounts into a new partnership for a 50%-interest in profit (loss)
and in capital to each of them. Their respective contributions will come from old proprietorships they owned and will both
be dissolved. JayR contributed the following items and amounts:
Cash 468,000
Machineries (book value) 320,000
Royskie contributed the following items at their carrying amounts in the proprietorship records:
Accounts receivable 60,000
Inventory 168,000
Furniture and fixtures 321,600
Intangibles 138,000

All the non-cash contributions are not properly valued. The two partners have agreed that
I. P 4,800 of the accounts receivable are uncollectible
II. The inventories are overstated by 12,000
III. The furniture and fixtures are understated by 7,200
IV. The intangibles include a patent with a carrying value of 8,400, which must now be derecognized due to the result of
unsuccessful litigation promulgated by the court just before the partnership formation.

What is the fair value of the machineries invested by JayR into the partnership?
a. 268,800 c. 312,000
b. 201,600 d. 280,000

3. Berto and Rubio are partners who share profits and losses in the ratio of 6:4, respectively. On May 1, 2020, their
respective balances were as follows:
Berto, capital 48,000 Loan to Berto 9,600
Rubio, capital 40,000 Loan from Rubio 12,800
Berto, drawing (debit) 4,000

On the date, Lyndon was admitted as a partner with a one-third interest in capital and profits for an investment of 32,000.
Immediately upon Lyndon’s admission, Berto’s capital should be:
a. 27,734 c. 43,200
b. 46,000 d. 48,000

4. The following balance sheet for the partnership of LuzVisMin was taken from the books on October 1, 2020.
Cash 200,000 Accounts payable 400,000
Other assets 800,000 Luz, capital 240,000
Vis, capital 190,000
Min, capital 170,000
Total 1,000,000 1,000,000

The profit and loss agreement among the partners follows:

I. Annual salaries to Luz and Vis of 10,000 each. Annual interest of 5% on beginning capital.
II. Bonus of 15% to Luz based on income after salaries, interest and bonus.
III. Remaining profit, 25% to Luz, 35% to Vis and 40% to Min.

The partnership began is operations on October 1, 2020. Net income for the year ended December 31, 2020 is 139,000.
Which of the following statements is true?
a. The bonus to Luz is 11,608
b. Net income after salaries, interest and bonus is 77,392
c. Vis’s total share in net income is 43,375
d. Min’s share on the profit after salaries, interest and bonus is 27,086
5. On June 30, 2020, the condensed balance sheet for the partnership of Ester, Florie and Gigie, together with their
respective profit and loss ratios as follows: Ester, capital (50%) 160,000
Asset, net of liabilities 320,000 Florie, capital (30%) 96,000
Gigie, capital (20%) 64,000
320,000

Gigie decided to retire from the partnership and by mutual agreement s to be paid 70,000 out of partnership funds for her
interest. After Gigie’s retirement, what are the capital balances of the other partners?
a. Ester – 156,250 Florie – 93,750 c. Ester – 108,000 Florie – 72,000
b. Ester – 102,000 Florie – 68,000 d. Ester – 120,000 Florie – 80,000

6. The following condensed balance sheet s presented for the partnership of Sergio and Juan, who share profits and losses
in the ratio of 60:40, respectively.
Other assets 450,000 Accounts payable 120,000
Sergio, loan 20,000 Sergio, capital 195,000
Total 470,000 Juan, capital 155,000
Total 470,000

The partners have decided to liquidate the partnership, and the other assets were sold for 515,000.What amount of the
available cash should be distributed to Sergio?
a. 136,000 c. 159,000
b. 202,000 d. 214,000

7. On January 1, 2020, the interest of Celso, David and Eddie, who share profits and losses in the ratio of 3:2:5
respectively, decided to liquidate their partnership. On this date the partnership condensed balance sheet was as follows:
Cash 40,000 Liabilities 60,000
Other assets 260,000 Celso, capital 80,000
300,000 David, capital 90,000
Eddie, capital 70,000
300,000

On January 15, 2020, the first cash sale of other assets with a carrying amount of 160,000 realized 120,000. How much
cash should be distributed to each partner?
Celso David Eddie
a. 15,000 51,000 44,000
b. 40,000 45,000 35,000
c. 55,000 33,000 22,000
d. 38,000 62,000 10,000

8. Star Corporation, a venture of entity Dee prepared the following working papers at December 31, 2020 in presenting its
financial statements for 2020 under the proportionate consolidation method:
WPEE Proportionate Consolidated
Particulars Star Debit Credit Financial Statements

Revenue 10,800,000 250,000 11,050,000

Expenses 9,280,000 192,500 9,472,500

Profit 1,520,000 1,577,500

Ordinary shares 3,000,000 3,000,000
Retained earnings 920,000 920,000
Liabilities 840,000 362,500 1,202,500
Totals 6,280,000 6,700,000

Current assets 1,830,000 557,500 2,387,000

Plant assets 3,900,000 1,175,000 5,075,000
Acc. Dep. (700,000) 62,500 (762,500)
Investment in JV 1,250,000 1,250,000
Totals 6,280,000 1,925,000 1,925,000 6,700,000

If the one-line consolidation method was used instead, how much would be the amount of Retained Earnings that will be
shown in Star’s balance sheet at December 31, 2020?
a. 920,000 c. 2,440,000
b. 977,500 d. 2,497,500
9. If the one-line-consolidation method was used, how much will be the reported amounts for Investment in JV and
Current assets n Star’s balance sheet at December 31, 2020?
a. P 0 and 2,387,500 respectively c. 1,250,000 and 1,830,000 respectively
b. 1,250,000 and 2,387,500 respectively d. 1,307,500 and 1,830,000 respectively

10. On June 1, 2020, SME AA acquired 35% of the equity of entities MM and NN for 58,000 and 37,000 respectively.
SME AA shares in the joint control, with other venturers, over the strategic financial an operating decisions of entities
MM and NN. Transaction costs of 5% of the purchase price of the shares were incurred by SME AA.

On December 31, 2020, entities MM and NN declared and paid cash dividends of 15,000 and 24,000 respectively. Also
for the year ended December 31, 2020, entity MM recognized a net loss of 42,000 while entity NN recognized a net profit
of 18,000.

Published price quotations do not exist for the shares of entities MM and NN. Using the appropriate valuation techniques,
SME AA determined the fair value of its investments in entities MM and NN at December 31, 2020 as 65,000 and 49,000
respectively. Costs to sell are estimated at 9% of the fair value of the investments. SME AA do not have any subsidiaries.

What is the profit (loss) of SME AA to be presented in the income statement in entity MM using the cost model?
a. (8,575) b. 3,500 c. 5,250 d. (1,750)

11. What is the profit (loss) of SME AA to be presented in the income statement in entity NN using the fair value model?
a. 20,400 b. 18,550 c. 15,990 d. 14,140

12. What is the profit (loss) of SME AA to be presented in the income statement in entity NN using the equity model?
a. (8,575) b. 3,150 c. 3,675 d. 8,400

13. What is the investment balance of SME AA at the end of the year in entity MM using the cost model?
a. 60,900 b. 59,150 c. 65,000 d. 53,900

14. What is the investment balance of SME AA at the end of the year in entity MM using the equity method?
a. 52,325 b. 57,575 c. 64,225 d. 47,075

15. What is the investment balance of SME AA at the end of the year in entity NN using the equity model?
a. 38,850 b. 42,525 c. 34,125 d. 26,775

16. The following were taken from the statement of affairs of No Way Company.
Assets pledged with fully secured creditors 56,800
Assets pledged with partially secured creditors 10,000
Free assets 8,800
Preferred creditors 2,400
Fully secured creditors 55,200
Partially secured creditors 16,000
Unsecured creditors without priority 14,400

The estimated deficiency to unsecured creditors:

a. 4,000 b. 10,000 c. 12,400 d. 11,600

17. The statement of affairs of Bailout Company shows the following summarized balances:
Estimated gains on realization of assets 756,000
Estimates losses on realization of assets 1,356,000
Contingent assets 600,000
Current assets 80,000
Liabilities 960,000
Contingent liabilities 320,000
Capital stock 1,200,000
Retained earnings (deficit) 480,000

Determine the estimated pro-rata payment on the peso to stockholders in the event of corporate liquidation.
a. 0.75 c. 0.43
b. 0.30 c. 0.70

18. Hulugan Company began operations on January 1, 2020 and appropriately uses the installment method of accounting.
The following information pertains to the operations of the company for 2020:
Cost of installment sales 656,250
Gross profit rate based on cost 25%
Collections on installment sales (including interest of 13,750) 371,875
Determine the deferred gross profit at December 31, 2020.
a. 46,875 c. 44,687.50
b. 47,437.50 d. 71,625

19. Determine the deferred gross profit at December 31, 2020.

a. 92,437.50 c. 67,187.50
b. 47,437.50 d. 117,187.50

20. On June 1, 2020, Paiyakan Company sells a new car costing 545,280 for 1,360,800. A used car is accepted as down
payment, 192,000 being allowed on the trade-in. The used car can be resold for 291,600 after reconditioning costs of
38,880. The company expects to make a 20% gross profit on the sale of used cars. During the period, 104,000 cash was
collected on the contract. Determine the realized gross profit for 2020?
a. 197,400 c. 147,090
b. 174,900 d. 179,040

21. In 2019, Builder Company agreed to construct a commercial building at a price of 3,750,000. Builder Company uses
the percentage of completion method. The information relating to the costs and billings for the contract were as follows:
2019 2020 2021
Cost incurred to date 1,050,000 2,250,000 2,943,750
Estimated costs yet to be incurred 1,950,000 750,000 -
Customer billings to date 562,500 1,500,000 3,750,000
Collection of billings to date 450,000 1,200,000 3,525,000

How much is the excess of construction in progress over progress billings or progress billings over construction in
progress in Builder’s December 31, 2020 balance sheet?
a. 1,312,500 c. 750,000
b. 2,062,500 d. 2,943,750

22. Using the same problem, assuming there is no dependable or reliable estimate available, how much is the construction
in progress, net of progress billings or progress billings net of construction in progress in Builder’s December 31, 2020
balance sheet?
a. 1,312,500 c. 750,000
b. 2,062,500 d. 2,943,750

23. Excel Constructions was recently awarded a 8,400,000 contract to construct a trade center for Alaya Lending, Inc.
Excel Construction estimates it will take 50 months to complete the contract. The company uses the percentage of
completion method to report profits. (Use two decimal places for the percentage of completion). The following
information details the actual and estimated costs from 2018 to 2021.
Year Actual cost each year Estimated cost to complete
2018 3,900,000 4,080,000
2019 1,980,000 2,250,000
2020 1,440,000 1,140,000
2021 1,350,000

Determine the realized gross profit (loss) in 2021.

a. (210,000) c. 60,000
b. 158,750 d. (60,000)

24. Using the zero-profit-method, how much is the realized gross profit (loss) in 2020?
a. (210,000) c. 60,000
b. 158,750 d. (60,000)

25. On January 2, 2020, Susie Proprietorship signed an agreement to operate as a franchisee of Solid Bakery for an initial
franchise fee of 2,812,500 for 10 years. Of this amount, 525,000 was paid when the agreement was signed and the balance
payable in four annual payments beginning on December 31, 2020. Susie issued a promissory note for the balance, the
relevant interest rate being 24%.

Assume that substantial services amounting to 417,450 had already been rendered by Solid and that additional indirect
franchise started operations during 2020 with a total sales of 450,000. The agreement further provides that the franchisee
must pay a continuing franchise fee equal to 5% of its gross sales. If needed, the PV factor is 2.40.

Assuming the note is non-interest bearing and its collection is reasonably assured, calculate the net income reported by
Susie for the year ended December 31, 2020.
a. 598,630.50 c. 1,920,000
b. 1,761,450 d. 2,835,000
26. Assuming the note is interest-bearing and its collectability is doubtful, determine the realized gross profit on the initial
franchise fee for the year ended December 31, 2020. (Use 2 decimal places for the gross profit rate)
a. 1,920,000 c. 598,630.50
b. 2,835,000 d. 934,098.75

27. Comparative trial balances of the Home Office of HOH Corporation and its two branches at December 31, 2020 were
as follows: Home CHI MIN
Cash 5,000 15,000 22,000
Accounts receivable 80,000 30,000 40,000
Inventories 150,000 60,000 48,000
CHI Branch 170,000
MIN Branch 165,000
Plant assets 730,000 250,000 200,000
Purchases 900,000
Shipments from home office 300,000 240,000
Expenses 300,000 75,000 50,000
Totals 2,500,000 730,000 600,000
Accounts payable 100,000 45,000 30,000
Other liabilities 80,000 15,000 5,000
Loading in branch inventories 108,000
Share capital, 10 par 500,000
Retained earnings 262,000
Home office 170,000 165,000
Sales 1,000,000 500,000 400,000
Shipments to branch 450,000
Totals 2,500,000 730,000 600,000

Additional information:
Home Office and branch inventories at December 31, 2020 were:
Home office 120,000
CHI Branch (at billed price) 72,000
MIN Branch (at billed price) 96,000

How much net income will HOH Corporation report for year ended 2020?
a. 260,000 c. 220,000
b. 122,000 d. 595,000

28. San Carlos, Inc. established a branch in Alaminos to distribute part of the goods purchased by the home office. The
home office prices inventory shipped to the branch at 25% above cost. The following account balances were taken from
the ledger maintained by the home office and the branch.
San Carlos, Inc. Alaminos Branch
Sales 336,000 144,000(20% still uncollectible)
Beginning inventory 69,000 38,400(1/3 from home office)
Purchases 222,000 40,000(30% unpaid)
Shipments to branch 66,000
Shipments from home office 82,500
Operating expenses 68,000 11,200(4/5 unpaid)
Ending inventory 48,000 21,600(10% from outsiders)

Calculate the combined net income for the home office and the branch.
a. 99,672 c. 83,172
b. 84,500 d. 96,972

29. Taytay Trading Company operates a branch in Teresa. At the close of the business on December 31, 2020, the Teresa
branch account in the home office books showed a debit balance of 200,000. The inter-office accounts were in agreement
at the beginning of the year. For purposes of reconciling the inter-office accounts, the following facts were ascertained:
I. A machinery costing the home office 17,500 was picked up by the branch as 1,750.
II. The branch did not take up insurance premium of 2,000 charged by the home office.
III. Freight charge on merchandise made by the home office for 9,800 was recorded in the books as 8,900.
IV. Home office credit memo representing a discount on merchandise for 1,500 was taken up twice by the branch.
V. The branch failed to take up a 2,000 debit memo from the home office representing the share of the branch in
advertising.
VI. A remittance of 15,000 from the Antipolo branch was inadvertently taken up in the Teresa branch account but was
corrected before year end.
VII. The home office inadvertently recorded a remittance from its Teresa branch.
Determine the balance in the books of the Home Office account (before adjustment) as of December 31, 2020.
a. 191,350 c. 198,350
b. 164,350 d. 209,350

30. On May 1, 2020, the Home Office establishes a sales agency in Bacolod City. The following assets are sent to the
sales agency on that date:
Cash (for the working fund to be operated under the imprest system) 100,000
Merchandise samples 240,000

During the month, the sales agency submits sales on account of 1,500,000 which was duly approved by the home office.
Cost of merchandise shipped to fill the orders from customers obtained by the sales agency is 800,000. Home office
disbursements chargeable to the agency are as follows:
Furniture and fixtures 150,000
Managers and salesmen’s salary 88,000
Rent 35,000

On May 31, the sales agency working fund is replenished: paid vouchers submitted by the sales agency amounted to
42,000. Sales agency samples are useful until December 31, 2020, which at that time, are believed to have a salvage value
of 15% of cost. Furniture are depreciated at 30% per annum. What is the net profit of the sales agency for the month of
May?
a. 327,250 c. 463,750
b. 315,250 d. 505,750

31. Manet Corporation exchanges 150,000 shares of newly issued 1 par value common stock with a fair market value of
25 per share for all the outstanding 5 par value common stock of Gardener Inc. and Gardener is then dissolved. Manet
paid the following costs and expenses related to the business combination:
Costs of special shareholders’ meeting to vote on the merger 13,000
Registering and issuing securities 14,000
Accounting and legal fees 9,000
Salaries of Manet’s employees assigned to the implementation of the merger 15,000
Cost of closing duplicate facilities 11,000

In the business combination of Manet and Gardener

a. the costs of registering and issuing the securities are included as part of the purchase price for Gardener
b. only the salaries of Manet’s employees assigned to the merger are treated as expenses
c. all of the costs except those of registering and issuing the securities are included in the purchase price of Gardener
d. none is included in the purchase price of Gardener

32. On January 1, 2020, Blackwater Corporation purchased 75% of the ordinary shares of High Tide Enterprises. Separate
balance sheet for the two companies at the combination date are given below:
Blackwater High Tide
Current assets 120,000 108,000
Land 31,200 12,800
Plant assets 280,000 120,000
Accumulated depreciation (96,000) (24,000)
Investment in Senegal 156,000
Totals 492,000 216,800

Accounts payable 82,400 56,800

Ordinary shares 320,000 120,000
Retained earnings 89,600 40,000
Totals 492,000 216,800

At the date of combination, the net assets of High Tide are fairly valued, except for its inventory which is understated by
8,000. The amount of non-controlling interests assigned at the said date is their proportionate share on the fair value of
identifiable net assets. Determine the amount of goodwill to be recognized in the consolidated balance sheet at January 1,
2020.
a. 40,267 c. 42,067
b. 30,200 d. 46,207

33. On January 1, 2018, Farm Corporation purchased a delivery truck with an expected useful life of five years. On
January 1, 2020, Farm sold the truck to Avocado Corporation and recorded the following journal entry:
Cash 50,000
Accumulated depreciation 18,000
Truck 53,000
Gain on Sale of Truck 15,000
Avocado holds 60% of Farm’s outstanding common shares. Farm reported net income of 55,000 in 2020 and Avocado’s
separate net income (excludes interest in Farm) for 2020 was 98,000. Consolidated net income for 2020 was
a. 121,000 b. 125,000 c. 131,000 d. 143,000

34. On January 1, 2020, Grass Corporation purchased 75% of the common stock of Light Co. Separate balance sheet data
for the companies at the combination date are given below:
Grass Light
Cash 24,000 206,000
Accounts receivable 144,000 26,000
Inventory 132,000 38,000
Land 68,000 32,000
Plant assets 700,000 300,000
Acc. Dep. (240,000) (60,000)
Investment in grass 392,000
Total assets 1,230,000 542,000

Accounts payable 206,000 142,000

Capital stock 800,000 300,000
Retained earnings 224,000 100,000
Total liabilities & Equity 1,230,000 542,000

At the date of combination, the book values of light’s net assets were equal to the fair value except for Light’s inventory,
which had a fair value 60,000. The fair value of the non-controlling interests at date of combination is 130,000. What
amount of Goodwill will be reported in the consolidated balance sheet at date of acquisition?
a. 75,500 c. 420,000
b. 200,000 d. 100,000

35. On January 1, 2020, Parent Company acquired 75% interest of Subside Enterprises. Parent issued 60,000 of its own 10
par ordinary shares, which was selling at 50 per share on the same date. Parent also incurred the following out-of-pocket
costs: Professional fees 30,000
Registration and issuance costs of issued shares 8,000
Indirect costs 4,000

At the date of acquisition, Subside has the following equity accounts:

Ordinary shares 2,800,000
Retained earnings 424,000

Net assets book carrying values and fair values are approximately the same except for a non-monetary asset that is
overstated by 40,000. Impairment loss on goodwill for 45,000 is discovered for 2020.

Determine the amount of goodwill on the December 31, 2020 consolidated balance sheet using the fair value model.
a. 816,000 b. 612,000 c. 771,000 d. 567,000

36. Determine the amount of goodwill on the December 31, 2020 consolidated balance sheet using the proportionate
method.
a. 816,000 b. 612,000 c. 771,000 d. 567,000

37. Assume now Parent Company is an SME, determine the amount of goodwill on the December 31, 2020 consolidated
balance sheet.
a. 597,000 b. 771,000 c. 532,800 d. 567,000

38. On November 1, 2020, Magpie Corporation sold merchandise to William Tell Corporation, a Swiss firm. Magpie
measured and recorded the account receivable from the sale at 78,000. William tell paid for this account on November 1
and November 30, respectively were 0.80 and 0.78. If the sale of the merchandise was denominated in francs, the
November 30 entry to record the receipt of payment from William Tell include a
a. credit to Accounts receivable for 76,050 c. debit to Cash for 78,000
b. credit to Exchange gain for 1,950 d. debit to Exchange loss for 1,950

39. On November 2, 2020, Switik Corporation entered into a 90-day contract to sell 220,000 kiwis in a transaction
accounted for as speculation. The spot rate for kiwis on November 2 was 0.74 and the current quotation for 90-day
forwards was 0.68. On December 31, 2020, the spot rate was 0.78 and the quotation for 30-day forwards was 0.65,
Switik’s entry to record the transaction on November 2, 2020 include a
a. debit to Contract receivable denominated in kiwis for 149,600
b. credit to Contract payable denominated in kiwis for 149,600
c. debit to Contract receivable denominated in kiwis for 162,800
d. credit to Contract payable denominated in kiwis for 154,000
40. On December 1, 2020, Sett, Inc. entered into a 4-month forward contact to purchase $250,000 for speculative
purposes. Sett’s accounting year ends on December 31. Relevant exchange rates are as follows:
Spot rate Forward rate
12/1/20 45.00 45.50
12/31/20 46.00 46.10
1/31/21 45.60 45.70
2/28/21 45.40 45.55
3/31/21 45.10

How much exchange difference will be reported from this forward contract in 2021?
a. 50,000 c. 100,000
b. 150,000 d. 250,000

41. Lorikeet Corporation has a foreign subsidiary located in a country experiencing high rates of inflation. Information
concerning this country’s inflation rate experience is given below:
Date Index Change in index Annual rate of inflation
1/1/2020 90
1/1/2021 120 30 30/100 = 30%
1/1/2022 150 30 30/130 = 23.08%
1/1/2023 210 60 60/160 = 37.50%

The inflation rate that is used in determining if the subsidiary is operating in a highly inflationary economy is
a. 37.50% c. 133.33%
b. 90.58% d. 53.08%

42. On December 1, 2020, Chile Company paid 6,000 to purchase a 90-day option contract for FC400,000. The option’s
purpose is to hedge an exposed accounts receivable of FC 400,000 from a sale of merchandise. The merchandise is to be
shipped on December 1, 2020, payment for which is due on March 1, 2013. Relevant rates and market values at different
dates are as follows: 12/1/20 12/31/20 3/1/21
Spot rate 1.20 1.12 1.13
Strike price 1.20
Fair value of put option 6,000 36,000 28,000

How much total net gain (loss) is recognized in the option contract at March 1, 2021?
a. 4,000 c. 8,000
b. (4,000) d. (8,000)

43. Given the following information for a 90-day forward contract:

Php. FC
Value today 3,750 5,000
Interest rate 4% 7%
3 months interest 37.50 87.50
Value in 3 months ? ?

The spot rate today is 1FC = 0.75. What will be the forward rate?
a. 1FC = 0.75Php c. 1FC = 0.57Php
b. 1FC = 0.745Php d. 1FC = 0.70Php

44. On June 1, 2020, a Philippine firm purchased an inventory costing FC100,000 from a foreign firm to be paid for on
August 1, 2020. Also on June 1, 2020, the Philippine firm entered into a forward contract to purchase FC100,000 for
delivery on August 1, 2020. The exchange rates were as follows:
Spot (1FC = Php) Forward
June 1, 2020 0.73 0.74
June 30, 2020 0.70 0.75
August 1, 2020 0.68 0.68

The Philippine firm’s fiscal year end is June 30, 2020. The changes in the value of the forward contract should be
discounted at 8%. What is the value of the Forward Contract Receiveble – FC on June 1, 2020?
a. 73,000 c. 68,000
b. 74,000 d. 70,000

45. What is the fair value of the Forward Contract Receivable – FC on June 30, 2020?
a. 75,000 c. 74,693
b. 75,693 d. 74,993
46. On April 1, 2020, a Filipino Company commits to sell a piece of equipment to a foreign customer. At that time, the
Filipino Company enters into a forward contract to sell foreign currency on August 1, 2020. Delivery will take place on
July 1, 2020 with payment due on August 1, 2020. The fiscal year end for the company is June 30, 2020. The sales price
of the equipment is FC200,000. Various exchange rates are as follows:
Spot Forward
4/1/20 0.60 0.58
6/30/20 0.58 0.56
8/31/20 0.55 0.55

Discount rate is 12%. What is the amount in the Firm Commitment account on June 30, 2020?
a. 4,000 debit c. 4,000 credit
b. 8,000 debit d. 10,000 credit

47. What is the value of Forward Contract Payable – FC on June 30, 2020?
a. 112,000 c. 111,960
b. 112,040 d. 116,000

48. On December 1, 2020, a Philippine Company entered into a contract to purchase FC1,000,000 on March 1, 2021.
Relevant exchange rates at various dates are as follows:
Spot rate Forward rate
12/1/2020 0.44 0.42
12/31/2020 0.39 0.38
3/1/2021 0.38

Discount rate is 12%. Use the present value factor of 0.9803. How will the Philippine Company report the fair value of the
forward contract on the balance sheet at December 31, 2020?
a. a liability of 39,212 c. an asset of 49,015
b. a liability of 50,000 d. an asset of 32,912

49. During March, Hardest Manufacturing Company incurred the following costs on Job 007 for the manufacturing of 200
motors. Original cost accumulation
Direct materials 660,000
Direct labor 800,000
Factory overhead (150% of direct labor cost) 1,200,000
Direct cost of reworking 10 units
Direct materials 100,000
Direct labor 160,000

The rework costs were attributable to the exacting specifications of Job 007. What is the cost per unit of Job 007?
a. 15,800 c. 14,000
b. 14,600 d. 13,300

50. Habagat Company uses job order costing system. Factory over head is applied to production at a predetermined rate of
150% of direct labor cost. Any over or under applied overhead is closed to the cost of goods sold account at the end of
each month. Additional information is available as follows:
I. Job 101 was the only job in process at January 31, 2020 with the accumulated costs as follows:
Direct materials 4,000
Direct labor 2,000
Applied factory overhead 3,000
II. Jobs 102, 103 and 104 were started during February 2020.
III. Direct materials requisitioned for February totaled 26,000.
IV. Direct labor cost of 20,000 was incurred for February.
V. Actual factory overhead was 32,000 for February.
VI. The only job still in process at February 28, 2020 was Job 104 with costs of 2,800 for direct materials and 1,800 for
direct labor.

Over and under applied factory overhead should be closed to the cost of goods sold account at February 28, 2020 in the
amount of
a. 700 over applied c. 1,700 under applied
b. 1,000 over applied d. 2,000 under applied

51. The following cost data pertain to Fishball Company for the month of February 2020:
Inventories 2/1/20 2/28/20 Other information
Materials 40,000 50,000 Direct labor cost 120,000
Work-in-Process 25,000 35,000 Factory overhead applied 108,000
Finished Goods 60,000 70,000 Cost of goods sold 378,000
Determine the cost of goods manufactured for February 2020.
a. 378,000 c. 398,000
b. 388,000 d. 423,000

52. Jordan Company employs a process cost system. A unit of product passes through three departments: molding,
assembly and finishing; before it is completed. The Finishing department information for May follows:
Work-in-Process inventory, May 1 1,400
Units transferred in from the Assembly department 14,000
Units spoiled 700
Units transferred out to finished goods inventory 11,200

Raw material is added at the beginning of the process in the Finishing department. Work-in-Process was 70% complete as
to conversion on May 1 and 40% complete as to conversion on May 31. All spoilages were discovered at final inspection
before the units were transferred to finished goods; 560 of the units spoiled were within the expected range.

Jordan Company uses the weighted average method. The equivalent units and the current months cost per equivalent unit
of production for each cost factor are as follows:
EUP Cost per EUP
Transferred in 15,400 5.00
Raw materials 15,400 1.00
Conversion costs 13,300 3.00
Total cost per EUP 9.00

The cost of production transferred to the finished goods inventory is

a. 100,800 c. 107,100
b. 105,840 d. 102,060

53. Beginning work-in-process has 10,000 units, 80% complete as to materials and 60% complete as to conversion costs.
Ending work-in-process has 15,000 units, 75% complete as to material cost and 50% complete as to conversion costs.
30,000 units were completed and transferred during the period. What are the equivalent units under weighted average
method for materials and conversion costs?
Materials Conversion costs
a. 37,000 35,500
b. 33,250 31,500
c. 34,000 32,500
d. 41,250 37,500

54. Department 1 of Davao Manufacturing Company presents the following production data for the month of May 2020:
Opening inventory, 3/8 completed 4,000 units
Started in process 13,000
Transferred to next department 9,000
Closing inventory: 1/2 completed 4,000
3/4 completed 4,000

The cost elements are applied uniformly all throughout the month. Using the first-in, first-out method, the equivalent unit
of production for Department 1for the month is
a. 12,500 units c. 18,000 units
b. 15,500 units d. 19,000 units

55. Summer Company makes a single product in two departments. The production data for department B for 2020
follows:
Units: In process, August 1(40% completed) 4,000 units
Received from department A 30,000 units
Completed and transferred 25,000 units
In process, August 31(60% completed) 6,000 units

Costs: WIP, August 1 Added during August

Received from department A 16,600 99,000
Materials 3,200 75,000
Conversion costs 1,640 90,000

Materials are added at the start of the process in this department. Losses, if any, occurs only at the end of the process.
Determine the cost of goods manufactured in August using the FIFO method.
a. 293,840 c. 239,840
b. 392,480 d. 329,480
56. Determine the cost of ending WIP inventory in August using the Average method.
a. 44,640 c. 45,600
b. 44,800 d. 46,800

57. Helen Corporation manufactures products W, X, Y and Z from a joint process. Additional information is as follows:
Sales value at If Processed Further
Products Units produced split-off point Additional costs Sales value at final point
W 6,000 80,000 7,500 90,000
X 5,000 60,000 6,000 70,000
Y 4,000 40,000 4,000 50,000
Z 3,000 20,000 2,500 30,000

Assuming a joint production cost of 160,000 and the use of the relative sales value at the split-off point, what joint costs
were allocated to each product?
W X Y Z
a. 40,000 40,000 40,000 40,000
b. 53,333 44,000 35,556 26,667
c. 60,000 46,667 33,333 20,000
d. 64,000 48,000 32,000 16,000

58. Harabas, Inc. produces two joint products, AA and BB. The joint production cost for March was15,000. During
March, further processing costs beyond the split-off point, needed to convert the products into salable form, were 8,000
and 12,000 for 800 units of AA and 400 units of BB, respectively. AA sells for 25 per unit and BB sells for 50 per unit.
Assuming that Harabas used the net realizable value method for allocating joint production costs, what were the joint
costs allocated to product AA for March?
a. 5,000 c. 9,000
b. 6,000 d. 10,000

59. Halimaw Containers, Inc. makes 300-gallon plastic tanks for a variety of commercial users. The standard per unit
material, labor and overhead costs are as follows:
Direct material: 80 pounds x 2 Variable overhead: 30 mins. of machine time x 50 per hour
Direct labor: 1.25 hours x 16 per hour Fixed overhead: 30 mins. of machine time x 40 per hour

The predetermined overhead rates were developed using a practical capacity of 6,000 units per year. Production is
assumed to occur evenly throughout the year. During May, 2020, the company produced 525 tanks Actual data for May
2020 as follows:
Direct materials purchased: 46,000 pounds x 1.92 per pound
Direct materials used: 43,050 pounds (all from May’s purchases)
Total labor cost: 10,988.25 for 682.50 hours
Variable overhead incurred: 13,770 for 270 hours of machine time
Fixed overhead incurred: 10,600 for 270 hours of machine time

Calculate the following: materials price variance based on purchases and material quantity variance
a. 3,680F and 2,100U c. 68.25U and 420U
b. 3,680U and 420F d. 168.25U and 2,100U

60. Calculate the following: labor rate variance and labor efficiency variance
a. 168.25U and 420U c. 3,680F and 2,100U
b. 168.25U and 2,100U d. 3,680U and 420F

61. Calculate the overhead variance using the one-variance approach

a. 1,245U c. 745U
b. 500F d. 870U

62 The following are the balance sheets of Entity A and Entity B as of June 30, 2020
Entity A Entity B
Current assets 500 700
Non-current assets 1,300 3,000
Totals 1,800 3,700

Capital stock – 100 shares 300

60 shares 600
Retained earnings 800 1,400
Current liabilities 300 600
Non-current liabilities 400 1,100
Totals 1,800 3,700
On July 1, 2020, A acquired all the issued shares of B, giving in exchange 2.5 A shares for each ordinary share of B in
order for B to obtain a public listing. The fair value of each ordinary share of B at July 1, 2020 is 40, while the quoted
market price of A’s ordinary shares is 16. The fair values of A’s identifiable net assets at acquisition date are the same as
their carrying amounts, except for noncurrent assets whose fair value was 1,500. On the other hand, the fair values of the
net assets of B are approximately their carrying amounts. Calculate the goodwill (excess) resulting from the combination
a. 400 c. 360
b. 300 d. (400)

63. Calculate the total assets in the consolidated balance sheet at July 1, 2020
a. 5,700 c. 8,100
b. 6,000 d. 7,660

64. Calculate the stockholder’s equity in the consolidated balance sheet at July 1, 2020
a. 800 c. 3,600
b. 1,400 d. 3,000

65. Calculate the total liabilities in the consolidated balance sheet at July 1, 2020
a. 3,000 c. 2,400
b. 3,600 d. 1,560

66. ABC Company operates in a hyperinflationary economy. Its balance sheet at December 31, 2022 follows:
In HF Currency
Cash 700 Current liabilities 700
Inventory 2,700 Noncurrent liabilities 850
Plant and equipment 900 Share capital (issued in 2017) 400
Total 4,300 Retained earnings 2,350
Total 4,300

The general price index had moved as shown below as at December 31 of each year
2018 100
2019 130
2020 150
2021 240
2022 300

The plant and equipment were purchased on December 31, 2020 and there is 6 months inventory held. Calculate the
carrying amount of the plant and equipment in the financial statements after the restatement required by PAS 29.
a. HFC 900 c. HFC 4,500
b. HFC 1,800 d. HFC 450

67. The following “equity” relates to an entity operating in a hyperinflationary economy

Before PAS 29 After Restatement
Share capital 100 170
Revaluation reserve (APIC) 20 ?
Retained earnings 30 ?
Total 150 270

What would be the balances on the revaluation reserve and retained earnings after the restatement for PAS 29?
Revaluation Reserve Retained Earnings
a. P0 100
b. 100 P0
c. 20 80
d. 70 30