ReSA B43 AFAR First PB Exam Questions, Answers & Solutions
ReSA B43 AFAR First PB Exam Questions, Answers & Solutions
ReSA B43 AFAR First PB Exam Questions, Answers & Solutions
CPA Review Batch 43 May 2022 CPALE 12 Feb 2022 6:00 PM – 9:00 PM
INSTRUCTIONS: Select the correct answer for each of the questions. Mark only one
answer for each item by shading the box corresponding to the letter of your choice on
the answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use pencil no. 2 only.
Atlas Sales Company advanced P6,000 to Philco Company upon receipt of the shipment.
Expenses of P800 were paid by Atlas. By June, 2022, 70% of the shipment had been sold,
and 80% of the resulting accounts receivable had been collected, all within the discount
period. Remittance of the amount due was made on June 30, 2022.
The consigned goods cost Philco Company P10,000 and freight charges of P120 had been
paid to ship it to Atlas Sales Company.
9. How many additional shares must Netcom subsequently issue to the former
shareholders of Unicom?
B a. P25,000,000
b. P 4,166,667
c. 2,083,333
d. No additional shares
10. The Netcom’s journal entry to record the issuance of the additional shares in
the previous number should be:
C a. Loss on stock contingency. . . . . . . . . . 50,000,000
Common stock . . . . . . . . . . . . . . 50,000,000
b. PIC – stock contingency . . . . . . . . . . 20,000,000
Loss on stock contingency. . . . . . . . . . 30,000,000
Common stock . . . . . . . . . . . . . . 50,000,000
c. PIC – stock contingency. . . . . . . . . . . 20,000,000
PIC – others. . . . . . . . . . . . . . . . 30,000,000
Common Stock . . . . . . . . . . . . . . 50,000,000
d. No entry required.
Debits Credits
Cash P 200,000
Accounts receivable 56,000
Inventory 142,000
Equipment – net 300,000
Land 150,000
Loan to Dana 20,000
Accounts payable P 400,000
Dana, capital – 20% 170,000
Elsie, capital – 10% 80,000
Fe, capital – 50% 140,000
Gloria, capital – 20% _________ ___78,000
P 868,000 P 868,000
Additional information:
1. The partners agree to retain P20,000 cash on hand for contingencies and
distribute the rest of the available cash at the end of each month.
2. In January, half of the receivables were collected. Inventory that cost
P75,000 was liquidated for P45,000. The land was sold for P250,000.
3. The accounts payable was liquidated.
How much will each partner receive for the month of January 2022?
C a. Dana, P68,000; Elsie, P39,000; Fe, P -0-; Gloria, P -0-
b. Dana, P81,000; Elsie, P45,500; Fe, P -0-; Gloria, P 9,000
c. Dana, P65,333; Elsie, P37,667; Fe, P -0-; Gloria, P -0-
d. Dana, P103,000; Elsie, P -0-; Fe, P -0-; Gloria, P -0-
12. On July 1, 2022, Sayonara Company has the following balance sheet:
Assets Liabilities and Capital
Cash……………………………… P 20,400 Accounts Payable………………………………… P 38,400
Other Assets………… 219,600 Due to Palmer………………………………………… 14,400
Other liabilities……………………………… 84,000
Palmer, capital–50%……………………… 28,800
Larsen – 50%…………………………………………… 74,400
As of July 1, 2022, the partners have personal net worth as follows:
Palmer Larsen
Assets………………………………………… P 62,400 P 91,200
Liabilities…………………………… 56,400 122,400
The personal net worth of each partner does not include amounts due to or from the
partnership. Assume the other assets are sold for P123,600 after incurring
liquidation expenses of P4,800. How much should Larsen receive?
B a. P -0-
b. 22,800
c. 24,000
d. 16,800
13. Lipton Company had an agency in Antipolo. For the period just ended, the agency
transactions showed the following:
Receipt from sales . . . . . . . . . . . . . . . P350,000
Disbursements:
Purchases . . . . . . . . . . . . . . . . . 400,000
Salaries and commissions . . . . . . . . . . 70,000
Rent . . . . . . . . . . . . . . . . . . . . 20,000
Advertising supplies . . . . . . . . . . . . 10,000
Other expenses . . . . . . . . . . . . . . . 5,000
The agency had P 100,000 receivables and P 50,000 payables as of the end of the
period. Also, there were inventories on hand of P 90,000 and unused advertising
supplies of P 6,000. The agency was set up as an experiment for one period and
would be closed if losses were incurred. The agency should:
19. Partners DD, EE, FF, and GG share profits 50%, 30%, 10% and 10%, respectively.
Accounts maintained with partners just prior to liquidation were as follows:
20. The partnership of Monte and Carlo has the following provisions:
1. Monte, who is primarily responsible for obtaining new clients, is to receive
a 30% bonus on revenues in excess of P200,000.
2. Carlo, who is primarily responsible for administration, is to receive a 30%
bonus on profits in excess of 50% of revenues, as reflected in the general
ledger.
3. All remaining profits or losses are to be divided equally.
Revenues for the year P280,000
Operating expenses 120,000
21. Cord and Stringer are partners who share profits and losses in the ratio of 3:2,
respectively. On August 31, 2022 their capital accounts are as follows:
Cord P70,000
Stringer 60,000
On that date, they agree to admit Twiner as a partner with a one-third interest
in the capital and profits and losses, for an investment of P50,000. The new
partnership will begin with a total capital of P180,000.
The capital balance of Cord after the admission of Twiner should be:
B a. P56,000
b. P64,000
c. P70,000
d. P76,000
22. On June 30, 2022, the balance sheet of the Oakley, Pine, and Woods partnership,
together with their respective profits and loss ratios was as follows:
23. The book value of the partnership equity/interest (i.e., total equity/interest
of the partners) on June 30, 2022 is:
C a. P210,000
b. P150,000
c. P145,000
d. P120,000
24. The cash available for distribution to partners on July 31, 2022 is:
D a. P55,000
b. P35,000
c. P20,000
d. P10,000
25. Without bias on your part, assume that the cash available for distribution to
partners on July 31, 2022 is P10,000. Under this assumption Sally should receive:
A a. P10,000
b. P 6,000
c. P 3,000
d. Amount cannot be determined
26. Ann, Bee, and Kay are in the process of liquidating their partnership. Kay has
agreed to accept the inventories as part of her settlement. The inventories have
a fair value of P60,000 and a book value of P80,000. Account balances and profit
and loss sharing ratios are summarized as follows:
Cash P 198,000 Accounts payable P 149,000
Inventories 80,000 Ann, capital (40%) 79,000
Plant assets, net 230,000 Bee, capital (40%) 140,000
_________ Kay, capital (20%) 140,000
Total Assets P 508,000 Total Liab. & Equity P 508,000
27. Which of the following procedures are acceptable for dealing with the negative
balance in a partner’s capital account during liquidation:
D a. The partner with the negative capital balance can contribute assets
to the partnership sufficient to bring the capital account up to
zero.
b. If the partner with the negative capital balance is personally
insolvent; the negative capital balance may be absorbed by those
partners having a positive capital balance according to the profit
and loss sharing ratios applying to all the partners.
c. If the partner with the negative capital balance is personally
insolvent, the negative capital balance may be absorbed by those
partners having a positive capital according to the profit and loss
sharing ratios applying to those partners having positive balances.
d. A and C are acceptable choices.
e. A, B, and C are acceptable.
28. What is the difference between the terms “the partners’ equity (or interest)
balances” and the partners’ capital account balances?”
D a. There is no difference in the terms; they can be used interchangeably.
b. The term “partners’ equity (or interest)” is the sum of the individual
partner’s capital accounts.
c. The term “partners’ equity (or interest)” is the sum of the individual
partner’s capital accounts as increased by partnership loans made to
the partner and reduced by a partner’s loans to the partnership.
d. The term “partners’ equity (or interest)” is the sum of the individual
partner’s capital accounts as decreased by partnership loans made to
the partner and increased by a partner’s loans to the partnership.
29. Patterson Company acquiring the net assets of Sheila Company by issuing 100,000
of its P1 par value shares of common stock. The shares have fair value of P15
each. Just prior to the acquisition, Sheila’s balance sheet was as follows:
Sheila Company
Balance Sheet
January 1, 2022
Determine the excess of total cost over fair value of net assets acquired (or
goodwill):
C a. P -0-
b. P469,350
c. P477,350
d. P519,350
Fair values agree with book values except for the equipment, which has an estimated
fair value of P40,000. Also, it has been determined that brand-name copyrights have
an estimated value of P15,000. Norton Corporation paid P25,000 in acquisition costs
to consummate the transaction.
31. Trial balances for the home office and the branch of the Tony Co. show the
following accounts before adjustment, on December 31, 2022. The home office
policy of billing the branch for merchandise is 20% above cost.
Home
office Branch
Unrealized intercompany inventory profit P 10,800
Shipments to branch 24,000
Purchase (outsiders) P 7,500
Shipments from home office 28,800
Merchandise inventory, December 1, 2021 45,000
What part of the branch inventory as of December 1, 2022 represent purchases from
outsiders and what part represents goods acquired from the home office?
Outsiders Home Office
D a. P 12,000 P33,000
b. 16,500 28,500
c. 15,000 30,000
d. 9,000 36,000
32. Six months after the acquisition, new information reveals that the expected
value of the lawsuit at the date of acquisition was P400,000. The appropriate
entry on Ping's books to record this new information.
C a. Retained earnings. . . . . . . . . . . . . . 400,000
Estimated lawsuit liability. . . . . . . 400,000
b. Loss on lawsuit. . . . . . . . . . . . . . . 400,000
Estimated lawsuit liability. . . . . . . 400,000
c. Goodwill. . . . . . . . . . . . . . . . . . 400,000
Estimated lawsuit liability. . . . . . . 400,000
d. No entry required.
On January 2, 2022, Park Corporation borrowed P60,000 and used the proceeds to obtain
80% of the outstanding common shares of Strand Corporation. The P60,000 debt is payable
in 10 equal annual principal payments, plus interest, beginning December 31, 2022. The
excess fair value of the investment over the underlying book value of the acquired net
assets is allocated to inventory (60%) and to goodwill (40%).
On a consolidated balance sheet as of January 2, 2022, what should be the amount for
each of the following?
38. The amount of goodwill using (1) proportionate basis (partial) and (2) full
fair value (full/gross-up) basis:
B a. (1) P 0; (2) P0
b. (1) P 8,000; (2) P10,000
c. (1) P10,000; (2) P 8,000
d. (1) P 0; (2) P20,000
39. Assuming NCI is measured at fair value, total Current assets should be:
A a. P105,000
b. P102,000
c. P100,000
d. P 90,000
40. Non-current asset using (1) proportionate basis (partial) and (2) full fair
value basis (full/gross-up) in computing goodwill should be:
C a. (1) P130,000; (2) P130,000
b. (1) P138,000; (2) P138,000
c. (1) P138,000; (2) P140,000
d. (1) P140,000; (2) P140,000
41. (1) Current liabilities and (2) non-current liabilities should be:
B a. (1) P50,000; (2) P110,000
b. (1) P46,000; (2) P104,000
c. (1) P40,000; (2) P104,000
d. (1) P46,000; (2) P 90,000
42. Stockholders’ equity using (1) proportionate basis (partial) and (2) full fair
value basis (full/gross-up) basis of determine non-controlling interest should
be:
B a. (1) P80,000; (2) P 95,000
b. (1) P93,000; (2) P 95,000
c. (1) P93,000; (2) P93,000
d. (1) P95,000; (2) P95,000
Page 10 of 22 0915-2303213 [email protected]
ADVANCED FINANCIAL ACCOUNTING & REPORTING
ReSA Batch 43 - May 2022 CPALE Batch
12 Feb 2022 6:00 PM to 9:00 PM AFAR First Pre-Board Exam
43. Anselmo Company operates retail hobby shops from the main store and a branch
store. Merchandise is shipped from the main store and to the branch and billed
to the branch at an arbitrary 10% markup. Trial balances of the main store and
branch as of December 31, 2022 are as follows:
Main Store Branch
Debits:
Cash . . . . . . . . . . . . . . . . . . . .P . 1,500 P 1,000
Accounts receivable – net . . . . . . . . . . 200 -
Inventory, December 31, 2022 . . . . . . . . . 3,500 2,500
Building – net . . . . . . . . . . . . . . . . 60,000 18,000
Equipment – net . . . . . . . . . . . . . . . 30,000 12,000
Branch store . . . . . . . . . . . . . . . . . 32,300 -
Purchases . . . . . . . . . . . . . . . . . . 240,000 11,000
Shipments from home office . . . . . . . . . . - 99,000
Other expenses . . . . . . . . . . . . . . . . 15,000 7,000
Total debits . . . . . . . . . . . . . . . . P. 382,500 P 150,500
Credits:
Accounts payable . . . . . . . . . . . .P 15,000 P 500
Unrealized inventory profit . . . . . . . 9,200 -
Main Store . . . . . . . . . . . . . . . - 30,000
Capital stock . . . . . . . . . . . . . . 50,000 -
Retained earnings . . . . . . . . . . . . 16,000 -
Sales . . . . . . . . . . . . . . . . . . 200,000 120,000
Shipments to branch . . . . . . . . . . . 90,000 -
Profit from branch . . . . . . . . . . . ____2,300 _________
Total credits . . . . . . . . . . . . . .P 382,500 P 150,500
Inventories on hand at December 31, 2022 at the main store and branch are P3,000
and P1,800, respectively. The December 31, 2021 branch inventory includes
merchandise purchased from outsiders of P300, and the December 31, 2022 branch
inventory includes P150 of merchandise purchased from outsiders. The combined
cost of goods sold amounted to:
D a. P 261,200
b. P 252,200
c. P 243,150
d. P 252,150
44. The amount of franchise revenue on January 1, 2022 assuming that Campbell must
provide services to Benjamin throughout the franchise period to maintain the
franchise value.
A a. Zero.
b. P10,433
c. P39,567
d. P50,000
45. In relation to No. 44, the amount of franchise revenue on December 31, 2022:
B a. Zero.
b. P7,913
c. P39,567
d. P50,000
47. Meyer & Smith is a full-service technology company. They provide equipment, and
installation services as well as training. Customers can purchase any product or
service separately or as a bundled package. Container Corporation purchased
computer equipment, installation and training for a total cost of P120,000 on
March 15, 2022. Estimated standalone fair values of the equipment, installation,
and training are P75,000, P50,000, and P25,000 respectively. The transaction
price allocated to equipment, installation and training:
D a. P75,000, P50,000, P25,000 respectively
b. P40,000, P40,000, P40,000 respectively
c. P120,000 for the entire bundle
d. P60,000, P40,000 and P20,000 respectively
48. On July 31, O’Malley Company contracted to have two products built by Taylor
Manufacturing for a total of P185,000. The contract specifies that payment will
only occur after both products have been transferred to O’Malley Company.
O’Malley determines that the standalone prices are P100,000 for Product 1 and
P85,000 for Product 2. On August 1, when Product 1 has been transferred, the
journal entry to record this event include a:
D a. debit to Accounts Receivable for P100,000
b. debit to Accounts Receivable for P85,000
c. debit to Contract Assets for P85,000
d. debit to Contract Assets for P100,000
49. On January 1, Joey enters into a contract with Althea for the sale of an excavator
with unique specifications. Joey and Althea develop the specifications and Joey
contracts with a construction equipment manufacturer to produce the equipment.
The manufacturer will deliver the equipment to Althea when it is completed Joey
agrees to pay the manufacturer P42,000,000 upon delivery of the excavator to
Althea. Anderson and Althea agree to a selling price of P46,200,000 that will be
paid by Althea to Joey. Joey’s profit is P4,200,000 Joey’s contract with Althea
requires Althea to seek remedies for defects from the manufacturer, but Joey is
responsible for any corrections due to errors in specifications. The role of
Joey is a:
B a. Customer
b. Principal
c. Agent
d. No agreement at all
50. Maybelle Paulino Computers manufactures and sells computers that include a
warranty to make good on any defect in its computers for 150 days (often referred
to as an assurance warranty). In addition, it sells separately an extended
warranty, which provides protection from defects for three years beyond the 150
days (often referred to as a service warranty). How many performance obligations
are in the contract?
C a. 0
b. 1
c. 2
d. 3
Use the following information for questions 51 and 52: Variable Consideration
Billy Biotech enters into a licensing agreement with Paul Pharmaceutical for a drug
under development. Billy will receive a payment of P20,000,000 if the drug receives a
regulatory approval. Based on prior experience in the drug-approval process, Billy
determines it is 90% likely that the drug will gain approval and a 10% chance of
denial. Assuming that regulatory approval was granted on December 20, 2022, and that
Billy received the payment from Paul on January 15, 2023.
56. Parental Company and Sub Company were combined in an acquisition transaction.
Parental was able to acquire Sub at a bargain price. The sum of the fair values
of identifiable assets acquired less the fair value of liabilities assumed
exceeded the cost to Parental. After eliminating previously recorded goodwill,
there was still some "negative goodwill." Proper accounting treatment by
Parental is to report the amount as
C a. paid-in capital.
b. a deferred credit, which is amortized.
c. an ordinary gain.
d. an extraordinary gain.
57. What is the theoretically preferred method of presenting a non-controlling
interest in a consolidated balance sheet?
D a. As a separate item within the liability section.
b. As a deduction from (contra to) goodwill from consolidation, if any.
c. By means of notes or footnotes to the balance sheet.
d. As a separate item within the stockholders’ equity section.
58. The investment in a subsidiary should be recorded on the parent's books at the
C a. underlying book value of the subsidiary’s net assets.
b. fair value of the subsidiary’s net identifiable assets.
c. fair value of the consideration given.
d. fair value of the consideration given plus an estimated value for
goodwill.
62. If both the home office and the branch of a business enterprise use the perpetual
inventory system, a Shipment to Branch ledger account appears in the accounting
records of:
D a. The home office only
b. The branch only
c. Both the home office and the branch
d. Neither the home office nor the branch
63. In preparing the financial statements of the home office and its various branches:
D a. Nonreciprocal accounts are eliminated but reciprocal accounts are
combined
b. Both reciprocal and nonreciprocal accounts are eliminated
c. Both reciprocal and nonreciprocal accounts are combined
d. Reciprocal accounts are eliminated and nonreciprocal accounts are
combined
64. In the year end general ledger closing procedures,which accounts are closed in
arriving at Cost of Sales?
Purchases Sent to Branch Purchases from Home Office
A a. Yes Yes
b. No Yes
c. No No
d. Yes NO
66. The Statement of Realization and Liquidation differs from the Statement of
Affairs because
D a. The Statement of Realization and Affairs reports estimated realizable
values rather than actual liquidation results
b. The Statement of Realization and Affairs is a summary of secured debt
activity only
c. The Statement of Realization and Affairs is prepared only at final
completion of the liquidation process
d. The Statement of Realization and Affairs reports actual liquidation
results rather than estimated realizable values
67. Which of the following are recognized each period under the cost-recovery (point-
in-time) method?
C a. Costs only.
b. Revenues only.
c. Both costs and revenues.
d. None of these.
- END –
ANSWERS & SOLUTIONS/CLARIFICATIONS
1. Total revenue recognized during 2019 (w): P 50 million
CIP contains cost + gross profit* = revenue, so W = P50
* Note that the Income statement is in gross profit position, therefore, entries
recorded under CIP account pertain to both actual costs incurred and the RGP
(alternatively, the amount pertains to the amount debited to AR)
2. Gross profit recognized during 2022 (x): P50M Revenue - P35M cost = P15M GP P 15 million
3. Billings on construction (y):
AR billed ending balance of P14M + AR billed collected in 2022 P46M = P 60 million
P60M Recorded AR billed for 2022
4. Net billings in excess of construction in progress (z): P10 million
Billings of P60M – CIP of P50M (alternatively, this pertains to the net billed AR
(i.e., billed AR is higher than the amount of revenue recorded as unbilled AR)
5. Calculate the percentage of PAC that was completed during 2022: 33.33%
P50M revenue recognized/P150M Contract Price = 33.33%
7. Charges Related to
Total Consignment Inventory on
Charges Sales Consignment
(100%) (70%) (30%)
Consignor’s charges:
Cost P10,000 P 7,000 P 3,000
Freight 120 84 36
Consignee’s charges:
Expenses 800 800
Commission (15% x 1,575 1,575
P10,500)
Cash discount (P10,500 x 168 168 ______
80% x 2%)
Total P12,663 P 9,627 P 3,036
Sales price (70% x P15,000) _10,500_
Profit on Consignment P 873
Page 15 of 22 0915-2303213 [email protected]
ADVANCED FINANCIAL ACCOUNTING & REPORTING
ReSA Batch 43 - May 2022 CPALE Batch
12 Feb 2022 6:00 PM to 9:00 PM AFAR First Pre-Board Exam
8. Assets 570,000,000
Liabilities 100,000,000
Capital stock 400,000,000
Cash 50,000,000
PIC-stock contingency 20,000,000
10. The contingency was originally recorded in equity at the amount of P20,000,000. However, changes in the
value of stock price contingencies do not affect the acquisition price or income. Any changes in value are
adjustments in equity.
PIC- stock contingency 20,000,000
PIC-other 30,000,000
Common stock 50,000,000
Payment to partners:
Cash, beginning…………………………………………………………………………… P 200,000
Add: Proceeds from -
Receivables (1/2 x P56, 000)…………………………………………………… 28,000
Inventory…………………………………………………………………………………. 45,000
Land ……………………………………………………………………………………….. 250,000
Less: Cash withheld………………………………………………………………. ( 20,000)
Payment of accounts payable…………………………………………………… (400,000)
Cash available for distribution (CAFD)………………………………. P 103,000
19. D E F G Total
Advances P( 4,500) P( 2,500) P( 7,000)
Loans P 5,000 P 10,000 15,000
Capitals 40,000 30,000 15,000 25,000 110,000
Total Interests P 45,000 P 40,000 P 10,500 P 22,500 P 118,000
Reduction in Interest (50,000) (30,000) (10,000) (10,000) ( 100,000)
(5:3:1:1)
CAFD P( 5,000) P 10,000 P 500 P 12,500 P 18,000*
Additional loss for possible
insolvency (3:1:1) 5,000 ( 3,000) ( 1,000) ( 1,000) -0-
Balances P 7,000 P( 500) P 11,500 P 18,000
Additional loss for possible
insolvency ( 3:1) ( 375) 500 ( 125) -0-
Balances P 6,625 P 11,375 P 18,000
20. Allocated to
Total Monte Carlo
Bonus:
30% of (P280,000 – P200,000) ..................... P 24,000 P24,000
30% of [P160,000 – (50% of P280,000)] ............... 6,000 P 6,000
Residual profit ..................................... P 30,000
Allocate 50:50 ..................................... 130,000 65,000 65,000
P160,000 P89,000 P71,000
Alternatively:
Amount paid P 61,200
Less: Book value of interest of Oakley (20%) * 58,200
Bonus to retiring partner P 3,000
32. note on the term “expected value (i.e., PV of the expected cash flow) …at the date…”,
“expected…at the” means it exists on the date of acquisition.
Goodwill 400,000
Estimated Lawsuit liability 400,000
33. note on the word “occurring subsequent”, it means it does not exist on the date of acquisition.
Loss on lawsuit 400,000
Estimated Lawsuit liability 400,000
34. Assets:
DJ: P62,400,000 + P2,100,000 + P3,000,0000 + P7,000,000 + P170,000 + P70,000
+ P50,000 + P2,384,440 – P400,000 (direct costs) – P200,000 (costs to
issue) – P5,000,000 (cash consideration) + ( unreported intangibles:
P170,000 + P70,000, + P50,000) – P290,000 cash paid for the unreported intangibles P71,574,440
Goodwill computation:
Consideration transferred:
Cash to former shareholders P 5,000,000
Market value of stock to former shareholders 2,000,000
Earnout (Prob. PV of Cash Contingent P4,000,000 x .25 x .69444 _____694,440
Consideration)
Consideration transferred/Total acquisition cost P 7,694,440
Less: MV
Current assets P 2,100,000
Property, plant & equipment 3,000,000
Identifiable intangibles on DJ’s books 7,000,000
Previously unreported intangibles- advanced
production technology 170,000
Noncompetition agreements 70,000
Customer contract 50,000
Current liabilities ( 1,000,000)
Long-term debt ( 5,800,000)
Previously unreported warranty contractual
Obligations ( 280,000) __5,310,000
Positive Excess: Goodwill P 2,384,440
35. Liabilities:
DJ: P6,500,000 + P30,000,000 + P1,000,000 + P5,800,000 + P280,000, contractual
Obligations + P694,440, PV of Cash Contingent Consideration P44,274,440
(2)
Park stockholders' equity ............................................................... …………. P80,000
NCI (full):
BV of SHE – S ……………………………………………………………..P50,000
Adjustments to reflect fair value (inventory)……………. 15,000
FV of SHE – S……………………………………………………………………….P65,000
x: Multiplied by: NCI%............................................... 20%
NCI (partial)………………………………………………………………...P13,000
Add: NCI on full-goodwill (P10,,000 – P8,000)…………. 2,000
Non-controlling interest at fair value (20% × P75,000)………… 15,000
Total stockholders' equity P95,000
43. Combined Cost of Goods Sold:
Merchandise Inventory, 1/1/20X5:
Home Office, cost……………………………………………… P 3,500
Branch: Outsiders, ……………………………...........................P 300
From Home Office (P2,500 – P300)/110%.............. 2,000 2,300 P 5,800
Add Purchases (P240,000 + P11,000)…………………………….. 251,000
COGAS………………………………………………………………… P 256,800
Less: Merchandise Inventory, 12/31/20X5
Home Office, cost………………………………………………. P 3,000
Branch: Outsiders…………………………………………………………...P 150
From Home Office (P1,800 – P150)/110%............ 1,500 1,650 4,650
Cost of Goods Sold………………………………………………… P252,150
44. refer to AFAR-04 on discussion of Contract Liability
January 1, 20x5:
Cash……………………………………………………………………………………………………………………….10,000
Notes Receivable……………………………………………………………………………………………………40,000
Unearned Interest Income/Discount on Notes Receivable………………… 10,433
Contract Liability (P10,000 + P29,567)…………………………………………… 39,567*
*Down payment made on 4/1/x5…………………………………………..P10,000.00
Present value of an ordinary annuity (P8,000 x 3.69590).. 29,567.20
Total revenue recorded by Campbell and total
acquisition cost recorded by Lesley Benjamin……………..P39,567.20
45. December 31, 20x5: (P39,567 ÷ 5) = P7,913
46. No entry is required on March 1, 2022, because neither party has performed on the contract. That is, neither
party has an unconditional right as of March 1, 2022. On July 31, 2022, Giordano delivers the product and
therefore should recognize revenue as it received an unconditional right to consideration on that date. In
addition, Giordano satisfies its performance obligation by delivering the product to Hotter.
The entry to record the receipt of cash on August 31, 2022 is a follows:
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57,000
.
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,000
A key attribute of the revenue arrangement is that the signing of the contract by the two parties is not
recorded until one or both of the parties perform under the contract. Until performance occurs, no net
asset or net liability occurs.
47. P75,000 + P50,000 + P25,000 = P150,000
P75,000/ P150,000 P120,000 = P60,000
P50,000/ P150,000 P120,000 = P40,000
P25,000/ P150,000 P120,000 = P20,000.
49. Joey is acting as principal in the contract based on the following indicators:
• Joey is responsible for fulfilling the contract because it is responsible for ensuring that the excavator
meets specifications
• Joey has inventory risk because it is responsible for correcting error in specifications, even though the
manufacturer has inventory risk during production
• Joey has discretion in establishing the selling pric
• Joey’s consideration is in the form of profit, not commission
• Joey has credit risk for the P46,200,000 receivable from Tanner
50. In this case, two performance obligations exist:
1. one related to the sale of the computer and the assurance warranty (it should be noted that quality-
assurance warranty is part of performance obligation), and
The sale of the computer and related assurance warranty (quality-assurance) are one performance
obligation as they are interdependent and interrelated with each other.
However, the extended warranty is separately sold and is not interdependent (or not connected).
51. Because the arrangement only has two possible outcomes (regulatory approval is achieved or not), Bai
determines the transaction price based on the most likely approach. Thus, the best measure for the
transaction price is P20,000,000.
**Don’t think that there’s so much darkness, that it’s no use to have a small light, because even one
candle can be seen a mile away when it’s dark.**
**When all else is lost, the future still remains.**
**The greatest mistake you can make is to continually fear making mistakes.**
We are never given guarantees in life. We are only given the opportunities and it is up to us to make the
BEST out of it.
The most difficult secret of a man to keep is the opinion he has of himself.
Nothing great was ever achieved without determination.
Don’t be discouraged; everyone who got where he is, started where he was.
Impossibilities vanish when a man and his GOD confront a mountain.