ACC 114: Third Periodic Exam

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You may now begin answering.

1. 11. 21. 31. 41.

2. 12. 22. 32. 42.

3. 13. 23. 33. 43.

4. 14. 24. 34. 44.

5. 15. 25. 35. 45.

6. 16. 26. 36. 46.

7. 17. 27. 37. 47.

8. 18. 28. 38. 48.

9. 19. 29. 39. 49.

10. 20. 30. 40. 50.

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On January 1, 2019, GININTUANG PUSO CORPORATION acquired 80% of the outstanding
shares of BAGAL SULONG COMPANY for P743, 750. At this date, the stockholders' equity of
BAGAL SULONG follows:
Ordinary shares, P5 par 350, 000
APIC 175, 000
Retained earnings 175, 000
700, 000

The net assets of BAGAL SULONG on January 1, 2019 were fairly valued. GININTUANG PUSO
assigned the full fair value to the non-controlling interest at the date of acquisition in analysing
the fair value of its investment.

Selected information over the first two (2) years of affiliated operations follows:

• Intercompany merchandise sales are summarized as follows:

Date Transaction Sales Amount GPR Purchaser's Remaining

Ending Inventory
In 2019 Upstream 35,000 25% 6,125
In 2020 Downstream 56,000 30% 10,500

• Condensed trial balances of the two (2) companies on December 31, 2020 follow:

GININTUANG PUSO BAGAL SULONG

CORP. COMPANY
Current assets P 1,428,000 Р 387,275
Investment in BAGAL SULONG 743,750 ---
Equipment, net 1,891,750 262,500
Buildings, net 1,592,500 332,500
Goodwill 105,000 ---
Liabilities (1,123,500) (186,025)
Common Stocks, P1 par ( 437,500) ---
Ordinary shares, P5 par (350,000)
APIC (2,187,500) (175,000)
Retained earnings, January 1, 2020 (1,933,750) (245,000)
Sales (1,540,000) (1,102,500)
Dividend income ( 42,000) ---
Cost of goods sold 1,232,000 882,000
Other expenses 227,500 141,750
Dividends declared 43,750 52,500
Totals P0 P0

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 1. Compute the consolidated cost of goods sold for 2020.

a. P2,050,355 c. P2,500,553
b. P2,059,619 d. P2,056,381

2. Compute the consolidated net income for 2020.

a. P 195, 125 c. P215,915

b. P 161,043 d. P157,631

3. Compute the amount of the consolidated net income for 2020 attributable to the parent's
shareholders.

a. P 175,500.50 c. P145,249
b. P 141,575 d. P143,482.50

4. Compute the amount of consolidated net income attributable to the non controlling interest

a. Р 19,624.50 c. P 15,794
b. P 16,056.00 d. P 15,732.50

5. Any negative goodwill arising on the date of the business combination

a. Is recognized as a gain on the date of acquisition

b. is prorated among the parent company's identifiable net assets
c. Should be amortized over a predetermined period
d. Is recognized as a loss on the date of acquisition.

6. A company owning a majority (but less than 100%) of another's voting shares on the date
of acquisition should account for its subsidiary

a. By including only its share of the fair market values of the subsidiary's net assets b. By
including only its share of the book values of the subsidiary's net assets
c. By including 100% of the fair values of the subsidiary's net assets
d. By including 100% of the fair market values of the subsidiary's net assets and
accounting for any un-owned portion of the voting shares using the non controlling
interest account.

Pol Boba III is City Administrator of the city of LA PRESA in the Bontoc Peninsula. Returning
from a national seminar in Manila for city administrators, Boba III presented receipts for valid
disbursements of P23, 500 and refunded the City Treasurer's Office unspent amount of P6, 500
to liquidate his cash advance in relation to the seminar.

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 7. The entry to record the liquidation of the cash advance would be

a. Training and Seminar expenses 23,500

Cash - Collecting Officer 6,500
Due from Officers and Employees 30, 000
b. Cash - Collecting officers 6,500
Training and Seminar expenses 6,500
c. Cash - NT-MDS 6,500
Training and Seminar expenses 6,500
d. Training and Seminar expenses 23,500
Cash NT – MDS 6,500
Due from Officers and Employees 30, 000

8. The entry to record the remittance to the National Treasury of the unspent amount would
be

a. Due to National Treasury 6,500

Cash- NT MDS 6,500
b. Due to National Treasury 6,500
Cash - Collecting Officer 6,500
c. Memo Entry only in RAOMO
d. Subsidy Income from the NG 6,500
Cash - Collecting Officer 6,500

Amounts related to the statement of affairs of Distressed Company as of April 30, 2019 follow:

Assets pledged for fully secured liabilities P 80,000

Assets pledged for partially secured liabilities 50,000
Free assets 272,000
Fully secured liabilities 60,000
Partially secured liabilities 80,000
Unsecured liabilities with priority 40,000
Unsecured liabilities without priority 330,000

9. Calculate the expected amount recoverable by partially secured creditors in the event of
liquidation.

a. P71,000 c. P69,500
b. P50,000 d. P80,000

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 10. In a statement of affairs, assets pledged for partially secured creditors are

a. Included with assets pledged for fully secured creditors

b. Offset against partially secured creditors
c. Included with free assets
d. Disregarded

11. Which of the following provide evidence of a parent-subsidiary relationship?

I. The parent has power over more than 50% of the voting rights through
agreement with other investors
II. The parent has power to govern the financial and operating policies of the entity
by statute
III. The parent has the power to remove a majority of members of the board of
directors
IV. The parent has representation on the board of directors

a. I only c. I, II and III only

b. I and IV only d. I, II, III and IV

12. Which of the following statements are true?

I. Intra-group transactions must be eliminated consolidation
II. A holding of 10% of ordinary voting shares in another company is accounted
for in accordance with PAS 27 Consolidated and separate financial statements
III. Where a subsidiary does not adopt the same accounting policies as its parent
company, adjustments must be made to bring its accounting policies into line
prior to consolidation
IV. Where a group comprises a parent company and an investee over which the
parent has significant influence, consolidated accounts must be prepared

a. I and III only c. II and III only

b. I and IV only d. I, II, III and IV

For the quarter ended September 30, 2019, Victory Company consigned 80 units of 3SM truck
batteries costing P6, 250 each to Florida Enterprises. The freight cost incurred by Victory for the
merchandise shipments was P10, 500, 60% of which was paid by Victory and the balance by
Florida. On September 30, an account sales was received from the consignee reporting that 45
batteries had been sold for P9, 375 each. Remittance was made by the consignee for the
amount due, net of 6% commission on sales, advertising of P2, 500, installation costs of P4, 000
on units sold, and the amount advanced for the freight on Victory's shipments.

13. The inventory value of the units unsold in the hands of the consignee is

a. P 69,437.50 c. P116,725.00
b. P223, 343.75 d. P110, 312.50

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 14. The profit for the consignor for the units sold is

a. P102, 906.25 c. P104,031.25

b. P102, 793.75 d. P106,540.00

15. The amount of cash that will be remitted by the consignee is

a. P395,987.50 c. P389,575.00
b. P283,937.50 d. P385,862.50

16. Unrestricted net assets are typically the assets in the

a. General fund
b. Restricted fund
c. Permanent endowment fund
d. Loan fund, term endowment fund, annuity fund, life income fund and plant fund

17. In the cash distribution plan, which partner gets the first cash distribution?

a. The partner with the largest loan balance

b. The partner with the largest loss absorption potential
c. The partner with the largest capital balance
d. The partner with the largest profit or loss ratio

18. Determine the true statement under PFRS 11

a. Joint arrangement is either joint venture or joint operation.

b. Joint operation is either joint arrangement or joint venture.
c. Joint venture is either joint arrangement or joint operation.
d. Joint arrangement, joint venture and joint operation are one and the same.

On January 1, 2019, Entity A acquired 80% of outstanding ordinary shares of Entity B at a gain
on bargain purchase of P180,000. The following intercompany transactions occurred for
between the two entities:
• On January 1, 2019, Entity B sold land to Entity A with a cost of P1,000,000 at a selling
price of P1,100,000. The land was eventually sold by Entity A to third persons during
2020.
• On January 1, 2019, Entity A sold a white machinery to Entity B with a cost of P200,000
and accumulated depreciation of P40,000 at a selling price of P180,000. The machinery
is already 4 years old at the date of sale. The residual value of white machinery is
immaterial.
• On July 1, 2020, Entity B sold a black machinery to Entity A at with a cost of P270,000 and
accumulated depreciation of P180,000 at a selling price of P60,000. The machinery is
already 6 years old at the date of sale. The residual value of black machinery is
immaterial.

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For the year ended December 31, 2020, Entity A reported net income of P800,000 while Entity B
reported net income of P500,000 and distributed dividends of P150,000. Entity A. accounted for
its inventory in Entity B using cost method in its separate financial statements.

19. What is the consolidated depreciation expense of machinery for 2020?

a. 40,000
b. 55,0000
c. 61,667
d. 42,333

20. What is the consolidated carrying amount of machinery on December 31, 2020?

a. 225,000
b. 215,000
c. 200,000
d. 210,000

21. What is the non-controlling interest in net income for 2020?

a. 124,000
b. 105,000
c. 125,000
d. 104,000

22. What is the consolidated net income attributable to parent shareholders for 2020?

a. 1,538,750
b. 1,518,750
c. 1,398,750
d. 1,418,750

Alpha, Inc. obtains control over Omega, Inc., on July 1, 2019. The book value and fair market
value of Omega's accounts on that date (prior to creating the combination), along with the book
value of Alpha's accounts

Alpha Book Value Omega Book Omega

Value Market Value
Revenue P250,000 P130,000
Expenses 170,000 80,000
Retained earnings, 1/1/00 130,000 150,000
Cash and receivables 140,000 60,000 60,000
Inventory 190,000 145,000 175,000
Land 230,000 180,000 200,00
Buildings (net) 400,000 200,000 225,000
Equipment (net) 100,000 75,000 75,000

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 Alpha Book Value Omega Book Omega
Value Market Value
Liabilities 540,000 360,000 350,000
Common stock 300,000 70,000
Additional paid-up capital 10,000 30,000

23. For the fiscal year ending December 31, 2019, how much consolidated net income will be
in this business combination if Alpha acquires all of Omega's stock?

a. Alpha's income for the past year plus Omega's income for the past six months.
b. Alpha's income for the past year plus Omega's income for the past year
c. Alpha's income for the past six months plus Omega's income for the past six months. d.
Alpha's income for the past six months plus Omega's income for the past year

24. Assume that Alpha issues 16,000 shares of common stock with a P5 per share par value
and a P40 fair market value in exchange for all of the outstanding shares of Omega.
What will be the consolidated Additional Paid-In Capital and Retained Earnings. (January
1, 2019, balance) after the combination is recorded?

a. P 10,000 and P130,000

b. P 300,000 and P560,000
c. P 500,000 and P630,000
d. P 570,000 and 760,000

Entity A acquired the net assets of Entity B by issuing 10,000 ordinary shares with par value of
P10 and bonds payable with face amount of P500,000. The bonds are classified as financial
liability at amortized cost.

At the time of acquisition, the ordinary shares are publicly quoted at P20 per share. On the other
hand, the bonds payable is trading at 110.

Entity A paid P10,000 share issuance costs and P20,000 bond issue costs. Entity A also paid
P40,000 acquisition related costs and P30,000 indirect costs of business combination.
Before the date of acquisition, Entity A and Entity B reported the following data:

Entity A Entity B
Current assets 1,000,000 500,000
Noncurrent assets 2,000,000 1,000,000
Current liabilities 200,000 400,000
Noncurrent liabilities 300,000 500,000
Ordinary shares 500,000 200,000
Share premium 1,200,00 300,000
Retained earnings 800,000 100,000

At the time of acquisition, the current assets of Entity A have fair vakue of P1,200,000 while the
noncurrent assets of Entity B have fáir value of P1,300,000. On the same date, the current

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liabilities of Entity B have fair value of P600,000 while the noncurrent liabilities of Entity A have
fair value of P500,000.

25.What is the goodwill or gain on bargain purchase arising from business combination?

a. 50,000 goodwill
b. 150,000 gain on bargain purchase
c. 120,000 goodwill
d. 70,000 gain on bargain purchase

26. What total amount should be expensed as incurred at the time of business combination?

a. 20,000
b. 70,000
c. 30,000
d. 50,000

27. What is Entity A's amount of total assets after the business combination?

a. 4,520,000
b. 4,810,000
c. 4,750,000
d. 4,440,000

28. What is Entity A's amount of total liabilities after the business combination?

a. 2,240,000
b. 2,510,000
c. 2,320,000
d. 2,130,000

On January 1, 2019, Entity A acquired 70% of outstanding ordinary shares of Entity B at a price
of P210,000. On the same date, the net assets of Entity B were reported at P260,000. On
January 1, 2019 Entity A reported retained earnings of P2.000,000 while Entity B reported
retained earnings of P200,000.

All the assets and liabilities of Entity B are fairly valued except machinery which is undervalued
by P80,000 and inventory which is overvalued by P10,000. The said machinery has a remaining
useful life of four years while 40% of the said inventory remained unsold at the end of 2019.
For the year ended December 31, 2019, Entity A reported net income of P1,000,000 and
declared dividends of P200,000 in the separate financial statements while Entity. B reported net
income of P150,000 and declared dividends of P20,000 in the separate financial statements.
Entity A accounted for the investment in Entity B using cost method in the separate financial
statements.

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 29. What is the non-controlling interest in net assets on December 31, 2019?

a. 124,800
b. 130,200
c. 126,000
d. 133,800

30. What is the consolidated net income attributable to parent shareholders for the year
ended December 31, 2019?

a. 1,102,200
b. 1,162,200
c. 1,141,200
d. 1,095,200

31. What is the amount of consolidated retained earnings on December 31, 2019?

a. 3,012,200
b. 2,991,200
c. 2,952,200
d. 2,945,200

On January 1, 2019, Entity A acquired 60% of outstanding ordinary shares of Entity B at a gain
on bargain purchase of P40,000. For the year ended December 31, 2020, Entity A and Entity B
reported sales revenue of P2,000,000 and P1,000,000 in their respective separate income
statements. At the same year, Entity A and Entity B reported cost of goods sold of P1,200,000
and P700,000 in their respective separate income statements.

During 2019, Entity A sold inventory to Entity B at a selling price of P280,000 with a gross profit
rate of 40% based on cost. On the other hand, Entity B sold inventory to Entity A at a selling
price of P400,000 with a gross profit rate of 30% based on sales during 2020.

On December 31, 2019, 25% of the goods coming from Entity A remained in Entity B's inventory
but all were eventually sold to third persons during 2020. As of December 31, 2020, 40% of the
goods coming from Entity B were eventually sold to third persons.

For the year ended December 31, 2020, Entity A reported net income of P500,000 while Entity B
reported net income of P200,000 and distributed dividends of P50,000. Entity A accounted for its
inventory in Entity B using cost method in its separate financial statements.

32. What is the consolidated sales revenue for the year ended December 31, 2020?

a. 2,600,000
b. B2,320,000
c. 3,000,000
d. 2,720,000

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 33. What is the consolidated gross profit for the year ended December 31, 2020?

a. 1,120,000
b. 1,048,000
c. 1,028,000
d. 1,152,000

34. What is the noncontrolling interest in net income for the year ended December 31, 2020

a. 100,800
b. 59,200
c. 51,200
d. 88,000

35. What is the consolidated net income attributable to parent's shareholders for the year
ended December 31, 2020?

a. 766,800
b. 596,800
c. 606,800
d. 626,800

On December 31, 2019, the Statement of Financial Position of STAR Partnership provided the
following data with profit or loss ratio of 5:1:4:

Current asset 1,500,000 Total liabilities 500,000

Non-current Asset 2,000,000 S. Capital 1,100,000
T. capital 1,200,000
A Capital 700,000

On January 1, 2020, R was admitted to the partnership by investing P500,000 to the partnership
for 10% capital interest. The total agreed capitalization of the new partnership is P3,000.000.

36. What is the capital balance of R after his admission to the partnership?

a. 500,000
b. 300,000
c. 350,000
d. 400,000

37. What is the capital balance of A after the admission of R to the partnership?

a. 580,000
b. 820,000
c. 500,000
d. 780,000

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On September 1, 2022, HAIKYU Company, a Philippine Based Company, ordered 1000 units of
inventory for $25,000 from a corporation incorporated in the US. The inventory was shipped and
invoiced to HAIKYU on December 1, 2022 to be paid on February 1, 2023. HAIKYU’s fiscal year
end is December 31, 2022. Assume that HAIKYU did not engage in any form of hedging activity.

The following are the spot rates for US Dollars to various dates:

Buying Spot Rates Selling Spot Rates

September 1, 2022 38.90 40.10
December 1, 2022 40.00 40.30
December 31, 2022 40.60 40.85
February 1, 2023 40.45 40.65

38. How much is the forex gain (loss) on December 31, 2022?

a. (6,250)
b. 6,250
c. (13,750)
d. 13,750

39. How much is the outstanding accounts payable as of December 31, 2022?

a. 1,015,000
b. 1,016,250
c. 1,021,250
d. 1,035,000

40. How much is the forex gain (loss) on February 1, 2023?

a. (5,000)
b. 5,000
c. 3,750
d. (3,750)

41. How much is the net forex gain (loss) as a result of the FX transaction?

a. 11,250
b. (11,250)
c. 8,750
d. (8,750)

On December 1, 2022, RED Company entered into forward contracts for speculative purposes in
anticipation for a gain to sell US $10,000 in 90 days for delivery on March 1, 2023 for P40.25.
The fiscal year-end for RED Company is December 31. The exchange rates available on various
dates are as follows:

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 12/01/2022 12/31/2022 03/01/2023
Spot rate 40.00 40.25 40.35
30-day forward rate 40.10 40.35 40.50
60-day forward rate 40.15 40.40 40.70
90-day forward rate 40.25 40.45 40.65
120-day forward rate 40.30 40.50 40.70

42. How much is the FX gain (loss) on December 31, 2022?

a. (1,500)
b. 1,500
c. 1,000
d. (1,000)

43. How much is FX payable on March 1, 2023 prior the settlement?

a. 402,500
b. 403,000
c. 403,500
d. 404,000

44. How much is the Peso receivable on March 1, 2023 prior the settlement?

a. 402,500
b. 403,000
c. 403,500
d. 404,000

45. How much is the FX gain (loss) on March 1, 2023?

a. 0
b. (500)
c. 500
d. (1,000)

46. Under PAS 21, what exchange rates should be used to translate the items below,
assuming the foreign subsidiary is a country which has not experienced hyperinflation over
the three years?

Equipment Depreciation Inventories

a. Current rate Average rate Historical rate
b. Historical rate Average rate Historical rate
c. Current rate Historical rate Current rate
d. Historical rate Historical rate Historical rate

47. PROBLEM: Record the following events of PGH Hospital:

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 ● Patient Henry was billed for the following: Room and Board, Physician care,
Laboratory and Xray for the amount of P 500,000, 250,000 and 150,000,
respectively.
● A donation of drugs with fair value of P150,000 was received from a Mr. Sy, a
doctor. The said drug is normally purchased.
● The other following revenues were collected: Parking lot charges, vending
machines and snack bar of P 50,000; 10,000 and 30,000 respectively. d. Medicare
cleared charges above with contractual adjustments granted to patients for
medicare charges totaled P 150,000.
● Interim payments received from medicare amounted to P 80,000.

How much is the Net Patient Service Revenue?

a. 670,000
b. 830,000
c. 900,000
d. 1,110,000

48. Using Problem no.47, How much is the other operating revenue- unrestricted?

a. 90,000
b. 150,000
c. 240,000
d. 1,140,000

49. Using Problem no.47, How much is the total revenue?

a. 910,000
b. 980,000
c. 1,070,000
d. 1,140,000

50. PROBLEM: VHWO is a voluntary welfare organization funded by contributions from the
general public. During 2016, unrestricted pledges of P300,000 were received, of which it
was estimated that P36,000 would be uncollectible. By the end of 2016, P240,000 of the
pledges had been collected, and it was expected that an additional P24,000 of these
pledges would be collected in 2017, with the balance to be written off as uncollectible.
Donors did not specify any periods during which the donations were to be used. Also,
during 2016, VHWO sold a computer for P9,000. Its cost was P10,500, and its book
value was P7,500. VHWO made the correct entry to record the gain on the sale.
What amount should VHWO include as unrestricted support in 2016 for contributions?

a. P240,000
b. P268,000
c. P275,500
d. P300,000

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