Page 1 of 39

COMPILED BY: PATRICK

WITH THE SUPPORT OF BELOVED FRIENDS FROM WORLD WAR ACCOUNTANT’S

AUTHOR OF LAZY NOTE
MAKER OF CENTURY EGG

THIS CENTURY EGG IS DEDICATED TO MY BESTFRIEND TO CARL VINCENT N. TALAROK WHO

FOUGHT FOR THIS BATTLE FOR THE 8TH TIME BUT NEVER GIVEN THE CHANCE TO PROVED HIS
WORTH.REST IN PEACE YOUR WISH IS GRANTED CARL. I LOVE YOU. YAWA KA.

ACTUAL AFAR QUESTIONNAIRES OCTOBER 2021 TO DECEMBER 2021:

(b ch17) 2. Which of the following must approve a Chapter 11 plan?

a. The organization’s management.
b. The assigned trustee.
c. The entity’s stockholders.
d. The court and the creditors.

2. Butuan Company is bankrupt and has undergone corporate liquidation. Pre-

sented below is its statement of financial position before the start of liqui-
dation.
Cash 300,000 Accounts Payable 100,000
Machinery Salaries Payable 200,000
500,000
Building Income Tax Payable
1,200,000 300,000
Loan Payable
400,000
Mortgage Payable
500,000
Contributed Capital
800,000
Deficit
300,000

• Liquidation expenses amounting to P600,000 were paid.

• The loan payable is secured by the machinery with fair value of P300,000.
• The mortgage payable is secured by the building .
• At the end of liquidation, the holder of loan payable received P340,000.

What is the amount to be received by the holder of accounts payable at the end
of liquidation?

a. P60,000 b. 85,000 c. P40,000 d. P15,000

B90 PW) On January 1, 2021, SDC Company granted a franchise to a franchi-

see. The franchise agreement required the franchisee to pay a nonrefundable up-
front fee in the amount of P1,600,000 and on-going payment of royalties equiva-
lent to 10% of the sales of the franchisee. The franchisee paid the nonrefund-
able upfront fee on January 1, 2021.
In relation to the nonrefundable upfront fee, the franchise agreement required
the entity to render the following performance obligations which were separate
and distinct from each other:

To construct the franchisee’s stall with stand-alone selling price of

P400,000.
To deliver 20,000 units of raw materials to the franchisee with stand-alone
selling price of P500,000.
Page 2 of 39

To allow the franchisee to use the entity's tradename for a period of 5 years
starting January 1, 2021. The stand-alone selling price of the use of the
tradename was P100,000.

On July 31, 2021, the entity completed the construction of the franchisee’s
stall. On December 31, 2021, the entity was able to deliver 15,000 units of raw
materials to the franchisee. For the year ended December 31, 2021, the franchi-
see reported sales revenue amounting to P1,000,000.

3. Under IFRS 15, what amount should SDC Company recognize as revenue in rela-
tion to the
delivery of the raw materials on December 31, 2021?
A. 800,000
B. 500,000
C. 600,000
D. 375,000

4. Under IFRS 15, what amount should SDC Company recognize as revenue in rela-
tion to the
construction of the franchisee's stall on December 31, 2021?

A. 640,000
B. 400,000
C. 1,600,000
D. 0

5. Under IFRS 15, what amount should SDC Company recognize as total revenue for
the year ended
December 31, 2021?
A. 1,600,000
B. 1,372,000
C. 1,700,000
D. 1,276,000

(b86 ST)Numbers 18 and 19

On January 1, 2018, an entity sold a car to a customer at a price of P400,000
with a production cost of P300,000. It is the entity's policy to employ in-
stallment method to recognize gross profit from installment sales.
At the time of sale, the entity received cash amounting to 25% of the selling
price and old car with trade-in allowance of P50,000. The said old car has fair
value of P150,000. The customer issued a 5-year note for the balance to be pay-
able in equal annual installments every December 31 starting 2018. The note
payable is interest bearing with 10% rate due on the remaining balance of the
note.
The customer was able to pay the first annual installment and corresponding in-
terest due. However, after the payment of the second interest due, the customer
defaulted on the second annual installment which resulted to the repossession
of the car sold with appraised value of P110,000. On December 31, 2019, the re-
possessed car was resold for P140,000 after reconditioning cost of P10,000.
18 What is the entity's realized gross profit for the year ended December 31,
2018?
A. 50,000
B. 120,000
C. 108,000
D. 128,000
6. What is the loss on repossession for the year ended December 31, 2019?
A. 30,000
B. 20,000
Page 3 of 39

C. 10,000
D. 40,000

(b86 ST)Number 23

7. Under IFRS 15, in which of the following instances shall an entity recognize
revenue through satisfaction of performance obligation at a point in time in-
stead of satisfaction of performance obligation over time?

A. The customer simultaneously receives and consumes the benefits provided by

the entity's performance as the entity performs.

B. The entity's performance creates or enhances an asset that the customer con-
trols as the asset is created or enhanced.

C. The entity's performance does not create an asset with an alternative use to
the entity and the entity has an enforceable right to payment for performance
completed to date.

D. The entity has transferred the legal title, control and physical possession
of the asset at a specific date.

(res b37 fpb)18.

8. In 2019, Kalye Construction Company was contracted to build the private road
network of Alaya Subdivision for P100 million. The project was expected to be
finished in 2 years , and the contract provided for:
 A five percent mobilization fee (to be deducted from the last billing),
payable within 15 days from the contract signing.
 A retention provision of ten percent on all billings, payable with the
final bill after the completed project is accepted. .
 Payment of progress billings within 7 days from acceptance.

Kalye, which uses the percentage-of-completion method of accounting for income,

estimated a 25% gross margin on the project. By the end of'theyear, Kalye had
presented progress billings to Alayacorresponding to 50% completion. Alaya ac-
cepted all the bills presented, except one for 10% which was accepted on Janu-
ary 5 of next year. With the exception of the second to the last billing for 8%
which was due January 3 of next year, all accepted billings were settled.
In 2019, Kalye Construction Company realized gross profit from the project the
amount to:

A. P 7,500,000
B. P10,000,000
C. P12,500,000
D. P25,000,000

(b ch11)

Use the following information for Questions 9, 10, 11, and 12.
Paris Corporation purchased 80% of the outstanding voting common stock of Sand-
ers Corporation on January 1, 2005, at a cost of $400,000. The stockholders’
equity of Sanders Corporation on this date consisted of $200,000 of Capital
Stock and $100,000 of Retained Earnings. Book values were equal to fair values
except for land and inventory. The book value of Sanders’ land was $10,000, and
fair value was $22,000. The book value of Sanders’ inventory was $30,000, and
fair value was $25,000.
LO1
Page 4 of 39

9. What amount of goodwill was reported under the parent company

theory?
a. $148,000.
b. $153,000.
c. $154,400.
d. $160,000.

LO1
10. What amount of goodwill was reported under the entity theory?
a. $185,000.
b. $191,250.
c. $193,000.
d. $200,000.

(governing standard)
11. What standard governs separate financial statements?

A. IAS 27 (2008) is superseded by IAS 27 Separate Financial Statements

(2011) and IFRS 10 Consolidated Financial Statements effective 1 January
2013
B. IFRS 12
C. IFRS 11
D. IFRS 9

What Standard governs ifrs 3, 11, 15, ias 21

(b ch12) LO6
12. Which of the following is not an approach appropriate for hedge
accounting?
a. Fair value hedge.
b. Straddle hedge.
c. Cash flow hedge.
d. Hedge of net investment in a foreign subsidiary.

(b ch13) LO2
13. When the financial statements of a foreign subsidiary one year
after acquisition are consolidated with the parent company,
Retained Earnings is
a. translated at the current exchange rate.
b. remeasured at the current exchange rate.
c. remeasured at the historical exchange rate.
d. None of the above answers is correct.

(b90 pw) Number 22

14. Which of the following statements regarding Derivatives and Hedging is
TRUE?

A. The sole purpose for entering into derivative contracts is to manage market
risks such as foreign
exchange risk and interest rate risk.

B. When a firm commitment is hedged using a derivative financial instrument,

fair value hedge
accounting requires explicit recognition of the statement of financial position
at fair value of both
the derivative financial instrument and the firm commitment.

C. Options are frequently used to mitigate risks associated with fluctuations

in the market prices of
Page 5 of 39

securities or commodities. A call option is purchased to limit the price it

will have to pay for a
commodity, a put option is purchased to limit potential price declines in the
value of a financial
asset or commodity.

D. All derivative instruments are presented in the Statement of Financial Posi-

tion at a positive fair
value.

(b ch14) LO1
15. SFAS 131 requires that segment information be reported by the process
that management has organized the enterprise for
I. performance evaluation
II.internal decision making
III.geographic region

a. Only I meets the standard.

b. Only II meets the standard.
c. Both I and II meet the standard.
d. All three meet the standard.

(b ch14) LO7
16. How does APB Opinion 28 view interim accounting periods?

a. As discrete units for which net income may be separately determined.

b. As integral units of the entire year for which estimates may be used.

c. As integral units of the entire year using the same principles that are ap-
plied to the annual period.

d. As discrete units of the entire year using the same principles that are ap-
plied to the annual period.

(b90 pw) Number 49

17. Leyte Hospital, a nonprofit organization, reported the following informa-
tion for the year ended
December 31, 2021:
Gross patient service revenue 3,940,000
Bad debt expense 70,000
Contractual adjustments, VAT 267,270
Allowance for discounts to hospital employees 45,000
In Leyte Hospital’s statement of activities for the year ended December 31,
2021, what amount should
be reported as net patient service revenue?

A. 3,940,000
B. 3,627,730
C. 3,597,730
D. 3,895,000

18. (b90 pw theo) 37. The financial reporting for the National Government is
under the Statutory responsibility of all the following, except

A. Bureau of Treasury
B. Department of Budget and Management
C. Commission on Audit
D. Congress of the Republic of the Philippines
Page 6 of 39

19. (b90 pw theo) 39. It is the authorization issued by the Department of

Budget and Management to National Government Agency to incur obligations for
specified amounts contained as a legislative appropriation in the form of
budget release documents.
A. Appropriation
B. Allotment
C. Obligation
D. Expenditure

20.(reconstructed) What do you call the policyholder under a reinsurance con-

tract?
The cedant is the insurer under a reinsurance contract.

(b90 pw)Numbers 67 and 68

On January 1, 2021, Entity X and Entity Y, both SMEs, incorporated Entity Z, a

jointly controlled entity by investing P10,000,000 each in exchange for 100,000
ordinary shares representing 50% interest each of Entity Z. Entity X and Entity
Y each incurred P400,000 transaction costs. The contractual agreement of the
incorporating entities provided that the decisions on relevant activities of
Entity Z will require the unanimous consent of both entities. Entity X and En-
tity Y will have rights to the net assets of Entity Z. For the year ended De-
cember 31, 2021, Entity C reported net income of P2,000,000 and declared divi-
dends in the amount of P600,000. On December 31, 2021, the ordinary shares of
Entity C are quoted at P112.

21. If Entity X elected fair value model to account for its investment in En-
tity Z, what is the net effect on Entity X’s profit or loss for the year ended
December 31, 2021?
A. 1,100,000 net income
B. 1,200,000 net income
C. 300,000 net income
D. 800,000 net income

22. If Entity Y elected equity method to account for its investment in Entity
Z, what is the carrying amount of Entity Y’s Investment in Entity C on December
31, 2021?
A. 10,400,000
B. 10,900,000
C. 10,700,000
D. 11,100,000

23. (Crc pw2) 19. MANGO Company has the following information for July:

Units started 200,000 units

Beginning Work in Process: (35% complete) 40,000 units
Normal spoilage (discrete) 7,000 units
Abnormal spoilage 10,000 units
Ending Work in Process: (70% complete) 29,000 units
Transferred out 194,000 units
Beginning Work in Process Costs:
Material P 30,000
Conversion 20,000

All materials are added at the start of the production process. MANGO Company
inspects goods at 75 percent completion as to conversion.
Page 7 of 39

What are equivalent units of production for conversion costs, assuming FIFO?

A. 217,800 B. 207,800 C. 217,300 D. 213,050

24. (b86 ST)Number 63

Simple Company employs actual costing for its production. The entity provided
the following data concerning its production during the year:
Decrease in direct materials during the year 500,000
Labor cost during the year 400,000
Actual factory overhead during the year 300,000
Increase in work in process during the year 200,000
Decrease in finished goods during the year 100,000

What is the cost of goods manufactured during the year?

A. 1,200,000 8. 1,000,000 C. 1,400,000 D. 1,100,000

25. (b86 pwl)Number 58

When will the FIFO process costing method product the same cost of goods manu-
factured as the average method?

a. There are no lost units.

b. There is no beginning work in process inventory.
c. The beginning work in process inventory and ending work in process inventory
are equal.
d. There is no ending work in process inventory.

26. (res b37 fpb) 25. A company has identified the following overhead coats
and cost drivers Tor
the coming year:
Overhead Item Cost Driver Budgeted
Budgeted
Activity
Cost
level
Machine setup No. of setups P 20,000 200
Inspection No. of inspec-
P 130,000 6,500
tion
Material han- No. of material
P 80,000 8,000
dling moves
Engineering Engineering
P 50,000 1,000
hours
P 280,000

The following information was allocated on three Jobs that were completed
during the year:
Job 1 Job 2 Job 3
Direct materials P 5,000 P 12,000 P 8,000
Direct labor P 2,000 P 2,000 P4,000
Units completed 100 50 200
No. of setups 1 2 4
No. of inspec- 20 10 30
tions
No. of material 30 10 50
moves
Engineering 10 50 10
hours

Budgeted direct labor cost was P100,000 and the budgeted direct material cost
was P280,000.
Compute the cost of each unit of Job 102 usingActivity-Based Costing:
A. P340
Page 8 of 39

B. P392
C. P440
D. P529

27. (res b37 fpb) 26. The Kuwait Manufacturing Company has a cycle of 3 days,
uses a raw and in process (RIP) account, and charges all conversion costs to
Costs of Good Sold. At the end month all inventories are counted, their conver-
sion cost components are estimated and inventory account balances, are ad-
justed. Raw material cost is back flushed from RIP to finished Goods. The fol-
lowing information is for June:

Beginning balance of RIP account,

including P2,000 of conversion cost P 15, 000
Beginning balance of finished goods account,
including P3,000 of conversion cost 23,000
Raw materials on credit 500,000
Ending RIP inventory per physical count,
including P2,500 conversion cost 22,500
Ending finished good inventory per physical count,
including P1,000 conversion cost estimate 16,000

Compute the amount of Cost of Goods Sold after adjustments were made:
A. P499,500
B. P493,000
C. P498,000
D. P500,000

(res b37 fpb)(no.31) Items 28 to 30 are based on the following information:

Lucille Inc. manufactures a product that gives rise to a by-product called 'Ro-
bon.' The only costs associated with Robon are additional processing costs of
P1.00 for each unit. Lucille accounts for "Robon' sales first by deducting its
separable Cost from such sales and then by deducting this net amount from the
cost of sales of the major product. For the past year 2,000 units of Robon were
produced which were sold for P3.00 each. Sales revenue and cost of goods sold
from the main product were P500,000 and P400,000 respectively.
31. Compute the gross margin after considering the by-product sales and costs.
A. P 96,000
B. P100,000
C. P104,000
D. PI06,000

(hoba)Problem 7: Alabang Head Office opened a sales agency in Nuvali on January

1, 2023. The following is a summary of the transactions of the sales agency:
 Volume discount 1.5% and 2.5%
 Invoice price P 1,926,000
 Freight on shipment of agency 31,500
 Collections, 20% of which were able to avail of the 5% discount 1,261,125
 Selling expenses paid from the agency fund 67,500
 Administrative expenses allocated to agency 4% of net sales
 Samples shipped to the agency amounting to P99,000 are to be properly de-
preciated to its carrying amount of P85,851 as of December 31, 2023.
 Remaining receivables are estimated to be 95% collectible.
 The company's gross profit rate based on invoice price is 30% excluding
the freight cost on shipments to agency.
28. What is the net income of the agency for 2023?
a. P374,787
b. P343,287
c. P356,562
Page 9 of 39

d. P346,401

Answer B

29. (hoba) Problem 14: The home office transfers merchandise to Manila branch
at a mark-up of 25% above cost during the year 2028 and 30% above cost during
the year 2027. In 2028, the reciprocal account in the income statement of the
branch is P1,487,500. The account Unrealized Inventory Profit has a balance
ofP84,000 at the end of last year. The branch started to acquire merchandise
from outsiders during the year in the amount of P76,000.
How much is the cost of goods available for sale of the branch at cost?
a. P1,851,500
b. P1,470,000
c. P1,927,500
d. P1,546,000

Answer D

30. (hoba)Problem 22: On December 31, 2030, the investment in branch account on
the home office books has a balance of P347,000. In analyzing the activity in
each of these accounts for December, you find the following differences:
a. A P39,000 branch remittance to the home office initiated on Dec. 27, 2030,
was recorded twice by the home office in 2030.
b. A home office inventory shipment to the branch of P45,000 on December 29,
2030, was recorded by the branch on Dec. 31, 2030 at P54,000. The home office
transfers merchandise to the branch at cost
c. The home office incurred P12,000 of advertising expenses and allocated 1/8
of this amount to the branch on Dec. 21, 2030. The branch inadvertently re-
corded half of the advertising expenses incurred by the home office during the
year.
d. A home office customer remitted P7,000 to branch. The branch recorded this
cash collection on Dec. 23, 2030. Meanwhile, back at the home office, no entry
has been made yet.
e. Inventory costing P11,500 was returned by the branch to the home office on
December 19, 2030. The billing was at cost, but the home office recorded the
transaction at P1,150.
Compute the unadjusted balance of the Home Office current as of December 31,
2030
a. p416,850
b. P396,150
c. 461,850
d 369,150

Answer B
 Page 10 of 39

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
PAUY

#31 CASE #2 ONLY

CPALE CASE
#2 ONLY
Page 11 of 39

#32-#34.

35. A U.S. firm has a Belgian subsidiary that uses the British pound as
its functional currency.
According to GAAP, the U.S. dollar from Belgian unit's point of view
will be:

A) its only foreign currency.

B) its local currency.
C) its current rate method
D) its reporting currency.
Page 12 of 39

36. Selvey Inc. is a wholly-owned subsidiary of Parsfield Incorporated,

a U.S. firm. The country where Selvey operates is determined to have a
highly inflationary economy according to GAAP definitions. Therefore,
for purposes of preparing consolidated financial statements, the fun-
tional currency is

A) its reporting currency.

B) the U.S. dollar.
C) its current rate method
D) its local currency.

37. All of the following factors would be used to define a foreign en-
tity's functional currency, except:

A) high volume of intercompany transactions.

B) expenses for foreign entity primarily driven by local factors.
C) financing for foreign entity denominated in local currency.
D) foreign entity's status as a local tax haven for transfer pricing
purposes

#38.- #39
Page 13 of 39

#40-#41 TATANUNGIN KA DITO ANONG KUNG WHAT TYPE OF AASSET SI JET AIR-
CRAFT THEN MGA ENTRIES NIYA WHICH IS WHAT IS THE ENTRY OF PURCHASE OF
OWNERSHIP NA ENTRY PASTE KO NALANG LAHAT NA ENTRIES PARA ALAM ANG LAHAT
KAYA ILALAGAY KO NALANG PARA SURE BALI 2 POINTS TO THEORIES.
Page 14 of 39

Problem 42-#45
Ruffa Corp. acquired 80% interest in Paolo Corp by issuing 100,000
shares with fair value of P20 per share and par value of P10 per share.
The financial statements of Ruffacorp and Paolo Corp. before the busi-
ness combination are shown below:
Ruffa Paolo
Book Fair Book Fair
Value Value Value Value
Cash 600,000 600,000 120,000 120,000
Accounts Receiv- 250,000 240,000 50,000 40,000
able
Inventory 350,000 345,000 150,000 140,000
Prepaid expenses 25,000 20,000 5,000 4,000
Land 2,000,000 2,200,000 800,000 900,000
Building 1,500,000 1,650,000 700,000 950,000
Equipment 400,000 300,000 325,000 300,000
TOTAL ASSETS 5,125,000 5,355,000 2,150,000 2,454,000

Accounts Payable 1,500,000 1,550,000 600,000 620,000

Notes Payable 2,000,000 2,100,000 750,000 760,000
Ordinary Share 1,200,000 500,000
Share Premium 500,000 200,000
Retained Earnings 125,000 100,000
TOTAL LIABILITIES 5,325,000 2,150,000
AND SHE

Ruffa Corp. opted to measure the non-controlling interest at non-

controlling interest proportionate share in Paolo’s net identifiable as-
sets.
42. Req 1. What is the total amount of goodwill to be presented by
Ruffa Corp. in its separate financial position? TAKE NOTE OF THE UNDER-
LINED WORDS MAY CRUCIAL NA TANONG JAN SA THEORY MARAMING NALITO FOLLOW
UP KO SA BABA.

a. P0
b. P1,140,800
c. P1,360,000
d. P1,100,000

43. Req 2. What is the total amount of goodwill to be presented by

Ruffa Corp. in its separate financial position?
a. P0
b. P1,140,800
c. P1,360,000
d. P1,100,000
Page 15 of 39

44. Req 3. What is the total amount of accounts receivable to be re-

ported by Paolo Corp. in its separate financial statement?

a. P50,000
b. P40,000
c. P290,000
d. P300,000

45. Req 4. The working paper elimination entry will include the follow-
ing, except:
a. Debit ordinary share – Paolo P500,000
b. Debit push-down capital P1,514,800
c. Debit Retained Earnings – Paolo P100,000
d. Credit investment in Paolo P2,000,000

SOLUTION MANUAL:PROB #42-45

Page 16 of 39

#46 ABOUT SEPARATE FINANCIAL POSITION THEORY (PARENT AND SUBSIDIARY)

TATANONG SAYO NUNG PARENT FS KUNG NASA DR OR CR
Page 17 of 39

#47. (Problem 22):

On January 2, 2030 Hugo Corp paid cash of P5,000,000 in exchange
for all the net assets of Calvin Inc. The carrying value of Calvin as-
sets and liabilities on January 2 2030 follow:

Cash 600,000
Accounts receivable 800,000
Computer software 1,200,000
Patent 500,000
Goodwill 200,000
Liabilities 750,000

On January 2 2030, Calvin's accounts receivable had a fair value of

P750,000. Calvin in process and development cost was estimated had fair
value of P420,000. In applying the recognition measurement, Hugo Corp.
Has identified the following unrecorded intangible assets:
Customer list 50,000
Customer contract 15,000
Trademarks S100,000

 Calvin recognize the research and development costs as expense when

incurred.

 The customer contract refers to a contract to sell to Victoria for

a period of 8 years. On the date of acquisition there is a remain-
ing 2 years in the contract. Hugo and Calvin believe that Victoria
will renew the contract at the end of term. The agreement is not
separable.

Compute the amount of goodwill or (gain from acquisition)

a. P1,915,000
b. P2,335,000
c. P2,115,000
d. P2,535,000
Page 18 of 39

#48 Problem 40:

The following are the Statements of Financial Position of Pol and Sol
Company as of December 31, 2030.
Pol Sol
Cash 250,000 50,000
Accounts Receiv- 175,000 37,500
able
Inventories 200,000 62,500
Land 187,500 250,000
Building (net) 800,000 250,000
Equipment (net) 625,000 600,000
TOTAL ASSETS 2,237,500 1,250,000

Pol Sol
Accounts Payables 462,500 150,000
Ordinary Shares 1,250,000 500,000
Share Premium 125,000 350,000
Retained Earnings 400,000 250,000
TOTAL LIAB AND EQ- 2,237,500 1,250,000
UITY

Pol decided to acquire 15,000 outstanding shares of Sol on January 1,

2031. Pol paid a purchase price of P60,000 and will issue 22,500 ordi-
nary shares with market value of P28 per share in exchange for the
P15,000 outstanding shares of Sol. Pol and Sol's ordinary shares both
have a par value of P20 per share. The book values reflect fair values
except for building of Pol, which has a net realizable of P975,000 and
inventories and land of Sol which has a net realizable value of P74,500
and P295,000, respectively. Pol and Sol paid cost of registering in is-
suing securities amounting to P26,000 and direct costs of combination
amounting to P58,500.
Req 1: How much is the consolidated asset after the combination?
a. P3,400,000
b. P3,544,500
c. P3,460,000
d. P3,484,500
Page 19 of 39

#49 - #50 (Problem 17):

On January 2, 2031, the KAKOY Company purchase the net assets of
BRAM Company by paying P425,000 cash and issuing shares of stocks at
P1,555,000 fair market value. Book value and fair value data on the
Statement of Financial Position on January 1 2031 are as follows:
KAKOY Company BRAM Company
Book Fair Book Fair
Value Value Value Value
Cash 2,300,000 2,300,000 150,000 150,000
Accounts Receiv- 500,000 490,000 490,000
500,000
able
Inventory 750,000 650,000 355,000 300,000
Building and 900,000 730,000 760,000 532,000
equipment (net)
Goodwill - - 45,000 40,000
TOTAL ASSETS 4,450,000 4,180,000 1,800,000 1,512,000

Liabilities 500,000 500,000 285,000 285,000

Share Capital 800,000 300,000
Share Premium 450,000 480,000
Retained Earnings 2,700,000 735,000
TOTAL LIABILITIES 4,450,000 1,800,000
AND SHE
KAKOY incurred and paid legal and brokerage fees of P12,800 for business
combination; stock issuance costs of P11,500 and P6,000 indirect acqui-
sition costs. It is determinable that contingency fee of P5,900 would be
paid within the year.

49. Req. 1: total assets after the business combination

a. P5,995,600
b. P6,690,600
c. P6,265,600
d. P6,265,000

50. Req. 2: the stockholder’s equity after the business combination

a. P3,950,000
b. P5,505,000
c. P6,265,600
d. P5,474,700
Page 20 of 39

SOLMAN 49-50
Page 21 of 39

#51
Under Government Accounting Manual, it refers to an authorization issued
by the DBM to NGAs to incur obligations for specified amounts contained
in a legislative appropriation in the form of budget release documents.

a. Appropriation
b. Allotment
c. Obligation
d. Disbursement

#52.
A controlling interest in a company implies that the parent company

a. owns all of the subsidiary's stock,

b. has influence over a majority of the subsidiary's assets.
c. has paid cash for a majority of the subsidiary's stock.
d. has transferred common stock for a majority of the subsidiary's
outstanding bonds and debentures.

#53
Under IFRS 10, what financial statements are required to be prepared and
presented by a parent corporation?

a. Consolidated financial statements and combined financial statements

b. Consolidated financial statements, combined financial statements, and
separate FS
c. Combined financial statements, and separate financial statements
d. Only consolidated financial statements

Under IFRS 10, what financial statements are required to be prepared and
presented by a parent corporation? d. Only consolidated financial state-
ments

Paragraph 2 (a) requires an entity (the parent) that controls one or

more other entities (subsidiaries) to present consolidated financial
statements;

IAS 27 Separate Financial Statements deals with separate financial

statements

#54
Last year, a nonprofit organization received a contribution with a donor
restriction for educational scholarship of members. In the current year,
the nonprofit organization fully spent the said contribution for the in-
tended purpose. What is the effect of this expenditure on current year's
net assets?

a. It will increase the temporarily restricted net assets.

b. It will not affect the unrestricted net assets.
c. It will not affect the total net assets.
d. It will decrease the permanently restricted net assets.
Page 22 of 39

EXPLAINATION: ANSWER KEY (C)

When a donation is received by an entity from an outsider with a clear
instruction to use such fund for a specific purpose, a separate liabil-
ity fun is formed for such purpose while the cash received for such pur-
pose is regarded as restricted for use. When such task has been carried
out for which fund was received, the fund liability account is trans-
ferred to general reserve or written off.

The net assets refer to the total of assets available with the entity
less the total of liabilit ies with it. Thus, when the educational
scholarship is distributed, the fund liability account is written off
while the restricted cash is also spent. Thus, there is a compensating
effect on both the parts of the balance sheet and no changes are seen on
an overall basis. Thus, option C is correct.

#55- 59 THEORIES: PFRS 11- JOINT ARRANGEMENTS

55. Under IFRS 11, when the joint arrangement is not structured through
a separate vehicle, it shall be properly classified as

a. Always joint venture

b. Always joint operation
c. Joint venture or joint operation depending on the terms of the ar-
rangement
d. Joint venture or joint operation depending on the substance of the
arrangement

56. IFRS 11 defines it as a type of joint arrangement whereby the par-

ties that have joint control of the arrangement have rights to the as-
sets, and obligations for the liabilities, relating to the arrangement.

a. Joint venture
b. Joint operation
c. Jointly controlled entity
d. Jointly controlled asset

57. Under IFRS 11, the venturer in a joint venture shall account for its
investment in joint venture using

a. Equity method
b. Fair value model
c. Cost method
d. Any of the above

58. Under IFRS for SMEs, an SME-venturer in a joint venture shall ac-
count for its investment in joint venture using

a. Equity method
b. Fair value model
c. Cost method
d. Any of the above
Page 23 of 39

59. Under IFRS 11, when the joint arrangement is structured through a
separate vehicle, it shall be properly classified as

a. Always joint venture

b. Always joint operation
c. Joint venture or joint operation depending on the accounting policy
of the venture.
d. Joint venture or joint operation depending the structure and form of
the arrangement, the terms agreed by the parties in the contractual ar-
rangement and other facts and circumstances.

60. Which of the following does not underlying?

a. Insurance index
b. Equity shares
C. Exchange rate
d. Commodity price

#61.
In process cost system, costs are assigned only:

a. to one work in process inventroy account.

b. to work in process and finished goods inventories.
c. to work in process, finished goods, and cost of goods sold.
d. to work in process inventory accounts.

62. Indicate which of the following statement is not correct.

a..Both a job order and a process cost system track the same three manu-
facturing cost elements - direct materials, direct labor, and manufac-
turing overhead.
b. In a job order cost system, only one work in process is used, while
in process cost system, multiple work in process inventory accounts are
used.
c Manufacturing costs are accumulated the same way in a job or der and
in a process cost system.
d. Manufacturing costs are assigned the same way in a job order and in a
process cost system.

63. It arises when the uneamed premium reserve is less than the antici-
pated claims and related expenses

a. Premium deficiency
b. Claims
c. Acquisition costs
d. Premiums

64. It is an arrangement whereby the reinsurer, in consideration of a

premium, agrees to indemnify the principal ceding insurer against the
loss, or part of the loss, which the latter may sustain under the policy
or policies that the insurer has written.

a Reinsurance c. Acquisition costs

b. Claims d. Pipeline premiums
Page 24 of 39

#EXTRA. It is an insurer that reinsures part or the whole of a risk with

one or more reinsurers. The risk reinsured is referred to as an out-
ward reinsurance. - B
a. Reinsurer
b. Ceding insurer
c. Beneficiary
d. Victim

#extra. It is an insurer which accepts part of a risk from ceding in-

surer by way of reinsurance. The risk accepted is referred to as an in-
ward reinsurance. - A

a. Reinsurer
b. Ceding Insurer
c. Beneficiary
d. Victim

#extra. It is defined as "a reinsurance of reinsurance assumed where the

reinsurer will retrocede a whole or a part of the risk accepted the di-
rect insurer to another reinsurer".

a. Reinsurer
b. Ceding insurer
c. Beneficiary
d. Retrocession

#65. Consider the two situations:

S1 - Kaido Appliance Company sold an equipment costing P10,000 for

16,000 on September 30, 2021. The down payment was P1, 600 and the same
amount was to be paid at the end of each succeeding month. Interest was
charged on the unpaid balance of the contract at 1/2 of 1% a month, pay-
ments being considered as applying first to accrued interest and the
balance to principal. After paying a total of P6,400, the customer de-
faulted. The equipment was repossessed in January 5, 2022. It was esti-
mated that the equipment had a value of P5,600.

S2 - Big Mom Company uses the installment sales method in accounting for
- its installment sales. On January 1, 2021, Big Mom had an installment
account receivable from Luffy with a balance of P18,000. During 2021,
P4,000 was collected from Luffy. When no further collection could be
made, the merchandise sold to Luffy was repossessed. The merchandise had
a fair market value of P6,500 after the company spent for P600 for re-
conditioning of the merchandise. The merchandise was originally sold
with a gross profit rate of 40%.

Determine the gain or loss on repossession

a. S1 - P521; S2 - (P2,100)
b. S1 - (P521); S2 - (P2,500)
c. S1 - (P400); S2 - P2,500
d. S1 P400; S2 P2,100
Page 25 of 39

SOLMAN #66
Page 26 of 39

67-#68
Page 27 of 39

#69-#70

SOLUTION MANUAL
Page 28 of 39

HOBAD

PROBLEM #7
Page 29 of 39

PROBLEM #14

PROBLEM #22
Page 30 of 39

#12 ONLY ABOUT CEDANT ANSWER :B

TAKE NOTE ON THIS PLEASE : CRUCIAL TO SA THEORY

YUNG MGA OCTOBER 2021 TAKERS DITO SILA PINATAY SA MGA
ANALYSIS SCENARIO
Page 31 of 39
Page 32 of 39

ITO NAMAN SI #38 YUNG SINABI NILA NA PARANG LAW

PARANG TAX AT YUN AFAR HAHHAHAHAHA OH DIBA PARANG
BALIW ANG BOA
Page 33 of 39

FVPA – 12/31 9,800

PBO – 12/31 (10,500)
ACCRUED PENSION 700
INCREASE FVPA 500
NET RETIREMENT BENEFIT 200,000 LETTER (B)
Page 34 of 39

Situation 2 - Investor acquires a 20% ownership interest in Investee

(Mingucompany) at January 1,2013 for P3,500,000 cash, which is the fair
value of the investment at that date. The Investor has concluded that
despite of its 20% holding it does not have a significant influence over
the Investee.

At that date, the fair value of Investee's identifiable assets is

P10,000,000 and the carrying amount of those assets is P8,000,000. In-
vestee has no liabilities or contingent liabilities at that date.
The following shows Investee's statement of financial position at Janu-
ary 1, 2018 together with the fair values of the identifiable assets:

The Investee' s Statement of Financial Position As at January 1, 2018

(000)
Carrying Amount Fair
Value

Cash and receivables 2,000 2,000

Land 6,000 8,000

TOTAL 8,000 10,000

Issued equity,
1,000,000 ordinary
shares 2,000
Retained Earnings 6,000
TOTAL 8,000

During the year ended December 31, 2018, Investee reported a profit of
P6,000,000 but does not pay any dividends. In addition, the fair value
of the Investee's land increases by P3,000,000 to P11,000,000. However,
the amount recognized by Investee in respect of the land' remain un-
changed at P6,000,000. The following shows Investee's statement of fi-
nancial position at December 31, 2018 together with the fair values of
identifiable In assets:
Investee's Statement of Financial Position As at December 31, 2018 (000)
Carrying Fair
Amount Value
Cash and receivables 8,000 8,000
Land 6,000 11,000
TOTAL 14,000 10,000

Issued equity, 1,000,000

ordinary shares 5,000
Retained Earnings 9,000
TOTAL 14,000

On January 1, 2019, Investor acquires a further 60% ownership interest

in Investee forP22,000,000 cash, thereby obtaining control. Throughout
Page 35 of 39

the period January 1, 2018 to January 1, 2019, Investor's issued equity

was P30,000,000. Investor's only Asset apart from its investment in In-
vestee is cash.

Investor’s initial 20% investment in Investee is measured at its fair

value at the acquisition date of P3,500,000. Investee's 1,000,000 ordi-
nary shares have a quoted market price at December 31, 2018 of P30 per
share. Therefore, the carrying amount of Investor's initial 20% invest-
ment is remeasured in Investor's Financial statements to P6,000,000 at
December 31, 2018, with the P2,500,000 increase recognized as a compo-
nent of other comprehensive income. Investor's statement of financial
position before the acquisition of the additional 60% ownership interest
is as follows:

Cash and receivables 26,500

Land 6,000
TOTAL 32,500

Issued equity, 1,000,000

ordinary shares 30,000
Gain on remeasurement of
the equity investment
2,500
designated as FVOCI
(without recycling)
TOTAL 32,500

59. Assume that Investor, in measuring the non-controlling interest in

Investee, the option that proportionate of the value of the net identi-
fiable assets acquired is adopted, the amount of goodwill to be recog-
nized in its consolidated financial statements shall be
A. P6,000,000
B. P3,000,000
C. P13,000,000
D. P12,800,000

60. Investor's consolidated financial statements immediately after the

acquisition of the additional 60% ownership in Investee will show a bal-
ance in its `Investment in Investee' account of
A. P2,500, 000
B. P5,000,000
C. P0.
D. P3,800,000

61. Investor's consolidated financial statements immediately after the

acquisition of the additional 60% ownership in Investee will show a bal-
ance in its `Retained Earnings' account of
A. P2,500,000
B. P30,000,000
C. P11,000,000
D. P12,800,000
Page 36 of 39

62. Investor's consolidated financial statements immediately after the

acquisition of the additional 60% ownership in Investee will show a bal-
ance in its Non-ControllingInterest account of
A. P3,800,000
B. P0
C. P5,000,000
D. 2,500,000
Page 37 of 39

PAUL= 570,000 ROD= 592,500

Page 38 of 39

WE DID IT! MGA GAGA HAHAHA SALAMAT SA SUPPORT I KNOW MAGIGING CPA TAYONG LAHAT
BASTA TULONG TULONG WALANG MAIIWAN SA DECEMBER 2021 PAPASA TAYONH LAHAT MA-
NALIG LANG KAY LORD! FIGHTING!

IFRS 15 SAMPLES
Significant financing component and right of return

An entity sells a product to a customer for P121,000 that is payable 24 months

after delivery. The customer obtains control of the product at contract incep-
tion. The contract permits the customer to return the product within 90 days.
The product is new and the entity has no relevant historical evidence of prod-
uct returns or other available market evidence.

The cash selling price of the product is P100,000, which represents the amount
that the customer would pay upon delivery for the same product sold under oth-
erwise identical terms and conditions as at contract inception. The entity’s
cost of the product is P80,000.

Q1. What is the amount of revenue that shall be recognized when control of the
product transfers to the customer?
A. P100,000
B. P5,042
C. P121,000
D. P0

Q2. During the 3-month right of return period, how much interest income shall
be recognized?
P0
P1,708
P5,125
P2,625

The entity does not recognise revenue when control of the product transfers to
the customer. This is because the existence of the right of return and the lack
of relevant historical evidence means that the entity cannot conclude that it
is highly probable that a significant reversal in the amount of cumulative
revenue recognised will not occur in accordance with paragraphs 56–58 of IFRS
15. Consequently, revenue is recognised after three months when the right of
return lapses.

The contract includes a significant financing component, in accordance with

paragraphs 60–62 of IFRS 15. This is evident from the difference between the
amount of promised consideration of P121,000 and the cash selling price of
P100,000 at the date that the goods are transferred to the customer.

The contract includes an implicit interest rate of 10% (ie the interest rate
that over 24 months discounts the promised consideration of P121,000 to the
cash selling price of P100,000)= 100,000*1.10*1.10 = 121,000. The entity evalu-
ates the rate and concludes that it is commensurate with the rate that would be
reflected in a separate financing transaction between the entity and its cus-
tomer at contract inception. The following journal entries illustrate how the
entity accounts for this contract in accordance with paragraphs B20–B27 of IFRS
15.

Q3. When the product is transferred to the customer, what shall be the account-
ing entry?

A, Recover Asset P100,000

Page 39 of 39

Sales P100,000
B. Accounts Receivable P121,000
Sales P121,000

C. Recover Asset P80,000

Inventory P80,000
D. Accounts Receivable P100,000
Sales P100,000

(a)When the product is transferred to the customer, in accordance with para-

graph B21 of IFRS 15:

Asset for right to recover product to be returned P80,000 [(a)]

Inventory P80,000

(a) This example does not consider expected costs to recover the asset.
(b)During the three-month right of return period, no interest is recognised in
accordance with paragraph 65 of IFRS 15 because no contract asset or receivable
has been recognised.

Q4. When the right of return lapses and the product is not returned what amount
of revenue shall be recognized?
A. P0
B. P121,000
C. P100,000
D. P80,000

(c)When the right of return lapses (the product is not returned):

Receivable P100,000[(a)]
Revenue P100,000

Cost of sales P80,000

Asset for product to be returned P80,000

The receivable recognised would be measured in accordance with IFRS 9. This ex-
ample assumes there is no material difference between the fair value of the re-
ceivable at contract inception and the fair value of the receivable when it is
recognised at the time the right of return lapses. In addition, this example
does not consider the impairment accounting for the receivable.
Until the entity receives the cash payment from the customer, interest revenue
would be recognised in accordance with IFRS 9. In determining the effective in-
terest rate in accordance