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CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
ADVANCED FINANCIAL ACCOUNTING AND REPORTING GERMAN and VALIX PREWEEK May 2025
Number 1
The home office sends merchandise to the branch at a billed price of 150%. In the separate books of the home office, the allowance for overvaluation account had a balance of P60,000. In the combined statement, the ending inventory of the branch was P40,000 of which P10,000 came from outsiders.
What is the overstatement of the cost of goods sold of the branch from the home office merchandise?
A. 20, B. 50, C. 45, D. 5,
Number 2
Which of the following statements regarding Partnership Accounting is FALSE?
A. A partnership loan that was made from a partner who has a capital deficiency may be offset against the debit balance in his capital account. B. Gains and losses incurred at liquidation are distributed to the partners using the residual profit and loss sharing ratios when these amounts represent profits and losses from prior periods that would have been shared using the remainder profit and loss ratios. C. In dividing the profit or loss to the partners, all types of withdrawals made by a partner affects the computation of the ending capital balance used as a basis in providing an allowance as to interest. D. When partners agree to make their capital ratio in conformity with their profit and loss ratio using the transfer of capital method, the partner whose agreed capital is lower than his contributed capital, may receive a payment from the partner whose agreed capital is higher than his contributed capital.
Number 3
At the time of corporate liquidation, which of the following unsecured claims with priority shall be settled first? A. Liability for taxes B. Liability for corporate crime C. Liability for employee benefits D. Liability for corporate torn
Number 4
In every corporation liquidation, which type of credit will not share from the free assets of the corporation?
A. Unsecured claims with priority B. Unsecured claims without priority C. Fully secured claims D. Partially secured claims
Number 5
Soon-to-be partners, A and B will contribute the following: A will contribute cash, P750,000, and B will contribute a Building with a carrying amount of P500,000 and an agreed value of P600,000. The building has a mortgage in the amount of P50,000, but it will be paid personally by B. One of the provisions, of their agreement is upon formation the capital balances of the partners will be equal.
What is the contributed capital of B?
A. 500, B. 550, C. 600, D. 675,
Number 6
Partners A and B formed a partnership on January 1, 2025, with original capital contributions of P1,000,000 and P750,000 respectively. They agreed to distribute profits and losses with the following provisions:
a) 10% on their original capital contributions b) Monthly salaries of P7,500 and P10,000 respectively for A and B c) The remainder shall be shared at 60:
At the end of the year, due to unfavorable circumstances, the partnership generated a net loss of P150,000.
What is the share of A in the net loss?
A. 49, B. 131, C. 19, D. 101,
Number 7
The following were ascertained for the given period in the statement of realization and liquidation:
Assets to be realized 50, Assets realized 40, Assets not realized 10, Increase in asset 25, Liabilities liquidated 17, Liabilities not liquidated 20, Liabilities assumed 12, Liabilities to be liquidated 25, Supplementary credits 85, Supplementary debits 40,
What is the gain or loss for the period?
A. 20,000 gain B. 20,000 loss C. 50,000 gain D. 50,000 loss
Number 8
Under IFRS 15, in which of the following instances will the revenue from contracts with customers be recognized at a point in time instead of over time?
A. When the customer simultaneously receives and consumes all of the benefits provided by the entity as the entity performs. B. When the entity’s performance creates or enhances an asset that the customer controls as the asset is created. C. When 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. When the entity has transferred physical possession and legal title to the asset to the customer.
Number 15
In a job order system, direct labor costs usually are recorded initially as an increase in A. Factory overhead applied B. Factory overhead control C. Finished goods control D. Work in process control
Number 16
Partners A, B, and C have capital balances of P150,000, P100,000, and P50,000 respectively. The following were also loan balances present in the partnership books: a loan to A in the amount of P25,000 and a loan from C in the amount of P15,000. Partner B decided to retire from the partnership and they agreed to pay P85,000 for his interest. They share profits and losses 30:30:40 respectively.
Assuming there was an asset that needed to be revalued, what is the capital balance of Partner C after retirement?
A. 50, B. 70, C. 58, D. 30,
Number 17
Partners A, B, and C have capital balances of P300,000, P200,000, and P100,000 respectively. The total liabilities of the partnership were P150,000 and the cash balance was P250,000. They agreed to liquidate the partnership. Non-cash assets were sold at a gain of P125,000 and liquidation expenses were paid in the amount of P40,000. They share profits and losses 40:40:20.
What is the amount of cash that Partner B received after liquidation?
A. 200, B. 234, C. 166, D. 184,
Number 18
Partners A, B, and C have capital balances of P300,000, P200,000, and P100,000 respectively. The total liabilities of the partnership were P150,000 and the cash balance was P250,000. They agreed to liquidate the partnership. Only P150,000 of the non-cash assets were sold for P50,000 and liquidation expenses were paid in the amount of P40,000. Cash withheld for future liquidation expenses was P10,000. They share profits and losses 40:40:20.
What is the amount of cash that Partner C received after the 1st installment liquidation?
A. 72, B. 100, C. 28, D. 0
Number 19
Book value Estimated realizable value
Cash 50,000 50, Inventory 40,000 35, Building 250,000 375,
The inventory was pledged to accounts payable in the amount of P25,000. The building was pledged to a mortgage payable including its interest in the amount of P400,000. Salaries and taxes had a total amount of P100,000. Other liabilities not mentioned were P75,000.
What was the amount paid to the holder of the mortgage payable? A. 400, B. 250, C. 375, D. 0
Numbers 20 and 21
At the beginning of 2025, the company enters into a contract to build an establishment for a client. The contract price (CP) for the said establishment is P4,000,000. The client has given the company until the end of 2027 to finish the establishment. The following data were ascertained:
2025 2026 2027
Costs incurred to date P1,250,000 P2,250,000 P3,000,
Estimated costs to complete P1,875,000 P562,500 -
20. Under IFRS 15, what is the realized gross profit/(loss) for the year ended December 31, 2025? A. 875, B. 850, C. 350, D. 1,100, 21. Under IFRS 15, what is the construction-in-progress as of December 31, 2026? A. 4,800, B. 3,200, C. 3,550, D. 4,450,
Number 22
On January 1, 2025, a franchisor entered into a franchise agreement with a franchisee which requires the latter to pay a non-refundable upfront fee of P400,000 at the signing of the contract and ongoing payment of royalty equal to 5% of the sales of the franchisee. On the date of the signing of the contract, the franchisee paid the non-refundable upfront fee. As part of the franchise agreement, the franchisor shall render the following performance obligations which are considered separate and distinct from one another: a) Training ten personnel of the franchisee with stand stand-alone selling price of P100,000. b) Construction of the franchisee's building and landscape with stand stand-alone selling price of P400,000. c) Delivery of 1,000 units of raw materials to franchisee with stand stand-alone selling price of P300,000. d) Allowing the franchisee to access the franchisor's trademark and tradename for a term of 10 years starting from January 1, 2025, with stand-alone. selling price of P200,000.
As of the end of December 31, 2025, the accounting department of the franchisor obtained the following information:
a) The franchisor was able to train seven out of ten personnel of the franchisee. b) The percentage of completion of construction of the franchisee's building and landscape was estimated by the engineer and architect at 90% although the building was fully completed because the landscape was not yet started. c) 600 units of raw materials were already delivered to the franchisee. d) For the year ended December 31, 2025, the franchisor reported sales revenue amounting to P50, because it already started operation upon the construction of the building on October 1, 2025.
What is the joint cost allocated to Product A? A. 48, B. 44, C. 49, D. 51,
Number 28
Entity A consigned his goods costing P25,000 to Entity B. Entity A paid freight of P1,500 to ship the goods to Entity B. At the end of the period, only 40% of the consigned goods remained in the shop of Entity B. Total cash sale received by Entity B from the customer was P25,000. Entity B incurred and paid a total of P750 freight to deliver the goods to the customer. Also the terms of their contract were 10% commission based on sales and any payment made by Entity B was to be reimbursed by Entity A. What is the net income of Entity A at the end of the period? A. 11, B. 13, C. 8, D. 5,
Numbers 29 and 30
A certain company manufactures a certain product and uses a job order costing system. There is always spoilage during production. The following are the costs related to the current production:
Total cost exclusive of allowance for spoilage P50,
Allowance for spoilage P10, Units produced 5,
At the end of the production, 100 units are spoiled and the total cost is P4,000. The spoiled units can be sold for P3,000.
29. Assuming the spoilage is due to internal failure, what is the cost transferred to the Finished Goods Inventory account? A. 46, B. 57, C. 56, D. 57, 30. Assuming the spoilage is due to exacting specifications, what is the cost per good unit? A. 11. B. 9. C. 11. D. 9.
Number 31
BPI bank has the following traceable costs and cost drivers: Activities Traceable costs Budgeted cost driver New accounts P250,000 1,000 accounts Deposits P180,000 400,000 deposits Loans P135,000 900 applications The activities were being used by the Ayala branch and Ortigas branch:
Activities Ayala Ortigas
New accounts 200 accounts 400 accounts Deposits 40,000 deposits 20,000 deposits
Loans 100 applications 160 applications
What amount of Deposits will be assigned to the Ortigas branch?
A. 60, B. 9, C. 120, D. 18,
Number 32
The cost of goods sold is an A. expired product cost
B. unexpired product cost
C. expired period cost
D. unexpired period cost
Numbers 33 and 34
Andi Manufacturing Corp. uses a process costing system to account for its production and the policy is to use the Weighted Average method. The following data are ascertained for the period:
Units Beginning inventory (45% complete) 7, Started 25, Ending inventory (60% to complete) 4, Completed 26,
The normal spoilage is 10% of the units started. All of the materials were added at the start of production.
33. What is the EUP for Direct materials?
A. 32, B. 30, C. 25, D. 26,
34. What is the EUP for Conversion?
A. 27, B. 28, C. 30, D. 30,
Number 35
The Home Office in Manila established a branch in Bacolod. At the end of the year the reciprocal account in the books of Manila was P175,000, however, the following transactions were not recorded by the receiving party:
a) A debit memo in the amount of P5,000 was sent by Bacolod b) A credit memo in the amount of P10,000 was sent by Manila c) A credit memo in the amount of P15,000 was sent by Bacolod
What is the adjusted balance of the reciprocal account at the end of the year?
A. 175, B. 185, C. 165, D. 195,
Number 40
GHI Company acquired 75% of EFG Company’s outstanding voting shares for P2,550,000 cash. At that date, the acquired company reports identifiable assets with a book value of P5,200,000 and a fair value of P6,400,000, and it has liabilities with a book value and fair value of P3,580,000.
Compute the goodwill or (gain on bargain purchase) arising on consolidation if non-controlling interest is measured at fair value and control premium of P150,000 is excluded in the price paid.
A. 580, B. 530, C. (435,000) D. 730,
Number 41
KLM Corporation paid P18,000,000 for a 90% interest in CDE Corporation on January 1, 2024. The excess of the aggregate amount over the book value of the identifiable net assets of the acquired company amount to P960,000. The excess was allocated as follows: P640,000 to an undervalued equipment with a five-year remaining useful life and the balance to goodwill. Non-controlling interest is measured at fair market value. Net income of KLM in 2024 is P8,000,000; Net income of CDE in 2024 is P2,000,000. Dividends declared by CDE to KLM amount to P192,000.
Compute the consolidated net income in 2024.
A. 9,872, B. 9,360, C. 9,680, D. 9,532,
Number 42
MNO owns 70% of DEF Company’s outstanding ordinary shares. DEF Company, in turn, owns 20% investment in RST Corporation. During 2024, MNO earned a net income of P32,060,000 while DEF suffered a loss of P6,000,000 excluding its share in the earnings of associates, if any. RST reported a net income of P4,350,000. DEF declared dividends of P2,500,000 from its accumulated profits in previous years.
Compute the consolidated net income attributable to controlling interest for the year 2024.
A. 28,469, B. 26,930, C. 26,719, D. 26,110,
Number 43
DEF Corp. owns 70% of PQR Corp’s ordinary shares. On August 1, 2024, DEF Corp. acquired a building from PQR Corp. for P40,600,000. The carrying amount of the building is P23,800,000 and has a remaining life of 8 years.
Due to this intercompany transaction, compute the net adjustment (increase/decrease) in the consolidated net income attributable to controlling interest for 2024
A. 15,925,000 decrease B. 14,700,000 increase C. 11,147,500 decrease D. 10,290,000 increase
Number 44
UVW Corp. owns 80% of FGH Corp’s ordinary shares. On June 1, 2024, FGH Corp. sold machinery to UVW Corp. for P21,000,000. The carrying amount of the machinery is P22,800,000 and has a remaining life of 5 years.
Due to this intercompany transaction, compute the net adjustment (increase/decrease) in the non- controlling interest in net income 2024 A. 1,590,000 decrease B. 318,000 increase C. 288,000 decrease D. 1,272,000 increase
Number 45
RST Company acquired a 75% interest in JKL Company in 2022. For years ended December 31, 2023, and 2024, JKL reported net income of P22,960,000 and P26,000,000, respectively. During 2023, JKL sold merchandise to RST for P6,080,000 at a cost of P4,160,000. Two-fifths of the merchandise was later resold by RST to outsiders for P2,800,000 during 2024. In 2024, RST purchased merchandise from JKL for P7,040,000 at a profit of P2,560,000. One-fourth of the merchandise was resold by RST to outsiders for P2,160,000 during 2024.
Compute the non-controlling interest in net income in 2024 A. 6,692, B. 6,628, C. 6,308, D. 6,212,
Number 46
Condensed statements of the financial position of HIJ Corp. and LMN Corp. as of December 31, 2023, were as follows:
HIJ LMN Current assets P 175,000 P 65, Noncurrent assets 725,000 425,
Liabilities P 85,000 P 35, Ordinary shares, P20 par 550,000 300, Share premium 5,000 25, Retained earnings 260,000 130,
On January 1, 2024, HIJ Corp. issued 29,000 shares with a market value of P22/share for the identifiable assets and liabilities of LMN Corp. The book value reflects the fair value of the assets and liabilities, except that the noncurrent assets of LMN have a fair value of P630,000, and P30, overstates the noncurrent assets of HIJ. Contingent consideration to the extent probable on the date of acquisition amounts to P15,000. HIJ also paid for the share issue costs worth P84,000 and other acquisition costs of P59,000.
Compute the retained earnings in the books of the surviving company immediately after the merger
A. 251, B. 201, C. 192, D. 187,
Number 50
Which of the following statements regarding foreign currency transactions is true? A. Appreciation in a foreign currency result in a foreign exchange loss to an entity with liability exposure. B. Foreign currency transactions result in an accounting exposure. C. The statement of financial position accounts is remeasured at year-end. D. The strengthening of the local currency will result in a loss to an exporter.
Number 51
On December 1, 2024, HIJ Company paid cash to purchase a 90–day “at the money” call option for 375,000 Canadian Dollars. The option’s purpose is to protect an exposed liability of 375,000 CAD relating to an inventory purchased, received on December 1, 2024, and to be paid on March 1, 2025.
12/1/24 12/31/24 3/1/ Spot rate 41.22 41.56 41. Fair value of call option P74,000 P156,000?
Compute the gain or loss on option contract due to change in the time value on December 31, 2024 A. 28,500 loss B. 127,500 gain C. 83,000 gain D. 44,500 loss
Number 52
On October 1, 2024, QRS Company paid a premium to purchase a 120-day “at the money” put option for 640,000 Malaysian Ringgits. The option’s purpose is to protect an exposed asset of 640,000 MYR relating to a merchandise sold, delivered on October 1, 2024, and to be collected on January 31, 2025.
10/1/24 12/31/24 1/31/ Spot rate 13.86 13.77 13. Fair value of put option P14200 P182,500?
Compute the gain or loss on option contract due to change in the effective portion in 2025 A. 99,300 loss B. 83,200 gain C. 25,600 gain D. 124,900 loss
Number 53
On January 1, 2024, NOP Inc. paid a premium to acquire a put option from a writer. This is in relation to a forecasted sale of merchandise worth $390,000. (option price = P54.965)
1/1/24 3/31/24 6/30/ Spot rate P54.934 P54.908 P54. Fair value of option P58,800 P68,400 P83,
Compute the gain/loss affecting other comprehensive income on the first quarter of 2024 A. 10, B. (540) C. 9, D. (10,140)
Numbers 54 and 55
XYZ Corporation, a trading company located in Manila, imports merchandise from foreign suppliers and exports its own products to other foreign customers. The unadjusted accounts denominated in foreign currencies on December 31, 2024 were as follows:
● Accounts receivable from the sale of merchandise on December 10 to RST Corporation and due on January 15, 2025. Billing is for 750,000 foreign currencies amounting to P517, ● Accounts payable to JKL Corporation for merchandise received December 5 and payable on January 20, 2025. Billing is for 1,375,000 foreign currencies amounting to P976,
Applicable exchange rates on the above transactions were as follows:
2024 Closing rate P 0. January 2025 selling spot rate 0. January 2025 buying spot rate 0.
54. The net exchange gain (loss) from the two transactions that will be included in the statement of comprehensive income of XYZ Corporation for 2024
A. (33,750) B. 33, C. 41, D. 48,
55. The net exchange gain (loss) from the two transactions that will be included in the statement of comprehensive income of XYZ Corporation for 2025 A. 10, B. (10,625) C. (3,125) D. (6,875)
Number 56
TUV Company sold merchandise for €125,000 to a French company on December 1, 2024. Collection in Euros was due on February 28, 2025. On the same date, TUV entered a 90-day forward contract to sell €125,000 to a bank. Exchange rates for Euros on different dates are as follows:
spread is P0.15 12/1/24 12/31/24 2/28/ Selling spot rate P 61.55 P 62.85 P 62. 30-day forward selling rate 62.45 62.65 63. 60-day forward selling rate 61.95 62.35 62. 90-day forward selling rate 60.75 62.75 63.
Compute the gain or loss on the forward contract on December 31, 2024.
A. 200,000 gain B. 200,000 loss C. 37,500 gain D. 37,500 loss
Numbers 60 and 61
On January 15, 2024, the Department of Science and Technology received a P15,200,000 appropriation from the national government for the acquisition of laboratory equipment. On January 30, 2024, the said Department received the obligational authority which is 75% of the expenditure authority from the Department of Budget and Management. On February 9, 2024, the DOST entered a commitment with the accredited supplier for the purchase of the laboratory equipment with an agreed contract price of 90% of the amount authorized. On February 27, 2024, the Department received the disbursement authority from the Department of Budget and Management in the amount equal to the agreed contract price. During the month of March there were contract adjustments and modifications resulting in total disbursements equivalent to only 80% of the original contract price.
60. Compute the amount of allotment
A. 15,200, B. 11,400, C. 10,260, D. 13,680,
61. Compute the amount credited to Subsidy Income from National Government
A. 11,400, B. 10,260, C. 15,200, D. 13,680,
Numbers 62, 63, and 64
LMN College, a not-for-profit private higher educational institution had the following contributions and activities during 2024:
a. Received P1,280,000 cash from a benefactor. Although no specific instruction was given by the donor as to its use, the Board of Trustees voted to set aside the said fund for the acquisition of air purifier units in the administration office. b. Received P120,000 worth of office supplies from a publisher, designated by the board to be used for its operations. As of the end of the year, three-fourths of the supplies were used up. c. Received P1,600,000 cash with donor restriction intended for administrative related training and conferences. During the year, P1,040,000 of this amount was used for several training and conferences. d. Received P3,200,000 cash and equity securities with a fair value of P800,000 from the alumni association. The donor stipulated that the amount of cash be used for the acquisition of the vending machine. The donor explicitly stated that only the investment income from the equity securities can be used by LMN College which was internally imposed for use in current operations. e. Received an unconditional pledge from donors worth P720,000. Based on past experience, 5% of the pledges are considered doubtful of collection. f. During the specific period, the equity securities from the alumni association yielded earnings amounting to P64,000. LMN College also purchased P1,400,000 worth of a vending machine at the end of the year. g. Mr. CIG, a Certified Public Accountant, rendered LMN College its accounting services for free. Mr. CIG normally charges his clients P200,000 per engagement for such service.
Compute the following in the Statement of Activities for the year ended 2024:
62. Total unrestricted contributions revenue
A. 2,320, B. 2,384, C. 3,840, D. 1,994,
63. Change in the temporarily restricted net assets
A. 4,360, B. 6,800, C. 2,360, D. 560,
64. Change in the unrestricted net assets
A. 4,434, B. 3,458, C. 4,634, D. 3,394,
Number 65
On April 1, 2024, SME A and SME B acquired 40% (each) of the ordinary shares that carry voting rights at a general meeting of shareholders of Entity Z for P640,000 and transaction cost of P20,000. SME A and SME B immediately agreed to share control over Entity Z. For the year ended December 31, 2024, Entity Z recognized a loss of P520,000. On December 30, 2024, Entity Z paid a dividend of P50,000 declared in the prior year. On December 31, 2024, the fair value of each venturers’ investment in Entity Z was P509,000 and cost to sell amounted to P15,000. The amount of value in use is P490,000. There is a published price quotation for Entity Z.
The effect in profit or loss to be reported by SME A in 2024 using the equity model
A. 146, B. 156, C. 208, D. 166,
Numbers 66 and 67
On January 1, 2024, Entity A and Entity B incorporated Entity C by investing P1,500,000 and P300,000 for a capital interest ratio of 60:40. The contractual agreement of the incorporating entities provided that the decisions on relevant activities of Entity C will require the unanimous consent of both entities. Entity A and Entity B will have rights to the net assets of Entity C.
In 2024, Entity C sold merchandise to Entity A resulting in a gross profit of P200,000. Only 30% of the said inventories were sold by Entity A to third parties during the same year and the remaining inventories were sold in 2025. On September 1, 2024, Entity C sold machinery to Entity B resulting in a loss of P435,000. The remaining life of the machinery was 8 years
Entity C reported net income of P600,000 in 2024 and declared dividends in 2024 in the amount of P187,500.
66. Compute the amount of investment income/(loss) to be reported by Entity B for the year ended December 31, 2024. A. 240, B. 406, C. 414, D. 392, 67. Compute the amount of Investment in Entity C to be reported by Entity A on December 31, 2024. A. 1,663, B. 1,776, C. 1,627, D. 1,711,
