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CPA REVIEW SCHOOL OF THE PHILIPPINES
MANILA
ADVANCED FINANCIAL ACCOUNTING AND REPORTING Sunday, May 4, 2025 Final Preboard Examination 1:00 p.m to 4:00 p.m.
Number 1
Book value Estimated realizable value Cash 120,000 120, Inventory 90,000 85, Building 800,000 950,
The inventory was pledged to accounts payable in the amount of P60,000. The building was pledged to a mortgage payable in the amount of P900,000, and the mortgage has an interest in the amount of P80,000. Salaries and taxes had a total amount of P120,000. Other liabilities not mentioned were P75,000. (Round recovery percentage to two decimal places, ex, 0.88888 = 88.89%)
What is the amount of the net free assets?
A. 25, B. 30, C. 195, D. 0
Number 2
The following data were taken from the statement of affairs: The note payable was secured by an equipment with a book value of P160,000 and an estimated realizable value of P150,000. The amount received by the holder of the note payable was P184,000. Total unsecured creditors without priority were P180,000, and the estimated deficiency was P57,600. The interest on the note was P15,000.
What is the book value of the note payable?
A. 150, B. 250, C. 200, D. 185,
Number 3
The following were ascertained for the Statement of Realization and Liquidation for the month of April:
Increase in assets 30, Liabilities paid 85, Increase in liabilities 25, Liabilities to be liquidated, May 1 115, Assets realized 250, Assets not realized, March 31 300, Supplementary credits 45, Supplementary charges 35,
The equity on April 1 had a balance of (P30,000), and the equity on April 30 had a balance of (P20,000).
What is the ending cash balance?
A. 15, B. 35, C. 75, D. 0
Numbers 4, 5, and 6
The entity entered into a three-year construction contract, starting in 2025, with a fixed contract price. In 2025, the entity debited construction-in-progress in the amount of P2,500,000 for the actual cost incurred, and it also realized P700,000 gross profit in the same year. In 2025 and 2026, the entity debited accounts receivable in P3,200,000 and P3,600,000, respectively. In 2026, the entity recorded a contract liability (excess billings) in the amount of P 30,000. Also, in the same year, the percentage of completion was 85%, and the estimated cost to complete was P1,230,000. The following expenses were also incurred in 2025 and 2026, P80,000 and P15,000, respectively.
4. Under IFRS 15, what is the construction-in-progress balance as of 2026? A. 3,200, B. 3,570, C. 6,770, D. 3,170, 5. Under IFRS 15, what is the realized gross profit or (loss) in 2026? A. (200,000) B. (900,000) C. 700, D. (2,130,000) 6. Under IFRS 15, what is the construction revenue in 2026? A. 3,600, B. 3,200, C. 6,800, D. 3,570,
Numbers 7 and 8
Entity A purchased 100,000 units costing P1,000,000 and paid P10,000 freight for its shipment. After a day, the company consigned these goods to Entity B, stating that the consignee is entitled to 10% of the revenue from all sold units. The shipment from the consignor to the consignee amounted to P5, with payment terms freight collect. With a standard retail price of P19 each, the consignee remitted a total of P1,306,000. Other notable expenses paid by the consignee on the consignor’s behalf were P12,000 advertising expense, P3,000 delivery charges to customers, and P7,800 installation fee on the customer’s premises.
7. What is the cost of goods still out on consignment? A. 220, B. 221, C. 222, D. 223, 8. What is the net income from the sale of consigned goods? A. 519, B. 514, C. 509, D. 504,
Number 9
Statement 1: The consolidated financial statements are statements wherein the parent and subsidiary are viewed as separate entities. Statement 2: Under the full goodwill concept, the parent and subsidiary will have a share in the impairment loss.
A. Statement 1 is TRUE and Statement 2 is FALSE B. Statement 1 is FALSE and Statement 2 is TRUE C. Both statements are TRUE D. Both statements are FALSE
Numbers 14 and 15
At the end of the year, December 31, 2025, the Branch Current account had a balance of P105,000. However, there were transactions discovered to have errors.
The home office shipped merchandise to the branch at a cost of P58,000, and the merchandise was still in transit as of December 31, 2025.
The branch paid the accounts payable of the home office in the amount of P9,800, and the home office acknowledged the payment as P8,900 in its books.
The branch collected the home office’s customer in the amount of P13,400, but the home office was not notified of the said transaction.
14. What is the adjusted balance of the reciprocal accounts?
A. 117, B. 92, C. 104, D. 118,
15. What is the unadjusted balance of the Home office current account?
A. 175, B. 34, C. 59, D. 117,
Numbers 16 and 17
Manila Company decided to open a branch in Clark. Manila Company credited the Shipments-to- Branch account in the amount of P900,000 and consistently has a 20% markup on cost. All accounting records are kept at the home office. The branch submitted the following report summarizing the operations for the year ended December 31, 2025: Sales on account 2,400, Sales on cash basis 1,000, Collections of accounts receivable 1,600, Expenses paid 560, Expenses unpaid 240, Purchases from outside suppliers for cash 1,000, Inventory on hand, December 31, 80% from the home office 600, Remittance to the home office 1,100,
16. What amount should Manila Company report as Clark branch inventory on December 31, 2025, at cost? A. 520, B. 400, C. 500, D. 200, 17. What is the net income reported by the Clark branch for the year ended December 31, 2025?
A. 1,360, B. 1,220, C. 1,120, D. 1,380,
Number 18
In a Joint Venture, SME, the entity elects to choose the fair value model, but the fair value cannot be reliably determined without undue cost or effort, the entity may use
A. Cost B. Equity C. Fair value D. None
Numbers 19 and 20
On January 1, 2025, Entity A acquired 70% of the outstanding shares of Entity B, and the result was goodwill. It was the policy that they would measure the non-controlling interest at a minimum. The book value of the shareholders' equity of Entity B was P340,000 on January 1, 2025. The book value of the assets and liabilities of Entity B already equals the fair value on the date of acquisition, except, an equipment which had an excess of book value over fair value in the amount of P25,000. The equipment had a remaining life of 1 year.
The following data were ascertained on December 31, 2025:
Income for Entity A's own operations was P580,000, and the income for Entity B's continuing operations was P280,
Entity B declared dividends in the amount of P140,
Goodwill was impaired in the amount of P40,
19. What is the consolidated net income attributable to Entity A for the year ended December 31, 2025? A. 655, B. 718, C. 765, D. 753, 20. What is the non-controlling interest net income for the year ended December 31, 2025?
A. 151, B. 91, C. 79, D. 139,
Numbers 21 and 22
Entity A acquired a 60% interest in Entity B on June 1, 2025, for P500,000. On the date of acquisition, the result of the business combination was a gain on bargain purchase in the amount of P55,000. The book value of the net assets of Entity B on the date of acquisition was composed of Ordinary shares in the amount of P400,000 and Retained earnings in the amount of P450,000.
The assets and liabilities of Entity B were already at their fair values, except for an equipment item which is overstated by P50,000 and an inventory which is understated by P125,000. The equipment had a remaining life of 4 years. At the end of 2025, 30% of the inventory had not been sold.
The following were the balances of the net income and dividends in the year 2026:
Entity A Entity B Net income 450,000 130, Dividends paid 130,000 90,
In the consolidated statements, the non-controlling interest balance on December 31, 2025, was P388,000.
21. What is the consolidated net income attributable to controlling interest for the year ended December 31, 2026? A. 459, B. 480, C. 448, D. 544, 22. What is the non-controlling interest net asset on December 31, 2026?
A. 350, B. 371, C. 414, D. 394,
Numbers 27 and 28
On January 1, 2025, Entity A acquired 55% of the outstanding shares of Entity B at book value. On March 1, 2025, Entity B bought equipment in the amount of P200,000 from Entity A; the equipment had a carrying amount of P140,000 and a remaining life of six years. On September 1, 2025, Entity A purchased a machine for P350,000 from Entity B; the machine had an original cost of P800,000 and an accumulated depreciation of P300,000. The machine had a remaining life of eight years. On December 1, 2025, Entity B also sold another equipment to Entity C for P190,000, and the said equipment had a carrying amount of P120,000. The said equipment had a remaining life of five years. On December 31, 2025 Entity B declared dividends of P240,
The following were the balances in the separate books on December 31, 2025:
Entity A Entity B Net income, excluding any gain or loss on sale 800,000 550, Operating expenses 50,000 35, Gain on sale 120,000 88, Loss on sale 76,000 161,
27. What is the consolidated net income attributable to Entity A for the year ended December 31, 2025? A. 1,001, B. 997, C. 963, D. 932, 28. What is the net increase or (decrease) in the consolidated operating expenses in 2026?
A. 2,083 net decrease B. 8,750 net increase C. 3,250 net decrease D. 5,250 net decrease
Numbers 29 and 30
The following balances were ascertained in the trial balance of a US Company at December 31, 2025, denominated in USD:
DEBIT CREDIT
Total assets 35,000 Total liabilities 15, Cost of sales 9,500 Ordinary shares 5, Operating expenses 2,250 Share premium 3, Dividends (declared at year-end) 1,750 Retained earnings (01/01/2025) 9, Sales 15,
TOTAL 48,500 TOTAL 48,
The following exchange rates were made available at year-end:
Closing $1 = P57. Historical $1 = P59. Weighted average $1 = P58. Date of issuance $1 = P56.
29. What are the translated retained earnings in PHP on December 31, 2025?
A. 619, B. 614, C. 611, D. 621,
30. What is the cumulative translation adjustment gain or loss on December 31, 2025? A. 3,500 debit B. 700 debit C. 6,500 credit D. 3,700 credit
Numbers 31, 32 and 33
On January 1, 2025, Entity A invested P1,400,000 cash in a joint venture for a 40% interest. The following were ascertained for the next 3 years:
Year Net Income/(Net Loss) Dividend Distribution
2025 P1,000,000 P300, 2026 (P6,000,000) - 2027 P4,000,000 P800,
31. What is the balance of the Investment in the joint venture account on December 31, 2025? A. 1,400, B. 1,680, C. 1,800, D. 1,920, 32. What is the Investment loss for the year ended December 31, 2026? A. 1,680, B. 2,400, C. 6,000, D. 0 33. What is the Investment income for the year ended December 31, 2027? A. 1,600, B. 1,920, C. 880, D. 1,200,
Number 34
Statement 1: In the working paper, recording the realized loss from the intercompany sale of equipment involves a credit to depreciation expense. Statement 2: In the working paper, recording the realized loss from the sale of land, it involves a debit to loss on sale. A. Statement 1 is TRUE and Statement 2 is FALSE B. Statement 1 is FALSE and Statement 2 is TRUE C. Both statements are TRUE D. Both statements are FALSE
Number 35
A US Company is a subsidiary of a Japanese Firm. The selected presentation currency of the Japanese Firm is Japanese Yen. What is the functional currency of the US Company? A. US Dollar B. Japanese Yen C. Philippine Peso D. Any currency the US Company chooses
Number 42
Which of the following statements regarding government accounting is false?
A. Notice of Cash Allocation is issued by the Department of Budget and Management. B. The Commission on Audit prescribed the Government Accounting Manual. C. The Bureau of Treasury deposits the funds to the agencies. D. The Commission on Audit is involved in the Budget Legislation.
Number 43
Which of the following statements regarding government accounting is false?
A. Disbursements must not exceed the obligation. B. Obligation shall arise only after the release of the allotment. C. Depreciation is an object of expenditure. D. Receipts are monitored in the registries.
Number 44
The receipt of a subsidy from the national government or other government agencies
A. Results in the recognition of revenue B. Results in the recognition of an expense C. Results in the recognition of a liability D. Results in a memorandum entry
Number 45
A private not-for-profit entity receives three cash donations:
a. One gift of P70,000 is board-designated b. One gift of P90,000 is externally imposed to pay the salary of the organization’s workers. c. One gift of P120,000 is to be retained with the income to provide food for needy families.
Which of the following statements is false?
A. Temporarily restricted net assets have increased by P90,000. B. Restricted net assets have increased by P210, C. Unrestricted net assets have increased by P70,000. D. The salaries are deducted from the temporarily restricted net assets.
Number 46
St. Charity College, a private, not-for-profit college, received the following contributions in 2025:
I. P3,750,000 from alumni for the construction of a consultation room to be constructed in 2026. II. P750,000 from a donor who stipulated that the contribution be retained and the earnings be used for scholarships. As of December 31, 2025, earnings from investment amounted to P37,500.
For the year ended December 31, 2025, what amount of these contributions should be reported as restricted revenues on the statement of activities?
A. 37, B. 3,787, C. 3,750, D. 4,537,
Number 47
Atty. XYZ, a lawyer, has rendered legal services for a nonprofit organization for five months. He fills the corporate lawyer position, which normally pays P600,000 annually. Atty. XYZ agreed to assist the organization’s legal matters at no cost.
How should these donated services be recorded?
A. Debit to Salary expense, P600, B. Debit to Pledge Receivable, P600, C. Credit to Contributions Revenue, P250, D. Credit to Salary Payable, 250,
Number 48
Refer to the following direct buying rates against the peso:
JPY (P0.10 spread) 10/31/25 11/30/25 12/31/25 1/31/26 2/28/ Spot rate 0.55 0.50 0.45 0.44 0. 30 days forward 0.60 0.55 0.46 0.42 0. 60 days forward 0.70 0.47 0.59 0.46 0. 90 days forward 0.85 0.84 0.60 0.38 0. 120 days forward 0.90 0.77 0.44 0.48 0.
On November 30, 2025, the Ortigas Company entered a purchase commitment with a Japanese Firm for 1,000,000 Japanese Yen, delivery on January 31, 2026. On the same date, the Ortigas Company entered a forward contract with a bank to hedge against unfavorable fluctuations in the foreign exchange rates.
How much will Ortigas Company pay the bank on January 31, 2026?
A. 470, B. 440, C. 570, D. 540,
Number 49
Refer to the following direct selling rates against PHP:
KRW 10/31/25 11/30/25 12/31/25 1/31/
Spot rate 0.042 0.043 0.050 0.
On October 31, 2025, Cebu Corporation purchased merchandise from a firm in Korea on account for KRW3,000,000, payment due on January 31, 2026. On the same date, to hedge against the foreign exchange risk exposure, Cebu Corporation purchased an at-the-money call option from a bank to buy KRW3,000,000 on January 31, 2026, for PHP21,000. The fair value of the option contract on November 30, 2025, and December 31, 2025, amounted to P23,000 and PHP30,000, respectively.
Compute the gain or loss on the hedging instrument as to the time value for the month ended December 31, 2025, in the books of Cebu Corporation. A. 21,000 gain B. 15,000 loss C. 24,000 gain D. 14,000 loss
Number 53
On September 1, 2025, Manila Company sold merchandise to a foreign customer. The said transaction
is denominated in 25,000 USD, due on January 31, 2026. Direct exchange rates were as follows:
Buying Rate Selling Rate September 1, 2025 39.25 39. December 31, 2025 38.40 38. January 31, 2026 37.50 37.
Compute the gain or loss recognized by Manila Company on the hedged item on December 31, 2025. A. 21,250 gain B. 15,000 loss C. 21,250 loss D. 0
Number 54
The DP Company owns 80% of the HK Company. On their separate financial statements, DP Company has Trade Receivables of P13,650,000, including P336,000 due from HK, and HK Company has Trade Receivables of P4,592,000, including P462,000 due from YG.
What figure should appear for trade receivables in DP’s consolidated statement of financial position? A. 18,242, B. 17,444, C. 17,906, D. 0
Number 55
MNO Corporation acquired all the identifiable net assets of TUV Company on August 1, 2025. TUV Company reported assets with a book value of P7,600,000 and liabilities of P4,450,000. The total consideration of the surviving company is composed of cash amounting to P550,000 and bonds traded at 125. The acquiring company determined that the fair value of the machinery of TUV was P150, higher than its book value, and P60,000 overvalued the recorded amount of the inventory. All other identifiable assets and liabilities reported by the acquired company approximated the recorded amounts. The business combination resulted in a goodwill amounting to P920,000.
Compute the face amount of the bonds issued under the merger.
A. 2,888, B. 2,984, C. 2,648, D. 2,744,
Number 56
PR and CD formed a partnership on January 1, 2025, by contributing capital of P4,200,000 and P600,000, respectively. They agreed to share profits and losses at 70% and 30%, respectively. CD manages the partnership and is given a salary of P80,000 per month and a bonus of 20% of net income. The interest of 5% of the beginning capital is to be provided to each partner, and any remainder is to be divided according to their profit and loss ratio. For the year ended December 31, 2025, the partnership generated a net income of P768,000 after salaries, interests, and bonuses to partner(s).
Compute the share of CD in the net income of the partnership.
A. 1,712, B. 1,236, C. 1,220, D. 1,682,
Number 57
DEF Corp. acquired an additional 45% of the outstanding shares of GHI Company on October 1, 2025. It was noted that DEF owned 10% of the outstanding shares of GHI, amounting to P5,000,000 as of June 30, 2025, and accounted as an investment in equity securities through profit or loss.
The following information shows the book value and fair value of GHI Company on October 1, 2025.
Book Value Fair Value Total Assets 60,350,000 76,500, Total Liabilities 10,700,000 10,700,
On October 1, 2025, DEF Corp. paid P33,750,000, inclusive of the control premium of P1,250,000. The fair value of non-controlling interest is P27,500,000.
Compute the goodwill on October 1, 2025.
A. 7,950, B. 5,060, C. 2,950, D. 4,782,
Number 58
Partners RJ, CM, and AF decided to liquidate their partnership. The partnership’s statement of financial position reveals the following:
Cash P1,000,000 Liabilities P1,200, Other assets 10,000,000 RJ, Capital 3,600, CM, Capital 4,800, AF, Capital 1,400,
The partners share profits and losses in a 4:4:2 ratio, and all partners are personally solvent. AF received P1,960,000 in cash in full settlement of his share of the partnership.
Compute the proceeds from the sale of the other assets.
A. 13,800, B. 7,200, C. 12,800, D. 8,200,
Number 59
On December 31, 2024, ABC Partnership’s Statement of Financial Position shows that A, B, and C have capital balances of P16,000,000, P12,000,000, and P4,000,000 with a profit or loss ratio of 1:4:5. On January 1, 2025, C retired from the partnership and received P3,200,000. At the time of C’s retirement, the assets and liabilities of the partnership were properly valued.
What is B's capital balance after C's retirement?
A. 11,360, B. 12,320, C. 12,800, D. 12,640,
Number 63
AAA Co. uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. For the month of May, AAA's estimated manufacturing overhead cost was P6,000,000 based on an estimated activity level of 400,000 direct labor hours. Actual overhead amounted to P6,500,000, with actual direct labor hours totaling 440,000 for the month.
How much was the overhead overapplied or underapplied?
A. 500,000 overapplied B. 100,000 underapplied C. 500,000 underapplied D. 100,000 overapplied
Number 64
Consider the following data from the records of MNO Co.:
Units produced 20,
Manufacturing cost incurred (per unit): The cost incurred to rework (per unit): Direct materials P40 Direct materials P Direct labor 56 Direct labor 24 Overhead cost 48 Overhead cost 16
Defective units 500 Spoiled units 300 Sales value of spoiled goods P
What would be the unit cost of the good units, assuming both the defect and spoilage were attributable to exacting specifications? A. 146. B. 88. C. 144. D. 144.
Number 65
XYZ Corp. makes joint products, RS and LM. During 2025, it produced 12,000 units of RS with a relative sales value of P180,000 and 6,000 units of LM with a relative sales value of P120,000 at the point of separation. If processed further, additional costs of P40,000 and P12,000, respectively, would be needed, but market values would increase to P240,000 for RS and P144,000 for LM. The joint cost allocated to RS using the approximated NRV approach amounted to P108,000.
Compute the joint cost for the year 2025. A. 162, B. 270, C. 180, D. 179,
Number 66
ABC Company manufactures two main products, AB and BC, in a joint process that yields AC, a by- product. The joint cost amounted to P1,386,000 and is allocated among the main products using the sales value at the split-off approach. The company treats the revenue from the sale of by-products as a deduction from the manufacturing cost. The following relevant information is available:
Product Units produced Sales value at split-off AB 15,000 P315, BC 21,000 P609, AC 9,000 P 52,
Compute the joint cost allocated to BC
A. 454, B. 501, C. 878, D. 913,
Number 67
ABC Manufacturing Company had the following information for the month of May. All materials are added at the start of the process. ABC uses the FIFO costing method for its process costing system.
Units: Beginning work in process (25% to be done) 12, Started in production 128, Transferred-out 97, Ending work in process (10% complete) 20, Normal loss? Abnormal loss 3,
Beginning costs: Direct materials 41, Conversion cost 82,
Current costs: Direct materials 3,558, Conversion cost 3,917,
Assume the quality inspection of the products is at the 50% stage of production. Compute the cost of goods transferred out. A. 5,759, B. 5,883, C. 6,701, D. 6,825,
Number 68
Assume losses occur evenly throughout the process. Compute the amount charged to period cost. (Round off the cost per EUP to two decimal places.)
A. 141, B. 199, C. 225, D. 229,
