Name:__________________________

Date:___________________
Section:________________
Permit:_________________
ADVANCED ACCOUNTING 2
FINAL EXAM
2 nd Semester S.Y. 2015-2016

MULTIPLE CHOICE. Choose the letter of the best answer. ERASURES ARE STRICTLY NOT ALLOWED.

_____1. Faith and Hope, a private not – for – profit voluntary health and welfare organization, received the following contributions in 2011:
I. P25,000 from donors who stipulated that the money not be spent until 2012.
II. P60,000 from donors who stipulated that the contributions be used for the acquisition of equipment, none of which was acquired in 2011.
Which of the above events increased temporarily restricted net assets for the year ending December 31, 2011?
a. I only c. II only
b. Both I and II d. Neither I nor II

_____2. On December 31, 2010, the following figures were taken from the Trial balance of Ayoshi Company and Misao Company
Ayoshi Misao
Cash P 160,000 P 40,000
Receivables 120,000 120,000
Inventory 200,000 140,000
PPE – net 400,000 200,000
Goodwill -- 60,000
Current Liabilities 40,000 20,000
Long – term debt 140,000 100,000
Common Stock 220,000 200,000
Additional Paid In Capital 40,000 ---
Retained Earnings 440,000 240,000

On December 31, 2010, Ayoshi issues 10,000 shares of its P10 par value stock for the net assets of Misao. Ayoshi’s stock had a P34 per share
fair market value. Ayoshi would also issue bond debentures with face value of P200,000 maturing 3 years from date of issue. Discount related
to the bonds issue amounted to P40,000. Ayoshi also paid the following: P50,000 for broker’s fee P40,000 for pre –acquisition audit fee,
P43,000 legal fees, P36,000 for audit fee for SEC registration of stock issue and P11,000 for printing of stock certificates. Misao holds an
equipment that is worth P80,000 more than its current book value. The retained earnings of Misao on January 1, 2010 amounted to P140,000.
How much is the total combined assets after the merger?
a. P1,500,000 c. P1,280,000
b. P1,240,000 d. P1,320,000

_____3. On December 31, 2011, Jane Company purchased 70% of the outstanding shares of Jasmine Company for P245,000. On that date,
Jasmine Company had P100,000 capital stock and P250,000 of retained earnings. For 2012, Jane Company had income of P200,000 from its
own operations and paid dividends of P100,000. For 2012, Jane Company reported income of P30,000 and paid dividends of P20,000. All
assets and liabilities of Jasmine Company have book values approximately equal to their book values.
The beginning inventory of Jade Company includes P6,000 of merchandise purchased from Jasmine Company on December 31, 2011 at 150%
of cost. The ending inventory of Jane Company includes P9,000 of merchandise purchased from Jasmine Company at the same mark up. Jane
Company uses FIFO inventory costing.
What is the non-controlling interest in Jasmine Company for the year ended December 31, 2012?
a. 117,000 b. 110,700 c. 107,700 d. 105,000

_____4. On January 2, 2011, Davao Corporation purchased 70% of the common stock of Cotabato Company for P4,675,000. At that date,
Cotabato had P4,887,500 of common stock outstanding and retained earnings of P1,572,500. Cotabato’s equipment with a remaining life of
years had a book value of P2,380,000 and a fair value of P2,550,000. Cotabato’s remaining assets had book values equal to their values. All
intangibles except goodwill are expected to have remaining lives of 10 years. Non – controlling interest shall be measured at fair value.
The income and dividends figures for bioth Davao and Cotabato are as follows:
Income Dividends
Davao 2011 P1,572,500 P425,000
2012 1,785,000 510,000
Cotabato 2011 340,000 85,000
2012 569,500 127,500
Davao’s income as shown does not include any dividend income from Cotabato. Davao’s retained earnings balance at the date of acquisition
was P5,958,500.
On December 31, 2012, the consolidated retained earnings is:
a. P8,821,300 c. P8,993,850
b. P8,970,050 d.P9,017,650

_____5. Fish Ball Co. Charges P90,000 for a franchise, with P18,000 paid when the agreement is signed and the balance in four annual payments.
The present value of the annual payments, discounted at 9% is P58,315. The franchisee has the right to purchase P20,000 of equipment for
P16,000. If collectability of the payment is reasonably assured and substantial performance by Fish Ball has occurred, what is the amount of
revenue from franchise fee that should be recognized?
a. 81,563 c. 72,315
b. 76,315 d. 72,000

_____6. PAX has the following foreign currency transaction during 2012:
Merchandise was purchase from a foreign supplier on Jan 20, 2012 for the peso equivalent of P900,000, the invoice was paid on March 30,
2012 at the equivalent of P960,000
 On July 1, 2012, PAX borrowed the equivalent of P5,000,000 evidenced by a note that is payable n the lender’s local currency on July 1, 2012.
On Dec 31 2012, the equivalent of the principal amount and accrued interest were P5,200,000 and P260,000 respectively. Interest on the note
is 10% per annum.
In the 2012 income statement of PAX, what amount should be reported as foreign exchange loss?
a. 0 c. 270,000
b. 210,000 d. 60,000

_____7. On January 5, 2012, P sold to its 80% owned sunsidiary, S Corp., a machine for P120,000. At that time the machine had a net book value
of P90,000. S estimated the remaining life of the machine to be 6 years. Assume that in 2012, P and S reported a profit of P80,000 and
P100,000 respectively.
Determine the consolidated net income for 2012
a. 119,000 c. 144,000
b. 155,000 d. 135,000

_____8. P owns 80% interest in ABC Corp. in the year 2010, the two firms reported profit from own operations as follows:
P 90,000
ABC 75,000
Records show that P shipped merchandise to ABC billed for P360,000; the cost is P300,000 and 20% of these goods are not yet sold as of
Dec. 31, 2012
ABC constructed a warehouse for P at a cost of P120,000 and billed the latter for P150,000 on January 1, 2012. The asset has an estimated
useful life of 5 years.
How much is the consolidated net income at the end of 2012?
a. 129,000 c. 141,000
b. 165,000 d. 118,800

_____9. Palos Company opened its Cebu branch a year ago. At year end, the branch summarized operating data as follows: Sales, P364,000;
Shipments from home office, P148,500; Purchases, P137,500; Expenses, P71,500; Ending Inventory, P82,500 (of which P16,500 from
outsiders); beginning inventory, P60,000 (of which P45,000 came from home office)
The overstatement in branch cost of sales assuming shipments by home office are made at 20% Gross profit rate is:
a. P25,500 b. P21,000 c. P16,250 d. P21,250

_____10. The true net income of the branch is:

a. P45,250 b. P50,000 c. P50,250 d. P54,500

_____11. A corporation received a promissory note denominated in foreign currency from the sales made to a Singaporean customer. The following
were the related transactions: (in Singapore Dollars). On December 1, A corporation sold , merchandise to a Singaporean customer for 60- day,
12% promissory note for $32,000, at a buying rate of $1 to P34.20. On December 31, the buying spot rate is $1 to P34.85. On January 30, the
buying spot rate is $1 to P33.75. On the settlement date, how much is the forex gain or loss?
a. P35,552 gain c. P35,904 gain
b. P35,904 loss d. P35,552 loss

_____12. On November 1, 2009, Galaxy Philippines took delivery from a Thailand firm of inventory costing 225,000 bath. Payment is due on
January 30, 2010. Concurrently, Galaxy Philippines paid P2,025 cash to acquire a 90-day call option for 225,000 Thailand baht.
11/1/2009 12/31/2009 1/30/2010
Spot Rate P1.20 P1.22 P1.23
(market price)
Strike Price 1.20 1.20 1.20
(exercise price)
Fair value of P2,025 P4,950 P6,750
call option
What is the intrinsic value and time value of option on December 31, 2009?
Intrinsic Value Time Value Intrinsic Value Time Value
a. P4,500 P450 c. P450 P4,500
b. 4,950 0 d. 0 4,950

_____13. Light of Jesus operates a branch at Cagayan de Oro City. Selected accounts taken from Dec. 31, 2010 financial statements of Light of
Jesus and its branch follows:
Home Office Branch
Sales P6,900,000 P3,765,000
Shipments to Branch 1,750,000
Shipments from Home
office 2,187,500
Inventory, Jan 1 800,000 120,000
Inventory, Dec 31 640,000 250,000
Purchases 6,800,000 1,000,000
Allowance for
overvaluation before
Adjustment 452,500
Expenses 356,000 250,000
The ending inventory of branch includes P120,000 purchased from outside suppliers. The consolidated net income is:
a. P1,791,500 c. P2,218,000
b. P2,220,000 d. P2,244,000
_____14. On December 31, 2005 a foreign subsidiary in Hongkong submitted the following balance sheet stated in foreign currency:
Total Assets $500,000
Total Liabilities 100,000
Common Stock 250,000
Retained Earnings 150,000
The exchange rate are:
Current rate P3.40
Historical rate 3.10
Weighted average 3.00
Assuming the functional currency of the subsidiary is not the currency of the hyperinflationary economy was used and the retained earnings of
the subsidiary on December 31, 2005 translated to peso is P460,000. What amount of cumulative translation adjustment is to be reported in the
consolidated balance sheet on December 31, 2005?
a. 25,000 c. 150,000
b. 110,000 d. 125,000

_____15. O company sold merchandise for 90,000 pounds from a vendor in London on November 1, 2009. Payment in British pounds was due on
January 30, 2010. On the same date, O entered into a 90 – day futures contract to sell 90,000 pounds from a bank. Exchange rate as follows:
Nov. 1 Dec. 31 Jan. 31
Spot rate P71.4 P72.7 P71.9
30 day futures 72.3 72.5 73.2
60 day futures 71.8 72.2 72.6
90 day futures 70.6 72.6 73.4

How much is the net forex gain or loss on January 30, 2010?
a. P18,000 loss c. P9,000 loss
b. P18,000 gain d. P9,000 gain
_____16. On January 2, 2010, Panaad Company acquired 80% interest in Sarabia Company for P4,125,000 cash. On this date, the outstanding
capital stock and retained earnings of Panaad Company and Sarabia Company are as follows:

Panaad Sarabia
Common Shares P2,250,000 P1,312,000
Share Premium 1,500,000
Retained Earnings 5,250,000 3,187,500

There was no issuance of capital stock during the year. Non – controlling interest is initially measured at fair value. Fair values of the
following assets of Sarabia exceeded their book values as follows: Inventories, P210,000; Property and equipment (useful life, 10 years),
P127,500. All other assets and liabilities are fair valued. Goodwill if any is not impaired. On December 31, 2010 the two companies reported the
following operating results

Panaad Sarabia
Net Income P1,785,000 P975,000
Dividends paid 525,000 262,500

What is the consolidated stockholders’ equity to be reported in the consolidated statement of financial position on December 31, 2010?
a. P10,651,800 c. P7,035,000
b. P13,500,000 d. P11,781,000
_____17. A nonprofit organization had the following cash contributions and expenditures in 2012:
Unrestricted cash contributions P500,000
Restricted cash contributions for
the acquisition of property 200,000
Cash Expenditure to acquire property 200,000

The statement of cash flows should include which of the following amounts?
a. Operating P700,000;Investing (P200,000); and Financing P0
b. Operating P500,000;Investing P0; and Financing P0
c. Operating P500,000;Investing (P200,000); and Financing P200,000
d. Operating P0;Investing P500,000; and Financing P200,000

_____18. Good Buy Trading Co. operates a branch in Bacolod. At close of the business on December 31, 2012, the home office account in the
books of Bacolod branch showed a credit balance of P2,784,300. The interoffice accounts were in agreement at the beginning of the year. For
purposes of reconciling the interoffice accounts, the following facts were ascertained:
a. On December 29, 2012, the branch sent a check for P13,500 to its suppliers. The branch erroneously recorded the transaction as a
remittance to the home office and sent a copy of the debit memo on January 4, 2013
b. The home office allocated promotions and insurance expense totaling P18,000 to Bacolod Branch. The home office inadvertently charged
the said expense to Davao branch. Bacolod branch had not entered the allocation at year end
c. Home office debit memo for P20,700 regarding transfer of funds was recorded twice by the branch by debiting its reciprocal account.
d. A branch customer remitted P15,000 to the home office. The home office recorded this as a cash collection of its own receivable on
December 23, 2012. Upon notification on the same year, the branch debited the amount of receivable from home office and credited its
reciprocal account.
e. A P105,000 shipment, charged by home office to Bacolod branch, was actually sent to and retained by Leyte branch
f. The home office failed to take up a P12,000 credit memo from the branch
g. Branch store insurance premiums of P9,600 were paid by the home office. The home office debited insurance expense and credit Cash in
its books. The branch recorded the amount of P96,000 as a liability.
 h. Inventory costing P39,000 was sent to the branch by the home office on December 12, 2012. The branch recognized a liability by crediting
Accounts Payable upon the receipt of the inventory
i. Freight charge of P12,600 on merchandise shipped to the branch was paid by the home office and was recorded in the branch books as
P1,260.
j. A branch customer remitted P63,000 to the home office. The home office recorded this cash collection on December 28, 2012. Upon
receiving a credit memo, the branch recorded the transaction twice on December 30, 2012.
The unadjusted balance of the branch account as of December 31, 2012, is:
a. P2,097,840 c. P3,051,240
b. P3,075,240 d. P2,962,140

_____19. Freemind College, a private not- for – profit college received from Ms. Charity on May 25, 2012. Ms. Charity stipulated that her contribution
to be used to support faculty developmwnt seminars during the fiscal year beginning on July 1, 2012. On July 15, 2012, administrators of
Freemind awarded seminar and training grants totaling P195,000 to several faculty members in accordance with the wishes of Ms. Charity. For
the year ended June 30, 2012 Freemind should report the P240,000 contribution as
a. Temporarily restricted revenues on the statement of activities
b. Unrestricted revenue on the statement of activities
c. Temporarily restricted deferred revenue in the statement of activities
d. An increase in fund balance on the statement of financial position
_____20. The Symanuevo Co.’s home office bills Rizal branch at 120% above cost during 2009 and 125% above cost during 2010. In 2010, goods
billed at 355,600 were shipped to the branch. Also, during the year, the branch returned 119,050 worth of defective merchandise to the home
office. The account unrealized intra – company inventory profit has a balance of 18,240 at the end of last year. The branch started to acquire
merchandise from outsiders during the year in the amount of P54,000 and return defective merchandise to the vendor amounting to 19,750.
How much is the cost of goods available for sale at cost?
a. 314,870 c. 311,222
b. 189,308 d. 300,420

Mandaluyong Company buys goods from Tokyo Company of Japan, worth 2,500,000 yen. The prevailing exchange rate is P0.1302136/Yen.
Mandaluyong Company settles the account 60 days later when the exchange rate is going at P 0.118376/Yen.
_____21. What is the forex gain or loss of Mandaluyong?
a. P29,594 gain c. P1,920,000 loss
b. P29,594 loss d. P1,920,000 gain
_____22. What is the forex gain or loss of Tokyo?
a. P29,594 gain c. P 0
b. P29,594 loss d. Yen 2,500,000
_____23. CC Corp. owns a subsidiary in Japan whose statement of financial position in Japanese Yen for the last years follow:
December 31, 2011December 31, 2012
Assets
Cash & Cash equivalents ¥ 30,000 ¥ 25,000
Receivables 122,500 147,500
Inventory 160,000 170,000
Property and Eqpt. (net) 255,000 230,000
Total Assets ¥567,500 ¥ 572,500
Liabilities & Equity
Accounts Payable ¥ 55,000 ¥ 75,000
Long term debt 322,000 285,000
Common Stock 115,000 115,000
Retained earnings 75,000 97,500
Total Liabilities & Equity ¥567,500 ¥572,500
Relevant exchange rates are:

January 1, 2011 ¥ 1 = P45

December 31, 2011 ¥ 1 = P42.50
December 31, 2012 ¥ 1 = P47.50
Average 2011 ¥ 1 = P43.75
September 12, 2011 ¥ 1 = P40

CC formed the subsidiary on January 1, 2011. Income of the subsidiary was earned evenly throughout the years and the subsidiary declared
dividends worth ¥15,000 on September 12, 2011 and none were declared during 2012.
How much is the cumulative translation adjustment for 2012?
a. P625,000 c. P1,006,250
b. P568,750 d. P875,000
_____24. On September 1, 2012, Alabang Main Office established two branches: Ortigas and Makati branches.
 The home office transferred P320,000 worth of cash and P1,400,000 worth of inventory to its Ortigas branch. The home office transfers
merchandise to its branch at a mark-up of 25% above cost.
 The home office instructed Ortigas to transfer 75% of the goods and cash received to Makati
 In addition, on October 1, 2012, shipments from home office were received by Ortigas amounting P500,000 at cost and the branch paid
freight costs amounting P26,000
 60% of the said shipments were sold to outsiders
 On November 1, 2012, Ortigas transferred 50% of the remaining October shipments from alabang to Makati, with Makati branch paying
freight costs of P10,000
 Had the merchandise been shipped from Alabang to Makati City branch, only P7,600 worth of freight would have been incurred.

How much is the balance of the Makati branch account in the Home office books?
 a. P1,675,100 c. P1,387,600
b. P1,012,300 d. P1,395,200

Items 31 to 35 were based on the following information:

Home office bill its branch for merchandise shipments at 30% above cost
The following are some of the account balances on the books of home office and its branch as of December 31, 2012:

Home Office Branch Books

Inventory, January 1 P35,000 P101,500
Shipments from Home office 263,900
Purchases 1,575,000 350,000
Shipments to Branch 253,750
Branch inventory Allowance 91,875
Sales 2,100,000 1,260,000
Operating Expenses 507,500 192,500

Per physical count, the ending inventory of the branch is P73,500 including goods from outside purchases of P48,475; the ending inventory
of the home office is P210,000.

_____25. The amount of the unrealized profit in the separate books of the home office on January 1, 2013 is
a. P11,000 c. P21,000
b. P15,750 d. P18,750

_____26. The branch beginning inventory in 2012 came from outside purchases is
a. P35,000 c. P48,475
b. P26,924 d. P33,250
_____27. The cost of goods available for sale of branch
a. P715,400 c. P742,323
b. P781,375 d. P750,400
_____28. The total ending inventory to be shown on the combined financial statements;
a. P328,475 c. P283,500
b. P277,725 d. P235,025
_____29. The combined net income for the year:
a. P957,950 c. P719,600
b. P942,725 d. P825,900
_____30. On April 30, 2011, Baker Co., in exchange for thr 90% of outstanding shares of Baker Co., King issued 72,000 common shares at P39 par
value, then going at a market price of P43 per share. Before the business combination, King already owns 10% interest with a carrying value of
P258,000 at the date of acquisition. The fair value of the net identifiable assets and liabilities amounted to P3,777,300. Relevant data on the
stockholders’ equity immediately before the combination show:
King Baker
Common Stock P9,350,000 P1,790,000
APIC 4,022,000 812,000
Retained earnings(deficit) (1,016,000) 572,600
King also paid for the cost of registering and issuing equity securities amounting to P470,200, direct costs of combination amounting to
P946,700 and indirect cost amounting to P255,000.
Included as part of the acquisition agreement is the additional cash consideration of P150,000 in the event Baker Co.’s share price will reach
P23 per share by year-end. At acquisition date, the share price is P20.50, and increased by P2.60 by December 31, 2011. At acquisition date,
there was only a low probability of reaching the target share price, so the fair value of the consideration was P45,000. The contingent
consideration was in fact not probable at this time. What is the net effect in the net profit or loss of the business combination for the year
ended December 31, 2011?
a. P1,110,700 b. P1,398,000 c. P1,155,700 d. P 928,400
_____31. The Elmo Store operates a branch in Laguna. Operating data of home office and the branch for 2012 are as follows:
Home Office Branch
Sales P456,250 P218,125
Shipments to branch 120,000
Shipments from home office 150,000
Purchases from outsiders 275,000 43,750
Operating expenses 68,200 15,950
Inventories, Jan 1, 2012
Home office 106,250
Branch
Acquired from outsiders 11,875
Acquired from HO at billed price 52,500
Inventories, Dec 31, 2012
Home office 81,250
Branch
Acquired from outsiders 8,125
Acquired from HO at 2012 billed price 37,500
Merchandise from the home office were billed at 125% of cost in 2011. How much is the combined net income of Elmo Store?
 a. P230,725 b. P110,725 c. P186,475 d. P274,475
_____32. On December 31, 2011, the following figures were taken from the trial balances of Kenshin Company and Kauro Company (both using
PFRS for SMEs)
Kenshin Kauro
Cash P80,000 P20,000
Receivables 60,000 60,000
Inventory 100,000 70,000
PPE – net 200,000 100,000
Goodwill 30,000
Current liabilities 20,000 10,000
Long – term liabilities 70,000 50,000
Common Stock 150,000 100,000
APIC 20,000
Retained earnings 180,000 120,000
On December 31, 2011, Kenshin issues 10,000 shares of its P10 par value stock for 80% of the outstanding voting shares of Kauro. Kenshin’s
stock had a P25 per share fair value. Kenshin also paid the following: P25,000 for broker;s fee for negotiation, P20,000 for acquisition – related
audit gee, P21,000 for legal fees, P18,000 for audit gee for SEC registration of stock issue and P6,000 for printing stock certificates. Kaoru
holds an equipment that is worth P40,000 more than its current book value. The retained earnings of Kaoru on January 1, 2010 amounted to
P70,000. The fair value of non – controlling interests at acquisition date is P56,000. How much is the consolidated assets at acquisition date?
a. P772,000 b. P716,000 c. P706,000 d. P782,000
_____33. The M Company holds an 85% interest in the H Company. At the current year end M holds inventory purchased from H for P330,000 at
cost plus 10%. The group’s consolidated statement of financial position has been drafted without any adjustments in relation to this holding of
inventory. What adjustments should be made to the draft consolidated statement of financial position figures for non-controlling interest and
retained earnings?
Non – controlling interest Retained earnings
a. No Change Reduce by P30,000
b. No Change Reduce by P30,000
c. Reduce by P4,500 Reduce by P25,500
d. Reduce by P4,950 Reduce by P28,050
_____34. Page Company acquired all of the outstanding shares of S Company at total cost of P100,000. S Company’s net assets have a book value
of P60,000 and current value of P90,000. In the parent’s ledger, the amount shown as goodwill account is
a. P0 b. P10,000 c. P30,000 d. P40,000

_____35. P Corporation acquired 70% of the voting common stock of S Company at a time when S Company’s book values and fair values were
equal. Separate incomes of P Corporation and S Company for 2014 are as follows:
P Corporation S Company
Sales 792,000 438,000
Cost of goods sold 480,000 240,000
Operating expenses 144,000 120,000
Separate income from own operations 168,000 78,000
Intercompany sales from P and S for 2013 and 2014 are summarized as follows:
Cost Selling Prize Unsold at year end
Intercompany sales – 2013 300,000 468,000 30%
Intercompany sales – 2014 210,000 330,000 40%
The 2013 consolidated income statement will show cost of goods sold of
a. P387,600 b. P720,000 c. P480,000 d. P240,000

CLASS SORRY FOR NOT TEACHING YOU THE BEST THAT I CAN DO. I DO BELEIVE IN YOUR KNOWLEDGE. GOODLUCK TO YOUR
JOURNEY.

LOVE,

SIR ARWIN