On October 1, 2023, Chris Corp.

entered in a non-cancellable purchase order from Taiwanese

Company for Taiwan New Dollar 200,000. The goods were received on October 30, 2023. The
the invoice was dated October 15, 2023, shipping date (FoB shipping point). Chris corporation
paid on January 15 2024. The relevant direct Spot Exchange rate for buying Taiwan New dollar
is shown below:

Req 1: What is the amount of inventory to be recorded by Chris Corp?

376,000
380,000
384,000
104,167

Based on no. 1, What is the amount of account payable on December 31, 2023?

372,000
384,000
380,000
378,000

Based on No. 1, What is the foreign exchange gain or loss on December 31, 2024?

P12,000 gain
P8,000 gain
P4,000 gain
3,360 loss

based on No. 1, What is the foreign exchange gain or loss on January 15, 2024?

P6,000 loss
P2,000 loss
P2,000 gain
P1,707 gain
5. On December 1, 2023, Chris Corp. accepted a non-cancellable sale order from a Chinese
Company for CN Yuan 150,000. The goods were delivered on December 24,2023. The invoice
was dated December 10, 2023, shipping date (FOB shipping point). The Chinese Company paid
Chris Corp on January 25, 2023. The relevant exchange rate for PHP1 to Yuan is shown below:

Req. 1 What is the total amount of sales to be reported by Chris Corp?

18,450
1,219,512
18,630
1,210,654

Based on no. 5, What is the amount of FOREX gain or loss of December 31,2023?

(P6,901)
(P75)
P105
P1,957

Based on no. 5, What is the amount of FOREX gain or loss of December 31, 2024?

P75
(P30)
(P4,937)
P1,964

8. It is the exchange rate at the balance sheet date.

Spot rate
Historical rate
Forward rate
Closing rate
9. It is the currency of the primary economic environment in which the entity operates.

Foreign currency
Functional currency
Local currency unit
Presentation currency

10. What is the term describing currency values relative to one another?*

Exchange rate
Functional currency
Spot rate
Presentation currency

11. What is the exchange rate used to translate the assets of a foreign operation?

Spot rate
Historical rate
Closing rate
Average rate

12. A forex gain is recorded when there is an:

Importing transaction and the exchange rate increases
Exporting transaction and the exchange rate decreases
Exporting transaction and exchange rate decreases
All of the above

13. On January 2, 2025, Prime sold equipment to its 60% owned subsidiary Mega Company with
book value of P450,000 for P500,000. The equipment has a remaining estimated useful life of 5
years with no salvage value. On December 31, 2025, the separate books of Prime and Mega
includes the following balances:

The consolidation working paper journal entry on December 31, 2025 included a:

Credit to Depreciation expense P100,000

Debit to Gain on sale of equipment P40,000
Credit Gain on sale of equipment P50,000
Debit Accumulated depreciation P10,000

On January 1, 2023, Pants Corp. acquired 90% interest in Shirt Company. On December 31,
2023, Shirt Company sold equipment to Pants at a selling price in excess of its book value but
less than its original cost. The amount of equipment in the consolidated financial statements on
December 31, 2023 will be reported at:

Pant’s original cost

Pant’s original cost less Shirt’s recorded gain on sale
Pant’s original cost less 90% of Shirt’s recorded gain on sale
Pant’s original cost plus Shirt’s recorded gain on sale

Gain on sale of equipment by subsidiary to its parent will be

Added in the computation of consolidated net income

Increase the investment in subsidiary account under cost method
Deducted to net income of subsidiary to compute the NCI net assets of subsidiary
Increase the investment in subsidiary accounts under equity method

Which of the following intercompany transactions would not need a consolidated working paper
elimination entry?

Loan made by the parent to its subsidiary

The sale of inventory by subsidiary to its parent
The payment of rent by parent to its subsidiary
None of the above

On January 2, 2021, Ivan acquired 80% of the outstanding ordinary shares of Josh Company for
an amount equal to the book value.

During 2021, the selling affiliate sold land by buying affiliate costing P1,000,000 for
P1,200,000. The land is geld by the buying affiliate until 2023, it is sold to unaffiliated entity for
P1,500,000.

The net income and dividend paid by Josh Company are as follows:
Under downstream sale:

Req 1. What is the amount of NCI in net income of subsidiary 2021?

70,000
170,000
130,000
100,000

Under downstream sale:

Req. 2: What is the amount of parent’s income from subsidiary 2022?

960,000
400,000
1,200,000
800,000

Under downstream sale

Req. 3: What is the amount of parent’s income from subsidiary 2023?

880,000
960,000
720,000
1,120,000

Under downstream sale.

Req. 4: What is the consolidated working paper elimination entry for 2021?
A

B
C
D

Under equity method, the following transactions affect the Investment in subsidiary account
except:

Initial investment in subsidiary

Adjustments assets of subsidiary to fair value
Net income of subsidiary
Unrealized profit in ending inventory – downstream

The consolidation working paper entry in the year of sale to eliminate the unrealized profit in
ending inventory is to:

Debit the Cost of Goods sold

Debit Inventory
Debit Sale
Credit Cost of goods sold

The non-controlling interest in net income of subsidiary is computed by multiplying the non-
controlling interest percentage by the net income of subsidiary

Plus realized profit in beginning inventory (downstream) less realized gross profit (upstream)
Less realized profit in ending inventory (upstream) plus realized gross profit in beginning inventory
(upstream)
Plus unrealized profit in ending inventory (downstream) less realized gross profit in beginning (upstream)
Less unrealized profit in ending inventory (upstream) less amortization of undervalued inventory/
Under cost method, the Investment in Subsidiary account will be affected by:

Net Income of subsidiary

Dividend of subsidiary
Realized profit in beginning inventory - downstream
None of the choices

What is the effect of eliminating the unrealized profit in ending inventory?

Increase gross profit

Decrease the sales revenue
Increase the cost of goods sold
Decrease the cost of goods sold

What is the amount of intercompany profit in ending inventory that should be eliminated in the
consolidated working paper?

The gross profit on goods sold to unaffiliated entities during the year
The gross profit on goods sold to buying affiliates inventory at the end of the year.
The gross profit on the entire intercompany sales to buying affiliates during the year.
None of the choices.

Which of the following will not be deducted to compute the consolidated cost of goods sold?*

Intercompany sale of inventory

Amortization of undervalued inventory
Realized gross in beginning inventory - upstream
Realized gross in ending inventory - downstream

Shame Corp sold goods to its 80% own subsidiary in 2021 at a profit. Assume that Shame uses
the equity method, the intercompany sale during 2021 would debit

Cost of goods sold

Inventory
Sales
Investment in subsidiary

When intercompany sales of inventory were not eliminated, it overstates the:

Consolidated cost of goods sold
Consolidated net income
Consolidated gross profit
All the above

The realized profit in beginning inventory- upstream, affects the computation of the following
except:

Non-controlling interest in net income

Consolidated net income
Consolidated sales
Consolidated cost of goods sold

The entity that supposed to be represented by the consolidated financial statements is the:

a. Economic entity
b. Parent entity
c. Dual-listed entity
d. Subsidiary entity

Which is the following terms best describes the financial statements of a parent in which the
investments are accounted for on the basis of the direct equity interest?

a. Consolidated financial statements

b. Separate financial statements
c. Combined financial statements
d. All of the above

A single set of financial statements that combines the separate sets of financial statements of a
parent and its subsidiaries is known as:

a. Consolidated financial statements

b. Separate financial statements
c. Combined financial statements
d. Condense financial statements

The Investment Income under equity method is affected by the following, except:

a. Goodwill
b. Net loss of subsidiary
c. Amortization of overvalued assets
d. Amortization of undervalued assets

Under cost method, the gain on bargain purchases:

a. Increase the Investment in subsidiary
b. Decrease the Investment in subsidiary
c. No effect on the Investment in subsidiary
d. Has an effect on the NCI in net income

When a parent and its subsidiary use a periodic inventory system rather than a perpetual system, the
income and asset balances reported in the consolidated financial statements are:
I. affected only if there are upstream intercompany sales of inventory.
II. affected only if there are downstream intercompany sales of inventory.

I
II
both I and II
neither I and II
When there are intercompany sales of inventory during the year and a three-part consolidation workpaper
is prepared, elimination entries related to the intercompany sales:
I. Always are needed.
II. Are not needed if all the inventory is resold to unrelated parties prior to the end of the year.
I
II
Both I and II
Either I and II
Earth Company owns 100 percent of the capital stock of both Mars Corporation and Venus Corporation.
Mars purchases merchandise inventory from Venus at 125 percent of Venus's cost. During 2022, Venus
sold inventory to Mars that it had purchased for P25,000. Mars sold all of this merchandise to unrelated
customers for P56,892 during 2022. In preparing combined financial statements for 2022, Earth's
bookkeeper disregarded the common ownership of Mars and Venus.

Based on the information given above, what amount should be eliminated from cost of goods sold in the
combined income statement for 2022?
31,250
25,000
56,892
6,250
Based on the information given above, by what amount was unadjusted revenue overstated in the
combined income statement for 2022?
25,000
56,892
31,250
6,250
On January 1, 2023, Parent Company acquired 90 percent ownership of Subsidiary Corporation, at
underlying book value. The fair value of the noncontrolling interest at the date of acquisition was equal to
10 percent of the book value of Subsidiary Corporation. On Mar 17, 2023, Subsidiary purchased
inventory from Parent for P90,000. Subsidiary sold the entire inventory to an unaffiliated company for
P120,000 on November 21, 2023. Parent had produced the inventory sold to Subsidiary for P62,000. The
companies had no other transactions during 2023.

Based on the information given above, what amount of sales will be reported in the 2023 consolidated
income statement?
62,000
120,000
90,000
58,000
Based on the information given above, what amount of cost of goods sold will be reported in the 2023
consolidated income statement?
62,000
120,000
90,000
58,000
Based on the information given above, what amount of consolidated net income will be assigned to the
controlling shareholders for 2022?
58,000
59,000
55,000
52,200
Senior Inc. owns 85 percent of Junior Inc. During 2023, Senior sold goods with a 25 percent gross profit
to Junior. Junior sold all of these goods in 2023. How should 2023 consolidated income statement items
be adjusted?
No adjustment is necessary
Sales and cost of goods sold should be reduced by 85 percent of the intercompany sales
Net income should be reduced by 85 percent of the gross profit on intercompany sales.
Sales and cost of goods sold should be reduced by the intercompany sale
During the year a parent makes sales of inventory at a profit to its 75 percent owned subsidiary. The
subsidiary also makes sales of inventory at a profit to its parent during the same year. Both the parent and
the subsidiary have on hand at the end of the year 20 percent of the inventory acquired from one another.
Consolidated revenues for the year should exclude:
80 percent of the total revenues from intercompany sales.
total revenues from intercompany sales.
only the revenues from the subsidiary's intercompany sales.
only the revenues from the parent's intercompany sales.

Consolidated net income may include the parent's separate operating income plus the parent's share of the
subsidiary's reported net income:
plus the unrealized profit on upstream intercompany sales of inventory made during the current year.
plus the profit realized this year from upstream intercompany sales of inventory made last year
plus unrealized profit on downstream intercompany sales of inventory made during the current year.
minus the parent's share of profit realized this year from upstream intercompany sales of inventory made
last year.
Global Corporation acquired 85 percent of Local Company's voting shares of stock in 2022. During 2023,
Global purchased 50,000 picture tubes for P15 each and sold 28,000 of them to Local for P20 each. Local
sold all of the units to unrelated entities prior to December 31, 2023, for P30 each. Both companies use
perpetual inventory systems. Which workpaper eliminating entry is needed in preparing consolidated
financial statements for 2023 to remove all effects of the intercompany sale?

Option A
Option B
Option C
Option D
Pilfer Company acquired 90 percent ownership of Scrooge Corporation in 2022, at underlying book
value. On that date, the fair value of noncontrolling interest was equal to 10 percent of the book value of
Scrooge Corporation. Pilfer purchased inventory from Scrooge for P90,000 on August 20, 2023, and
resold 70 percent of the inventory to unaffiliated companies on December 1, 2023, for P100,000. Scrooge
produced the inventory sold to Pilfer for P67,000. The companies had no other transactions during 2023.

Based on the information given above, what amount of sales will be reported in the 2008 consolidated
income statement?
90,000
120,000
100,000
67,000
Based on the information given above, what amount of cost of goods sold will be reported in the 2023
consolidated income statement?
60,900
90,000
46,900
67,000
Based on the information given above, what amount of consolidated net income will be assigned to the
controlling interest for 2023?
51,490
53,100
37,000
20,100
Based on the information given above, what inventory balance will be reported by the consolidated
entity on December 31, 2023?
51,490
53,100
37,000
20,100
A subsidiary made sales of inventory to its parent at a profit this year. The parent, in turn, sold all but 20
percent of the inventory to unaffiliated companies, recognizing a profit. The amount that should be
reported as cost of goods sold in the consolidated income statement prepared for the year should be:
the amount reported as intercompany sales by the subsidiary.
the amount reported as intercompany sales by the subsidiary minus unrealized profit in the ending
inventory of the parent
the amount reported as cost of goods sold by the parent minus unrealized profit in the ending inventory of
the parent.
the amount reported as cost of goods sold by the parent.

Consolidated net income for a parent and its 80 percent owned subsidiary should be computed by
eliminating:
all unrealized profit in downstream intercompany inventory sales, and unrealized profit in upstream
intercompany inventory sales made during the current year.
all unrealized profit in downstream intercompany inventory sales, and the noncontrolling interest's share
of unrealized profit in upstream inventory sales made during the current year.
the controlling interest's share of unrealized profit in downstream intercompany sales, and the controlling
interest's share of unrealized profit in upstream sales made during the current year
all unrealized profit in downstream intercompany sales, and the noncontrolling interest's share of
unrealized profit in upstream sales made during the current year.

The consolidation treatment of profits on inventory transfers that occurred before the business
combination depends on whether:

I. the companies were independent at that time.

II. the sale transaction was the result of arm's-length bargaining.

I
II
Both I and II
Neither I and II
When there are intercompany sales of inventory during the year and a three-part consolidation workpaper
is prepared, elimination entries related to the intercompany sales:
I. Always are needed.
II. Are not needed if all the inventory is resold to unrelated parties prior to the end of the year.
I
II
Both I and II
Either I or II