CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

ADVANCED FINANCIAL ACCOUNTING AND REPORTING GERMAN and VALIX

PARTNERSHIP FORMATION

Part I: Theory of Accounts

1. In the absence of partners' agreed valuation, what is the proper initial measurement of the building
contributed by a partner to the partnership?
A. The assessed value of the building on the date of formation
B. The fair value of building on the date of formation
C. Book value of building on the date of formation
D. Cost of building on date of acquisition

2. Which of the following statements regarding Partnership Formation is FALSE?

A. Upon formation of a partnership, the partners may agree to make their capital ratio in
conformity with their profit and loss ratio using the bonus method.
B. The non-cash contributions of the partners to form a partnership are recorded by the partnership
at their agreed value.
C. The amount of capital credited to a partner may be equal to the total assets contributed at agreed
or fair value less liabilities assumed by the partnership.
D. The capital to be credited to each partner upon formation is always the actual amount
contributed by each partner.

-
3. When the incoming partners contribute an asset, upon recording the asset in the new partnership
books, it involves a
ASI24
A. debit to the capital account of the partner equal to the fair value of the asset capital
B. credit to the capital account of the partner equal to the agreed value of the asset
C. credit to the capital account of the partner equal to the fair value of the asset
D. debit to the asset account equal to the carrying amount of the asset

4. When the contributed asset has an attached liability, and it is assumed by the partnership upon
recording the said liability in the new partnership books, it involves a
A. debit to the asset account capital
B. credit to the capital account -

C. debit to the capital account lability

D. memo entry

9701

M
 1 996M
.
-

X 3

96M
Page 2
4 USSM
.
~19 .

Part II: Problem Solving X

2

8 976M v
Problem 1
.

A business owned by C was short of cash, and C decided to form a partnership with D and E. D was
able to contribute cash thrice the interest of C in the partnership while E was able to contribute cash
twice the interest of D in the partnership.

The assets contributed by C were as follows: Cash of 18,000; Accounts receivable of 378,000 with
allowance for doubtful account of 12,000; Inventory 840,000; and store equipment of P300,000 with
accumulated depreciation of P30,000 but with FMV of P250,000 and agreed value of P200,000.
X 4 CA

C, D, and E agreed that the allowance for doubtful accounts was inadequate and should be P20,000.
They also agreed that the fair value of the inventory is P920,000.
casn 18 ,000
1. What is the cash contributed by D? AR 378, 000

A. 4,488,000 ADA (12 000) ,

B. 4,728,000 invty 840, 000

C. 2,424,000 Equip 200 , 000
D. 4,638,000
1, 424 , 000
2. What are the total assets of the partnership? PADA (8 , 000)
A. 7,880,000 Plaity 80 , 000
18 , 000
B. 7,092,000 Ci Capital 1 , 496 , 000
C. 14,960,000 358, 006 (37215-20k) (10 )
%

D. 15,460,000 92 ,000
1 49
Y
E
.

200 , 000 4 458N

.

&

Problem 2
CLAC 1 .

496M 60% 8 976/4

.

Total 14 92M .

On January 1, 2025, A and B, both sole proprietors, decided to form a partnership to expand both of
their businesses. According to their agreement, they will split profits and losses 75:25, and their initial
capital will also reflect that ratio.

The following are A and B’s Statement of Financial Position:

A 1
- =
2
A Proprietor
Statement of Financial Position
December 31, 2024

ASSETS LIABILITIES & EQUITY

Cash 50,000 Accounts Payable 65,000
Accounts Receivable 100,000 Accrued Expenses 55,000
Inventories 75,000 Notes Payable 80,000
Equipment 250,000 A, Capital 90,000
Acc Depr – Equipment (185,000) _
TOTAL ASSETS 290,000 TOTAL LIABILITIES & EQUITY 290,000
A B
C Al
90 000 160 , 000
Unadi cap ,

A So , 008 1931758 273,750 (75 %)

Al (201 000)
B 2855, 000 (193 750)
, 91 , 250 (25%)
iuty 15 1 000 (15,000)
3651008 =

363 , 000
Equip 50 , 008
9701
AE (10 ,
000)
AP (5, 000)
NP 100 , 000

U So , 000 285, 000 365 008 ,

 Page 3

B Proprietor
Statement of Financial Position
December 31, 2024

ASSETS LIABILITIES & EQUITY

Cash 30,000 Accounts Payable 75,000
Accounts Receivable 110,000 Accrued Expenses 90,000
Inventories 85,000 Notes Payable 100,000 > add back -

Equipment 300,000 B, Capital 160,000

Acc Depr – Equipment (100,000) _
TOTAL ASSETS 425,000 TOTAL LIABILITIES & EQUITY 425,000

Both invested their separate businesses. The values reflected in the Statement of Financial Position are
already at the agreed values except for the following accounts:

A’s Accounts Receivable is now 20,000 less than what was stated in his Statement of Financial
Position. Both Inventories of A and B are now 90,000 and 70,000, respectively. Equipment for B has
an assessed value of 275,000, an appraised value of 250,000, and a book value of 200,000. Additional
accrued expenses are to be established in the amount of 10,000 for B only, while additional accounts
payable in the amount of 5,000 for A. It was also agreed that all liabilities are assumed by the
partnership, except for the notes payable of B, which will be personally paid by him.

1. What is the adjusted net investment of B immediately upon formation?

A. 91,250
B. 185,000
C. 285,000
D. 310,000

2. What is the agreed capital credited to A upon formation?

A. 80,000
B. 273,750
C. 292,000
D. 255,500

3. What amount should be credited to A to be in conformity with their initial capital agreement?
A. 193,750
B. 212,000
C. 175,500
D. 205,000

9701
 Page 4

Problem 3

O
Bonnie and Clyde enters into a partnership agreement in which Bonnie is to have 55% interest in the

65% in the profits and losses. Bonnie contributed the following:

G
partnership and 35% in the profits and losses, while Clyde will have 45% interest in the partnership and
B
255 , 008
Cost Fair Value 156 ,000
Building P235,000 P255,000 525T 000,

Equipment P168,000 P156,000

(50 000),
Land P500,000 P525,000
(2)A2 886 , 000
The building and the equipment have a mortgage of P50,000 and P35,000, respectively. Clyde is to
contribute P150,000 cash and equipment. The partners agreed that only the building mortgage would be
assumed by the partnership.

1. How much is the fair market value of the equipment which Clyde contributed?
AC
A. 615,818
(55 )
B (45))
%

586 , 000 cash 150, 000

B. 989,143
C. 546,273 724 , 909
D. 574,909
Equip 574 , 989
Total 1 , 610 , 909

2. How much is the total asset of the partnership upon formation?

Asset
A. 1,892,143
B. 1,701,818 casu 150 , 000
C. 1,660,909 255 ,000
D. 1,632,273
BidG
730 , 909
-

EQUID > -

156 , 000 + 574 , 909

land 525 , 000 2 + L
&

Problem 4 11610, 909 + 50,000

1 , 660 , 909 or

X and Y agree to form a partnership. X is to contribute P135,600 cash and equipment that have a
carrying value of P135,000 and a fair value of P115,000. The equipment, however, has a mortgage
attached to it, and is agreed by the partners that they will assume it. Y, on the other hand, contributed
P240,000 cash. They share profits and losses in the ratio of 4:5, respectively. Furthermore, part of their
agreement is to bring their initial capital in conformity with their profit and loss ratio.

Al
What is the mortgage of the equipment?
A. 58,600 Y (5) 240, 000
cash 135 , 200
B. 78,600 X (4) 194,008 [
C. 10,600 1 Equip 115 , 000
D. 34,600 Total 432, 000
Mortgage (58 600)
,

END

9701
 CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila

ADVANCED FINANCIAL ACCOUNTING AND REPORTING GERMAN and VALIX

PARTNERSHIP OPERATION

Part I: Theory of Accounts

1. The following are considered expenses of the partnership, except

A. salaries of managers employed in the company
B. bonus to managing partner
C. supplies used
D. interest on the partnership's outstanding loan

2. How do the partners distribute the profit or loss?

A. equally
B. based on the partnership contribution
C. based on agreement
D. none of the choices

3. When computing the weighted average capital balance of the partner, the following are included:
except
A. regular or temporary withdrawals
B. additional investment
C. permanent withdrawals
D. none of the choices

4. The following decreases the capital balance of a partner, except

A. permanent withdrawals
B. regular withdrawals
C. share in the debit balance of the income summary account
D. share in the credit balance of the income summary account

5. When initial recording of the regular or temporary withdrawal, it involves a

A. debit to the capital account of the partner
B. debit to the drawing account of the partner
C. credit to the loan account of the partner
D. credit to the capital account of the partner

9602
 NOTE the Interest base on take effect
:
computing
① Addt) innitment Page 2
Divict cap bal
Part II: Problem Solving ① Permanent Draw

Problem 1

A, B, and C are partners, and they have the following changes in their capital balances:

A B C
January 1 67,500 90,000 37,500 19519
March 1 (18,000)
April 1 15,000
May 1 36,000
June 1 13,500
August 1 (4,500) >
pirnament withdrawals since SILENT
-

October 1 (27,000)
December 1 9,000
76 , 500 94, 500 48, 000
Assume the following independent cases:
dibit Beton ignon
NI
-

Income :
N)
CASE 1: summary After
undit : NI didnet
Monthly salaries were P15,000, P25,000, and P22,500 for the partners, respectively. Partner A will
have a bonus of 5% of net income after the bonus. Interest is 12% of ending capital balances. The
remainder will be divided 25:40:35 for the partners respectively. The income summary account had a
credit balance of P1,417,500.
51 (N1 B) .
-

25 48 35
What is the share in the net income of Partner B? A B a total
A. 476,562
S 180 , 000 300, 000 270 ,000 750 , 000
B. 400,110
C. 540,828 B 67, 508 - 67 , 568
D. 311,340 17 , 348
I , 158
9 SiT48 26 1 250
R 143 ,435 229 , 488 200 , 202 573, 720

CASE 2: 400 ,
110 540 , 822476 , 56211 417, 500

Interest is 10% of weighted average capital balances. Annual salaries of P240,000, P315,000, and
P255,000 for the partners respectively. Partner B will have a bonus of 25% of their net income after the
bonus and G his salary. The remainder will be divided 2:3:4 for the partners respectively. The partnership
generated a net income of P525,000. 25%. (N1 B J) -

23
-

Y
A B ( total
What is the share in the net income of Partner C?
A. 249,187.5 S 240 , 000 315, 000
B. 104,787.5 WACC 255, 00 S10 , 000

C. 171,025 B &
42, 000 & 42, 000
D. 259,687.5 A 84, 758
I 8, 475 8, 362 54, 487 5 . .
211525
83, 625
B246
(77, 450) (116 175) (154, 900)
. (348 525)
,

875 171 , 025 249, 187 5 104, 787 5

CASE 3: ,
.
.
525, 000

Partner C will have a bonus of 20% of net income after the bonus and the salaries. Quarterly salaries of
P75,000, P67,500, and P93,750 for the partners respectively. The interest of 15% of ending capital in
excess of P70,000. The remainder will be divided based on their beginning capital balances. The
income summary account had a credit balance of P870,000. 20 % (N1
B S)
-
-

What is the share in the net income of Partner A?

A. 236,913 A B a total
B. 359,683
C. 300,975 S 300 , 000 270 , 000 375, 000 9455008
D. 273,404
B - - -
&

9602
No Bonus when: I 9753, 675 &
41656

① NIT LOS (27 571)(34 762)(15, 317)(79, 450)

, ,

273 , 404276, 913359,

Basis becomes NEGATIVE 683870 , 088
①
 Page 3

Problem 2

Partners A and B have the following net income distribution agreement: Salaries of P45,000 and
P135,000, respectively; a bonus to A of 10% of net income after salaries; and 10% interest on their
average capital balances of P150,000 and P250,000, respectively. Any remainder will be distributed
equally among the partners.
(0 % (NI-S)
If the partnership generated a net income of P200,000, and salary, bonus, and interest are
distributed to the extent of earnings only, what is the share in the net income of Partner A?

-
A. 51,000
B. 149,000
C. 53,750
D. 146,250 , 000
2

B
2, 000 -

6, 75011 1 250 /8, 000

-

53 750146 , 250
, 200 , 00
Problem 3

Partner A is trying to decide whether to accept a salary of 162,500 or a salary of P97,500 plus a bonus
of 10% of net income after salaries and bonus as a means of allocating profit among the partners.
Salaries traceable to the other partners are estimated to be P450,000.

What amount of income would be necessary so that Partner A would consider the choices to be
equal?
A. 1,100,000 Salary 162, 500
B. 1,197,500
C. 650,000
D. 1,262,500
Salary 97 , 50

Bonus 65 , 008
10 % (N -J B) -

END
45, 000 10%
=
(N1 -547 500 , -
65: 000)
65,000 =
10 % (N1
-612,
500)
451 000 + 61 1 250 =
O IN
-

N1 =
1 , Hez , 50

9602
 CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila

ADVANCED FINANCIAL ACCOUNTING AND REPORTING GERMAN and VALIX

PARTNERSHIP DISSOLUTION

Part I: Theory of Accounts

1. Which of the following statements pertains to partnership dissolution?

A. It refers to the process of converting the non-cash assets of the partnership and distributing the
total cash to the creditors and the remainder to the partners. Liquidation
>
-

B. It refers to the change in the relation of the partners caused by any partner ceasing to be
associated in the carrying on of the partnership.
C. It refers to the extinguishment of the juridical personality of the partnership.
D. It refers to the end of the life of the partnership.

2. Which of the following statements is correct when a new partner is admitted to an existing
partnership by purchasing a portion of the capital interest of an existing partner?
A. It will result in revaluation or impairment of existing assets of the partnership.
B. The partnership will recognize gain or loss in the transfer of capital from one partner to another
partner.
C. The partnership is not dissolved by the admission of a new partner by purchase.
D. It will just result in a credit to the capital of the newly admitted partner with the corresponding
debit to the capital of the selling partner.

-
3. In case of admission of a new partner in an existing partnership through investment to the
partnership, which of the following scenarios will result in a bonus to the new partner and asset
revaluation? upward TL < TNC
A. The total contributed capital of all partners is equal to the total agreed capital of the new
partnership, while the agreed capital of the new partner is higher than the amount he has
contributed.
B. The total contributed capital of all partners is more than the total agreed capital of the new
partnership, while the agreed capital of the new partner is lower than the amount he has
contributed.
C. The total contributed capital of all partners is less than the total agreed capital of the new
partnership, while the agreed capital of the new partner is higher than the amount he has
contributed. capital undit
D. The total contributed capital of all partners is more than the total agreed capital of the new
partnership, while the total agreed capital of old partners is equal to the amount they
contributed.

4. If a partner who retired from the partnership receives less than the capital balance before retirement,
which also results in to decrease in the capital balance of remaining partners, which is correct?
A. The retiring partner receives a bonus from the remaining partner.
B. There is an overvalued asset to be adjusted before retirement.
C. There is an undervalued asset to be adjusted before retirement.
D. The retiring partner gives a bonus to the remaining partner.

If incnase , bonus tomaining partners

9603
 Page 2

Part II: Problem Solving

Problem 1

Partners P and Q had capital balances of P358,500 and P300,000, respectively, before admitting R. P
and Q share profit and loss in the ratio 6:4. R O paid P225,000 in exchange for 30% interest in the
partnership as well as the profit and loss. Purchase of intense

-
1. How much is the capital of partner P after the admission of R?
A.
B.
250,950
250,590 & ESCUSSO) Ms
C. 279,480 R 1971550 197 , 556 20%
D. 269,580
454, 500 658, 588
-
2. How much is debited to the capital account of partner Q upon admission of R?
A. 120,000
Q, Capital 90k
B. 90,000
C. 79,020 Ri capital 90K
D. 105,360
- Asset Revaluation
&
3. If equipment is undervalued, how much would be the capital balance of partner Q after the
admission of R?
A. 336,600 225K/30%. =
750K P354 50054, 900413 , 400(124,
B. 235,620
,
020) 2891350
(652, 500) & 300 , 00834 600346 , 600
C. 335,600 ,
(100 920) 235, 42
,

D. 205,620 91 , 500 under R 225, 000 225, 00

658, 50091 , 500 750,000 750 , 008

Problem 2
↑ Investment
X and Y have capital balances of P150,000 and P180,000, respectively. Z is to invest P60,000 for 15%
in the partnership interest and also in the profit and loss. There is an undistributed net income in the
amount of P80,000. Partners X and Y share profit and loss 65:35.

1. How much is the capital credit of Z upon his admission?

* YOK SE WU (
A. 60,000 Is it
B. 61,500 204 , 325 ↑

C. 72,000 z 601 10, 500 70, 500 15.

D. 70,500
470K S
470k
2. How much is the bonus to partner X from partner Z?
A. 10,500 no bonus to partner X
B. 6,825
C. 0
D. 3,675

9603
 X 2019 (45, 500) 154 , 50

22 (24, 500) 183 , 508

Y
Lok 15) Page 3
2 nok

470K (2017) 400K

3. If an equipment is overvalued, how much is the share of partner Y in the overvaluation of the
equipment?
A. 24,500
601 / 15 %. = 400K
B. 45,500 470K
X 43; 568
C. 10,500
D. 28,000 Tok over
Y 24, 508

Problem 3

Partners E, F, and G had capital balances of P120,000, P155,000, and P115,000, respectively. The
partnership generated a net loss of P140,000 during the year. The partners share profit and loss 2:5:1,
respectively. S

Due to disagreement, partner F wanted out of the partnership. Before retirement, the value of inventory
increased from P85,000 to P97,000. The partners decided to pay partner F P70,000 upon retirement.
P12,000
1. What amount should be reported as the capital balance of partner E after the retirement of
partner F? ( 120k ,
3 (35K) 000 85, 0009, 773 91 , 733
A. 84,667 F 155K (87 500)
, 7 1 560 751 000 (SiOro) 70, 008
B. 89,000
C. 91,333 G 1154 (17, 500) 115to 99 , 008 1 , 667 100, 667
D. 87,000

2. What amount should be reported as the capital balance of partner G after the retirement of
partner F?
Fi capital 751
A. 93,333
B. 99,500 casn 70K
C. 100,667 E, Cap 3 , nn)
D. 98,500 G
, Cap 1 , 467

-
3. Assume that equipment is overvalued. How much is the overvaluation of the equipment?
A. 5,000
B. 2,500
E St, 000 (2 000)
,
Sa , 02
F 751 000 (5000) 70 , 008
C. 8,000
D. 4,000 G 99 , 008 (1 , 000) 95, 008

(5 , 000)
&

4. In relation to No. 3, what amount should be reported as the capital balance of Partner E after
the retirement of Partner F?
A. 91,333
B. 84,667
C. 89,000
D. 86,000

9603
 Page 4

T 5. In relation to No. 3, what amount should be reported as the capital balance of Partner G after
the retirement of Partner F?
A. 100,667
B. 97,333
C. 99,500
D. 98,000

&

Problem 4

On December 31, 2024, the Statement of Financial Position of DEL Partnership shows the following
data with profit or loss sharing of 1:3:6:

Cash P5,000,000 Total Liabilities P10,000,000

Noncash Asset 15,000,000 Diane 5,000,000
Ellen 3,000,000
Liz 2,000,000

On January 1, 2025, Ana will be admitted to the new partnership named ADEL Partnership by
investing P4,000,000 for 30% capital interest in the new partnership, which has a total agreed
capitalization of P20,000,000.

What is the new capital balance of Liz upon admission of Ana in the ADEL Partnership?
A. 4,400,000 A UM IN um 30%
B. 8,400,000
-

I (200K
*
JM Look 5: 4M
C. 5,600,000
3M 1 SM (GOOK)
3
4 CM
D. 3,200,000
.
.

LM 3 6M
.
(1 2m)
.

4-UM

14M GM -

2014
&

Problem 5

C and D have capital balances of P 560,000 and P 450,000, respectively. Both decided to admit E into
their partnership. He invested enough cash to have a 20% interest in the partnership. The profit and loss
ratio of the old partners is 3:2, respectively. After the admission of E, the capital balance of D
amounted to P 495,000.
D25 Ass2t Revaluation
NO

TLC =
TAL
What is the amount of cash invested by E?
A. 333,125 C shou 671 5006771 500
B. 112,500 D 950K 451749519 J1 125M
.

C. 280,625
D. 393,125 E 393 125
, (112 500)
, 220 , 625 %i).
1 , 403 , 125

END

9603
 CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila

ADVANCED FINANCIAL ACCOUNTING AND REPORTING GERMAN and VALIX

PARTNERSHIP LIQUIDATION

Part I: Theory of Accounts

1. It refers to the process of converting the non-cash assets of the partnership and distributing the total
cash to the creditors and the remainder to the partners.
A. Dissolution
B. Termination
C. Liquidation
D. Operation

2. In the liquidation of a general partnership, which of the following credits shall be paid first?
A. Those owing to third persons.
B. Those owing to partners other than capital and profits.
C. Those owing to partners for their capital contribution.
D. Those owing to partners for their share in profits.

3. What is the nature of the liability of general partners as to partnership debts or obligations?
A. They are liable equally up to the extent of their separate assets after the partnership assets are
exhausted.
B. They are liable pro-rata up to the extent of their separate assets after the partnership assets are
exhausted.
C. They are liable pro-rata up to the extent of their capital contribution only.
D. They are liable solidarily up to the extent of their separate assets after the partnership assets are
exhausted.

4. Maximum possible loss is composed of the book value of the unrealized non-cash assets and
A. cash withheld for future liquidation expenses and anticipated labilities
B. cash withheld for outside creditors
C. cash withheld for payment to partners
D. cash withheld for payment of loans

9604
 Personal Asets) Llab-solvent Page 2
Asi2)) <
Liab= insolvent
Part II: Problem Solving
-

:
Problem 1 -
Lump sum NOMPL SILENT: Partners an invirent

The following condensed balance sheet is for the William, Faith, and Kim partnership. The partners
share profits and losses in the ratio of 5:3:2, respectively.
58 3p 20
Cash P 125,000 W # K
Proud 180k Inventory 100,000
Other Assets 300,000 look 85K 70K
other (nork) all
Total Assets P 525,000 (110K] (66k) (441)
(120K) LE (UK) (2, 400s (1 600)
,

Inv (luri) Liabilities P 270,000

William, Capital 100,000 - (14(4) 14, 600 24 ,488
wis (2001) Faith, Capital 85,000 - 141) (8, 400) (5 ,000)
Kim, Capital 70,000 ~ s
8 , 200 18 , 208
Total Liabilities and Equity P525,000

The partners have decided to liquidate the business. Liquidation expenses are estimated to be P8,000.
The other assets were sold for P180,000 and the inventories were considered a loss. What distribution
can be made to the partners?
sunario then WB
2 Compute for proceeds
:

William Faith Kim

T
W # K
A. 14,000 6,600 6,400 all (22015)
look 85K 701 lotal was
B. 0 8,200 18,800 ↓ LE (5k)
C. 4,000 6,400 16,600 (12) (76 200) (51 200) (256)
, ,
MPL -

D. 0 8,400 18,600
Givin Gain Cl
(281) 8
1 200 18 , 800 + S

Duf (22)

Problem 2

The Statement of Financial Position of LMN Partnership on December 31, 2024 is as follows:
partner , lan - was from
Assets Liabilities and Owners’ Equity
Cash 100,000 Liabilities 125,000
Other Assets 250,000 L, Loan > wan from partner 35,000
&
-

L, Capital 100,000
M, Capital 15,000 -

N, Capital 75,000 -

Total Assets 350,000 Total Liabilities and Owners’ Equity 350,000

They share profits and losses 40:40:20, respectively. Cash is realized for Other Assets as follows, and
amounts realized are distributed at the end of each month to the appropriate parties.
MPL- January
2025 Nr MPL Asset Book Value Cash Proceeds
No nm futur LE u
January 150,000 (201) 130,000
February NLI 100,000 15K 115,000 BV unnalized NCA look

How much is the total cash distribution to L in January?

A. 65,000 40 40 Fly 40
san w ur 10
B. 87,000
L M N L M N
C. 40,000
D. 0 135k 1519 75K 62k 71 31k
WI (51) (S1) (4(7) Gain 61 61 31
MPL (40K) (UUK) (201) 115K 68 14k 34k

87k(33k) 51K 9604

(22k) 331 (111)
105K 45K -
40K
 PROBLEM 1 Scenario U : W i solut for UK

Scenario 3 : All partners an SOLVENT I

WF
Glu (220 , 000)
W I K look 85K TUK
LE (8, 000)
look 85K TUK
MPL -
all (110K] (66k) (441)
(114K) (68, 4007 (45 400) , 228,000 Gain() LE (41) (2, 400) (1 600)
,

(14K)16 , 600 24 , 400 Dif -

(14(4) 14, 608 24 ,488

Deficient UK
Trk)
10k (6 ,000) (41 000)

Ninor 20, 408

-

wi I
all (220 , 000)
look 85K TUK
LE (8, 000)
MPL (248) (124) (74 400) (49 , 000)
,

Gain()
Dif (2, 000) (24k) 10, 600 20, 400
 Page 3

Problem 3

On December 31, 2024, the Statement of Financial Position of ABC Partnership shows the following
data with profit or loss sharing of 2:3:5:

Cash P 22,500,000 Liabilities to others P30,000,000

Other Non Cash asset 60,000,000 A, Capital 22,500,000
B, Capital 18,750,000
C, Capital 11,250,000

On January 1, 2025, the partners decided to wind up the partnership affairs. During the winding up,
liquidation expenses amounting to P3,000,000 were paid. Non-cash assets with a book value of
P45,000,000 were sold during January. Sixty percent of the total liabilities were still unpaid at the end
of January. P4,500,000 cash was withheld during January for future liquidation expenses. On January
31, 2025, partner A received P15,000,000. All partners are insolvent.
2 3 S

1. Compute the amount received by partner B on January 31, 2025 A B W

21 5M 18 75M 11 25N
A. 3,750,000
.
. .

B. 7,500,000 (37 5) .

(7 /) (11 251)
·
·

(18 75M)
.

C. 11,250,000 Total (ain 22- 5 15M 7 STU

-
(7-51)
D. 4,500,000 paid to partner I

2. Using the same information, Compute the proceeds from the sale of non-cash assets during
January 2025.
MPL :

I
A. 33,000,000 Glu (7 SM) .

casn future LE proceeds 37 5M

U-5M
↓
. &

B. 30,000,000 LE (3(2) &

BV NC gold
(45M)
BV unualized NIA
MPL (19 5 M) 151
C. 37,500,000 .

(7-51)
Gain Cl (Gri 45M) -

D. 34,500,000
T

19 5M 4 WB
(7- 5M)
-

Dif
c
Unpaid lab not included
(37 5M) . not anticipated
Problem 4

The statement of financial position for the partnership of Beth, Carla, and Davin, who share profits in
the ratio of 2:1:1, shows the following balances just before the liquidation:

Cash P12,000
CW futur LE 14, 600
Other assets 59,500
Liabilities 49,000 Unpaid Liab
14, 608
Beth, capital 22,000 (49k 34,400)
-

Carla, capital 15,500 Total cash withheld 29 , 208

Davin, capital (15,000)

On the first installment of the liquidation, a gain of P8,525 was realized from the sale of certain assets.
Liquidation expenses of P1,000 were paid, and additional liquidation expenses are anticipated.
Liabilities paid amounted to P34,400. The remaining book value of other assets is P1,550. On the first
payment to partners, Beth receives P6,250.

What is the amount of cash withheld for anticipated liquidation expenses and unpaid liabilities?
A. 11,475
z I I
B. 14,600
C. 26,075 B C D 8, 525
D. 29,200 Glu
22k (11 000)
15 , 500 (15k) LE
CW futur It (14, 6007
total cash
(15 ,750) (7 1 875) (7, 875)(31 5007 MPL
,
Br unnaliza (1 550)(
.

13,875 4 ,256 7 , 625 (22 875), Gain Cl - 9604

Dif (12, 875)
(31 , 500
 CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila

ADVANCED FINANCIAL ACCOUNTING AND REPORTING GERMAN and VALIX

CORPORATE LIQUIDATION

Part I: Theory of Accounts

1. Which of the following statements is true regarding the Statement of Affairs

A. The Statement of Affairs is normally prepared at the end of liquidation.
B. The historical cost amounts are relevant in this statement
C. This statement is not a going-concern report.
D. This statement reflects the book value of the debtor's assets and its application of the proceeds
to specific liabilities

2. These are the assets pledged to a specific liability which the estimated realizable value of the assets
exceeds the amount of liability.
A. Assets pledged to partial secured creditors
B. Assets pledged to fully secured creditors
C. Assets pledged to unsecured creditors
D. Free assets

3. The following are considered unsecured creditors with priority except

A. Taxes
B. Wages
C. Administrative / Liquidation expenses
D. Loans

4. Which of the following statements regarding the Statement of Realization and Liquidation is false?
A. This statement shows a complete record of the transactions of the receiver for a period of time.
B. Realization of assets only means collection of receivables from customers. >
-
also collection of said

C. The duty of the receiver is to realize the assets, to convert the non-cash assets into cash.
D. When done, this statement will generate a gain or loss.

9705
 Page 2

Part II: Problem Solving

Problem 1

AAA Corp. has the following statement of financial position:

LIABILITIES and SHAREHOLDERS’

ASSETS
EQUITY
Cash 5,000 &
Note payable (short-term) 128,000 + 10 , 248
Marketable securities 38,000 Accounts payable 105,000
Accounts receivable 55,000 Accrued expenses 58,000 -
224- BK
&
Inventory 65,000 &
Note payable (long term) 288,000 + 23 , 848

Prepaid expenses 3,500 Share capital 55,000

& Land 150,000 Retained earnings (deficit) (86,500)
& Building 125,000
Equipment 98,000
Intangible assets 8,000

Total Assets P547,500 Total Liabilities and P547,500

Shareholders’ Equity

Liab >
w/ always include interest
interst -

Additional information:
 The note payable (short-term) was secured by the inventory and the note payable (long term) was
secured by the land and building X

 Marketable securities have an estimated appraised value of P40,000

 Only P25,000 can be collected from the accounts receivable
 Inventory can only be sold at P58,800
 Estimated fair value of the land was P255,000 and building was P110,000 and the estimated fair
value of the equipment was P68,500
 Administrative expenses of P51,500 were estimated as liquidation expenses
 Salaries of P22,000 and payroll taxes of P13,000 were accrued
 Interest on the note payable (both short-term and long-term) is 8% had not been accrued
 Other non-cash assets not mentioned above are considered worthless
IUV NP (st) * include int
1. What is the amount of estimated deficiency?
D 58, 800 138 , 248 79 , 440 excess liab who prio
A. 68,200 LB
B. 49,980 ① 365 , 006 311 , 040 53, 960 excess assut (FA)
C. 101,480
FA
D. 100,680
casn 5, 006

I 18/0
FA 192, 460 79 , 448 as
2. What is the amount of estimated recovery percentage? M) 40, 008
000
exes
exp
,

A. 51.08% >
-
105, 966 AR 25, 000 23,000 A([Xp
B. 65.42% 192 468
,

Pe (13 000)
207 , 448 Tax ,

C. 75.91% 48 , 500
NCTFA 185 960 207, 440
,
Total US
D. 51.28% It
-

&
wo P
EXU)] 53, 948 Est Deficiency 101 , 450
3. What are the amount of estimated recovery and the estimated recovery percentage for
partially secured creditors? InV-Ry 58, 308
A. 113,330 and 80.53% Excess 40 , 578
-
79 ,440 x 51 08 %-

B. 99,378 and 71.89% Payment PSL 99 ,373

C. 110,770 and 80.13%
↑ -
138 ,248
D. 99,537 and 72.00%
N

Recovery 71 89 %
.

4. What is the amount estimated recovery for unsecured creditors without priority?
all unrecorded Inc) EXP SHE- Givin
A. 83,738 It a certain aslet has no NRV,
B. 97,165 all its BV is considered Loss . M1 ,000
2 (33 280) IntExp ,
55, 000 Shap
C. 65,638 AR (30 000) (S 500) (exp , , (56 500) KE(DC)
,
all GAINS
D. 65,382 Gain on NSSCt Realization
(107 000)
-

(6 200)
InV , ,

Loss + all Losses DeXp (3 500)

AP 105 ,000 ,

AE 23, 008 Nat Gain/Net Loss ->

total
Land 105,008 9705
128, 000 x 51 08 %
.

Blac (15,000)
= 45 , 382
ASS11] est RV 562 300 (29 500)
Equip
,
,

(579 000)
-

Recognized Lab 18 , 000)

,
It
unncorded lab/exp (84 780) ,
14 ,
500
(84 750)
1 (31, 500)
Est Def (101 , 430) I ,
(10) , 480)
 FSC : PSC : Liab w/ Pho

Bidd 7501 Salanis 100K Page 3

invty 70k
SoUK TaXI] 5017
AP JOK MP
50K 150K
Problem 2 201

Book value Estimated realizable value

Cash 100,000 100,000
Inventory 80,000 70,000 -

Building 500,000 750,000 -

The inventory was pledge to an accounts payable in the amount of P50,000. The building was pledged
to a mortgage payable including its interest in the amount of P800,000. Salaries was P100,000 and
taxes was P50,000. Other liabilities not mentioned was P150,000.
FH 120 ,000 50, 000 EXUS/
1. What is the amount paid to the holder of the mortgage payable?
sal (100 000), 150 , 000
A. 800,000
phority LexP
-

If FA cannot cover all use w/ 200 , 000 USI w/o P

B. 500,000
Tax (50 000),
C. 750,000 then N2T FA =
0 and Recovery % is 0
. 30, 000 excess tax

D. 0 NLFA 8 230 000

, Est Deficiency
Est Mc % W
2. What is the amount paid for the taxes? Any excess on USL w/prio
A. 50,000
Bidg (RV)
should be included in
B. 20,000
① 750 , 000
Est. Deficiency
C. 30,000 2 FA 120,000
D. 0 sal (100 000) ,

Tax W , 00
Explosses Inz/Profit/Gains
Problem 3 Allemative sol Cr

I
Dr
CCC Corp. has the following balances in July 1, 2025: forG/L :

\UT
AR ISO Inv
NR IntIn<
Cash 5,500 Accounts payable 59,500
45K
(3017) 1-
Accounts receivable
Inventories
7/8x 35,000 Wages payable
50% 60,000 Tax payable
119 500
, 25,000
35,000
[ Equip
EXP
(31 000)
,

(13 800)
,

15K Notes receivable 78,000 Note payable 65,000 InV2 (19 ,500)
Equipment 256,000 Mortgage payable 175,000
Int EXP (14 , 000)
10, Suf Share capital 120,000
(20 ,000) 75k[ (45,000)
u
Deficit 16 , 508

(19 , 500)
Total 434,500 Total 434,500 675)
In the statement of realization and liquidation the following data are ascertained for the month of July:
118 103) -

The note payable and mortgage payable together with their respective interests are paid. Only 7/8 is
collected from the existing accounts receivable at the beginning of the month. Half of the Inventories
were sold for P45,000. Only P68,500 of the notes receivable is collected. Equipment is sold for
P225,000. Administrative expenses of P13,800 are paid. Additional credit sales amounting to P10,500
are made for the remaining inventories. Interests accrued for the month are note receivable P1,500, note
payable P5,500 and mortgage payable P10,500. All existing noncash assets at the beginning of the
month are sold or collected during the month. 4 At not part Y
#19 : 70, 62

can be 30 1 000
realized
-

1. What is the profit or loss in the statement of realization and liquidation?amt or By

48, 508
254 , 006
A. (42,475) SURAL
30 1000

I
B. 27,975 ATBIT 429 , 888 AR 415 , 12 S
C. (77,675) 1 , 5001
10 , 500 + -
AA 12 , 000 ANR 12, 000
D. 75,175
65K +17517 +
161-1 256 , 000 LTBL 359 , 588
2. What is the estate equity at July 31, 2025? LNL 119 , 508 LA 16 , 000 + 5 , 500 + 10 , 50
A. (102,975) 75
,008 200
120
30k + 31k + 13 , 808 SD SC 57 , 000 45,000 + 10, 500 + 1 , 508
>

(77 ,675)
1- , -

B. 32,525
+ 20k + 16k
C. 150,175 937 , 708 299 , 625
D. (2,675) cJ
77 , 675 WJ

D Cash 30 , 625
③ 9705
can
68, 588
AR 30 , 62 R 68 , 500 AR 10 , 500
⑧ In) exp 14,000
sal 10 , 508
② cain 45, 000 ① cash 2251, 000 Intpay 16 , 000
sai 31 , 008 cos 30 ,000
U5 000 wis
,

Equip 24, 000 inv 30, 008 ⑨ MP 1737, 000

65008
CS 30 , 000 NP
⑤ EXP 13, 200 ② Int Re 11508 16 , 008
payash
Inv int
30, 000 256, 008
cash 13 , 308 IntInc 11508
 Page 4

Problem 4
A Statement of Realization and Liquidation has been prepared for TUV Co. The details are given
below:
- NCA , big
lab und
Assets to be Realized 60,000 ~ Liabilities assumed ↑ 50,000
,

Assets Acquired 40,000 Liabilities not liquidated 65,000 ~

Assets Realized 55,000 Supplementary credits 110,000
Liabilities to be Liquidated 80,000 ~ Supplementary debits 100,000
E
Liabilities paid -liquidated
to
similar
↑

labibeg
65,000
Wis
In the SORAL, the total of the debit side is greater than the total of the credit side by P12,000. The
ending balance of Capital Stock and Retained Earnings are P100,000 and (P85,000), respectively.
all is alady closed dificit
1. What is the amount of the beginning cash balance?
A. 47,000 Equity big , 21 , 000
B. 35,000 lok 55K
Liab bud So , 008
C. 20,000 ,

471 401 231

can , big
D. 0 ASI2t ,
big 107 , 000
65K solf ~
NCA ,big GOK
2. What is the amount of beginning estate equity? T

45K 5015
A. 5,000
Equity big , 27 , 008 look 110k
B. 9,000
12K
C. 3,000 *
G/L (12 000)
,

D. 27,000 end
Equity ,
15 , 008
Cl00K 85K) casn-ending balance
-

:
If

and 15, 008

Equity ,

Liab , end 65 , 008

Assets , end 20 , 000
END
casn NCA

5715 234

9705
 CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila

ADVANCED FINANCIAL ACCOUNTING AND REPORTING GERMAN and VALIX

LONG-TERM CONSTRUCTION

Part I: Theory of Accounts

1. It is a contract specifically negotiated for the construction of an asset or a combination of assets

that are closely interrelated or interdependent in terms of their design, technology and function
or their ultimate purpose or use.
A. Construction contract
B. Installment contract
C. Franchise contract
D. Consignment contract
-

2. Aside from the initial amount of revenue agreed in the long-term construction contract,
additional revenues may be recognized by the contractor (1) to the extent that it is probable that
they will result in revenue and (2) they are capable of being reliably measured. Which of the
following will not be considered as additional contract revenue by a contractor?
A. Variation in contract work as instructed by the customer regarding the scope of work to be
performed.
B. Claim that the contractor may seek to collect from the customer for customer caused delays
or errors in specification or design.
C. Incentive payments to be paid to the contractor if specified performance standards are met
or exceeded or for early completion of the contract.
D. Gain on sale of scrap materials from construction. incidental income cannot consider al runus.
>
-
: But
reduction on Actual cost Incuud

3. Which of the following costs shall be excluded in the contract costs of construction contract?
A. Costs that relate directly to the specific contract.
B. Costs that are directly attributable to contract activity in general and can be allocated to the
contract.
C. Such other costs as are specifically chargeable to the customer under the terms of the
contract.
D. Selling costs such as advertisement expense or commissions of real estate agents or
brokers. >
-
expansi

4. The following costs shall be capitalized as part of construction in progress or contract costs,
except
A. Costs of hiring and moving of plant and equipment to and from the contract site.
B. Systematically, rationally and consistently allocated construction overheads and borrowing
costs.
C. Costs that are specifically chargeable to the customer under the terms of the contract may
include some general administration costs and development costs for which reimbursement
is specified in the terms of the contract.
D. General and research and development costs for which reimbursement is not specified in
the contract. >
-

expensi

5. When it is probable that total contract costs will exceed total contract revenue, how shall it be
accounted for?
A. The expected loss shall be recognized as an expense immediately regardless of the certainty
or uncertainty of the outcome of a construction contract.
B. The expected loss shall be recognized as an expense immediately only when the outcome of
a construction contract cannot be estimated reliably.
C. The expected loss shall be recognized as an expense by reference to the state of completion
of the contract activity at the end of the reporting period when the outcome of a construction
contract cannot be estimated reliably.
D. The expected loss shall be accounted for based on company’s policy.

9706
 Page 2

6. When the company changes its percentage of completion of the construction project every year,
how shall the accounting change be treated?
A. It shall be accounted for as a change in accounting policy treated by retrospective application
or with cumulative effect in the beginning retaining earnings at the date of change.
B. It shall be accounted for as a change in accounting estimate treated by prospective
application to the date of change and future date profit or loss.
C. It shall be accounted for as a prior period error treated by retrospective restatement or with
cumulative effect in the beginning retaining earnings at the date of discovery of error.
D. It shall be accounted for as an equity transaction to be adjusted in the share premium or other
comprehensive income as the case may be.

-
7. How shall the contractor present in its statement of financial the accounts related to construction
contract?
A. It shall present as an asset the gross amount due from customers for contract work which is
the net amount of cost incurred plus recognized profits less the sum of recognized losses and
progress billings for all contracts in progress for which costs incurred plus recognized profits
or less recognized losses exceeds progress billings. (Meaning: It is presented as an asset if
Construction-in-Progress exceeds Progress Billings) 2x()) <IP
B. It shall present as a liability the gross amount due to customers for contract work is the net
amount of cost of cost incurred plus recognized profits less the sum of recognized losses and
progress billings for all contracts in progress for which progress billings exceeds costs
incurred plus recognized profits or less recognized losses. (Meaning: It is presented as a
liability if Progress Billings exceeds Construction in Progress) 2x2)] PB
C. Either A or B but the liabilities and assets resulting from the difference of Construction in
Progress and Progress Billings shall not be netted or offsetted in the Statement of Financial
Position.
D. Both A and B but the liabilities and assets resulting from the difference of Construction in
Progress and Progress Billings shall be netted or offsetted in the Statement of Financial
Position

8. Which of the following statements is FALSE regarding long-term construction contracts?

A. Any anticipated loss resulting from the contract must be recognized immediately and in
full. - - CIP PB
= No excel
:

B. If upon completion of the project the balance of Progress Billings is greater than the
balance of Construction in Progress, the excess is treated as a liability.T
C. General administrative costs may be part of contract costs but would usually be expensed.
D. The latest estimates of anticipated cost of materials, labor and subcontracting costs and
indirect costs required to complete a project should be used to determine the progress
toward completion.

9706
 Page 3

Part II: Problem Solving:

If costs to complet
=
/
Problem 1
h last ur of construction
On January 1, 2025, Entity A entered into a contract for the construction of a building at an original
price of P2,000,000 to be completed on June 30, 2027 subject to penalty of P500,000 on the year it
becomes virtually certain that construction will not be completed on the date agreed upon. On
January 1, 2026, the contract price increased by P2,500,000 due to the change in the design of the
building requested by the customer.
If SILENT : for that year
- costs a) TO DATE 12/31/2025 12/31/2026 12/31/2027
Cumulative costs incurred as of the end of the year 600,000 3,075,000 3,780,000
Estimated remaining cost to complete at the end of
900,000 1,025,000 420,000
the year
Billings to date >
-
It SILENT for the year
:
800,000 2,800,000 3,300,000

1. Under IFRS 15, what is the realized gross profit (loss) to be recognized by Entity A for the
year ended December 31, 2027? Wile 2017
wile 2027 CP 4-5M CP 41
A. 200,000 TEL (4- 1M) TEC (4 2 m)
-

3-075M 3 72M
B. (30,000) CTD
.

EST GP 400K
ESt CS 1-025M 420K
ESIGL (200K)
C. (500,000) 75 % 100%
TEC
D. 270,000 4 IM
. 4-2M
GP to data 300K
25 wis

24 GL to dat (200K) wil

75% 90 /
-

&
Phoryrs (200K) 2027

2. Under IFRS 15, what is the construction-in-progress balance as of December 31, 2026?(500K) + GL for the
yo
CTB-2027
A. 3,075,000 CTD-2026 3 075M
. 3 72M
.

I GP/L to date-toil 300K

I GP/2 to date -
2027 (20K)
B. 3,375,000 CIP
CIP 3 375M 3 5SM
C. 3,675,000
. .

D. 3,975,000

3. Under IFRS 15, what is the Excess CIP / (Excess Billings) as of December 31, 2026?
A. 275,000 contract asset CIP-24 3 3751
.

B. 525,000 contract liability PB-24 2 I -

C. 1,175,000 contract asset CA 57515

D. 575,000 contract asset EX()) (IP

4. Under IFRS 15, what is the construction revenue recognized for the year ended December
31, 2027? wis X

A. 3,600,000
Rennul As of 2027 (UMx90% ) 3M Volle x

227
Revenue As Of 2026 (4 5Mx (5% ) 3 375M
.

B. 600,000
.

REVINUL FOR THE YEAR 1027 225K

C. 225,000
D. 2,100,000

9706
 Page 4
Problem 2

BUILDER A entered into a fixed price contract of P120 million for the construction of a road for B
Corp. The estimated cost at completion is P75 million.
not CTC
The following were the total actual costs incurred by BUILDER A during the first year of the
construction:
- expensi
a. Research and development costs for which reimbursement is not specified in the
1,000,000 X
contract 1) nimbusible Capitalized (I :

b. Cost of negotiating the contract (charge immediately as expense) 500,000 X

c. Marketing costs 150,000
d.
e.
Costs of hiring equipment
Costs of materials used in construction
700,000
15,000,000
*
f. Costs of moving plant, equipment and materials to and from the contract site 200,000 -

g. Administrative costs not expected to be reimbursed 100,000 X

h. Depreciation of equipment used in construction 600,000 -

i. Site labor costs 5,000,000 -

j. Site supervision costs 1,000,000 -

CTD 22-JM
Under IFRS15, what is the net income at the end of the year? EXP 1-75M
1st yr : 22 - 5
A. 13,500,000 CIP 120M
- 75M
B. 10,790,000 TEC (75M)
C. 11,750,000 45M POL 30%
Est GP
D. 9,250,000 30%
since ist yr of operations,
GP to datI 13-5N >
-

it is also GP FOR THE YEAM.

EXPLUSLI (1-75(4)
&
Problem 3 N2t income 11 75/4
-

Reality, Inc. started on a contract in March 2025 to construct a commercial building. During 2025,
the entity used the cost to cost method. At December 31, 2025, the balances of certain accounts
were:

Excess of construction in progress over billings – due from customer -

CH 140,000
Progress billings – 1/5 of contract price CP1-IM 560,000
certain amount will be hald :
Receivable from
by the customer
At December 31, 2025, the estimated future costs to complete the project was P1,350,000. Of the customer ↑
amount billed 70% was paid in 2025 subject to retention provision of 15%, payable with the final
bill after the acceptance of entire completed project. A mobilization fee of 5% of the contract price
> -

deductible from the final bill is payable in 10 days after the contract signing. cash advance from customer

1. Under IFRS 15, what is the cost incurred to date in 2025?

CTD 4501 25) CIP Look CIP 700K
A. 1,800,000
.

75% = CP 2 SM
ECTC 1 35M PB J6OK
B. 1,350,000
. .

1 SM 100% POL 25%

C. 450,000 TEL .

EXUS) (11 140K

D. 700,000

2. Under IFRS 15, what is the total cash collections during 2025?
Mob FIL If Mob Fez Deductible 2025 :

A. 392,000
140K- cash 193 , 200
B. 532,000 casn
14017 Advanus 140 7 000
Adv
C. 333,200 58, 500
Contract Retention
D. 473,200 Al 392, 000
Prog Billings
AR 560K

PB 560K 9706
coll from AR

Cash (56017x70%.
x 85%.

) 333,200 -
can be collected once
E Contract Retention 58, 500
construction is complete 39217
AR (560K + 10% )
 BS- actual (I construction COGS 5 STU
.

construction COGS) 1 6M
(not always equal to CIP
-

Construction Revenue 3-9M

CTD 22]
CTD Wile 10 CIP
5. UM Page 5
Problem 4 cash 5 UM
&

Actual (I
.

5 4M
.

Fit 2027

On January 1, 2025, Entity A accepted a long-term construction project to construct a building with
an initial contract price of P10,000,000. During 2027, the contract price increases due to the change
in the project design requested by the client. The following data are provided by the accountant and
project manager concerning the construction costs for the three years of construction:
CITD
% POC
Year 12/31/2025 12/31/2026 12/31/2027 T
=

Cumulative costs incurred as of the end of the year P1,000,000 5 41 ?.

P10,800,000
Realized gross profit/(loss) during the year
=
250K ? P350,000 (P1,600,000) 12 5)
.

Percentage of completion as of the end of the year 12.5% 60% 90%

.

.YM-
5
Under IFRS 15, what is the Construction cost of sales to be recognized in the Income 60%
Statement for the year ended December 31, 2027? 2028 2016 2027 T =

Actual (1 IOM ION

CD /IM
(cust : BS) A. 5,400,000 Const Rev Fr 2027 3 9N
-901
2

(uncomm
.

TEC
B. 4,600,000 const LOS Fix 2027 (5 5) .

C. 4,800,000 (1)
D. 5,500,000 GP/LFTY 2017 (l-GM)
100%
POC

Rennuz as of 2027 9 9M +
. 11Mx 90% GP/LTD
cumulative loss ,
Romane as of zonu (600K)
Problem 5
3 91 -

On January 1, 2025, ABC Construction Corp. entered into a 3 year long-term construction contract
with Entity A. The agreed contract price was P10,000,000. The following were also the terms in the
contract:
● The contract price may increase or decrease depending on the completion of the construction
● If the construction will be completed ahead of schedule, for each day before the due date the
incentive will be P30,000 per day
● If the construction will be completed beyond the due date, for each day after the due date the
penalty will be P50,000 per day
● Another incentive bonus will be given in the amount of P250,000 in the event the percentage of
completion reaches at least 70% during the 2nd year of the construction. Based on its history of
completing construction projects, it is virtually certain that the construction will reach 70% in
the 2nd year. - Jum
of probabilities

● ABC Construction Corp. determined that the "expected value approach" is the best valuation for
the bonus incentive for early completion and penalty for the delay while the "most likely single most >
-

amount
approach" is the best valuation for the incentive bonus when the percentage of completion likely
1 it is appropriate
reaches at least 70% during the 2nd year of the construction.
for 2 possible
During the year 2025 the following data were ascertained: outcomes

No. of days Probability of happening

Early completion ahead of schedule 5 40%
On time completion - 35% > no 22C
-

Late completion 4 25%

- for the yo TO DATE
December 31, 2025
Actual cost incurred for the year 2,240,000 21 -

Estimated cost to complete 5,760,000

sin
Under IFRS 15, what is the construction revenue recognized for the year ended December 31,
2025? Expected value Approach :

IOM
A. 2,802,800 5 + 40%. )
(30K
+
6017
I

B. 2,786,000
(5017) (50k xyx 25 %)
C. 2,872,800
250K
D. 2,856,000
CP 10 26M
.

END
PO( 25%

2 , 872 , 800 - Revenue as of 157 yr/FTY 9706

 CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila

ADVANCED FINANCIAL ACCOUNTING AND REPORTING GERMAN and VALIX

FRANCHISE ACCOUNTING

Part I: Theory of Accounts

1. Under IFRS 15, an asset is transferred to the customer when customer obtains
A. Satisfaction
B. Possession
C. Control
D. Recognition

2. When shall an entity recognize revenue from contracts with customers?

A. When it is probable that future economic benefits will flow to the entity and the revenue can
be measured reliably.
B. When or as the entity satisfies the performance obligation.
C. When the entity collected the cash from the customers.
D. When the entity and the customers sign the contracts.

3. What is the accounting treatment of the transaction price when a contract with a customer has
multiple performance obligations?
A. The transaction price shall be recognized as revenue of the most important performance
obligation.
B. The transaction price shall be allocated equally to the different performance obligations.
C. The transaction price shall be allocated to the different performance obligations by reference
to their relative standalone selling prices.
D. The transaction price shall be recognized as revenue only at the end of completion of all
performance obligations.

4. When the stand-alone selling price is not directly observable, an estimate of the stand-alone
selling price is made through maximizing the use of observable inputs. Which of the following
is not a possible estimation approach?
A. Residual approach
B. Adjustment market assessment approach
C. Net realizable value approach
D. Expected cost plus a margin approach

5. Under IFRS 15, a good or service that is promised to a customer is distinct if

A. The customer can benefit from the good or service either on its own or together with other
resources that are readily available to the customer
B. The entity's promise to transfer the good or service to the customer is separately identifiable
from other promises in the contract
C. Both A and B
D. Neither A nor B

9707
 Page 2

Part II: Problem Solving:

Problem 1
On January 1, 2025, EFG Inc. entered into a franchise agreement with Entity H for an initial
franchise fee of P750,000 payable as follows: P250,000 down payment payable immediately and
two P250,000 annual payments evidenced by a non-interest bearing note, with the first payment due you will benefit
on December 31, 2025. With an effective rate of 9%, the present value of the note is P439,750. from future
modifications
The following excerpts were taken from the franchise contract: - Rennue nog over time
?
 The franchise license is granted to Entity H for a term of 5 years. Entity H has the right to access
the license from the date of franchise agreement. The license has an observable stand-alone
selling price of P200,000. Right to use point in time -

 EFG Inc. is to construct a food stall for Entity H. The food stall has no observable stand-alone no binefit
selling price but has an estimated cost of P300,000 and a margin of P100,000. 400K from future

 EFG Inc. must conduct training for the employees of Entity H. modifications

It was determined that the three performance obligations were separate and distinct from one
another. By the end of the year, the food stall was 90% completed as to construction and the training
was 80% done. Alluc basIs Alluc TR =

If RESIDUAL APPROACH
1. Under IFRS 15, assume that there was no established stand-alone selling price for the
training of the employees, what is the total revenue from franchise fees recognized by the
franchisor for the year ended December 31, 2025? Alloc bases (SASP) Alloc TP
RP 150. 006
A. 511,378 Pl 200 , 000 200 , 000 ↓
115 =
40 , 000

B. 471,800 PV NOTE 429 ,750 PL 400 000

, 400 000
, x 90% =
360 000,

C. 729,328 IFT 689 756 P3 89 ,158 89 ,150 x 80% =

11 , 800
D. 689,750 ,

Pasidual &

489 758, IFF 689 758

,
IFF 471 , 800

2. Under IFRS 15, assume that the stand-alone selling price of the training of the employees CFF -

amounted to P100,000 based on the adjusted market assessment approach, what is the 471 208 ,

total revenue recognized by the franchisor for the year ended December 31, 2025? uncared Revenue
A. 729,328 Alloc bases (SASP) Alloc TP (689 750 471 300) 217 956 ,
-
,
=
,

B. 472,972 Pl 200 000 , 197 071 115 39 414 , x =

,

C. 689,750 PL 400 000 , 394 143 90% 354 729 , x =

,
D. 512,550 Int Income
P3 100 , 000 98. 536x80% 78, 829 the
always based
=
4 on

C PV of not 2.
IFF 472 , 972
Adi markit 700 , 000 IFF 489 758
,

approach CFF -

Problem 2 *
Int(n( 39 , 578 + 429 , 758x91

512, 558
On April 1, 2025, Entity A, a franchisor entered into a contract with a franchisee for the
establishment of a restaurant. The franchise agreement provides that the franchisee shall pay a non-
refundable franchise fee in the amount of P500,000 with P200,000 payable at the signing of contract
and the balance payable in four equal annual installments starting March 31, 2026. The franchisee
issued a non-interest bearing note with effective interest rate of 10%. The present value factor of an
ordinary annuity at 10% for 4 periods is 3.16987. Aside from that, the franchisee shall pay on-going
royalties equivalent to 5% of franchisee’s revenue for the year. As of April 1, 2025, Entity A
completed the performance obligation of the franchise at a cost of P250,000. Indirect cost of
P35,000 was also incurred. The franchisee reported P200,000 sales revenue for year 2025.

Under IFRS 15, what is the net income for the year ended December 31, 2025?
DP 20, 000 #500 , 000
A. 180,571 DP (200, 000)
PV uf not 237 , 740T
B. 186,514
IFF 437 , 748 Bal 300 , 000/4 = 75T00
C. 162,740 x 3 67987
Direct cust (250 000)
.

D. 215,571 ,

GP 187 , 748

(FF 10 , 000 >

-
Look X 5% 9707
Int In2 17 , 841 -
237, 740 + 10%x9/12
indirect cust 135: 000)
NI 180 . 571
 Page 3

Problem 3

On July 1, 2025, Entity A, a franchisor, entered into a contract with a franchisee for the operation of
a restaurant. The franchise agreement provides that the franchisee shall pay a non-refundable
upfront franchise fee amounting to P2,500,000 with P500,000 payable at the signing of contract and
the balance payable in five equal semi-annual installments every December 31 and June 30. The
franchisee issued a non-interest bearing note with effective interest rate of 10%. The present value
of the note receivable is P1,731,791. The franchise agreement further provides for the payment of
on-going royalties equivalent to 3% based on franchisee’s sales revenue.

During 2025, Entity A has substantially performed the direct cost of services required by the
franchise in the amount of P1,785,433. In the same year, Entity A has also incurred indirect cost
amounting to P10,000. For the year 2025, the franchisee has reported sales revenue amounting to
P400,000. automatic
silent : DP is noumfundable Installment basic
1. Assume the collectability of the note is reasonably assured, what is the net income
recognized by Entity A for the year ended December 31, 2025?
12 000- 400K 3%

e
A. 621,537 DP 500 ,000 x

↑
,

B. 534,948 PU Noth 1 , 731 ,791 Int 86 , 590 + 11737 ,791x10% x 6/12

C. 528,948 (10 000)
,

F
D. 559,948
GP
Line an 534 , 948

2. Assume the collectability of the note is not reasonably assured, what is the net income
recognized by Entity A for the year ended December 31, 2025?
2015 voile
A. 188,590
SP V Coll EXCLUSIVE Of Coll EXCLUSIVE Of
B. 268,590
DP ~ Int in Lois Int in 2026
C. 251,272
D. 337,861 RGP 162, 652 134 923
, 1 DP 500 ,008 I DD -

LFF 12 000
-

713 ,418 Phi

-
,

1251354
2 pun 2
674 , 61l
Int 86 , 598
S13 , 418 674 114
(IDC) (10 , 000) - ,

20% Wil
NI 251 : 272 260 , 787 END .

RGP 142 , 682 RGP 134 , 923

InstjaiL] 2,237 :791

inst LOS 1 , 755 , 433

DGP 446 , 358 2)

Fer 2, 500, 000

DP (500 000)
,

Notz-Bal 2 , 000 , 00g

= j

Equal pay 400 , 000 +

12/319617

Dath coll In7 Phi Bal

7/1/i 1 1731 :791

12/21/25 400,008 86 , 548 313 , 418 1 , 418 , 78

6130/24 400 000 70 , 919 329, 081 1 , 089 300

I
, ,

743 765
12/31/26400 000 ,
54 , 46S 343 535
, ,

9707
 CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila

ADVANCED FINANCIAL ACCOUNTING AND REPORTING GERMAN and VALIX

CONSIGNMENT SALES

Part I: Theory of Accounts

1. Under IFRS 15, what is the specific point in time when the consignor satisfies is performance
obligation under consignment contract?
A. Upon delivery of consigned goods by consignor to consignee
B. Upon remittance of cash by consignee to consignor possible it
answe
>
-

C. Upon sale of consigned goods by consignee to final consumers is not in the choices
D. Upon signing of contract of consignment by consignor and consignee

2. Under IFRS 15, how does a consignor satisfy its performance obligation under consignment contract?
A. Satisfaction over a period a period of time
B. Satisfaction at a specific point in time
C. Either A or B
D. Neither A nor B

3. When the consignor ships merchandise out for consignment to the consignee, in the books of the
consignee, it involves a consignor
A. Debit to Consignment Inventory account consignedInv XX

Inv XX
B. Debit to Merchandise Inventory account
C. Credit to Consignor Payable account
consigned
D. Memo entry
Memo entry

4. Which of the following is considered capitalizable or inventoriable cost?

A. Commission
Advertising J
expenses
B.
C. Freight from the consignor to consignee
D. Freight from the consignee to consignor >
-
other exp

5. When the consignee pays expenses which is reimbursable on behalf of the consignor, in the books of
the consignor it involves a
consignor
A. Debit to Consignor Receivable account Consigned inv/Expanse xx
B. Credit to Cash consignee payable XX

C. Credit to Consignment Inventory account

D. Credit to Consignee Payable account consigned
consignor Consignor Receivable XX

XX
cash
Consigne Payable XX

Commission Expense XX

cash Xt
salz X

consigned
Cash XX

Consignor payable XX 9708

Consignor Payable XX

Consignor Receivable XX

Commission Income XX

cash XY >
-
Net Rimittanc
 Page 2
Part II: Problem Solving

Problem 1

Consignor consigned 10 items to consignee and the items had a cost of P43,200 each. The freight from
consignor to consignee amounting to P28,800 was paid by the consignor. The sales price of each item was
P72,000. They also agreed that the consignee shall have a 15% commission based on the sales. The
following costs were paid by the consignee on behalf of the consignor: Selling expense P36,000; cartage
cost upon receipt of the consigned goods P3,600. At the end of the year, consignee sold 6 items to
Initial cost (43 200 10) 432 008
customers.
x
, ,

Fr from
consigner to consignee 28, 808
carrage cost 3 , 600
1. What is the net income of the consignor at the end of the year? Total cost
444 , 400
A. 51,120 Sals (12k x () 437 , 000

B. 117,360 CoGs(42 400 4) ,

x 278 , 648 consignor
GP 153 , 328 39 , 608
C. 52,560 Consigne Payable
EXPCUSI)
You soo
36 , 008 Commission Expense 64 , 308
D. 111,600 commission (15 )
%

, cash 327, 605

NI salz 432 ,008
52, 568
2. What is the amount of the net remittance to the consignor?
consigned
A. 327,600 432 , 000
Cash coll from sal 432 , 088 Cash
B. 392,400 Comm Inc (64 800) , Consignor payable 432 , 008

C. 432,000 Payment on behalf

(39, 600)
D. 329,400 of consignor Consignor Payable &
492 000
,

Nit Remittance 327, 406 consignor Receivable 39 , 408

64 , 208
Problem 2 Commission Income
cash 327, 608
-

Entity A shipped 100 units of its inventories to Entity B on consignment. Each unit costs P900 and has a
standard retail price of P1,500. The 100 units had a freight-in charge of P7,500. After a month, Entity B
returned 10 units of inventory and remitted P65,700 cash to Entity A together with an account sales with
the following items included:
 Commission of 20% Cash coll from sal 90 000/1 500 60 units , ,
=

 Cartage on consigned goods, P1,500 (18 000) %

-

commission Inc 20

I
,
-

 Marketing and promotional expenses, P3,000 proceeds not commission 72 000 20%
,
,

 Delivery to customer and installation, P1,800 payment on behalf of consigner (6 1300)

N2t Rimittance 45, 708
1. How many units were sold by Entity B?
A. 0 units
B. 40 units
C. 60 units
D. 100 units
2. How much is the cost of inventory still out on consignment at the end of the month?
A. 19,800 Total 108 Initial cost (900 x 100) 90,008

B. 29,700 Sold (40) Freight in 7, 508

C. 30,600 Return (10) cartage cost 1 , 500

D. 0 unsold 38 99 000 ,

x
28/108
3. How much is the total consignment profit or (loss) recognized by Entity A?
unsold 29, 788
A. 6,900 sall 90, 008

B. 7,800 2) (99k x 60/100) (59 400)

,

C. 7,200 GP 30, 608

D. 6,300 Exp(us)/ (4 200)
,

END
-

Commission Exp (15, 000)

Other EXP 1900) -
Fright in 7 , 508

NI 6 ,908 cartage 11508

Total Fr 9 , 008
X
10/100
908
9708
 CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila

ADVANCED FINANCIAL ACCOUNTING AND REPORTING GERMAN and VALIX

HOME OFFICE AND BRANCH ACCOUNTING

Part I: Theory of Accounts

1. If the home office receives a debit memo from the branch, the home office shall record it in its
separate statement of financial position by
A. Increasing the investment in the branch account
B. Decreasing the investment in the branch account
C. Disclosure only
D. None of the above

2. If the branch receives a credit memo from the home office, the branch shall record it in its
separate statement of financial position by
A. Increasing the home office account
B. Crediting the home office account
C. Debiting the home office account
D. Disclosure

3. Which of the following transactions will increase the home office account in the branch’s
separate statement of financial position?
A. Net loss of the branch
B. Collection by the home office of the branch’s receivable
C. Debit memo received from the home office
D. Payment by the branch of home office’s liability

4. Which of the following transactions will decrease the investment in the branch’s account in the
home office’s separate statement of financial position?
A. Net income of the branch
B. Payment of the branch’s liability by the home office
C. Credit memo received from the branch
D. Return by the branch to the home office of merchandise shipped

5. Which of the following reconciling transactions will require credit to the home office's current
account in Branch A’s book for the adjustment?
A. Collection by Branch A of Branch B’s accounts receivable
B. Payment by branch A of the home office’s accounts payable
C. Credit memo received by branch A from home office
D. Reshipment of goods received by branch A to branch B

cas XX

9609
 ASSLA policy Page 2
cash word - the one who purchased/paid
Part II: Problem Solving
DLDEXP U12 the asset
Problem 1 Al recorded the asset

The following were found in your examination of the interplant accounts between the Home Office and
Branch A.
a. Transfer of equipment from the Home Office amounting to P50,000 was not booked by the branch.
b. P20,000 covering advertising expenses of Branch B was charged by the Home office to Branch A.
c. Branch A recorded a debit note on inventory transfers from the Home Office of P15,000 twice.
d. The Home Office recorded a cash transfer of P30,000 from Branch A coming from the Branch C
branch.
X e. Branch D reversed a previous debit memo from Branch E amounting to P21,000. The Home Office
decided this charge was appropriate for Branch F’s cost.
f. Branch A recorded a credit memo from the Home Office of P8,000 as P800.
DM/CM :
POr Of SENDER

1. The net adjustment in the Home Office books related to the Investment in Branch A account
is DBC A HOLL -
Hj Branch Adj
A. 50,000 credit (2017) 50K
a) BL -

A 501 Equip 50K

B. 10,000 credit (2017) (151) Equip 50K
No
entry # HOL 50K
C. 10,000 debit (7 200)
, b) BC -
A 2019
2017
D. 30,000 credit EXP 2013
No
entry EXP
(501) 27, 200 * BC -
A 201

2. The net adjustment in Branch A’s books related to the Home Office Account is

STOROK HOW
151
c)
- 151517
A. 50,000 credit BC
151)
B. 42,200 credit
.

C. 27,800 credit BL-2

a) cash Bl 2013
HOC not
EU
D. 12,800 credit Bl A 201
2017 * -

So0g
*
HOL 7, 200
e) var accts HUL Soo
Problem 2 BC (
=
Soof var accts sor
var accts 7,200

The main office of Ceres Inc. is stationed in Manila but has branches in Bacolod City and Silay City.
The main office shipped goods costing P215,000 to its Bacolod branch with freight-prepaid of P10,000
for the shipment. Out of this shipment, only 70% was meant for Bacolod, and the rest were to be
shipped again to the Silay branch with a freight collect of 7,500 for the reshipping of goods to the Silay
branch. Fright phpaid JENDER s
hocudis
:

Fright collect RECENVER J :

1. Assume it would have cost the main office P8,000 to ship the goods intended for the Silay
branch directly to its location. How much is the loss to be recognized by the main office?
A. 6,500 HU B S
B. 7,500 22517
C. 2,500 B2B -
B 2151
SFHS
Freight in
2151
10K
D. 0 cash luk
HOL Li5K

2. Assume it would have cost the main office P15,000 to ship the goods intended for the Silay
branch directly to its location. How much is the debit to freight-in in the Silay branch books?
A. 7,500 STB B 44,508 67 , 508 SFHO44 , 500
Q
-

HU2
B. 17,500 StB-S 44, 568 SEHO 44 , 508
↓
F- in 8 , 000
C. 15,000 Freight in 3 , 000 cash 7, 508
D. 10,500 BL -
S 45,000 HOL 65, 008
Freight-loss 2, 508

BC B -
671568

Actual freight should-be enight lowey

I 10 , 500 7 8, 000 ~ 2
, 500 loss
9609
z 10 , 500 15, 000

SFHD 44 , 508
BL S -

67, 500
2 ↓
F- in 10 , 508
BC -
B 67, 508
cash 7, 508
HOL 67, 500
 JTHO@ BP 150K x 250% 675,000 BP
=
:
258
SFHO Par Br bk 325 , 000 cost 100
1) SFHG
In-transit 50, 008 ON 158
2) El
HO 150K (BP)
175 , 008
Page 3
B1 upBV 0 251 (lost)
Problem 3 El per count Ho 42 , 500 + 50, 000 =
112, 500 (BP)
BR 72500
0 10, 000 (coST)
The Home Offices consistently billed its branch with a markup of 150% on cost. During 2025, the
Home Offices credited its Shipments-to-Branch account in the amount of P150,000. In the books of the
Branch, the Shipments-from-Home-Office had a balance of P325,000. The beginning inventory
reported by the branch was P175,000 of which P150,000 came from home office merchandise. Per
physical count, the branch reported an ending inventory in the amount of P72,500 of which P10,000
came from outside purchases. During the same year also, the Branch acquired P85,000 worth of
merchandise from its suppliers.

1. What is the cost of goods available for sale of the branch in the combined statement?
BP
A. 426,667 cost DA outside (cost)
90k
B. 460,000 150K 40K
S 375K 150K 2251 > adj Bal before

B
25 008 ,

C. 320,000 85 000 ,

El (112 500) (45%) (67 500) (10

,

D. 300,000 000)
,
El ,

Addt) Br Income
412 , 500165K 247, 500 .

WS WS 100 , 000
overval cos Branch

2. What is the cost of goods sold of the branch in the combined statement?
A. 265,000 OA
B. 375,000

I
OA 247 500 , 90 000 ,

C. 485,000 Br Inc 247 500 247 508 225T 000

,
-
,
,

D. 355,000
47 , 500

3. At the end of the year, the overallowance branch inventory account was debited in the
amount of?
A. 137,500
B. 247,500
C. 217,500
D. 154,167

Problem 4

For the year 2025, the Home Office billed its branch for merchandise shipments at 30% above cost.

The following were some of the account balances on the books of the home office and its branch as of
December 31, 2025:

Home Office Books Branch Books

Inventory, January 1 P 35,000 P 101,500
Shipments from Home Office 329,875 2024
wis
Purchases 1,575,000 350,000
BP 178% 140 %
Shipments to Branch 253,750 .

Branch Inventory Allowance 91,875 cost 188% 100 %

Sales 2,100,000 -
960,000 CA 20% 40 %
Operating Expenses 507,500 ~
92,500 ↑

TFj
The beginning inventory from home office merchandise at cost was P39,375. The ending inventory of
the branch was P380,100 including goods from outside purchases of P48,475. The ending inventory of
the home office is P210,000. -

1. What is the amount of the unrealized profit in the separate books of the home office on
January 1, 2026? 12131/25 ->
BP cost DA outside (cost)
44375
A.
B.
30,975
15,750 o [329 5iIS
. 875
39 ,775
253 ,758
15,758
76 , 125
> 91 , 875 B (

350 , 066 J
El (48 , 475)
C. 76,625 El (341 ,425) (255 ,000) (76 625)
,

WS 347 , 908
D. 72,490 WS 53 475, 38 , 125 15 , 250

55 , 125 -
53 , 975
↑
9609
Ho (BP) 55 ,125
B1 (1 750
, = 140%. ) 1 , 256
B1 UP BR 101 , 500 El @BP 337 , 625

-x )
O(cost) 441375 SFHO (329 , 875 = 10% 253 ,758

Ho (BP) 331 , 625

El &cust 255 , 008

El up BR 350 ,100
O(cost) 48 ,475
 Page 4

2. What is the branch beginning inventory in 2025 that came from outside purchases?
A. 46,375
B. 62,125
C. 9,625
D. 0

3. What is the Cost of goods available for sale of the branch?

A. 385,000
B. 781,375
C. 396,375
D. 715,400

4. What is the total ending inventory to be shown on the combined financial statements?
A. 303,475 El-Br
Ho (cost) 255 , 000
48 ,475
B. 513,475 O(cust)
Fl 18 210 , 000
C. 590,100
-

D. 462,821 513 475

.

5. What is the combined net income for the year?

H8 Br
A. 912,475
35006
B. 927,821 B 1 , 575 000
Sall , 100 , 000
2 940 , 000

C. 894,975
,
WS (1 . 1461250) (386 , 025) sal 960 , 008
D. 927,725 STB (253 750),
GP 953 , 756 577 , 975 WS (401 275)
.

El (210 000)
, OPEX (507 500) , (92 500)
, GB 558 ,725
LS 1,, 146 , 250 NI 446 258
,
481 , 475927 725 ,
OPEX (92, 500)
15 , 258
Problem 5
S
TM2 N1 of the Branch &
Reported NI N 466 , 225
(us was ecost) 464 25 ,
E

On November 1, 2024, BBB Inc. established a sales agency in Pasay by sending cash to be maintained
at a P100,000 imprest balance and shipping a year’s worth of samples costing P312,000. During the
month, the agency submitted sales orders to the home office amounting to P528,000, but only 80% of
them were approved and invoiced by the end of the calendar year. Expense vouchers for the 2 months
were as follows: meal allowance P8,000, rent P18,000, transportation allowance P4,000. The gross
profit rate of the company is 40% based on sales. Invoice generatedsally -

How much is the net income to be reported by the sales agency for the year ended
December 31, 2024?
A. 129.200 Gross SaIL) 422, 400152511X 80%
B. 138,960
+
S

C. 181,200 sales 422 , 400 100%

D. 86,960 W] (253 440) , 60 %

168 , 968 48
GP
EX (20 ,000)
Sample EXP (52,006) +
312kx"/12 E ND
Ni 86 , 968

9609
 CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila

ADVANCED FINANCIAL ACCOUNTING AND REPORTING GERMAN and VALIX

JOB ORDER COSTING / JUST-IN-TIME SYSTEM / BACKFLUSH COSTING

Part I: Theory of Accounts

1. A credit to Work in Process Inventory represents

A. work still in process
B. raw material put into production
C. the application of overhead into production TG *

D. the transfer of completed goods to Finished Goods Inventory up XX

2. Which of the following journal entries records the accrual of the cost of indirect labor used in
production? part of actual of

A. debit Work in process inventory credit Wages payable

B. debit Work in process inventory credit Manufacturing overhead control
C. debit Manufacturing overhead control credit Wages payable
D. debit Manufacturing overhead control credit Work in process inventory
-WS]
3. In a job order costing system, the net cost of normal spoilage is equal to
A. estimated disposal value plus the cost of spoiled work
B. the cost of spoiled work minus the estimated disposal value
C. the cost of spoiled work minus the estimated spoilage cost
D. the units of spoiled multiplied by the predetermined overhead rate

4. The net cost of normal spoilage in a job order costing system in which spoilage is common to all
jobs should be
A. assigned directly to the jobs that caused the spoilage
B. charged to manufacturing overhead control during the period of spoilage
C. charged to loss account during the period of spoilage
D. allocated only to jobs that are completed during the period

5. The rework cost in a job order costing system in which the defective goods are charged to a specific
job should be
A. treated as expense immediately
B. charged to manufacturing overhead control
C. capitalized to the particular job as an additional cost in the work in process
D. ignored

6. It is a production system in which each component in a production line is produced immediately as

needed by the next step in the production process.
A. Activity Based Costing system
B. Just-in-time manufacturing system
C. Just-in-case inventory system
D. Min-max inventory system

7. It is a product costing system that is usually used for just-in-time production systems since it
eliminates the detailed tracking of cost throughout the production system and only prepares journal
entries at the specified trigger points.
A. Backflush costing
B. Standard costing
C. Normal costing
D. Traditional costing

9710
 Page 2
8. Which of the following is not a benefit of utilizing a just-in-time inventory system?
A. Lowering the cost of inventory
B. Enhanced product quality and delivery time
C. Less margin for errors in the production process
D. Accounting procedures are simplified through backflush costing.

9. Which costing method is the most appropriate when using backflush costing in a just-in-time
inventory system?
A. Normal costing
B. Actual costing
C. Standard costing
D. Budgeted costing

Part II: Problem Solving

Problem 1
driver cost
WWW Corporation charges factory overhead to production at a predetermined rate based on direct
labor cost. The following data are given on its production for the month of January:

Job 101 Job 102 Job 103 Job 104 Total

Work in Process, January 1
Direct materials 36,000 67,500 103,500
Direct labor
Applied Factory Overhead
14,400
?
29,250
?
43,650
34,920
I
11 , 520 23 , 400
Cost Added in January
Direct materials 13,500 38,250 81,000 40,500 173,250 -

Direct labor 5,400 20,250 33,750 13,500 72,900 -

Job numbers 101, 102 and 103 were completed during the month. Job numbers 101 and 103 were sold.

M
182 , 078
1. What is the total cost of goods put into process? 173 , 158
POH rate
A. 226,890 DU 72 908, 54 , 92
80 %
B. 486,540
-

APDOH 58 ,32 43 , 656

C. 428,220 486 , 548
D. 239,670

2. What is the total cost of goods manufactured? 10) 102 103 104
A. 421,740 61, 920 120 , 150
B. 363,420 M 13 , 508 38 , 250 :1 1 00 40, 508
C. 304,470 DU 20 ,258
5 , 408 33, 758 13 , 500
D. 239,670
APDOH 4, 32 16,208 27, 000
10 , Jog
3. What is the cost of goods sold? 25 , 140- 194 , 358 141 ,750 - 421 ,748 64 , 200
A. 164,970 4 Fa , 2nd ↓

B. 195,570 (goods not sold) WIP , end

C. 226,890 >
-
85 . 140 + 141 ,75 (not completed)
D. 291,690

4. Assuming WWW Corp. incurred P60,000 overhead cost, what is the under/over applied
overhead?
MON
A. 1,680 under

I
B. 1,680 over
Actual Applied
C. 33,240 under 40,000 58 , 3201 WIP 58 , 31
D. 33,240 over Mol 58 , 770
1 i 450
under

immaterial 2 Material 9710

226 , 39 Wip , end 64 , So unadj vos 226 , 390
-
cus in general
unadj los

underapp 1 i so Fa , und 194 , 858 underapp 783 >

-
1 , 680 x
(224 290/486 540)
, ,

WS 226 , 298 227 , 673

228 , 578 -

>
-

Adjusted COS 486 , 548

 Dilictici
spoiled MUH (RW cost 958
Jalnv(NRV) 11508
PM 508
MOH(WSS) 905 Page 3
Payroll 208
Problem 2 WIP 2 , 408
Mult 28

A certain company manufactures a certain product and uses 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 P100,000

Allowance for spoilage P20,000 Included in
-
company's fault 120 , 000
Units produced 5,000 5000
=
24/4
Pinitial
At the end of the production, 100 units are spoiled and 50 units are defective. The spoiled units can be cst/unit
sold for P1,500. Direct materials and direct labor cost for rework are P500 and 200 respectively.

1. Assume the spoilage is due to internal failure and the overhead cost for rework is P250, what
is the cost transferred to the Finished Goods Inventory account? Spoiled NIV 1 500 1

total Initial cost (WIP) 120 008 cost of spoiled ,(2 400) ,
+
100x24
A. 118,550
cost of spoiled (2 400) Ws) , (900)
B. 117,600 cost trans FG 117 608 Defective DN 508
,
C. 98,950 DL 200
D. 120,000 AppOH 256
RW cost 958
2. Assume the spoilage is due to exacting specifications and the overhead cost for rework is
P150, what is the cost per good unit? Spoiled NRV 1 500 1

100, 00 8
cost of spoiled (2 000) 100 X 10 ,
+

A. 24.19 Ws)
2 (500)
=

B. 24.17 2008
508
Defective DN
C. 20.28 total Initial cost (WIP) 100 000 DL 200 ,

D. 20.17 NITV (1 500) AppOH 150

,

Rework cost 558

RW cost 558

cost trans FG 99 , 358 WIP (RW cost) 858

Problem 3 Good units (5 000 100)
,
-
JGInv (NRV) 11506 RMI 508
4 978
,
WIP 11508
cost per good unit payrol zog
20 28
- MOH 158
XOX Company uses a highly efficient just-in-time manufacturing system. The company uses backflush
costing for recording its production. The following transactions occurred for the year ended December
31, 2025:
DM 150 , 000

a. Purchased P200,000 worth raw materials on account. DL

JCC 220 , 000
APP OH
b. Incurred direct labor costs of P100,000.
X c. Actually incurred factory overhead costs amounting to P120,000.
LOGM 370 ,00

= 1000 prod
~d. Applied a total of P220,000 to the production as conversion cost
e. P50,000 worth of materials were left in the production process. cost/U 14-8
w, 000 sold
f. 25,000 units were completed but only 20,000 was sold.
CS 294 , 000

1. Assuming the company has three trigger points in its backflush costing system, the entry to
record the sale of goods would include a Actual (2 Scrup
A. credit to Applied conversion cost for P220,000
Payroll
220 ,000
B. credit to Finished goods account for P370,000
100, 000 -
DL
C. credit to Finished goods account for P296,000 Var accts 120, 000
Oh
-

D. debit to Raw and in-process account for P200,000

2. Assume that the company has one trigger point in its backflush costing system, sale of goods
stage. the entry would include a 3TP :

A. debit to Raw and in-process account for P50,000 1) Purch

B. debit to Finished goods account for P296,000 Raw-In process (RIP) 2001
AP Look
C. A debit to Finished goods account for P370,000
D. A credit to Raw and in-process account for P150,000 2) Comp
2TP : 27019
1TP: FG
1) Puren RIP 15575
1) sale
RIP Look Applied C( 2201 9710
RIP 501
AP 2001
FG 74k 3) Jala
Cus 2941T 296k
sall WS
2) AP 200K FG 296k
74k
FG
App(C TWIS
WS 2961
RIP
-
1501
Applica ( 220K
 Page 4

Problem 4

RM Co. adopted the Just-In-Time (JIT) production system and used Backflush Costing to account the
cost of the produced goods. The following data were given:
RIP
Purchase of raw materials P2,000,000
Materials requisitioned into production P1,980,000 Purch IM 1 92M
.
used-prod
Direct labor P600,000
X Factory overhead incurred 20K
P800,000
Applied factory overhead P900,000
Units produced 50,000
Units sold 49,000
There were no beginning inventories for raw materials, work-in-process, and finished goods.

1. What is the ending balance of the Raw and In-Process / Materials In-Process account?
A. 10,000
B. 20,000
C. 30,000
D. 0

2. What is the amount of the cost of goods manufactured?

A. 3,400,000 DN 1 92M
.

B. 3,380,000 DI Look
C. 3,480,000 900k
App OH
D. 3,500,000
CGM 3 42N.

3. What is the amount of the cost of goods sold? SUK

69 4
A. 3,332,000
-

nak
B. 3,312,400
C. 3,430,000 WS
3 , 410 , 408
D. 3,410,400

END

9710
 CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila

ADVANCED FINANCIAL ACCOUNTING AND REPORTING GERMAN and VALIX

JOINT PRODUCTS, BY-PRODUCT COSTING AND SERVICE COST ALLOCATIONS

Part I: Theory of Accounts

1. If a company obtains two salable products from the refining of a single raw material, the refining
process should be accounted for as a(n)
A. Mixed cost process
B. Joint process
C. Extractive process
D. Reduction process

2. Which of the following components of production are allocable as joint costs when a single
manufacturing process produces several salable products?
A. Direct material, direct labor, and overhead
B. Direct material and direct labor only
C. Direct labor and overhead only
D. Direct material and overhead only

3. The method of pricing by-products where no value is assigned to these items until they are sold is
known as the
A. Net realizable value at split-off point method
B. Sales value at split-off method
C. Realized value approach
D. Approximated net realizable value method

4. Which service department cost allocation method assigns overhead costs to cost objects after
considering interrelationships of the cost objects?
Algebraic Step
A. no no
B. no yes
C. yes yes
D. yes no

5. Which service department cost allocation method considers all interrelationships of the departments
and reflects these reflects these relationships in equations?
A. Step method
B. Indirect method
C. Algebraic method
D. Direct method

9711
 Page 2

Part II: Problem Solving

Problem 1

Miguel Company produces two floor cleaners from the same process, A and B. Joint product costs
were 90,000.
separable cost
Sales price per Disposal cost Further
Barrels Barrels Final sales price
barrel per barrel processing cost
produced sold per barrel
at split-off at split-off per barrel
A 800 600 P100.00 P60.00 P20.00 P150.00
B 1,000 900 P70.00 P20.00 P30.00 P120.00

If Miguel Company sells the products after further processing, the following disposal cost per barrel
will be incurred: 30.00 for A; 10.00 for B

1. Using the physical measure in allocating the joint cost, what amount of joint processing cost is
allocated to Product A? allow base (prod)
A So8
A. 72,000
B 90 , 000 800
B. 40,000 1 ,008 X
=
40 , 00
C. 18,000 1 , 200
1208

D. 50,000

2. Using the relative sales value at split-off in allocating the joint cost, what is the gross profit of
Product B if it was sold at the split-off point? #
Said 64, 000 +
70x900
A. 28,000 allow base
(os (37, 200) +
12,000 x 9/10
B. 29,647 A (100 X 200) 80 , 008
GP 25 , 20
C. 25,200 B (70 x 1 000)
, 70 , 000
D. 27,059 150 , 008
Bshan(C(90Kx 38) 42 , 000 + total cost of B

3. Using the net realizable value at split-off in allocating the joint cost, what is the net
income/(loss) of Product A if it was sold at the split-off point? Sally 40 000 100 x 60 ,
-

A. (14,342) alloc base WJ (261 242) 35 122x4/8 +

,

B. (2,342) A (100 60) x 800 -

32 00 - GP 33 655
,
,

(76 000) 60x606 +

C. (3,122) B (10 -10) x 1 000 50 , 008,
=
EXP ,

D. (6,000) NI (2 242) ,

82 , 008
A Shan (901X) 33: 122
-
Total cost A
4. Using the approximate net realizable value in allocating the joint cost, what is the net
income/(loss) of Product B if it was sold after further processing?
alluc basi saiL] 100, 000 - 120 x 900
A. 40,500
B. 35,000 A (150 -
20 -

30) x 300 :
80 000
,
CJ
(67 500)
,
-
75 , 000x9/10
GP 40 , 508
C. 36,000 B (120 -
20 10) x 11000
- =
80, 000
9 , 008 10x908
D. 31,500 EXP
-

160 , 000 NI 31 , 500

B Jhan 12 (a0kx /2) 45 , 008

Sup cost (30 x 1 000) , 70, 008

Total costof B 15 , 000

9711
 NRV Alloc base Page 3
bu prod
A (43 75 8, 000) 50 , 000 700 , 000
(hox 200 prod)
x =

4 , 000
-
.
=
2, 000
-

= 200
Problem 2 B (45x 2 000)
, -
30, 000 : 100 , 000

10)U 400 , 008

Isabel Company produced two main products jointly, A and B. C was a by-product. A and B were
produced from the same raw material. The joint cost was P200,000 and the company opted to use the
net realizable value method in allocating the joint cost to the main products.

The following were the data available for the month of January:

Number of lbs produced Number of lbs sold Sales price per lbs Further processing cost
A 8,000 6,400 P43.75 P50,000
B 2,000 1,800 P65.00 P30,000
C 200 150 P30.00 P4,000

1. Assuming the net realizable value of by-product C is accounted for as an additional sales
revenue in the sale of Product A, what is the gross profit of Product A?
A. 121,500
saIL] 20 000 (43 75
,
. x 6 , 400) (C : 200K +3/4 = 1504
Addtsaks 1 , 500 (10 x 150) 50K
B. 122,000 sup cost
C. 161,500 Total Sals 281 , 506
6 , 408 Total cust 200K
D. 162,000 WS (140 000) ,
>
-
200K X
8, 008
GP 121 , 500
2. Assuming the net realizable value of by-product C is accounted for as other income in the sale
of Product B, what is the gross profit of Product B?
saiLS 117 000 (45X 1 200) /C 20K 1/4 50 008 :
A. 46,500 ,

1 808
, x ,

B. 47,000 WS (72 000) 80k

,
Sep cost+ 30 008 x
,
,
2 008 ,
C. 45,000 GP 45 000 , Total cost 80 008 ,

D. 72,000 other Inc 1 500 (10

150)
, x

NI 46 , 508
3. Assuming the net realizable value of by-product C is accounted for as a reduction in the joint
cost, what is the gross profit of Product A?
280 000 (47 6 , 400) 12 : 20, 000
A. 121,600 sall] , . 75 x

B. 121,200 WS (158 800) ,

-
-198 , 500 x
6 ,400 NRV
by prod (2 000)
, Sh JC
C. 122,000 GP 121 , 208 8 , 008
Adj by 198 , 000 x 3/4 =
148 , 50
D. 121,500 50 , 000
Sup cust

Total cust 198 , 508

9711
 Page 4

Problem 3

RAV Manufacturing Company has two production departments (P1 and P2) and two service
departments (S1 and S2).
A summary of the year's overhead costs and other data for each department prior to allocation of
service department costs appears below:
P1 P2 S1 S2
Overhead costs P1,000,000 P1,200,000 P400,000 P300,000
Direct labor hours 20,000 30,000 5,000 12,500
Machine hours 6,000 3,000 1,000 3,000

The overhead cost of S1 is allocated based on direct labor hours and the overhead cost of S2 is
allocated based on machine hours. It is the company’s policy based on the benefit provided ranking that
S2 is rank number 1. JtID

1. Assume the Direct method, what is the total overhead cost allocated to P2?
P1 P2 P1 P2
A. 360,000 20 , 000 30, 000
B. 340,000 DLhrs S1
501008 50, 000
YOUK S1 1601 2401)
C. 386,667 3 ,00
BOUK S2 200K 1001
Mun 6 ,000
D. 313,333 S2
9 , 008 9, 008
340K 340K
2. Assume the Step method, what is the total overhead cost of P1?
S2 3141 S2 3141P2
P2
A. 352,000 2001 YOOK IM 1 2M
-1110 6/107/10
.

B. 340,000 S2
S2 (200K) 301 1801 9017
C. 1,352,000 45415 25815
51 S1 (450K) 1721
-
- -

D. 1,340,000
- -
1 752M
.
1 5UIM
.

3. Assume the Algebraic or Reciprocal method, what is the total overhead cost allocated to P1
and P2? 700 000 +. 20S)
300K YO0K 52
=
,

A. 700,000 400 000 10S2 +

S29141 P2 51 =
,
B. 826,531
C. 387.755 S2 10 40 78
- 32 700 000 + 20(400 000 + 10(2)
. ·
=
, ,

D. 438,776 62 200 000 + 80 000 +. 02S2 =

, ,
S1 ·
20 - 32 · 48
·
9832 =
750 , 000
Whether STEP , DLIECT Or ALGEBRAIL , · 98
total ourned cost allocated on the
S2 =
387 755 ,

production dipts an the same.

END
3) =
400, 000 + 10 (387 755)
,

S1 =
478 , 776
Look
S2 SI 41 P2

2001 YOOK IM 1 2M
.

S2 (387 755)38 776232

,
, , 653 116 , 327
700K
S1 87 , 755(438 772)140 405
,
, 210 , 612

T
&
1 , 373 , 04) 1 , 526 , 939

Total ourhead
cust

9711
 CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila

ADVANCED FINANCIAL ACCOUNTING AND REPORTING GERMAN and VALIX

ACTIVITY BASED COSTING

Part I: Theory of Accounts

1. Which of the following is typically regarded as a cost driver in traditional accounting

practices?
A. Number of purchased orders processed
B. Number of customers served
C. Number of transactions processed
D. Number of direct labor hours worked

2. The term cost driver refers to

A. Any activity that can be used to predict cost changes
B. The attempt to control expenditures at a reasonable level
C. The person who gathers and transfers cost data to the management accountant
D. Any activity that causes costs to be incurred

3. Cost allocation bases in Activity Based Costing should be

A. Cost drivers
B. Value-added activities
C. Activity centers
D. Processes

4. Traditional overhead allocations result in which of the following situations?

A. Overhead costs are assigned as period costs to manufacturing operations
B. High-volume products are assigned too much overhead, and low-volume products are
assigned too little overhead
C. Low-volume products are assigned too much overhead, and high-volume products are
assigned too little overhead
D. The resulting allocations cannot be used for financial reports

5. Relative to traditional product costing, Activity Based Costing differs in the way cost are
A. Processed
B. Allocated
C. Benchmarked
D. Incurred

9712
 -

Page 2
Part II: Problem Solving

Problem 1

Triple A Company manufactures two types of product, Regular and Premium. The following
data have been obtained:
Regular Premium
Direct materials cost per unit P33 P38
Direct labor cost per unit P32 P44
Direct labor hours 12,000 3,000 151

Machine hours 2,000 4,000

Engineering hours 450 450
Number of setups 5 20
Number of units 8,000 2,200

Overhead costs are assigned to production the basis of direct labor hours. The overhead costs
consist of the following items:
Setup costs P 250,000
Engineering costs 180,000
Machine costs 900,000
Total P1,330,000

1. What is the total cost per unit of Regular using traditional costing?
A. 65.00
B. 120.42
DLhr
RI9
12/15 imms
C. 198.00 DM as
D. 148.13 12/15) = 5 000
OH 133 +
(1 .
97m x ,

198
2. What is the total cost per unit of Premium using Activity-Based Costing?
A. 82.00 Pum

B. 115.25 ScUp se Due scrup 200 , 000

C. 486.55 Engrhus 450 45 Engr 90 , 000
D. 212.39 908 908 Mach 400. 000

Mainuu 26 4/6 290 , 000/ 2 200

,
=
404 55
.

DM 38
Du 44
OH YOU 55.

426 55.
.

9712
 Page 3

Problem 2

The Corsair Manufacturing Company produces two products, X and Y. Product X has a selling
price of P12.70. and Product Y has a selling price of P12.50.

Product X Product Y
Number of units 11,000 3,000
Direct materials cost per unit P3.23 P3.09
Direct labor cost per unit P2.22 P2.10
Direct labor hours 10,000 2,500
Machine hours 2,100 2,800
Inspection hours 80 100
Purchase orders 10 30

Overhead costs are assigned to products on the basis of direct labor hours. The overhead costs
for this time period consisted of the following items:

Inspection costs P16,200

Purchasing costs 8,000
Machine costs 49,000
Total P73,200

1. What is the gross profit / (gross loss) per unit of Product Y using Traditional costing?
X Y
sall) 12-58
A. 2.43 Dunn
B. 7.31 10/12 .
5
2 .

5/12 .
5 WG) 10 07 -

C. (6.63) DM 3 09
.
GP 2 .
43
DU +18
2
D. (10.99)
Dif 4 28
.
>
-
(73 200 x 25/12 5)
,
.
= 3 , 000

10 07.

2. What is the gross profit / (gross loss) per unit of Product X using Activity-based
costing? X Y

A. 7.25 inspec his so/130 100/130 inspec 7, 200

B. 4.75 purch order
10/40 30/40 purch 2 , 000
C. 1.93 Mach his 2 , 100 . 500
2 Mach 21 , 000
D. 4.50
4 , 908 4, 908
30 ,200 = 11 , 000 =
2 75
.

DM 3 25
.

END DL 3 27
. sales 12 78.

UH 2 75
.
Was 8 20.

GP 4 5
8- 2 .

9712