Cpar2016-afar-8021-to-8030.pdf

CPA REVIEW SCHOOL OF THE PHILIPPINES • MANILA • . V.

ADVANCED FINANCIAL ACCOUNTING AND REPORTING ACCOUNTING FOR FOREIGN CURRENCA TRANSACTIONS

CUERRERO/GERMAN/DE JESUS/LIM/F I RRER/LACO/ AL IX

000 Eutos (F). The 1.Trading purchased goods from Y. a company based in Fiance for L200,000 exchange rate at this time is P1 € 12. 5. X paia 30 days later when the prevailing exchange 0 b'o iateisP1€1b

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How much is the foreign currency gain/loss on the books of X and V A 21.000 loss 21 000 gain and 9t 0 1000 gain and 0 4200000 loss and D 4 200,000 loss and 4,200,000 gain

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2 Manila Company purchased merchandise for 300,000 pounds from a vendor in London on Noemher30 2022 Payment in British pounds ' as due on Januai 30 2023 The exchange rates for the British pound were as toltovs

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December 31, 2022

November 30, 2022

,- $1 62 1.59 1 56

, $1. 65 .1 .64 I 63

Spot rate, 30-day ' rate, 60 -day rate

In its December. 3, 2022 income statement, what is the amount to be reported by Manila Company as foreign exchange difference? A 9,000 gain 3. 367 loss / C. J.367 gain. D. 9.00.0 loss

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3 Uiagon Company sold warehouse facilities for $8,340..000 to a customer in Oregon 1SA on November. 02 2016 Collection in US dollars was due on January 31 2017 On the same date to hedge this foreign cnency exposure, liNgon ( ompanv entered into a forward contract to sell $8,340,000 to Export bank for delivery on January 31 2017 Indirect exchange rates on different dates ere as follows:

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Spot rate 30-d4\ futures 60-da\ futures 90-day futures

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Nov.2

Dec 31

02387 02364 02392 02463

02457 c Oi47 02481 02403

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02494 02278 02437 02304

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How much is the effect on earnings due to hedged item in the December 31, 2016 'I ') profit and loss statement? . U A 10.008,000) J B. ( 5 , 83) 8) ( C 10008000 J (p D 5,838

I2 How much is the effect on earnings due to hedging instrument in the 2017 profit and loss statement" (/ 2502000w -'b 1,585 ( (2502000) D( 1585)

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arako Company acquired a heavy equipment for $14100 from a supplier in Detroit. USA \,/on December 1 2016. Payment in US dollars was due on March 3 1 20 17. On the same date, to hedge this foreign currency exposure. Barako entered into a forward contract to purchase $14,100 from Citibank for delivery on March 31, 2017. Direct exchange rates for dollars on different dates were as follows: Spot Rates Offer Bid 4 .4 4j.6 December 1 , 20 1 6 42.3 42.5 December 3l,2016 March 3l,2017 43.7 43 .4

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Forward Rates Dec. 31 41 .8 42.2 42.5 )' 42.8

Dec.I 42.3 41.8 40.6 42.'f

30-day futures 60-day futures 90-day futures 120-day futures

March 31 43.2 4 2. 6 43.4 42.9

1. What is the reported value of the liability to the vendor at December 31, 2016 99 iLfC j1-) //A. 596A30 rn B. 599,250 q rp A C. 596.400 LI 599200

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arako Company's income in 2W,' as asutt ofthis * 2. What is theét impact in Bar hedging activity? A. 8,460 net gain t -B. 8 460 net loss c it C. 8 , 500 net gain D. 8 .500 net loss

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11 ote dt.N1O 1 11 111akd III ftrei .n curre ney Rr t he tbr 6Oday . I $' pniu issr 5nglwd on l)ecem he r P Ll I-C htsc iiade t'roni a uppl icr III 1 j(' t() ()i i)eeenber 3 i . the sc.hni. Sp)t 1 (I()()() 1) W 1-Ids. ii a sethne :tC (I note 7 5. 75. i I iC i rite () selling s1:5)ot ihe t P745. Januai:

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On the settlement date, how much is the foreign exchange gain/loss? 7F \uà UC) A. 172 422 gain B. 100,116 loss

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C. 172.422 loss D. 98658 loss

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6. On November 2, 2016, p Corp entered into firm cpmmitt/with Japanese firm to acquire equipment, delivery and passage of title on March3 1, 201 7t a price of 4375 yen. On the same date, to hedge against unfavorable changes in the exchange rate ofthe yen. P Corp. entered into a 150 day forward contract with BPI for 4 375 yen. The relevant exchange rates \ were as follows: t )L' 12/31/2016 3/31/2017 11/2/2016 ,

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Spot Rate Forward Rate

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P375 1 P4i

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P38

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What is the amount debited to the equipment account? 5 A. 161,875 on 11/2/2016

B. 175.000

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p35 p35

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11/2/2016

C. 153 . 125 on 3/31/2017 D 1 -75 , 000 on 3/31/2017

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CPA REVIEW SCHOOL OF THE PHILIPPINES MANILA

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ADVANCED FINANCIA1 ACCOUNTING AND REPORTING ACCOUNTING FOR FOREIGN CURRENCY TRMNSACTIONS GUERRERO/(_J' ERMAN/DE J ESUS/LI M/FERRERJiACOIVAL1X

I. The unadjusted accounts of PRIMER CORPORATION of the Philippines at December 3 1 . .' 2016 that relate to its forward contracts are summarized as follows: in Philippine pesos amounting to P 1 31000

Forward contract payable to

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the Chaiigi

Corporation hedge. Philippine pesos amounting to P294000 Forward contract receivable fro,m intended to hedge a foreign currency commitment to KBS Co. of Korea due in 90-days from December 1 2016. c a: ( Accounts payable to Chang* Corporation of Singapore amounting to P 12 7350. billing was for 10000000 Singapore dollars worth of merchandise.

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in Thailand Baht amounting to P2275OO. for Forward contract receivable from speculation to purchase 20(L000 haht i-days from December 1 . 2016.

Forward contract Payable tv1etro B,--i.n in Korean Won amounting to P294000, intended to hedge a I OOOOO ,Won sales comiTtiñent with KBS Co. of Korea.

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m to P 1 31000, which is to Forward contract receivable froiin m Singapore dollars aounting . hedge payable to Changi Corporation or I 20*davs from November 2. 20 6. Forward contract payable to in Thailand Baht.

Dd) in Philippine pesos amounting to P2275OO. fbi speculation

Direct Erc/iange rates ii December .31, 2016 were isJoIIovs: IJalil Closing sellingrate Closing buying rate

Won

Singapore dollars

1.12 1 , 10

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.013125 • .0 13 0?0

3.00125 3 .00100

Forward rates to purchase Thailand Baht and Singapore Dollars and sell Korean Won:

Ba/it 30-day futures 60-dayfuture's 9Oday futures 120-day futures

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Singapore dollars

Won 2.975 129575J

.0133 L013475 :0[365 .0138 25

1.155 1, 172 1.l9 1.2075

2.9225

I. On December 31, 2016, how much is the amount oftotal current assets of Primer?

A. B. -S D.

663.250 528500 665,000 666350

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i: 2. On December 31 2016, how much is the amount of total current liabilities of Primer? ,A. 7875O0 / B. 656.250 . C. 5,60,000 D. 918350 .

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3 In Primer's income statement for the year ended December 31, 2016, what amount of FORE X, gain(loss) should be reported from the forvi ard contract for speculation" VA A 7B

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4 In Primer's income statement for the year ended December 31, 2016, what amount of FORF \ gain(loss) should be reported from the change in the fair value of the Undei h ing sales commitment?

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1,750 7000 (1,750) (7,000)

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(1750) A B. 7.000 C (7000) Dr.-'1.350

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5.. In Primer's income statement for the year ended December 31, 2016, what amount of F ORF X gain(loss) should be reported from the hedged item in an ! exposed' liabilit

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position? I

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0 , 500) (2500) (7000) (1350)

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CPA REVIEWS( IIOOL OF I LIE PHILIPPINF S . MANILA . .

ADVANCED FINANCIAL ACCOUNTING AND REPOWIING AC COLJNI]NG FOR FOREIGN C URREN( V TRANSACTIONS GUERRERO/CERMAN/DE JI SUS/1 I M/FF. RRF R I tCO/V %LJX

I On October 1...'2016, the company took delivery irom a Bahrain firm of ln\entor\ costing 850.000 dinar. Payment is due on Ianua V) 2017 ConetiientIy the company paid P1 1 700 to acquire cm at-the-money call option for 8%() O4O B:,1-thin dinar. The stiike puce is P9 40 Fair value of the call option

( Market Price

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October 1 l 2016 Decemhei 31 2016 2017 Januai

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9400 9, 423 941S

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11.7001 23 200 29750

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i I If changes in the time value will he (excluded / from the assessment of hedge ef1ecnyiiess,what is the forex gain (lass.) on the hedging instrument due to change in the hieffective)Øorthon on Dee x "Vr I, 2016

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A 8050 (8050) C 19550 D (19550) 6°i

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2 11 changes in the time value will bçqded in the assessment of hedge effectiveness, what is the forex gain(loss) in the hedgrng instrument in 2O17 A S250 B 7650 C (4 300) / 6550

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3. Ifcpiit'accountgrnis used in the as3essment of hedge) effecti eness) what is the forex gain (10 S. s) on the option contract due to change in intrinsic value on December 31, 2017'

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J(' 10200 'B :5,100 C 12750 D (7500) N

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2 On Ma\ L 2016 GYM Co anticipated çhe wchase of ?45,000 units of merchandise from a foreign vendor. The purchase would probably occur on September 25 2016 and require the payment of 4,375,000 foreign currencies (FC)

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On May tqO 16, the company put chas F n to buy 4,375,000 FC at 'a strike price of 1FC=JO.7) - --An option premium of(P49 OOO'as paid Changes in the value of the option will be iexcludedi from the assessment of hedge effectiveness

For the year 2016 the following rates are as follows May I ' c

Spot Rate FV of call option

May-31 (I:t

June 3ü " Septem1er 25 c7-

P 079 P103.? 50

81 p WI 82 000

P&82

(c L What is the gain (loss) on option contract that woukiraffect equit/ on June 309 A 175,000 B (175,000) ZcL C (87,500) / D. 87.500 Litc c 0o

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2 What is the gain (loss) on option contrast thit would affectearningJon June 30

,A (8750) B 42000 C 4200 D 87,500

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On Otohei I 201 6 Da' ao Philippines took de1ier>/ horn Ohio USA turn of Inventor) costing $1.425,000, Payment is due on January 30 2Ui'

Concui Currently Davao Philippines paid an amount of cash to acquire an at-the-mone>[all toption for the Si 425000 I U

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The option premium paid is P19 625 The spot price at the inception date is F'44.40 flit spot price at the statement of financial date is P44 423 The effective portion, of the option contract on January 30 2017 amounts to P'38,47.5 / The gain on the uerivative instrument on Januaiy 30 201 7 using nonsplit accounting amounts is to P-3,225.

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I What is the gain/(loss) on hedging instrument due to thige in the ineffective portion on December 31, 2016 17 150 5 700 (17,150) D. ( 5700)

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. 2 What is the gai (JoSS) on hedging instrument due to change in the effective portion on December 31,'201D ,XS700 B. (.5,700) C 3225 D (3 225) END 8023

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CPA REVIEW SCHOOL OF THE PHILIPPINES MANILA ADVANCED FINANCIAL ACCOUNTING AND REPORTING TRANSLATION OF FOREIGN FINANCIAL S FATEME1'NTS CU IiRRLRO/C ERMAN/DE JESUS/I IM/F LRRER/LACO'VAUX

The following data were taken horn the subsidiary of Philippine Co Total Assets Total Liabilities Shareholders Equity Oidinai shares Retained Lalnings Sales C. ot ()! goods sold Depreciation expense. Othei opi Ttlng expenses

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balance on Dec'eniber 3 I 2017 of Foreign CO.. a

2 1 750 11.500

(January

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5 , 000 2.5 00 90,0('.)080'.000 500 -).,750 '

Additional Information a

The bttanc L of the e\change diltciences on tian1atng foieigii opeiilion iccount tt Decenibei 31 I6 'as P50,000 credit.

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The translated balance of retained eai1mgs in Philippine peso at December 3 1 2016 vas P i 19 0U

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When Foreign Co., vas mcoipoi fled the c>hage rate was I FC changes had occurred sin.e then.

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The following data were the e\change rates during the eai Januai\ 1,2017December 31 2017 Avei tge for)

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P61.20. No olJInaI\ shaie

1 F -= P6740 1 F = P67.60 IFC - Po7.5) 0

What is the cumulative tianslation adjustment to be reported at December II, 2017' /( 51 -175 credit B. 5L775 debit C S0,c 7'i; edt D 5)0,77 5- debit

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What is the translation adjustment for th year 2017 A7 1.77 debit 1,77-5 -credit. C 775 debit D 775 credit

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2 The follow ing data are taken from the records of Elite Imports Company, a foreign , subsidiary in New Zealand. , NZ dollar \ssets 12/31/17 Tottl I iabilities 12/31/17 Common Stock I 2/3 1 / 17 Retained Earnings 01/01/17 Nctlnome 2017 Dividends Declared 12'31/17 Tot-C-11

Exchange rates: Current. rate Histoiical rate Weighted Average Rate ,-'

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60,000 29 000 15000 "'000

PlO 11 12

The peso balance of retained earnings on December 31- 2016 is P-325.000. What amount of Cumulatie I ranslation Adjustment is reported in the Consolidated Statement of Financial Position on December 31, 2017 A 122,000 debit B 116.000 credit c ]'?',,000 debit' 7D L.2.5,000 credit 3 (IWA Coipoiation ol Makati paid P1 128 7W for t interest in KY Company of Taiwan on January 1 2022 when KYI s net asset totaled 375,000 NT Dollar and the exchange rate for NT, Dollar was P8.60. A summary of changes in KYJ s net assets during 2022 is as follows:. Ni Dollar.

Exchange Rates

375 000 75,000 25 000

Net assets. knuar\ I Net inonie for 2022 Dividtnds paid for 2022

P8 60 8S 8.54

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(JWA Corporation anticipated a strengthening of the Philippine peso against the Ni Dollar duiint the last halt of 2022 and it borioved I 50 000 NT Dollar horn a Taiwanese bank for on yeai at 10% interest on July 1 2022 to hedge its net investment in KYL The loan \\dS made when the e\LhdngL rate for NI Dollar was P8.55. The loan vas denominated eat e\change rate at December.') L, 2022 wasP8 S0 in NT dollar and the current

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What is the other comprehensive income - translation adjustment presented in equity in 2022 as a result of hedging" ' I ,

/A 68750 B 14.,087.50 ( 2067S00 0 a

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) 8024

CPA FtEVIEw SCHOOL OF THE PHILIPPINES Manila ADVANCED FINANCIAL ACCOUNTING AND REPORTING GOVERNMENT ACCOUNTING MANUAL (GAM) GUERRERO/GERMAN/DE JESUS/LIM/FERRERJLACO/VALIX

1 What is the title of the revised government accounting system for national government agencies which will be effective starting January 1, 2016

p Government Accounting Manual (GAM)

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/ b New Oover-nment Accounting System (.NGAS) -€ c. Philippine Government Accounting System (PGAS) d Natioial Government Accounting Manual (NGAM) cer 0 vI \c

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2.. Under Artc1e IX-D Section 2 of the 1-987 Constitution of the Republic of the Philippines, it shall have the exclusive authority, subject to the limitations in this Article, to define the scope of its audit and examination, establish the techniques and methods required therefore, and promulgate accounting and auditing rules and regulaflçs, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or uses ofgovernment ftmds and properties It shall also be responsible to keep the general accounts of the Government and, for such period as may be provided by law, preserve the vouchtirs and other supporting papers pertaining thereto. -

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Commission on Audit b Civil Service Commission c Commission on Election d Commission on Human Rights

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3. The Government Accounting Manual aims to update the following, except a standards, policies, guidelines and procedures In accounting for government funds and property b. coding structure and accounts . C, .accouiting books, registries, records, forms, reports and financial statements. i c c scope and objectives of aidit 4 CC A

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4 It eneomasses the processes of analyzing, record* irg classifying, summarizing and communicating all transactions involving the receipt and disposition of gvernmentfunds and property, 4nd interpreting the results thereof. a Goverment auditing b Gover4iment reporting 7c Govei*ment accounting / d Government analyzing A

refers to the is the financiI plan 01 a goverent for a g1ven period, usually for a fiscal year, which shows what its resources are, and how they will be generated 3 and used over the fiscal period

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a Government budget / b Government financial position C Government financial 'statements d Government financial peif'orrnanc'e

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I\ ik 6 It refers to the step in the government budgetaryprocess wherein the President. through the \ assistance of the Department of Budget and Management, shall paieland submit to the Congress a budget of expenditures and sources of financing, including receipts from existing and proposed revenue measures a Budget Preparation , b Budget Legislation or Authorization C, .Budget, Execution d. Budget Accountability /

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en the 7 . It refers to the step in the government budgetary process which involves theitrnentby Act1,GAA) based on the budget submitted by the

President which cannot be increased by the Congress The initiative for the enactment of the appropriation law shall come from the House of Representatives

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a Budget Preparation b Budget Legislation or Authorization Budget Execution C d. Budget Accountability

8 It refers to the step in the government budgetary process which involves thatfie1utLonjof the general appropriation act which includes the release of revenue.,allotment under the supervision of Department of Budget and Management

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a Budget Preparation b. Budget Legislation or Authorization Budget Execution /C d Budget Accountability

I 9. It refers to the step in the government budgetary process which involves the submission of proper documentary reports by responsible officer, liquidation of expenditures and audit conducted by Commis s ion onAudit to ensure the public funds are spent in accordance with the appropriation act a. Budget Preparation b. Budget Legislation or Authorization c. Budget Execution $k Budget Accountability /

io Under the Government Accounting Manual (GAM),,the financial reporting system of the Philippine government consists of accounting system on accrual basis and budget reporting system on budget basis under the statutory responsibility of the ationil Government Agencies (NGAs), Bureau of the Treasury (BTr), Department of Budgetand - Management (DBM), and the Commission on Audit (COA).Which of the folloving tsincorr under the Government Accounting Manual? -a. Each entity of the National Government (NG) maintains complete set of accounting books by fund cluster which is reconciled with the records of cash transactions maintained by the BTr. b The BTr accounts for the cash, public debt and related transactions of the NO C Each entity maintains budget registries which are reconciled with the budget records

maintained by the DBM and the Government Accountancy Sector (GAS), COA $1( Each entity shall maintain Regular Agency (RA) Books and National Government (NO) I Books for the recording of its transactions 11. The General Accounting Manual enumerates the following components of the General Purpose Financial Statements of National Government Agencies, except

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a. Statement of Financial Position / b Statement of Financial Performance -" A Statement of Retained Earnings d Statement of Cash Flows I e Statement of Changes in Net Assets/Equity .' f. Statement of Comparison of Budget and Actual Amounts g Notes to the Financial Statements, comprising a summary of significant accounting policies

and other explanatory notes./

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Page 3 12 The books of accounts of National Government Agencies under the GAM shall consist of the following, except

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a General Journal b Cash Receipts Journal / C Cash Disbursement Journal ,K Regular Agency and National Government Books x e Check Disbursements Journal f General Ledgers go Subsidiary Ledgers 13 The registries of National Government Agencies under the GAM shall consist of the following, except a Registries of Revenue and Other Receipts (RROR) . b Registry of Appropriations and Allotments (RAPAL) C, Registries of Allotments, Obligations and Disbursements (RAOD) do Registries of Budget,. ' Utilization and Disbursements (RBUD) Registries of Priority Development Assistant Program (RPDAP)

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14 It refers to the registry maintained by NGA unit to monitor the\revenue hnd other receipts estimated/budgeted, collected and remitted/deposited / a.Registries of Revenue and Other Receipts (RROR)

b Registry of Appropriations and Allotments. . (RAPAL) Registries of Allotments, Obligations and Disbursements (RAOD) C d Registries of Budget, Utilization and Disbursemeats (RBUD) J

15. It refers to registry main4nned by NGA unit to show the original, supplemental and fina budget for the year and all all o e nts received charged again s. the corresponding appropriation

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a Registries of Revenue and Other Receipts (RROR) l, Registry of Appropri4tions and Allotments (RAPA, L) c Registries of Allotmeits, Obligations and Disbursbments (RAOD) do Registries of Budget, Utilization and Di sbursements (RBUD)

16 It refers to registry maiktained by NGA unit to slow the allotments received for the year, t~T~~I _c9s incurred agathst the correspondmg allotment and the actual disbursements made a Registries of Revenue and Other Receipts (RROR) b Registry of Appropnations and Allotments (RAPAL) Registries of Allotments, Obligations and Disbursements (RAOD) 7' do Registries of Budget, Utilization and Disbursements (RBUD)

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17 It refers to registry maintained by NGA unit to record the approved special budget and the corresponding utilizations and disbursements charged to retained income authorized under the law and other retãiñë income fltion of a national government agency with similar authority.

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a Registries of Revenue and Other Receipts (RROR) b Registry of Appropria tions and Allotments (RAPAL) c Registries of Allotme ni, ts, Obligations and Disbursements (RAOD) d Registries of Budget, Utilization and Disbursements (RBUD) he following are the classifications of different RAPAL, RAOD and UD, except

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RAPAL/RAOD/RBUD eIIa Services . b RAPAIJRAOD/RBUD Maintenance and Other Operating Expenses z C RAPAL/RAOD/RBUD Financial Expenses d,RAPAL/RAOD/RBUD - Capital Outlays / RAPAL/RAOD/RBUD Noncash Expenses ( -

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Page 4 t-- 19 Which of the fo11owin. statements concerning the period of validity of Notice of Cash Allocations (NCAs) is ihcorré&?

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a NCA issued and credited to the Regular MDS Sub-Accounts of agencies/OUs for their regular operations, shall be valid until the last working day of the 3rd month of that quarter pursuant to DBM Circular Letter(CL) No 2013-12 / b NCA issued and credited to thSpecial MDS Accounts of agencies specifically for payment of RGJTL benefits shall be valid until last working day of the following month when the

NCA was issued, except when issued in December, pursuant to DBM Budget Circular No. 2013-1 NCA issued for trust receipts and credited to the Trust (MDS Account of agencies shall be valid until the last working day of the year shall be valid until the last working d. NCA issued to the •BTr for working funds rencie o" day ofthe ,e NCA, regardless of source, shall be valid only for a period of I -month from the date of 1 receipt C

20 On December 31, 2016, the Department of Health btlled its lessee on one of its,,buIdmgs in the amount of P100,000 On January 3 1, 2017, the Department of Health collèe±ed all of the accounts receivable On February 28, 2017 the Department Qf Health remitted all the collected amount to the Bureau of Treasury. What is the journal entry to record the remittance to the Bureau ofTreasury 7 O \o/ a Debit - Accounts Receivable P100,000 and Credit - Rent Income P100,000 b Debit - Accounts Receivable P100,000 and Credit - Retained Earnings P100,000 " C Debit - Cash Collecting Officers P 1 00,000 and Credit - Accounts Receivable P 100,000 ,d Debit - Cash - Treasury/Agency Depsit, Regular - P100,000 and Credit Cash - Collecting / Officer - p100,000

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21 On January 1,201 he Department of Public Works and Highways (DPWH) received a ion frohe national government for the acquisition of construction

machinery. On Februar 1 , 2016t WH received the allotment from the Department of Budget and Management On arch 1, 2016,10 entered into contract with CAT Inc for the acquisition of the mac ëFi?Ith ájiie of P8,000 1000 On A

6 t DPWH received the

Notice of Cash Al1ocaton from Department of Budget and Management net of 1 % withholding

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tax for mcome tax of s4pplier and 5% withholding of Final Tax on VAT of supplier On May I 2016, CAT Inc delivered the machinery to DPWH On June 1, 2016, DPWH paid the obligation 'toCAT1nc on July 1, DPWH remitted the withheld incom' tax and final VAT to BIR What is the journ-a' lent-" n -March 1 , '2016? a No entry but just posting to appropriate RAPAL b No entry but just posting to appropriate RAPAL and to RAOD -C ,p No entry but just posting of ORS (Obligation Request and Status) to appropriate RAOD d Debit Machinery P8,000,000 and credit Accounts Payable P8,000,000

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22 Using the same data in knumber 21 whatis the j'ournal entry on April 1, 201 /I'.Debit Cash-MDS, Regulary P7,520,000 and Credit Subsidy inc4me from National ' Government P7,520,000. I c b Debit Machinery P,000,000 and Credit Accounts Payable P8,000,000 c.' Debit Accounts Nyable P8,000 000 and Credit Due to BIR P480,000 and Cash-MDS, Regular P7,520,000. d Debit Due to BIR P480,000 and Credit Subsidy Income from National Government P480,000

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23 The salaiy accountant of DENR provided the following data concerning the salaries of its officers and Employees for the month ended December 31, 2016 P510 5 000 55QQQ 565,000 51 1,000 15,300 105200 510 P487 990

Salaries and wages Personal Economic Relief Allowance (PERA) Gross compensation Withholding income ax GSIS PAG-IBIG . Philhealth Net

DENR received the notice of cash allocation from the DBM net of 10% tax on basic salary. Afterwar4s, DENR granted cash advance to the cashier for the payroll. • Afterwards, the DENR . cashier $id the employees and submitted the liquidation report of the payroll fund ' with the corresponLhng supporting documents Afterwards, DENR remitted the withheld tax to B1R and the withhId contribution to GSIS, PAG-IBIG and Philhealth What is the journal entry to recogmze grant ofcashadvanceto the cashier for the payroll 7 5081,500 a Cash — MDS,Rcgular Subsidy Income from National Government 508,500 5105000 b Salaries and Wages Regular PERA 55 5000 Due toBIR 51,000 15,300 Due to GSIS /--' o j-\ \-) 1 0,200 Due to PAG-IBIG Due to Phiihealth 510 487,990 Due to officers and employees 487,990 (! A Advances for payroll 487,990 CashMDS,Regular 487,990 d Due tc officers and employees (T\ Advances for payroll 487,990 1 e Due tBIR 'R Govenm.icm 5LOOO C 11Z ASub-sic. \; f. Due tdGSlS 15,300 Due to PAG-IBJG 10,200 (\c Due to Philhealth 510 Cash MDS, Regular 26,010 (1\

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24 Departme*t of Foreign Affairs (DFA.) received Notice of Cash Allocation in the amount of P 1,226,618 from DBM DFA made a total cash disbursements in the amount of P1,094,422 What is the journal entry to recognize reversion of unused NOtice of Cash Allocation by DFA in the books of DFA9

a Debit Subsidy Income from National Government P132,196 and credit Cash-MDS, Regular P132,196 b Debit Retained Earnings of OFA P132,196 and credit CashMDS, Regular P132,196 c Debit Expenses of DFA P 132,196 and credit CashMDS, Regular P132,196 d Debit investment of DFA P132,196 and credit CasbMDS, Regular P 132,196

8025

Page 6

IJII

25

1hiehof the following closing entries in the accounting book of Department of Tourism is incorret ifthe following data are provided by its chief accountant? P1 1598 5000 ------ Total Income, aside from SING Total expenses 791 5652 Total Subsidy Income from National Government . 1,18102 1,598,000 a Income account other than SING Revenue and Expense Summary account 791,652 b Revenue and Expense Summary account Expense account Subsidy Income from National Government 1,181,882 C Revenue and Expense Summary Account d Revenue and Expense Summary Account 1,988,230 Accumulated Surplus/(Deficit) 3,931,534 1 Ordinary shares Share premium

ITI

1 1 598,000 4 ('

t/A

791,652 1,181,882 1,988 5230

t

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3 ,93 I ,534

2610 On January 31, 2016, the collecting officer of Bureau of Customs collected P350,000 import duties plus fines of P10,000 on the goods of an importer On February 28, 2016, the Bureau of Customs remitted the P350,000 to the Bureau of Treasury. What is the journal entry to record the collection of the import duties and fines?

Officer P360,000 and Credit Import Duties P350,000 and a Debit C Fines/Penalties P10,000. b Debit Cash-Treasury/Agency Deposit, Regular P360,000 and Credit Cash-Collecting Officer P360,000. C Debit CashTreasury/Agency Deposit, Regular and Credit Import Duties P350,000 and Fines/Penalties P10,000

I,

27 Using the same data in number 26, but assuming the importer directly deposited the 350,000 import duties and P10,000 fines through Authorized Agent Banks instead of collection by a ' customer collecting officer, what is the journal entry to record the collection/remittance of . import duties to Bureau of Treasury? a. Debit Cash-Collecting Officer P360,000 and Credit Import Duties P350,000 and Fines/Penalties P10 5000. /13 Debit Cash-Treasury/Agency Deposit, Regular P360,000 and Credit Cash-Collecting Officer. P360,000 C Debit Cash-Treasury/Agency Deposit, Regular and Credit Import Duties P350,000 and Fines/Penalties P10,000. ie 28 The Bureau of Treasury received P1 00,000 cash remittance from Department of Agriculture (DA) from its miscellaneous income. What is the Journal entry of the Bureau of Treasury in its accounting books to record the receipt of cash remittance from the income of a national government agency such as (DA), except BIR and BoC Debit Cash in Bank, Local Bank or BSP P100,000 and Credit Cash-Treasury/Agency Deposit, Regular P100,000 b Debit Cash in Bank, Local Bank or BSP P100,000 and Credit Miscellaneous Income of DA P1O0,000. C Debit Cash in Bank, Local Bank or BSP P100,000 and Credit Savings of DA, Regular P100,000 d Debit Cash in Bank, Local Bank or BSP P100,000 and Credit Cash-Collecting Officer, DA P100,000

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8025

Page 7 29 The Department of National Defense obtained a loan from Asian Development Bank to finance the acquisition of Philippine's first aircraft carrier, The principal of the loan is $1 B What is the journal entry in the accounting rook of Bureau of Treasury to record the receipt of loan proceeds based on credit advice from BSP? a. Debit Cash in Bank, Local Bank or BSP $1B and Credit Cash-Treasury/Agency Deposit, Regular $1B b Debit Cash in Bank, Foreign Currency BSP $1B and Credit Loans Payable-Foreign $1B c Debit Cash in Bank, Foreign Currency BSP $1B and Credit Subsidy Income From Asian Devekpment Bank $IB. d Debit Cash in Bank, Foreign Currency BSP $IB and Credit Capital Account, ADB $1 B 30 The Securities and Exchange Commission is authorized by the Department of Finance and by law to coiliduct seminar regarding registration of stocks to interested corporations The collection ofthe seminar fees is considered as authorized special account under the Government Accounting Manual (GAM) to be recorded in the Retained Income Fund The proceeds of the seminar will be used for acquisition of specialized equipment subject to the approval by Congress. On September 1, '2.016, the SEC collected a total P650,000 as seminary fees from interested corporation. On September 16, 2016, the SEC remitted the amount collected to the Bureau of Treasury On October 31, 2016, SEC received the Approved Special Budget for the Retained Income (SARO) from the DBM with the authorization from special appropriation act from Congress. What is the journal entry on September 16, 2016 in the accounting book of SEC a Debit Cash-Collecting Officer P650,000 and Credit Seminar Fees. P65 0,000. . . b. Debit Cash in Bank-Local Currency, Current Account and Credit Cash-Collecting Officers P650,000 Debit Cash An Bank-Local Currency Savings Account P650,000 and CreditC Treasury/Agency Depos't Special Account d Debit Cash-Treasury/Agency Deposit and Credit Seminar Fees P650,000

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3 1 On Febr4ry 1, 2016, the Department of Health received , P1 OM cash from PLDT for medical expenses of victims of calamities. The collection of the PIOM donation is considered as authorize4 special account DOH remitted the donation to the Bureau of Treasury on March 1, 2016 Whit is -the journal entry on Maich 1, 2016 m the accounting book of DOH a Debit $2ashCollecting Officer P650,000 and Credit Medical Fees P650,000 b Debit Cash-Treasury/Agency Deposit Special Account and Credit Cash-Collecting Officers P650,000 c Debit Cash in Bank-Local Currency, Savings Account P650,000 and CreditTreasury/Agency Deposit, Special Account d Debit Cash-Treasury/Agency Deposit and Credit Medical Fees P650,000

,

LI

: 32 On September 1, 2016 $1 OM donation is deposited directly by United Nations World Health \ Organization to the Bureau of Treasury to help Philippine government battle Zika Virus What

.

is the journa entry in the accounting book of Bureau of Treasury to record the receipt of grants or donation from UN-WHO? . a. Debit Cash in Bank, Foreign Currency Savings Deposit $'IOM and Credit Income from Grants and Donations $ 1 OMO b Debit Cash Collecting Officer $10M and Credit Income from Grants and Donations $ IOM c Debit Cash in Bank, Foreign Currency Savings Deposit $ 1 UM and Credit Loans Payable $10M.: d Debit Cash Collecting Officer $I OM and Credit Ordinary Share, I TN WI-TO $1OM 8025

Page 8 33. On February 1, 2016, the Department of Environment and Natural Resources (DENR) transferred P450,000 fund to Department of Public Works and Highway (DPWH) for the construction of DENR's irrigation project The P450,000 fund was then remitted by DPWH to Bureau of Treasury on May 1, 2016. The project was completed and turned over by DPWH to DENR on October 3 1, 2016 What is the journal entry in DENR's book to record the transfer of funds on February 1, 2016

'1

A Debit Due from DPWH P450,000 and Credit Cash, MDS, Regular P450,000

7

( \

b. Debit Cash-Treasury/Agency Deposit/Trust P450,000 and Credit Cash-Collecting Officers P450,000 C Debit Cash Collecting Officers P450,000 and Credit Due to DENR P450,000 d. Debit Cash-Treasury/Agency Deposit/Trust P450,000 and Credit Cash-Collecting Officers P450,000

34. Using the same data in number 33, what is the journal entry of DPWH to record the turnover of the irrigation project to DENR on October 3 1, 2016 % Debit Due to DENR P450,000 and Credit PPE Account P450,000 b. Debit PPE Account P450,000 and Credit Due from DPWH P450,000. c. Debit Due to DENR P450,000 and Credit Cash-Collecting Officer P450,000 d Debit Cash Collecting Officer P450,000 and Credit Due from DPWH P450,000

6PA REVIEW SCHOOL OF THE PHILIPPINES MANILA

2

ADVANCED FINANCIAL ACCOUNTING AND REPORTING NOT-FOR-PROFIT ORGANIZATION

GUERRERO I GERMAN I LIM I FERRER I LACO I VALIX

1. Psalm Hospital, a private nonprofit hospital, earned P500,000 revenues from its gift shop.

/

located at the lobby and spent P100,000 on research during the year ended December L- . 3 1 ,2016. The P100,000 spent on research was part of a P150,000 contribution received during December of 2014 from a donor who stipulated that the donation be used for medical research. None of the gift shop revenues were spent in 2016. What was the increase in unrestricted net assets from the eveits that occurred during 2016? tf a. 600,000 b. 40000 / C. 500,000 : . d. 550,000 2. AAA Hospital, a nonprofit hospital affiliated with a private university, reported the following: . 300,000 Cash contributions received from donors for acquisition of computer equipment 150,000 Proceeds from sales of hospital gift shop and snack bar • 501,000 . Dividend income not restricted by donor,,-What anount should be reported as..,"otherevenue and gains" in the statement of activities? . a. 50,00 . b, 150,00 /c. 200 !1 00 d. 500, 00

(

1

. Rev U4versity, a nonprofit university assessed its students P600,000 for tuition and miscelIaieous fees for the 2016 summer session. The net amount realized was only P580,000 because of the following reductions:

nI

\\

.

. .

Tuition emissions granted to faculty member families Class cancelation refund

cc '

->

6,000 14,000

1-low mh unrestricted current fund revenues from tuition and miscellaneous fees should Rev Unversity report for the period? . a. 580,pOO . /b. 586, 1 00 C. Id. ,

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594 3 00 600,poo

4. The following expenditures were incurred by a nonprofit botanical society: . C.V&\ Printin of annual report - j UnsoJiited merchandise sent to encourage contributions ctc

255 ,000 503000

What a4iount should be classified as ftmd-raising costs in the society's activity statement? a. b. 25,0!00.. c. 505000 d. 75,000

'

5. The following fOnds were amongthose held by URS at December 31 , 2016: . Principal Specified by the Donor as Non-Expendable 1,250,000 Principal Expendable After the Year 2016 750,000 W U Principal Designated from Current Funds 250,000 What amount should be classified as regular endowment funds? a.. 250,000 750,000 . b.. . / /c. 1,250,000 d. 2,25000 . . .

8026

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6 In 2016, the board of trustees of TCMC Private University designated P250,000 from its current funds for college scholarships Also in 2016, the university received bequest of /-"P500,000 from an estate of a benefactor who specified that the bequest was to be used for hiring teachers to tutor handicapped students. None of the bequest has been spent. What amount should be accounted for as restricted net assets? a 0 b. 250,000 • /c. 500,000 d. 750,000

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7 In April 2016, Ruth donated P250,000 cash to her church, with the stipulation that the income generated from this gift is to be paid to Claire during her lifetime. The conditions of this donation are that, after Ruth dies, the principal can be used by the church for any purpose voted on by the church elders The church received interest of P2000 on the P250,000 for the year ended March 31, 2017 and the interest was remitted to Ruth. In the church's March 3 1 , 2017 financial statements

a P20,000 should be reported under support and revenue in the activity statement b. P230,000 should be reported under support and revenue in the activity statement C P250,000 should be reported as deferred support in the balance sheet d The gift and its terms should be disclosed only in notes to the financial statements 8 Rizza Foundation, a non profit organization, received following cash contributions during the year to support its child care center

;

7

A P50,000 restricted by the'onoto be used for meals of children B. P37,500 received by subscriptions to a monthly child care magazine with a fair value to subscribe of P25,000 C P25,000 to be used only upon completion of .a new playroom that was 75% complete at current year-end What amount should be recorded as contribution revenue in current year?

a 50,000 %f ;b. 62,500 25,000 'Sc. 27,500 d 9 A nonprofit organization disclosed the following information

Ii

Net -sources invested in plant assets Board-designated funds

25,000,000 5,000 000

Ck

What amount should be included as part of unrestricted Rinds? / a. 30,000,000 : b. 25,0005000 C. 5 5000,0000 d. 0 7/

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100 An organization of high school seniors performs services for patients at Morong Doctors Hospital These students are volunteers and perform services that the hospital would not otherwise provide, such as wheeling patients in the park and reading to patients Morong Doctors has no employer-employee relationship with these volunteers, who donated 500 hours of service At the minimum wage rate, these services would amount to P46,875, while it is estimated that the fair market value of these services was P62,500 In Hospital's statement of revenues and expenses, what amount. should be reported as nonoperating

revenue?

.

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a 62,500 b 46,875 C. 15,625 ,d 0

END8026

CPA, REVIEW SCHOOL OF THE PHILIPPINES MANILA I ADVANCED FINANCI L ACCOUNTING AND AEPORTING . NOT-FOR-PROFIT ORGA IZkTION

GUERRERO 1 GERMAN I LIM I FERRER I LACO I VALIX

I . The following receipts were among those. recorded by Jonson College, a non-profit organization, during t current year: I ,250,000 Unrestricted Gifts 5005000 Restricted Current Funds (Expended for Current Operating Purposes) . 250,000 Restricted Current Funds (Not Yet Expended) What amount should be, included as revenues and current fund revenues, respectively? and 1,750,000 •1 a. 2,000,000 ' b 1,750,000 and 2,000,000 and 1,500,000 C 1,500,000 do 1,250,000 and 1,250,000 2 Maine, a non-profit orgirnzation, receive the follow:ing pledges 500,000 375 5000

Unrestricted Restricted for Acquisition of Equipment

L

All pledges are legally enforceable. However, Maine's experience indicates that 10% of all pledges may prove to be uncollectible What amount should the Maine report as pledges receivable, net of any required allowances? a 337,500 1 b 450,000 /C 787,500 .do 875,000

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3. On December 30, 2016, Barbarian, a nonprofit organization received a P17,500,000 donation of Goblin shares with donor- -stipulated requirements as follows: 1L . • Shares valued at P12,500,000 are to be sold with the proceeds used to construct a public / viewing building • Shares valued at P5,000,000 are to bretained( with P100,0000 dividend used to support current operations ç How much should the Barbanan report as temporarily restricted net assets in the 2016 statement of financial position? . I a 123600,000 b

5,000,000 12,500,000 ,2 d. 17950000

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4 Dr. Tan Hospital, nonprofit hospital affiliated with a religious group, reported the following information for the yer ended December 31,2016 Gross patient service revenue at the full rates Bad debts expense Contractual adjustments, VAT . Allowance for discounts to hospital employees

.

1,960,000 20,000 1785180 30,000

In Dr. Tan Hospital's statement ofactivities for the year ended December 31, 2016, what amount should be reported as patient service revenue? ut­v Y1, a 1,751,820 b 1,781,820 C 1,710,000 do 1 59609000

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Trisha Ho' ospital, a nonpr1 fit hospital, had the following cash receipts for 2016

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Patient service revenue r 600,000 0 - 5000 CT' Gift shop revenue J 1009000 j Interest incomeestricted by donor for tbe aciu fton of computer equipment As a result ofthese ca4i receipts, the hospital's statement of cash flows for 2016 would report an increase in operating activities of what amount?

I'

/ a 6505000 b 750,000 C 700,000 d 600,000 6 Doctor Hospital, a non rofit hospital affiliated sth RCF College, had the following cash

receipts for 2016 Patient service reven e C 1 5 500,000 ? Contribution from do or to be invested ndefimtely (endowment fund) k R \ 500,000 F ' 10000 CT' Tuition fees from nursing school 1L I 60,000 Dividends received from permanent in stmets The dividends receive are restricted b the donor for hospalbldjng improvents No Improvements were made during 2016 In the hospital's statenent of cash flows or 2016, what amount would be included in the net cash provided (used) bi operating activit 1es9

-,.

a 1 3,7601,000 / be 1 5600,000 C 25 100,000 d 1 15005000 7 A nonprofit organization had the following cash contributions and expenditures in 2016 Unrestricted cash contributions Restricted cash contributions for the acquisition of property Cash expenditures to acquire property

1.

I ,000,000 C 400,000 400,000 j

The statement of cash flows should include which of the following amounts"

a be C. I,

d

Operating activities Investing activities (400,000) 1,400,000 0 1 5000.1000 (400,000) I ,000 11000 1,000,000

Financing activities 0 0 400,000 800,000

-END 8027

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CPA REVIEW SCHOOL OF THE PHILIPPINES MANILA

ADVANCED FINANCIAL ACCOUNTING AND REPORTING JOINT ARRANGMENT GUERRERO I GERMAN I LIM I DE JESUS I FERRER I LACO I VALIX Part I. Theories

A

I.. It is characterized by a contractual arrangement whereby two or more parties have joint - control of the arrangement. . . j , a. • Joint arrangement • . b.. Joint operation • . . C. • Joint venture . • d. Jointly controlled asset

r' 2 It is the contractually.agreed sharing of control of an arrangement which exists only when

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decisions about relevant activities require unanimous consent of the parties sharing control a. Control . . . b. Significant influence • . . C. Joint control .4, Solidary control :

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3 It IS a type of joint arrangement whereby the parties that have joint control of the arrangement have right to the total assets and obligations for the total liabilities relating to the arrangement. a. Joint venture S b. Jointly controlled asset C. Joint operation d.. Joint. business .. . .

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4 It is a type of joint arrangement whereby the parties that have joint controJ of the arrangement have rights to the net assets of the arrangement a. Joint venture b Jointly controlled asset C. Joint operation . . . d. Joint business .. at is the classification of the joint arrangement when the arrangement is structured without a separate vehicle such as when the rights of each party to the total assets and obligations for total liabilities relating to the arrangement are clearly established 9 a It shall be classified as joint venture b. It shall be classified as joint operation. C. Neither joint venture nor joint operation. . . . d It can be either a joint operation or joint venture depending on the company policy of the parties to the joint arrangement

5 -

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at is the classification of the joint arrangement when the assets and liabilities relating to the arrangement are held by a separate vehicle or when the arrangement is established with a separate vehicle? a It shall be classified as joint venture b It shall be classified as joint operation c Neither joint ventuce nor joint, operation d It can he either a joint operation or joint

venture depending

o'i the legal form of the separate

vehicle, terms of the contractual arrangement or other relevant facts and circumstances

I

\ 7 Under IFRS 11, how shall the joint venturer account for its Investment in Joint Venture? a Equity method b Cost method \ c Fair value method under IFRS 9 d Proportionate consolidation 8028-

Page 2 \ 8 Under IFRS 11 as an exception to the general rule of mandatory equity method accounting for Investment in Joint Venture, what is alternative treatment available to joint venturer for an investment in joint venture held or is held indirectly through an entity that is a venture capital organization, mutual trust fund, unit trust and similar entities including insurance-liked fund? a It may elect to measure the investment mjomt venture at fair value through profit or loss b It may elect to measure the 'investment in 'Joint venture at fair value through other comprehensive income c. It may elect to measure the investment in joint venture at cost method. d It may elect to measure the investment in joint venture at proportionate consolidation 9 Under IFRS for SMEs, how shall the joint venturer account for its Investment in Joint Venture'?

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a Equity method b Cost method C. Fair value method under IFRS 9 d Any of the above

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io Under IFRS I I , how shall the joint operator account for its interest in ajornt operation? a The joint operator shall account for its interest under Equity Method b The joint operator shall account for its interest under Cost Method C The joint operator shall account for its interest using proportionate consolidation d The joint operator shall account for its interest by recognizing its assets, its liabilities, its revenue, its expenses and its shares in the jointly controlled assets, jointly. incurred liabilities, jointly earned revenue and jointly incurred expenses in accordance with the contractual arrangement

3 or Y

PartIL Proble m S1oivjjg

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Page 3

1. Two real estate companies, RK Developers and SV Holdings set up a separate vehicle (entity DP) for the purpose of acquiring and operating a shopping centre. The contractual arrangement between the parties establishes joint control of the activities that are conducted by entity DP has rights to the The main feature of entity DP's legal form is that the assets and obligations for the liabilities relating to the arrangement These activities include Ihe rental of the retail units, managing the car park, maintaining the centre and its equipment, such as lifts, and building the reputation and customer base for the centre as a whole. The terms of the contractual arrangement are such that: Entity DP owns the shopping centre The contractual arrangement does not specify that the parties have rights to the shopping centre The parties are not liable in respect of the liabilities of entity DP If entity DP is unable to pay any of its liabilities, the liability of each to any third party will be limited to the parties unpaid contribution The parties have the right to sell or pledge their interests in entity DP Each party receives a share of the income from the shopping center (rental income net of operating costs) in accordance with its interests in entity DP

S

S R

Transactions of the contractual arrangement for 2016 and 2017 follow

2016 Ile

. RK and SV contributed 60 million each for a '/ interest in the net assets of Entity DP . Organization expenses incurred amounted to P600,000,/ . Entity DP acquired land at a cost of P 12 million. . . Constructed a building (shopping centre) at a cost of P90 million . Operating expenses for the year amounted to P6 million . Rental income collected from the tenants, P60 million 0 Net income or loss is distributed to the venturers in accordance with their interest. 2017 . Operating expenses (including depreciation) incui ied for the year, P21 million . Rental income collected for the year, P72 million . Each venturer received a share of the income or loss from rental income net of the operating expenses

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What is the interest of RK Developers iii the joint venture on December-31,20169 . a 84,000,000 b 86,700,000 1 , C 90005000 d 1205000,000 What is the net income (loss) of entity PP on December 31, 2017 a 51 000,000 b. 72 3000,000 2- UbC) 1

93,000,000 do 6300,000 C

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3

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What is the interest of S\ 7 Holdings in the joint arrangement as of December 31, 2017 a. 112,200,000 b 873000n,000 ' L C 60,000,000 do' 4,000 000 ' Jr. 2,C0 .

8028

Page 4 2 Timon and Pumbaa establish jointarran ement HakunaM a HM) 0 using a separate vehicle, but the legal form of the separate vehicle between the parties and the separate vehicle itself. That is, Timon and Pumbaa have rights to the assets and obligations for the liabilities of HM (which is a loint operation) Neither the contractual terms nor the other facts and circumstances indicate otherwise Accorcungly, Timon and Pumbaa account for their rights to assets and their obligations for liabilities relating to HM in accordance with IFRS 11. Timon and Pumbaa each own 50% of the outstanding shares of HM. However, the contractual

terms of the jomt arrange tate that Timon has the rights to all of Airplane No 1 and the obligation to pay all th third party debt in HM. Timon and Pumbaa have nghts to all other assets in TM, and obligations for all other liabilities in TM in proportion to their equity interests

TM's statement of financial position is as follows Assets Cash

Liabilities and Equity . 60,000,0001 2- Debt

360,000,000 Airplane No 1 360,000,000-T Employee Benefit Plan Obligation 150 !1 000,000

Airplane No 2 300 000, 000 1 2.- Equity Total Assets 720 000,000 Total liabilities and equity .,

.

¶

210 000 000 72000O 000

,

I Under MRS 11, what is the amount of total assets of Timon as shown in its own statement of financial position to account for its rights and obligations in TM' ) eCCC (oCC(/2 c_ a. 360,000,000 '\ / b 540,000,000 ! s'x, Ct c ., ( C!: , C 660,000,000 S' oX d 420,000,000 (

2 Under IFRS 11, what is the amount of total liabilities of Pumba as shown in its own

I

statement of financial position to account for its rights and obligations in TM a 435,000,000 u "'C", b 150,000,000 p 759000,000 d 255 5 000,000

8028

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3 On January 1, 2016, Regina Corporation and Jessica Corporation established joint arrangement through an incorporated entity named RJ Corporation The contractual arrangement provides that

the relevant activities of RJ Corporation will require unanimous consent of both parties which will share control of the corporation RJ Corporation will control its assets, will incur liabilities and expenses and will earn income RJ Corporation may enter into contracts in its own name and raises finance for purposes of the arrangement The jointly controlling corporations will have rights only to the)ëatiofthe arrangement At the date of incorporation, Regina Corporation contributed cash of P1 OM while Jessica Corpthaliori contributed Land and Building with a total fair value of P1 5M Each corporation will have 50% of the authorized ordinary shares of RJ Corporation For the year ended December 31, 201 6, RJ Corporation reported net income of P5M and distributed cash dividends in the amount of P2M 0

o

For the year ended December 31, 201 6, the following transactions occurred > On Juh 1 , 2016, RJ Corporation sold an office equipment to Regina Corporation for P400,000 As of this date the equipment has a book value of P600,000 with remaining useful life of 2 years,- tL

On October 1, 2016, Ri Corporation sold an inventory to Jessica Corporation at a selling price of P1,000,000 RJ Corporation has a normal gross profit rate of 40% based on sale 60% of the inventory was resold by Jessica Corporation to third persons during 2016. KJI

1

I What is the book value of Investment in Joint Venture to be presented by Regina Corporation in its December 31, 2016 Statement of Financial Position? ( 0 2 a I l,')75,000 c LC cc\ T b. 11,500,000 s; r IA c. 11 495 5000 , ' d 11 fi15000 Lfl I

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What is the book value of Investment in Joint Venture to be presented by Jessica Corpoi ation in its December 31, 2016 Statement of Financial Position? a 16,4205000 b. 1 co 16,495,000 2 . d. 16,625,000 •

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Page 6 4 On January 1, 2020, Storm Inc invested P2M cash in a joint venture for 50% interest For the years ended December 31, 2020, 2021 and 2022, the joint venture reported the following net incomes I (losses) and dividend distributions Year

Netlncoine/(Net Loss)

Dividend Distribution

2020 2021 2022

P1,000,000 (P6,000,000) P4 5 00000

P300,000 P8003 000

-to

,2o • ,cLtiI What is the share in net loss or investment loss to be reported by Storm Inc for the year ended December 31, 2021 ' ç

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a 3,000,000 b 21 500,000 C 2,3505000 do 2,000,000

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2 What is the book value of Investment in Jomt Venture to be reporteft by Storm Inc. as of e (V December 31, 2022 J

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a 1 1,600,000 / b 950,000 C 1,250,000 do 1 1 4505000

5

On January 1, 2030, Logan Inc. , a small and medium enterprise (SME), invested P500,000 cash m a joint venture for 50% interest For the year ended December 31 , 2030, the joint venture reported net income of P200,000 and distributed cash dividend in the amount of P60,000 As of December 31 , 2016, the fair value of the investment in joint venture is P600,000 and the estimated cost of disposal is 10% of fair value The value in use of the. investment is estimated at P550,000. '\ (0 00 )( C(( 1 Under IFRS for Swhat is the book value of Investment in Joint Venture to be reported by Logan Inc as of December 31, 2030 if the SME elects equity method" a 550,000 b. 540000 C 570,000 d 600,000

'

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2 Under MRS for SMEs, what is the book value of Investment in Joint Venture to be reported by Logan Inc as of December 31, 2030 if the SME elects cost method" a 550,000 b. 540,000 C. 570,000 do 500,000

' .

I3 Under MRS for SMEs, what is the book value of Investment in Joint Venture to be reported by Logan Inc as of December 31, 2030 if the SME elects fair value method" a 550,000 b 600,000 '. C. 570,000 do 500,000

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END190 ..

' 8028

CPA REVIEW SCHOOL OF THE PHILIPPINES MANILA . ADVANCED FINANCIAL ACCOUNTING AND REPORTING PARTNERSHIP ACCOUNTING

GUERRERO/GERMANILIM/DE JESUS/FERRER/LACO/VALIX

SELF TEST .

1. On January 1 , 2016, Carla and Ara formed CA partnership upon capital contribution of P12,000,000 and P8,000,000, respectively with capital interest ratio of 3:7 respectively. Based on the articles of co-partnership, they agreed to bring their capital balances in accordance with their capital interest ratio without the necessity of withdrawals or additional investment because Ara contributed special skills The articles of copartnership provides that profit or loss shall be distributed under the following terms: 40,000 monthly salary for Carla and 60,000 monthly salary for Ara > The remainder on the basis of capital interest ratio For the year ended December 31, 201 6, the partnership reported net income of P500,000 '. During 201 6, the partners regularly withdrew 20% of their monthly salary On January 1, 2017, Vanna was admitted to the newly formed CAV partnership by paying personally the partners in the amount of P6,000,000 for 20% of their capital interest As a result of the dissolution, the new CAV partnership fully amended the profit or loss agreement. Vanna will have 20% share in the profit or loss while the original partners will share on the remainder based on their original capital interest ratio.

:

For the year ended December 31, 201 7, the partnership reported net loss of P1,000,000. Carla, Ara and Vanna made P200,000, P300,000 and P400,000, withdrawals, respectively during 2017, • On January. 1, 2018, Sarah was admitted to the newly formed CAVS partnership by investing P4,000,000 for 25% interest in the partnership. The new articles of co-partnership provides that the total new agreed capitalization should be P20,000,000 The profit or loss

agreement was also fully amended and will be in the ratio of 3:2:4:1 respectively for Carla, Ara, Vanna and Sarah. . For the year ended December 31,2018, the partnership reported net income ofP2,000,000. Carla, Am, Vanna and Sarah made P500,000, P200,000, P300,000 and P400,000,withdrawals, respectively.

A

1 What is the capital balance of Carla on January 1, 2017, after the admission of Vanna 9 A. 4,9395200 B. 550165000 . . C. 9,739,200 . D 6,832 5 200 .

2 What is the capital balance of Ara on January 1, 2018 after the admission..of Sarah 9 A. 7,692,800 B. 83527,200 . C 91,780,000 D 6,2805800 .

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3 'What is the capital balance ofVanna on December 31, 2018 A 3 3 1925 800 B. 350275200 C, . 3,280,000 D.'3,420,000 S

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Page 2 2 On December 31, 2016, the Statement of Fmancial Position of NBA Partnership shows the following data with profit or loss sharing of 24: 3: 5 : Cash P20,0001000 Other Noncash asset 80,000 3 000 Receivable from N 10,000,000

Liabilities to others Payable to B Payable to A N, Capital B, Capital A, Capital

P50,000,000 510 0005,000 I 5,000,000 30001000 20,0001000 (10,000,000)

On January 1, 2017, the partnership decided to wind up its affairs For the month ended January 3 1, 2017, the following transactions occurred

> > > >

at a loss of P10,000,000 Other non cash assets with book value of P60 Liquidation expenses amounting to P3,000,000 were paid P2,000,000 cash was withheld for future liquidation expenses 60% of liabilities to third person were paid

For the month ended February 28, 2017, the following transactions occurred

> Remaining other non-cash assets were sold at a gain of P5,000,000 > Liquidation expenses amounting to P2,000,000 were paid > The remaining liabilities to third persons were paid I What is the amount received by N on January 31, 2017 A 7,000,000 B 8,000,000 C 3 9000 3 000 D 4,5001000

C

2

What is the am'ount received by B on February 28, 2017' A 1090005000 B 7,500,000 C 15,003p0000 D 1290005000

WEND8029

CPA REVIEW SCHOOL OF THE PHILIPPINES MANILA

ADVANCED FINANCIAL ACCOUNTING AND REPORTING GUERRER() I GERMAN I LIM I DE JUSES I FERRER I LACO I VALIX SPECIAL REVENUE RECOGNITION AND HOME OFFICE AND BRANCH ACCOUNTING .

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SELF TEST

I The following account balances appeared on the books of FRC Company on December 3 1, 2016 150,000 Cash 80000 Receivables 75,000 Merchandise inventory 30,000 Accounts payable , . : 2615250 Deferred gross profit-2014 • 1,250,000 Sales 640,000 Purchases Expenses . 425,000 > The Receivables account is a controllmg account for three subsidiary ledgers which showed the following totals: : 2015 installment contracts I50 000 600,000 2016 installment contracts 50 5 000 Charge accounts (terms, 30 days, net) > The gross profit on sales was 55% on installment contTats for 201 5 and 50% on installment contracts for 2016 Collections on installment contracts for 2015 totaled P300,,000 for the year just closed, on installment contracts for 201 6, P400,000 and on charge accounts, P200,000 >Account balances from installment sales made prior to 2015 were also collected > Repossession for the year was on installment contracts for 2015 on which the uncollected balance at the time of repossession amounted to P50,000

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> Merchandise repossessed was erroneously debited as a newly acquired merchandise equal to the amount defaulted by the customer. This repossessed merchandise had a true worth of P20,000 at the time of repossession and was unsold at year end. . > The linal inventory of the merchandise (new) valued at cost amounted to P45,000

N

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I. What is the total realized gross profit in 2016 A 626,250 B. 756,250 . C 495,000 I) 365,000

(/Th

2 What is the net income for 2016 A 331,250 B 301,250 C 328.750 D 382,500

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Page 2

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/ 2. On July 1, 2016, the company contracted to build an office building for a total contract price of

\\J P975,000 The company opted to use the zero-profit method Data relating to the project from

2016 to 2018 are as follows Construction cost incurred to date Estimated costs at completion Debits to accounts receivable

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2016 75 3F 000 150,000

2017 2018 600,000 1 5 050,000 9 1,000,000 550,000

1 What is the balance of the Constructionin-progress net of progress billings at December 31, 2017

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A 25,000 B (25,000) Co.125,000 D (125,000) 2 Assuming the company uses the percentage of completion method, what is the gross profit I (loss) to be recognized for the year 2O17 A 22,500 B (22,500) 47,500 D (47,1500)

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3 On June 1, 2016, franchisor receives P200,000 from franchisee representing down payment on the franchise agreement signed that day Franchisee gave 12% interest bearing note for the balance of P1 5000,000 payable four semi-annual installments Franchise services was substantially completed on November 10 at a cost of P900,000 The first semi-annual payment was made due Collectabthty of the note is reasonably certain

Eli

What is the net income recognized by the franchisor at December 31, 2016?

- A 405 9,000 B 360,000 C 367,500 D 300,000

4

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On January 1, 201 6, franchisee entered into an agreement with franchisor for an initial fee of P700,000 Franchise gave a 1 5% note to cover the initial fee on the date of agreement The agreement also provided that the franchisor has the option (within, 365 days) to reacquire the eptember 30, 20161'n the amount of P175,000 business Franchisee made the first payment on Sep! Franchisor prepares its interim financial statements for the period ended September 30, 2016 What is the revenue to be recogmzed for the period ended September 30, 2016 A 700,000 B 78,750 C 105,000 D 0

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Page 3 Miles Company established a branch in Ayala by sending merchandise costing P924,500 and effecting a fund transfer of P400,000 cash on January 1, 2016

5

The branch purchased computer equipment costing P420,000 on April 1. As per agreement, the the property, plant and equipment records

home office will maintain all

Ayala branch collected P56,000 worth of Ortigas branch's receivable on August 4. Cash remittance to the home was P250,000 on September 28 On November 21 , Ayala branch returned defective merchanuise worth P125,000 to the home office. At the end of the year, the company's controller found out that the branch accountant had failed to record all the transactions initiated by the home office from the second half of the year.

Because of this, there is a significant discrepancy between the balances of the reciprocal accounts. . For the purpose of reconciling the reciprocal accounts,,the controller instructed the accounting staff ofthe home office to send a copy ofthe Investment in Ayala general ledger to the branch 1/1 Merchandise to branch 1/1 Fund transfer 7/2 Merchandise to branch 8/31 Fund transfer • 10/.,' Expense paid for branch

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Investment rnAla 4/2 Equipment acquisition 400,000 9/30 Remittance 135,000 11/22 Return of goods from branch 924,500

240,000 . 2253000 12,500

95 5000

29,000

I. What is the unadjusted balance of the Home Office account? A 598 3500 B. 585,500 . . C. 723,500 . D. 335,500 . .

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2 What is the adjusted balance of the reciprocal accounts

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9 .

A 844 5 500

B. 574,500 .

C. 901,000 D. • 596,500

6. During 2016, goods billed at P3,250,000 were shipped to the branch at 130% of cost. The account Loading in Branch Inventory has a balance ofPl ,225,000 before adjustment.

The beginning inventory of the branch from the home office at cost is P2,375,000, the beginning inventory of the branch from outsiders is P540,000 and the amount of purchases from outsiders is P1,450,000 ¶

How much is the total goods available for sale of the branch from the home office 9 A. 55308,335 . B. 693371,500 C. 8,0905000 D 65 1005000

.END-

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