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Question #1
Which of the following statements concerning the different types of hedging transactions is incorrect?
In hedging transaction which is undesignated, unrealized holding gain or loss on hedging instrument will be
recognized in profit or loss. In hedging transaction designated as fair value hedge, unrealized holding gain or
loss on hedged item will be recognized in profit or loss. In hedging transaction designated as cash flow
hedge, unrealized holding gain or loss on hedged item will be recognized in other comprehensive income with
reclassification adjustment to profit or loss if realized. In hedging transaction designated as hedge of net
investment in foreign operation, unrealized holding gain or loss on hedging instrument which is considered
effective portion will be recognized in other comprehensive income with reclassification adjustment to profit or
loss if realized.
Advanced Accounting - Foreign Currency Transactions and Translations (Average)
Question #2
It is the allotment release by Local Government Units (LGU) or Department of Budget and Management to
barangays.
Internal Revenue Allotment (IRA)
Subsidy - LGU
Income fro grants and donations
Barangay Social Fund
Advanced Accounting - Government Accounting (Easy)
Question #3
Which of the following is not objective evidence of impairment of a financial asset?

Significant financial difficulty of the issuer or obligor. A decline in the fair value of the asset below its
previous carrying amount A breach of contract, such as a default or delinquency in interest or principal
payments. Observable data indicating that there is a measurable decrease in the estimated future cash flows
from a group of financial assets although the decrease cannot yet be associated with any individual financial
asset.
Advanced Accounting - Derivatives (Difficult)
Question #4
If the foreign operation reports in the currency of a hyperinflationary economy, assets, liabilities income and
expenses shall be translated at
Closing rate
Forward rate
Average rate
Exchange rate on the date of transaction
Advanced Accounting - Foreign Currency Transactions and Translations (Easy)
9/22/2017 Quiz | iCPA
Question #5
According to PAS 21, The effects of changes in foreign exchange rates, at which rate should an entity's
noncurrent assets be translated when its functional currency figures are being translated into a different
presentation currency?
The average rate
The historical exchange rate
The closing rate
The spot exchange rate
Question #6
On January 1, 2016, Bartell Company sold its idle plant facility to Cooper, Inc. for P1,050,000. On this date the
plant had a net book value of P735,000. Cooper paid P150,000 cash on January 1, 2016, and signed a P900,000
note bearing interest at 10%. The note was payable in three annual installments of P390,000 beginning January
1, 2017. This included interest of P90,000. Bartell appropriately accounted for the sale under the installment
method.
Cooper made a timely payment of the first installment on January 1, 2017. At December 31, 2017, Bartell has
deferred gross profit of
225,000 153,000 180,000 270,000
Solution:
The total gross profit (GP) on the sale is P315,000 (selling price of P1,050,000 less depreciated cost of
P735,000), and the GP rate is 30% (P315,000/P1,050,000). GP recognized in 2016 is P45,000 (30% x P150,000
down payment), and GP recognized in 2017 is P90,000 (30% x (P390,000 - P90,000)). This leaves a balance of
P180,000 in deferred GP.
Deferred gross profit
Recognized 2016 45,000 315,000 Total gross profit
Recognized 2017 90,000
180,000 Balance 12/31/2017

GP is recognized only on the portion of the sales price collected, not on the interest collected (P90,000). A short-
cut approach is to multiply the remaining balance in installment notes receivable by the GP rate (P600,000 x
30% = P180,000).
Advanced Accounting - Installment Sales (Average)
Question #7
Anas Inc. granted a franchise to Mocca for the Makati area. The franchisee was to pay a franchisee of P500,000,
payable in five equal annual installments starting with the payment upon signing of the agreement. The franchise
was to pay monthly 3% of gross sales of the preceding month. Should the operations of the outlet prove to be
unprofitable, the franchise may be canceled with whatever obligations owing Anas, Inc. in connection with the
P500,000 franchise fee waived. The prevailing interest rate is 14%. The first year generated a gross sales of
P2,500,000.
What is the amount of unearned franchisee fee after the first year of operations?
291,400 575,000 391,400 500,000
9/22/2017 Quiz | iCPA
Solution:
Unearned franchise fee: p100,000 x 2.914 = P291,400 Since the franchise maybe canceled with any outstanding
balance to be waived, then that amount still to be collected is considered unearned.
Advanced Accounting - Franchise Accounting (Difficult)
Question #8
On July 1, the Joshua Company, organized a sales outlet in Cebu City. Following are the home office-branch
transactions for the month of July:
July 1 The home office transferred P250,000 to its Cebu branch.
2 Merchandise costing the home P30 per unit was shipped to the branch
at an invoice price of P40 per unit. Ten thousand units were shipped on
July 2; a second order was to be filled by local suppliers.
2 Shipping costs on the above were paid as follows:
By the office: P15,000
By the branch: P5,000
5 Additional merchandise was acquired by the branch from regional

distributors, 5,000 units at P31
6 Display equipment was purchased by the home office, cost P360,000,

and was delivered to the branch. Plant assets accounts were kept by the
home office.
10 Branch sales for the period July 3-10; on account, 8,000 units at P50.
18 Branch collections on account, P320,000
25 Branch sales for the period July 11-24; on account, 5,000 units at P50
29 Cash remittance by branch to home office, P100,000
30 Monthly summary of branch cash expenses: Advertising (P4,000);

Sales commission (65,000); Miscellaneous (P1,000)
31 Depreciation recorded by the home office for July included P15,000

that related to the display equipment used by the branch. Insurance on
this equipment was amortized by the home office in the amount of
P2,500.
31 Inventories of merchandise at the branch on July 31 included the

following:
From the home office (1,500 units x P40)
From local suppliers (500 units x P31)

Determine the correct balance of reciprocal account after recording branch net income or loss.
582,500 665,500 648,500 599,500
9/22/2017 Quiz | iCPA
Solution:
Sales
(8,000 x 50) 400,000
(5,000 x 50) 250,000 650,000
Cost of sales:
Shipments from home office (10,000 x 40) 400,000
Add: Shipping costs (15,000 + 5,000) 20,000
Total 420,000
Less: Cost of ending inventory (1,500/10,000 x 63,000 (357,000)

420,000)
Purchases from outside suppliers (5,000 x 31) 155,000
Less: Ending inventory (500 x 31) 15,500 (139,500)
Gross profit 153,500
Less: Operating profit
Advertising 4,000
Sales commissions 65,000
Miscellaneous 1,000
Depreciation 15,000
Insurance 2,500 (87,500)
Net income reported by the branch 66,000
Cash to Cebu branch 250,000
Merchandise shipped to Cebu branch (40 x 10,000) 400,000
Shipping cost paid by the home office 15,000
Cash remittance by Cebu branch to home office (100,000)
Depreciation charged to Cebu branch by the home office 15,000
Insurance charged to Cebu branch by the home office 2,500
Branch reported net income 66,000
Balance of reciprocal accounts 648,500

9/22/2017 Quiz | iCPA
Advanced Accounting - Home Office & Branch Accounting (Difficult)
Question #9
When disclosing information about investments in associate, PAS 28 Investment in Associates and Joint
Ventures, requires separate disclosure of which of the following?
I Shares in associates in the statement of financial position
II Share profit or loss associates in the statement of profit or loss and other
comprehensive income
III Share of any discontinuing operations in the statement of changes in equity
IV Shares of changes recognized directly in the associates equity in the statement

of changes in equity
I, II, III and IV I, II and III only II, III and IV only I, II and IV only
Advanced Accounting - Joint Venture (Average)
Question #10
What is the principle for recognition of a financial asset or a financial liability in PAS 39?
A financial asset is recognized when, and only when, the entity obtains the risks and rewards of ownership
of the financial assets and has the ability to dispose the financial asset. A financial asset is recognized when,
and only when, the entity obtains control of the instrument and has the ability to dispose of the financial asset
independent of the actions of others. A financial asset is recognized when, and only when, it is probable that
future economic benefits will flow to the entity and the cost or value of the instrument can be measure reliably.
A financial asset is recognized when, and only when, the entity becomes a party to the contractual provision
of the instrument.
Question #11
On October 3, 2020, Mike Inc. entered into a forward contract with BPI Bank for the speculation to buy $100 to
be delivered on January 30, 2021. The following direct exchange rates were provided:
October 3, 2020 December 31, 2020 January 30, 2021
Spot-buying P40 P43 P41
Spot-selling P42 44 44
Forward-buying 120 days 41 40 42
Forward-selling 120 days 43 45 42
9/22/2017 Quiz | iCPA
What is the net foreign currency gain (loss) to be recognized by Mike for the years ended December 31, 2020
and December 31, 2021, respectively?
(P300) and P400 (P200) and P300 P200 and (P100) P300 and (P200)
Solution:
12/31/2020 forward selling 30-day rate 40
10/3/2020 forward selling 120-day rate (43)
Change in forward rate (3)
100
Forex loss (300)
1/30/2021 selling spot rate 44
12/31/2020 forward selling 30-day rate (40)
Change in forward rate 4
100
Forex gain 400

Since the forward rate increased (decreased) therefore the forward contract receivable also increased resulting to
a gain (loss).
Question #12
Jojo, Inc. has several branches. Goods costing P10,000 were transferred by the head office to Camiguin Branch
with the latter paying P600 for freight cost. Subsequently, the head office authorized Camiguin Branch to
transfer the goods to Bohol Branch for which the latter was billed for the P10,000 cost of the goods and freight
charge of P200 for the transfer. If the head office had shipped the goods directly to Bohol Branch, the freight
charge would have been P700. The P100 difference in freight cost would have been disposed of as follows:
Considered as savings
Charged to the Head Office
Charged to Bohol Branch
Charged to Camiguin Branch
Advanced Accounting - Home Office & Branch Accounting (Average)
Question #13
Personal services include
9/22/2017 Quiz | iCPA
Travelling, training and seminar, telephone, internet staff development

Advertising, rent, insurance and gasoline
Bank charges, interest, loss on foreign exchange transactions
Salaries, allowances and bonuses
Advanced Accounting - Government Accounting (Average)
Question #14
Foreign operations that are an integral part of the operations of the entity would have the same functional
currency as the entity. Where a foreign operation functions independently from the parent, the functional
currency will be
that of the country of incorporation the same as the presentation currency determined using the
guidance for determining an entitys functional currency that of the parent
Question #15
Below is the unadjusted trial balance of Elmer Corporation at December 31, 2015
Debit Credit
Cash 2,500
Installment accounts receivable, 2014 20,000
Inventory, December 31, 2015 100,000
Other assets 248,500
Accounts payable - trade 25,000
Unrealized gross profit, 2013 10,000
Capital stock 300,000
Retained earnings 40,000
Gain on repossession 3,000
Operating expenses 25,000
Total 466,000 466,000

Cost of goods sold had been uniform over the years at 60% of sales.
Elmer Corporation adopts perpetual inventory procedures. On installment sales, the corporation charges
installment accounts receivable and credits inventory gross profit accounts.
Repossessions of merchandise have been made during the 2015 due to some customers failure to pay maturing
installments. Analysis of these transactions were summarized as follows:
9/22/2017 Quiz | iCPA
Inventory 3,750
Unrealized gross profit, 2013 400
Gain on repossession 1,350

The repossessed merchandise was unsold at December 31, 2015. It was ascertained that they were booked upon
repossession at original costs. A fair valuation of these items would be a sale price of the repossessed
merchandise at P5,000 after incurring costs of reconditioning of P2,500 and cost to dispose them in the market at
P250.
The realized gross profit on 2015 sales was:
68,000 62,000 28,000 22,000
Solution:
50,000/.40 = 125,000 - 70,000 = 55,000 x 40% = 22,000
Advanced Accounting - Installment Sales (Difficult)
Question #16
Tillary Company, which began business on January 1, 2017, appropriately uses the installment sales method of
accounting. The following data are available for 2017:
Installment accounts receivable, December 31, 2017 P200,000
Deferred gross profit, December 31, 2017
(before recognition of realized gross profit) P140,000
Gross profit on sales 40%

The realized gross profit on installment sales for the year ended December 31, 2017, should be
70,000 80,000 50,000 60,000
Solution:
As this is the first year of operations, all P140,000 is from 2017 sales. In the absence of any defaults and
repossessions during the year, this represents the total gross profit (GP) for 2017. Therefore, the total debits to
installment AR for 2017 sales (1) can be computed by dividing the deferred GP by the GP ratio, or P350,000
(P140,000/40%). Next, cash collections (2) can be calculated as: P350,000 total debits - P200,000 ending
balance = P150,000 cash collections. Finally, GP realized in 2017 (3) would be 40% times cash collections of
P150,000 for P60,000 GP realized.
Installment AR
Deferred GP
0
Beg. bal. 0 150,000 (2) Beg. bal.
140,000
(1) 350,000 (3) 60,000
9/22/2017 Quiz | iCPA
End. bal. 200,000

Question #17
A manufacturing group has just acquired a controlling interest in a football club that is listed on a stock
exchange. The management of the manufacturing group wishes to exclude the football club from the
consolidated financial statements on the grounds that its activities are dissimilar. How should the football club be
accounted for?
The entity should not be consolidated; details should be disclosed in the financial statements. The entity
should not be consolidated using the purchase method but should be consolidated using equity accounting.
The entity should be consolidated as there is no exemption from consolidation on the grounds of dissimilar
activities. The entity should not be consolidated and should appear as an investment in the group accounts.
Advanced Accounting - Consolidation After Acquisition (Difficult)
Question #18
Mendiola Construction is constructing a skyscraper in the heart of town and has signed a fixed price two-year
contract for P21 million with the local authorities. It has incurred the following cost relating to the contract by
the end of first year:
Material cost 5,000,000
Labor cost 2,000,000
Construction overhead 2,000,000
Marketing costs 500,000
Depreciation of idle plant and equipment 500,000

At the end of the first year, it has estimated cost to complete the contract, P9 million.
What profit or loss from the contract should Mendiola Construction recognize at the end of the first year?
1,500,000 (9/18 x P3,000,000) 1,000,000 (9/18 x P2,000,000) 1,005,000 (10/19 x P2,000,000)
1,280,000 (9.5/18.5 x P2,500,000)
Advanced Accounting - Construction Accounting (Difficult)
Question #19
Kenneth Company, Inc. franchisor, entered into a franchise agreement with Orville Trading, franchisee on March
31,2013. The total franchise fee is P500,000, of which P100,000 is payable upon signing and the balance in four
equal annual installments. The downpayment is refundable in the event the franchisor fails to render services and
none thus far had been rendered. When Kenneth Company prepares its financial statements on March 31, 2013,
the franchise fee revenue to be reported is:
0
400,000
500,000
100,000
Advanced Accounting - Franchise Accounting (Average)
Question #20
Exchange differences arising from translation of financial statement of a foreign entity are
9/22/2017 Quiz | iCPA
Recognized as accumulated translation adjustments in the equity section

Capitalized if the differences resulted from severe devaluation of a currency
Recognized as accumulated translation adjustments in profit or loss
Recognized directly in retained earnings
Question #21
PSY Corporation owns 90% of the outstanding common shares of SVG Company. On January 2, 2016, office
equipment that had a carrying value to SVG Company P480,000 and has a remaining life of 10 years was sold to
PSY Corporation for P400,000. On the other hand, last August 31, 2017, PSY Corporation sold a second hand
delivery van to SVG Company at a gain of P30,000 (remaining life of 5 years).
Included in the January 1, 2017 inventory of PSY Company was merchandise inventory worth P65,000 while
SVG Company had P80,000 on its December 31, 2017. These inventories came from inter-company sales and
purchases. PSY Corporation included a mark-up of 25% on cost while SVG Company charged a 30% mark-
upon sales.
Each of the two companies has net incomes in 2016 and 2017 as follows:
2016 2017
PSY Corporation 1,200,000 1,500,000
SVG Company 900,000 1,000,000

What is the amount of the consolidated net income attributable to controlling interest in 2017?
2,377,600 2,366,350 2,369,500 2,398,350
Solution:
Net income of controlling interest, 2016
Net income of parent per books 2016 1,200,000
Share net income of subsidiary per books 2016 (900,000 x 810,000

90%)
Upstream unrealized loss 2016 (80,000 x 90%) 72,000
Upstream realized loss 2016 (8,000 x 90%) (7,200)
Upstream ending inventory 2016 (19,500 x 90%) (17,550)
Consolidated net income attributable to parent 2,057,250

Net income of controlling interest, 2017
Net income of parent per books 2017 1,500,000
Share net income of subsidiary per books 2017 (1,00,000 x 900,000

90%)
Downstream unrealized gain, 8/31.2017 (30,000)
Downstream realized gain, 12/31/2017 2,000
9/22/2017 Quiz | iCPA
Upstream realized loss 2017 (8,000 x 90%) (7,200)
Upstream RP beginning inventory 2017 (19,500 x 90%) 17,550
Downstream UP ending inventory 2017 (16,000)
Consolidated net income attributable to parent 2,366,250

Advanced Accounting - Consolidation After Acquisition (Average)
Question #22
On December 1, 2016, Gary Inc. entered into a 120-day forward contract to purchase 250,000 US dollars for
speculative purposes. Gary, Inc, fiscal year ends on December 31. The exchange rates are as follows:
Date Spot rate Forward rate (3/31/10)
December 1, 2016 P45.00 P45.50
December 31, 2016 46.00 46.50
January 30, 2017 45.60 45.30
March 31, 2017 45.10

How much is the forex gain or loss to be reported from this forward contract in 2017?
350,000 250,000 300,000 225,000
Solution:
(46.50 - 45.10) x 250,000 = 350,000
Advanced Accounting - Foreign Currency Transactions and Translations (Difficult)
Question #23
BPI US is operating within US territory wherein the functional currency is the US $. However, the presentation
currency of the bank is Philippine peso. The following financial position data for the year 2020 are provided:
Total assets on 12/31/2020 $1,000
Total liabilities on 12/31/2020 200
Ordinary shares on 12/31/2020 300
Share premium on 12/31/2020 100
Retained earnings on 1/1/2020 200
Net income for year 2020 300
Dividends declared on 12/1/2020 100

The following additional data are provided.
1. All ordinary shares are issued on January 1, 2015.
2. The translated amount of retained earnings at Philippine peso on December 31, 2019 is P8,000.
3. The following direct exchange rates are determined:
9/22/2017 Quiz | iCPA
1/1/2015 45
12/31/2019 42
12/1/2020 41
12/31/2020 43
Average rate for 2020 44

What is the translation gain (loss) to be recognized by BPI US in its Statement of Comprehensive Income for the
year ended December 31, 2020?
(P700) loss P800 gain P100 gain (P600) loss
Solution:
Net income in $ 300
Weighted average rate 44
Net income in Peso 13,200
Dividends declared 12/1/2020 in $ 100
Rate at the date of declaration 41
Dividends declared in Peso 4,100
Retained earnings in Peso 1/1/2020 8,000
Net income in Peso 13,200
Dividends declared in Peso (4,100)
Retained earnings in Peso 12/31/2020 17,100
Assets in Peso (1,000 x 43) 43,000 DR
Liabilities in Peso (200 x 43) 8,600 CR
Ordinary shares in Peso (300 x 43) 12,900 CR
Share premium in Peso 4,300 CR
Retained earnings in Peso 17,100 CR
Cumulative translation adjustment 100 CR
9/22/2017 Quiz | iCPA
The rate used of the ordinary shares and share premium was the rate at the date of declaration which was the
same as the closing rate.
Question #24
Financial statements of non profit organization includes all of the following, except
Statement of cash flows
Statement of activities
Statement of financial position
Statement of changes in equity
Advanced Accounting - Not for Profit Organizations (Easy)
Question #25
On December 18, 2010, the statement of affairs of Paz Company, which is in bankruptcy liquidation, included
the following:
Assets pledged for fully secured liabilities 100,000
Assets pledged for partially secured liabilities 40,000
Free assets 120,000
Fully secured liabilities 80,000
Partially secured liabilities 50,000
Unsecured liabilities with priority 60,000
Unsecured liabilities without priority 90,000

Compute the estimated amount to be paid to the unsecured liabilities with priority:
64,000
48,000
60,000
80,000
Advanced Accounting - Corporate Liquidation (Average)
Question #26
James Inc. purchased a P1 million life insurance policy on its president, of which James is the beneficiary.
Information regarding the policy for the year ended December 31, 2013 follows:
Cash surrender value, 1/1/13 87,000
Cash surrender value, 12/31/13 108,000
Annual advance premium paid 1/1/13 40,000

During 2013, dividends of P6,000 were applied to increase the cash surrender value of the policy. What amount
should James report as life insurance expense for 2013?
19,000
40,000
9/22/2017 Quiz | iCPA
13,000
21,000
Advanced Accounting - Derivatives (Average)
Question #27
By applying the definition provided in PAS 21, which item will be regarded as a monetary item?
Inventory
Accounts receivable
Property, plant and equipment
Land and buildings
Question #28
The Rissa Company has entered into a contract on June 1, 20X3 that requires it to issue its own ordinary shares
with a value of CU250,000 on 31 May 20X6. In accordance with PAS32, Financial instruments presentation, the
company should classify the contract as
Equity instrument
Financial liability
Embedded derivative
Financial asset
Advanced Accounting - Derivatives (Easy)
Question #29
When the outcome of the construction contract can be estimated reliably, which of the following accounting
treatment is proper?
The construction revenue shall be recognized only to the extent of contract costs incurred that it is probable
will be recoverable. When it is probable that total contract costs will exceed total contract revenue, the
expected loss shall be recognized as an expense immediately without reference to the stage of completion of the
contract activity at the end of the reporting period. The construction costs shall be deferred without reference
to the stage of completion of the contract activity at the end of the reporting period. The balance construction
in progress account will be equal to cumulative construction revenue recognized even if it is probable that total
contract costs will exceed total contract revenue.
Advanced Accounting - Construction Accounting (Average)
Question #30
Tillary Company, which began business on January 1, 2017, appropriately uses the installment sales method of
accounting. The following data are available for 2017:
Installment accounts receivable, December 31, 2017 P200,000
Deferred gross profit, December 31, 2017
(before recognition of realized gross profit) P140,000
Gross profit on sales 40%

The cash collections on installment sales for the year ended December 31, 2017, should be
100,000 130,000 150,000 120,000
9/22/2017 Quiz | iCPA
Solution:
As this is the first year of operations, all P140,000 is from 2017 sales. In the absence of any defaults and
repossessions during the year, this represents the total gross profit (GP) for 2017. Therefore, the total debits to
installment AR for 2017 sales (1) can be computed by dividing the deferred GP by the GP ratio, or P350,000
(P140,000/40%). Next, cash collections (2) can be calculated as: P350,000 total debits - P200,000 ending
balance = P150,000 cash collections. Finally, GP realized in 2017 (3) would be 40% times cash collections of
P150,000 for P60,000 GP realized.
Installment AR
Deferred GP
0
Beg. bal. 0 150,000 (2) Beg. bal.
140,000
(1) 350,000 (3) 60,000
End. bal. 200,000

Question #31
PFRS 4 was introduced principally for what reason?
As a response to recent scandals within the insurance industry. Because of pressure from the financial
services authorities in several countries. To completely overhaul insurance accounting. To make limited
improvements to the accounting for insurance accounting.
Advanced Accounting - Insurance Contracts (Average)
Question #32
With respect to the cost a business acquisition, PFRS 3 requires cost(total consideration) to be allocated
Based on recoverable amounts
Based on original costs
Based on fair values
To the assets based on their carrying values
Advanced Accounting - Business Combination (Easy)
Question #33
This serves as the covering letter in transmitting the agency's financial statements to the COA, DBM and other
oversight agency.
Statement of management responsibility
Preclosing trial balance
Note to the financial statements
Postclosing trial balance
Question #34
A parent is not required to present consolidated financial statements

When the parent is virtually wholly owned provided parent does not obtain approval of the owners of
minority interest
When the parent and the subsidiary are engaged in dissimilar activities
9/22/2017 Quiz | iCPA
When there is a three-month time lag in the fiscal periods of the parent and its subsidiary When the
parent is wholly owned subsidiary
Advanced Accounting - Consolidation After Acquisition (Average)
Question #35
When the bankruptcy court grants the order for relief:
The court discharges the debtor except for claims provided for in the reorganization plan. The
bankruptcy court confirms that the reorganization plan is fair an equitable. The reorganization plan has been
accepted by at least two-thirds in amount and over half in number of claims. Creditors may not seek payment
of their claims directly from the debtor corporation.
Question #36
It is the currency of the primary economic environment in which the entity operates.
Functional currency
Foreign currency
Local currency
Presentation currency
Question #37
Joshua Corporation is considering an acquisition of Pane Company. Pane has a capital structure of 50 percent
debt and 50 percent equity, with a current book value of P10 million in assets. Panes pre-merger beta is 1.36 and
is not likely to be altered as a result of the proposed merger. Joshuas pre-merger beta is 1.02 and both it and
Pane face a 40 percent tax rate. Joshuas capital structure is 40 percent debt and 60 percent equity, and it has P24
million in total assets. The net cash flows from Pane available to Joshuas stockholders are estimated at P4.0
million for each of the next three years and a terminal value of P19.0 million in Year 4. Additionally, new debt
issued by the combined firm would yield 10 percent before-tax, and the cost of equity is estimated at 12.59
percent. Currently, the risk-free rate is 6.0 percent and the market risk premium is 5.88 percent.
What is the present value (to the nearest thousand) of the Pane cash inflows to Joshua?
31,000,000
14,695,000
22,847,000
25,620,000
20,536,000
Advanced Accounting - Business Combination (Difficult)
Question #38
Jinkee Corp. has been undergoing liquidation since January 1. As of March 31, its condensed statement of
realization and liquidation is presented below:
Assets:
Assets to be realized 1,375,000
Assets acquired 750,000
Assets realized 1,200,000
Assets not realized 1,375,000
Liabilities:
Liabilities liquidated 1,875,000
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Liabilities not liquidated 1,700,000

Liabilities to be liquidated 2,250,000
Liabilities assumed 1,625,000
Revenues and Expenses:
Supplementary charges/debits 3,125,000
Supplementary credits 2,800,000
The net gain (loss) for the three-month period ending March 31 is:
250,000
(325,000)
425,000
750,000
Advanced Accounting - Corporate Liquidation (Difficult)
Question #39
Dallas Motors Auto, a national autoparts chain, is considering purchasing a smaller chain, Southern Auto. Dallas
Motorss analysts project that the merger will result in incremental net cash flows of P2 million in Year 1, P4
million in Year 2, P5 million in Year 3, and P117 million in Year 4. The Year 4 cash flow includes a terminal
value of P107 million. Assume all cash flows occur at the end of the year. The acquisition would be made
immediately, if it is undertaken. Southerns post-merger beta is estimated to be 2.0, and its post-merger tax rate
would be 34 percent. The risk-free rate is 8 percent, and the market risk premium is 4 percent. What is the value
of Southern Auto to Dallas Motors Auto?
67,000,000
88,230,000
72,520,000
60,350,000
81,930,000
Advanced Accounting - Business Combination (Difficult)
Question #40
Jim Builders reports under PAS 11, and constructed a new subdivision during 2013 and 2014 under contract with
Cactus Development Co. Relevant data are summarized below:
Contract amount P3,000,000
Costs 2013 1,200,000
2014 600,000
Gross profit 2013 800,000
2014 400,000
Contract billings 2013 1,500,000
2014 1,500,000
The Company uses the cost recovery method under PAS 11 to recognize revenue.
What would be the journal entry SDH would use to record revenue in 2014?
(DR) Construction-in-progress 400,000
(DR) Costs of construction 600,000
(CR) Revenue for long-term contracts 1,000,000
9/22/2017 Quiz | iCPA
(DR) Costs of construction 2,000,000

(DR) Gross profit 1,000,000
(DR) Accounts receivable 1,500,000
(DR) Construction-in-progress 1,200,000
(DR) Costs of construction 600,000
Question #41
Which of the following transactions will increase the normal balance of home office account in the separate
statement of financial position of the branch?
Debit memo received from the home office Payment by the branch of home offices loans payable
Collection by the home office of branchs receivable Credit memo issued by the home office
Question #42
SLEX enters into an arrangement under which it will build and operate a toll bridge. Company B is entitled to
charge users for driving over the toll bridge for the period from the completion of construction until 1 million
cars have driven across the bridge, at which point the concession arrangement will end. SLEX incurred a total
cost of P1 billion for the construction of the toll bridge. How shall SLEX account for its infrastructure asset?
It shall be classified and treated as intangible asset to be amortized on the basis of usage or unit method of 1
million cars. It shall be classified and treated as intangible asset to be amortized using straight line method of
presumed life of 10 years. It shall be classified and treated as financial asset It shall be bifurcated into
intangible asset and financial asset
Question #43
Congressional authorization in the form of a law to make payments out of the public treasury for specific
purposes after compliance with certain conditions:
Allotment
Budgeting
Appropriations
Obligation
Question #44
On January 1, 2012, Mark Company received a two-year P500,000 loan. The loan calls for payment to be made
at the end of each year based on the prevailing market rate at January 1 of each year. The interest rate on January
1, 2012, was 10%. Anthony company also has a two-year P500,000 loan, but Anthony's loan carries a fixed
interest rate of 10%. Mark Company does not want to bear the risk that interest rates may increase in year two of
the loan. Anthony Company believes that rates may decrease and they would prefer to have variable debt. So the
two companies enter into an interest rate swap agreement whereby Anthony agrees to make Mark's interest
payment in 2013 and Mark likewise agrees to make Anthony's interest payment in 2013. The two companies
agree to make settlement payments, for the difference only, on December 31, 2013. The interest rate on January
1, 2013 is 12%. How much should be recognized as derivative asset at December 31, 2012?
9/22/2017 Quiz | iCPA
10,000
8,929
0
9,091
Question #45
Abby Inc. charges an initial franchise fee of P115,000, with P25,000 paid when the agreement was signed and
the balance in five annual payments. The present value of the future payments, discounted at 10% is P68,234.
The franchisee has the option to purchase P15,000 of equipment for P12,000. Abby has substantially provided
all initial services required and collectability of the payments is reasonably assured. The amount of the revenue
from franchise fees is:
93,234
115,000
90,234
25,000
Question #46
Aliza Trading established a branch in Quezon City to distribute part of the goods purchased by it from other
suppliers. Aliza ships merchandise to the branch at 20% above cost. The following account balances are taken
from ledger balances of the home office and the branch:
Home Office Branch
Sales 384,000 134,400
Beginning inventory 76,800 38,400
Purchase 320,000
Shipment to branch 83,200
Shipment from home office 99,840
Operating expenses 46,080 23,040
Ending inventory 62,720 30,720

Calculate the combined net income.
108,800 106,080 104,960 90,880
Solution:
Branch net income
Sales 134,400
Less: Cost of sales at cost 89,600
Gross profit 44,800

9/22/2017 Quiz | iCPA
Less: OPEX 23,040
Net income 21,760
Head office sales 384,000
Less: Cost of sales
Beginning inventory 76,800
Purchases 320,000
Shipments (83,200)
End (62,720) 250,880
Gross profit 133,120
Less: OPEX 46,080
Head Office net income 87,040
Branch net income 21,760
Combined net income 108,800

Question #47
All of the following are characteristics of a derivative, except

It settled at a future date
It is acquired for the purpose of generating a profit from short-term fluctuations in market factors
It requires no initial investment or an initial net investment
Its value changes in response to the change in a specified underlying
Advanced Accounting - Derivatives (Average)
Question #48
A construction contractor has a fixed price contract for P100,000 to construct a building (the project).The
contractor's initial estimate of total contract costs is P60,000. It will take two years to construct the building.At
the end of the first year of the project (31 December 2013) the contractor has incurred costs of P20,000 on the
contract, including P2,000 on cement that is held offsite. The entity's estimate of total contract costs has stayed
the same.The contractor determines the stage of completion of the construction contract by reference to the
proportion that costs incurred for work performed to date bear to the estimated total costs.
Determine the expenses for the year 2013:
18,000
20,000
33,333
13,333
Question #49
9/22/2017 Quiz | iCPA
The following transactions were incurred for the year by the Company:
1. Transfer of P13,000 merchandise to an agency to establish a working fund.
2. Receipt of sales orders from the agency, P130,000.
3. Collection of agency accounts by the home office, P91,000.
4. Home office disbursements representing agency expenses, P11,700.
5. Replenishment of the agency working fund upon receipt of expense vouchers for P5,850.
6. Cost of goods sold identified with the agency sales, P93,600.
How much is the net income traceable to the agency?
(72,150) 18,850 5,850 36,400
Solution:
Agency sales receipts 130,000
Cost of sales (93,600)
Gross profit 36,400
Expenses (11,700 + 5,850) (17,550)
Net income of the agency 18,850

Question #50
On January 2, 2017, Magnolia Ice Cream signed an agreement authorizing Trisha to operate as franchisee for an
initial franchise fee P500,000 received upon signing of the agreement. Trisha commenced operations on August
1, 2017, at which date all of the initial services required of Magnolia Ice Cream had been performed at a cost of
P120,000. The franchise agreement further provides that Trisha must pay a 10% monthly continuing franchising
fee. Sales reported from August 1 to December 31, 2017 amounts to P400,000.
What is the net income related with franchise fee to be reported by Magnolia Ice Cream in 2017?
540,000 380,000 420,000 500,000
Solution:
Cash received / Initial Franchise Fee 500,000
Direct cost (120,000)
Gross profit on initial franchise fee 380,000
Continuing franchise fee (400,000 x 10%) 40,000
Net income 420,000

Since the franchise reported gross sales starting August, therefore as of December 31, there is substantial
performance already and the initial franchise fee is recognized as revenue.
Question #51
9/22/2017 Quiz | iCPA
Net assets restricted by the governing board of a non-government, not-for-profit organization are reported as part
of:
Any of these, depending on the terms
Temporarily restricted net assets
Permanently restricted net assets
Unrestricted net assets
Advanced Accounting - Not for Profit Organizations (Average)
Question #52
Lane Co., which began operations on January 1, 2017, appropriately uses the installment method of accounting.
The following information pertains to Lanes operations for the year 2017:
Installment sales P1,000,000
Regular sales 600,000
Cost of installment sales 500,000
Cost of regular sales 300,000
General and administrative expenses 100,000
Collections on installment sales 200,000

The deferred gross profit account in Lanes December 31, 2017 balance sheet should be
320,000 150,000 500,000 400,000
Solution:
Under the installment method, gross profit is deferred at the time of sale and is recognized by applying the gross
profit rate to subsequent cash collections. At the time of sale, gross profit of P500,000 is deferred (P1,000,000 -
P500,000). The gross profit rate is 50% (P500,000 / P1,000,000). Since 2017 collections on installment sales
were P200,000, gross profit of P100,000 (50% x P200,000) is recognized in 2017. This recognition of gross
profit would decrease the deferred gross profit account to a 12/31/2017 balance of P400,000 (P500,000 -
P100,000). Note that regular sales, cost of regular sales, and general and administrative expenses do not affect
the deferred gross profit account.
Question #53
Corporation Lizzy acquired 2,000 shares of the voting stock of Corporation Lizette in the open market at P48 per
share. Direct costs associated with the acquisition total of P4,000. Balance sheets of both companies on January
1, 2017, immediately after the acquisition of shares of Lizzy, are as follows:
Corporation Lizzy Corporation Lizette
Cash 50,000 10,000
Temporary investments 80,000 40,000
Receivables (net) 95,000 10,000
9/22/2017 Quiz | iCPA
Investment in Corporation Lizette 100,000
Machinery and equipment (net) 100,000 45,000
Land 50,000 20,000
Total assets 475,000 125,000
Accounts payable 75,000 25,000
Common stock (P20 par) 250,000 50,000
Excess over par 90,000 30,000
Retained earnings 60,000 20,000
Total liabilities and SHE 475,000 125,000

The fair values of Lizzy and Lizette assets on January 1m 2017 are presented below. Liabilities of both
companies are properly valued at their respective book value:
Lizzy Lizette
Cash 50,000 10,000
Temporary investment 100,000 50,000
Receivables (net) 95,000 8,000
Investment in Corporation Lizette 100,000 -
Machinery 110,000 40,000
Land 100,000 30,000
555,000 138,000
The total consolidated assets must be
613,000 522,600 520,000 518,600
Solution:
Total consolidated assets must be the total book value of Lizzy excluding investment in Lizette, and fair market
value of Lizette plus goodwill from business combination, if any. Percent of control: (2,000/50,000)/20 = 80%
Cost of investment
Fair value of stocks issues (2,000 x 48) 96,000
Fair value of investment (138,000 - 25,000) x 80% 90,400
Goodwill 5,600
Total consolidated assets
Book value of the assets of Lizzy excluding investment

(475,000 - 100,000)
9/22/2017 Quiz | iCPA
375,000
Fair value of the assets of Lizette 138,000
Goodwill from the business combination 5,600
Total 518,600
Advanced Accounting - Consolidation After Acquisition (Difficult)
Question #54
Kenneth Company had a Swiss franc receivable resulting from exports to Switzerland and a Mexican peso
payable resulting from imports from Mexico. Kenneth recorded foreign exchange gains related to both its franc
receivable and peso payable. Did the foreign currencies increase or decrease in Philippine peso value from the
date of the transaction to the settlement date?
Franc (Decrease); Mexican Peso (Increase)
Franc (Decrease); Mexican Peso (Decrease)
Franc (Increase); Mexican Peso (Increase)
Franc (Increase); Mexican Peso (Decrease)
Question #55
Abby Inc. charges an initial franchise fee of P115,000, with P25,000 paid when the agreement was signed and
the balance in five annual payments. The present value of the future payments, discounted at 10% is P68,234.
The franchisee has the option to purchase P15,000 of equipment for P12,000. Abby has substantially provided
all initial services required and collectability of the payments is reasonably assured. The amount of the revenue
from franchise fees is:
93,234
25,000
115,000
90,234
Solution:
25,000+68,234=93,234
Question #56
Jane had the following information

1. Purchased merchandises from a foreign supplier on January 20, 2016 for the Philippine peso equivalent of
P60,000 and paid the invoice on April 20, 2016 at the Philippine peso equivalent of P68,000.
2. On September 1, 2016, borrowed the Philippine peso equivalent of P300,000 evidence by a note that is
payable in the lenders local currency on September 1, 2017. On December 31, 2016, the Philippine peso
equivalent of the principal amount was P320,000.
In Janes income statement, what amount should be included as a foreign exchange loss?
22,000 28,000 20,000 4,000
Solution:
9/22/2017 Quiz | iCPA
Loss (60,000 - 68,000) 8,000
Loss (300,000 - 320,000) 20,000
Total 28,000
Advanced Accounting - Foreign Currency Transactions and Translations (Difficult)
Question #57
The recognition of unrealized gain or loss on the measurement of the financial assets and insurance liabilities as
a component of other comprehensive income is described in insurance parlance as
fair value accounting hedge accounting current value accounting shadow accounting
Advanced Accounting - Insurance Contracts (Average)
Question #58
An entity will primarily generate and expend cash in one primary economic environment. According to PAS 21,
the effects of changes in foreign exchange rates, the correct term for the currency of this primary economic
environment is the
Presentation currency
Functional currency
Reporting currency
Foreign currency
Question #59
On December 31, 2017, the home office of Trisha Supply Company recorded a shipment of merchandise to its
Glenda branch as follows:
Glenda branch 30,000
Shipments to Glenda branch 25,000
Unrealized profit in Glenda branch inventory 4,000
Cash (for freight charges) 1,000

The Glenda branch sells 40% of the merchandise to outside entities during the rest of December 31, 2017. The
books of the home office and Trisha branches are closed on December 31 of each year. On January 5, 2018, the
Glenda branch transfers half of the original shipments to the Sandy branch and the Glenda branch pays P500
freight on the shipment.
At what amounts should the 60% of the merchandise remaining unsold at December 31, 2017 be included in the
inventory of the Glenda branch on December 31, 2017?
18,000 17,400 15,000 15,600
Solution:
Shipments from home office 29,000
Freight in 1,000
9/22/2017 Quiz | iCPA
Total available for sale 30,000
60%
Ending inventory of branch 18,000
Shipments from home office 29,000
Over allowance (4,000)
Shipments from home office at cost 25,000
Freight 1,000
Total available for sale at cost 26,000
60%
Ending inventory of branch at cost 15,600

Question #60
On January 2, 2015, Mycors Inc. signed an agreement to operate as franchisee of Mang Inasal for an initial
franchise fee of P2,343,750 for 10 years. Of this amount, P468,750 was paid when the agreement was signed
and the balance payable in three annual payments beginning on December 31, 2015. Mycors signed a non-
interest bearing note for the balance. The implicit interest rate is 18%. Assume that substantial services
amounting to P730,000 had already been rendered by the franshisor and indirect costs of P53,750 have also been
incurred.
If collection of the note is not reasonably assured, calculate the net income. For the year ended December 31,
2015. Use PV factor 2.17.
753,900 700,150 509,776 456,026
Solution:
Downpayment 468,750
Present value (312,500 x 2.17) 1,356,250
IFF 1,825,000
Less: Franchise cost 730,000
Franchise profit 1,095,000
Gross profit rate (1,095,000/1,825,000) 60%
Realized gross profit (468,750 + ((625,000 - 244,125) x 509,775

60%)
9/22/2017 Quiz | iCPA
Interest income 244,125
Expenses (53,750)
Net income 700,150

Advanced Accounting - Franchise Accounting (Difficult)
Question #61
Bucca Warehousing Corporation bought a building at auction on June 30, 2017, for P1,000,000. On July 2, 2017,
before occupying the building, Bucca sold it to a triple-A rated company for P1,200,000. Bucca received a cash
down payment of P300,000 and a first mortgage note at the market rate of interest, for the balance. No additional
payments were required until 2018. On September 1, 2017, an independent appraiser valued the property at
P1,500,000. On its 2017 income tax return, Bucca reported the sale on the installment basis. How much gain
should Bucca recognize in its income statement for the year ended December 31, 2017?
300,000 200,000 0 50,000
Solution:
The installment method of recognizing revenue is not acceptable for financial reporting purposes unless the
circumstances are such that the collection of the sales price is not reasonably assured. Since the property was
sold to a triple-A rated company and the value of the property is appreciating, collection can be assumed to be
reasonably assured. Therefore, the entire gain should be recognized for financial reporting purposes at the date
of sale:
Sales price Cost of building = Gain recognized
P1,200,000 P1,000,000 = P200,000
Question #62
Dorian and Donnie are partners who share profits and losses in a 2:3 ratio. The partnership will be liquidated in
installments. Some noncash assets have been sold, but other assets with a book value of P126,000 remain.
Liabilities are now P16,000, and liquidation expenses are expected to be P7,200. The capital balances are
P92,000 for Dorian and P68,000 for Donnie.
Assuming the available cash is distributed, how much is the share of Dorian?
8,000 42,800 26,800 32,000
Solution:
Liabilities still unpaid 16,000
Capital of Dorian 92,000
Capital of Donnie 68,000
Total 176,000
Less: Noncash assets (126,000)
Cash balance 50,000
9/22/2017 Quiz | iCPA
Less: Anticipated expenses (7,200)
Liabilities to be paid (16,000)
Available to owners 26,800
Dorian Donnie Total
Capital balance 92,000 68,000 320,000
Liquidation loss (53,280) (79,920) 133,200
Deficiency (11,920) 11,920 26,800
Cash distribution 26,800 - (26,800)

Advanced Accounting - Partnership (Difficult)
Question #63
When a secured claim is not fully settled by the selling of the underlying collateral
The unsettled portion of the claim cannot be collected by the creditor The unsettled portion is classified
as an unsecured priority claim The unsettled portion remains as an unsecured priority claim. The
unsettled portion remains as a secured claim
Question #64
On January 2, 2017, Diversified Enterprises signed a franchise agreement with DTSI Company for an initial
franchise fee of P92,500. Of this amount DTSI paid P17,500 upon the signing of the franchise contract and the
balance is payable in four annual payments of P18,750 starting December 31, 2017. DTSI issued 12% interest-
bearing notes for the balance. Collection of the notes are not reasonably assured.
The down-payment is not refundable; it represents the actual cost of initial services provided by Diversified
before formal signing. However, additional substantial services have yet to be performed by Diversified. During
2017 additional direct franchise cost of P45,750 and indirect cost of P15,000 were incurred by Diversified.
It is also agreed that DTSI will pay continuing franchise fee at 3% of its gross sales revenue. The franchise outlet
commenced business operations on October 1, 2017 and its gross sales totaled P600,000 by year-end.
The net income recognized by Diversified from the DTSI franchise in 2017 is
36,812.50 19,312.50 37,150 16,590
Solution:
Journal entry upon signing of franchise contract
Cash 17,500
Notes receivable 75,000
Franchise revenue 17,500
Unearned franchise revenue 75,000
Installment sales 75,000
9/22/2017 Quiz | iCPA
Installment cost 45,750
Gross profit 29,250
Gross profit % 39%
Initial franchise fee 17,500,000
Realized gross profit (18,750 x 39%) 7,312.50
Continuing franchise fees (600,000 x 3%) 18,000
Interest revenue (75,000 x 12%) 9,000
Direct cost (17,500)
Indirect cost (15,000)
Net income 19,312.50

Question #65
A contractor enters into a construction contract on January 1, 2011. The contractor agrees to a fixed price of
P9,000 to build a bridge. The contractor's initial estimate of contract costs is P8,000. The contract expects that it
will take three years to build the bridge.
The contractor has a December 31 year-end.
By the end of the first year of the contract (December 31, 2011), the contractor's estimate of total costs has
increased to P8,050 (costs incurred in 2011 amounted to P2,093).
In 2012, the customer and contractor agree to a variation resulting in an increase in contract revenue of P200 and
estimated additional contract costs of P150. At the end of 2012, costs incurred of P4,075 include P100 paid for
standard materials stored at the site to be used in 2013 to complete the project.
The contractor determines the stage of completion of the contract by calculating the proportion that contract
costs incurred for work performed to date bear to the latest estimated total contract costs.
Determine the revenue for the year 2013:
2,392
4,468
2,340
2,592
Question #66
A construction entity signed a contract to build a theater over a period of two years, and with this contract also
signed a maintenance contract for five years. Both contracts are negotiated as a single package and are closely
interrelated to each other. The two contracts should be
Treated differently, the building contract under the full cost recovery method and the maintenance contract
under the percentage of completion method.
Combined and treated as a single contract
Recognized under the full cost recovery method
Segmented and considered two separate contracts
9/22/2017 Quiz | iCPA
Question #67
Which of these considerations would not be relevant in determining the entity's functional currency?
The currency that influences the costs of the entity
The currency in which receipts from operating activities are retained
The currency in which finance is generated
The currency that is the most internationally acceptable for trading
Question #68
Dickie Corporation contracted to build a building for Dickson Company. The contract price was P500,000 and
Dickie estimated that construction costs would total P420,000. The construction period lasted until September 1,
2015. Costs during the each period, estimated total cost of the product at the end of the year, billings and cash
collected during the year were as follows:
2015 2016 2017
Cost during the period 105,000 195,000 125,000
Estimated or actual total costs 420,000 425,000 425,000
Billings during the period 100,000 150,000 250,000
Cash collected during the period 80,000 140,000 260,000

The amount of gross profit recognized in 2016 using the percentage of completion method must be:
80,000 32,942.50 20,000 36,500
Solution:
Contract price 500,000
Total estimated costs 425,000
Estimated gross profit 75,000
Percentage of completion ((105,000 + 70.59%

195,0000)/425,000)
Gross profit realized to date 52,942.50
Less: Gross profit realized prior year
Contract price 500,000
Total estimated cost (420,000)
Estimated gross profit prior year 80,000
Percent of completion (105,000/420,000) 25% (20,000)

9/22/2017 Quiz | iCPA
Gross profit realized 2015 32,942.50

Question #69
Electricity companies A and B (involved in electricity sales but not distribution) jointly establish a power
generation entity (Company C) to build and operate a power plant. Companies A and B each have a 50%
ownership interest in Company C, which is structured as a corporation. The incorporation enables the separation
of Company C from Companies A and B and, as a consequence, the assets and liabilities held in Company C are
the assets and liabilities of Company C. The contractual arrangement between the parties does not specify that
the parties have rights to the assets or obligations for the liabilities of Company C.
However, the parties also enter into an off-take agreement requiring the following:
1. Companies A and B agree to purchase all the power generated by Company C in a ratio of 50:50. Company C
cannot sell any of the output to third parties, unless this is approved by companies A and B. Because the purpose
of the arrangement is to provide companies A and B with power they require, such sales to third parties are
expected to be uncommon and not material.
2. The price of the power sold to companies A and B is set forth in the off-take agreement at a level that is
designed to cover the costs of production and administrative expenses incurred by company . The arrangement is
intended to operate at a break-even level.
What is the proper classification of this joint arrangement?
It is classified as joint operation because the off-take agreement reflects the exclusive dependence of
Company C upon Companies A and B for the generation of cash flows and the rights of Company A and B to all
of the economic benefits of the assets of Company C. It is classified as joint operation because PFRS 11
provides that in case of doubt, a joint arrangement shall be classified as joint operation instead f joint venture.
It is classified as joint venture because the incorporation enables the separation of Company C from
Companies A and B and, as a consequence, the assets and liabilities held in Company C on the assets and
liabilities of Company C. It is classified as joint venture because the arrangement is established through a
separate vehicle, an incorporated entity Company C.
Question #70
Which of the following statements is (are) false?
I PFRIC 12 specifies that the infrastructure to be recognized as property, plant

and equipment of the operator because the contractual service arrangement
does not convey the right to control the use of the public service infrastructure
to the operator.
II The operator has access to operate the infrastructure to provide the public
service on behalf of the grantor in accordance with the terms specified in the
contract.
III Under the terms of the contractual arrangement, the operator acts as a service
provider by constructing or upgrading the infrastructure used to provide a
public service, and operates and maintains that infrastructure (operation
services) for a specified period of time.
I and II only I only II only I and III only
Question #71
9/22/2017 Quiz | iCPA
A construction company is in the middle of a 2 year construction contract when it receives a letter from the
customer extending the contract by a year and requiring the construction company to increase its output in
proportion of the number of years of the new contract to the previous contract period. This is allowed in
recognizing additional revenue according to PAS 11 if
Negotiations have reached an advanced stage and it is probable that the customer will accept the claim. It
is probable that the customer will approve the variation and the amount of revenue arising from the variation,
and the amount of revenue can be reliably measured. It is probable that the customer will approve the
variation and the amount of revenue arising from the variation, whether the amount of revenue can be reliably
measured or not. The contract is sufficiently advanced and it is probable that the specified performance
standards will be exceeded or met.
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Answer More Challenges

Which of the following is not objective evidence of impairment of a financial asset?

Recognized 2016 45,000 315,000 Total gross profit

Recognized 2017 90,000

180,000 Balance 12/31/2017

July 1 The home office transferred P250,000 to its Cebu branch.

2 Shipping costs on the above were paid as follows:

By the office: P15,000

By the branch: P5,000

5 Additional merchandise was acquired by the branch from regional

6 Display equipment was purchased by the home office, cost P360,000,

18 Branch collections on account, P320,000

29 Cash remittance by branch to home office, P100,000

30 Monthly summary of branch cash expenses: Advertising (P4,000);

31 Depreciation recorded by the home office for July included P15,000

31 Inventories of merchandise at the branch on July 31 included the

From the home office (1,500 units x P40)

From local suppliers (500 units x P31)

(8,000 x 50) 400,000

(5,000 x 50) 250,000 650,000

Shipments from home office (10,000 x 40) 400,000

Add: Shipping costs (15,000 + 5,000) 20,000

Less: Cost of ending inventory (1,500/10,000 x 63,000 (357,000)

Purchases from outside suppliers (5,000 x 31) 155,000

Less: Ending inventory (500 x 31) 15,500 (139,500)

Gross profit 153,500

Less: Operating profit

Sales commissions 65,000

Insurance 2,500 (87,500)

Net income reported by the branch 66,000

Cash to Cebu branch 250,000

Merchandise shipped to Cebu branch (40 x 10,000) 400,000

Shipping cost paid by the home office 15,000

Cash remittance by Cebu branch to home office (100,000)

Depreciation charged to Cebu branch by the home office 15,000

Insurance charged to Cebu branch by the home office 2,500

Branch reported net income 66,000

Balance of reciprocal accounts 648,500

Advanced Accounting - Home Office & Branch Accounting (Difficult)

I Shares in associates in the statement of financial position

III Share of any discontinuing operations in the statement of changes in equity

IV Shares of changes recognized directly in the associates equity in the statement

October 3, 2020 December 31, 2020 January 30, 2021

Spot-buying P40 P43 P41

Forward-buying 120 days 41 40 42

Forward-selling 120 days 43 45 42

12/31/2020 forward selling 30-day rate 40

10/3/2020 forward selling 120-day rate (43)

Change in forward rate (3)

Forex loss (300)

1/30/2021 selling spot rate 44

12/31/2020 forward selling 30-day rate (40)

Change in forward rate 4

Forex gain 400

Personal services include

Travelling, training and seminar, telephone, internet staff development

Installment accounts receivable, 2014 20,000

Installment accounts receivable, 2015 70,000

Inventory, December 31, 2015 100,000

Other assets 248,500

Accounts payable - trade 25,000