CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

ADVANCED FINANCIAL ACCOUNTING AND REPORTING GERMAN and VALIX

PREWEEK October 2024

Number 1
The home office sends merchandise to the branch at a billed price of 150%. In the separate books of the
home office, the allowance for overvaluation account had a balance of P60,000. In the combined
statement, the ending inventory of the branch was P40,000 of which P10,000 came from outsiders.
What is the overstatement of the cost of goods sold of the branch from the home office
merchandise?
A. 20,000
B. 50,000
C. 45,000
D. 5,000

Number 2
Unrealized holding gain or loss for the effective portion of derivatives designated as a hedge of a net
investment in a foreign entity shall be recognized in
A. Profit or loss
B. Other comprehensive income with reclassification adjustment
C. Retained earnings
D. Other comprehensive income without reclassification adjustment

Number 3
Last year, a nonprofit organization received a contribution with a donor restriction for research
purposes. In the current year, the nonprofit organization fully spent the said contribution for the
intended purpose. What is the effect of this expenditure on the current year’s change in net assets?
A. Increase the temporarily restricted net assets.
B. No effect on the unrestricted net assets.
C. No effect on the total net assets.
D. Decrease the permanently restricted net assets.

Number 4
Resources of a non-profit organization that have been set aside for a specific purpose by the Board of
Trustees of the organization are accounted for in
A. Term endowment fund
B. Unrestricted fund
C. Restricted current fund
D. Annuity fund

Number 5
Soon-to-be partners, A and B will contribute the following: A will contribute cash, P750,000, and B
will contribute a Building with a carrying amount of P500,000 and an agreed value of P600,000. The
building has a mortgage in the amount of P50,000, but it will be paid personally by B. One of the
provisions, of their agreement is upon formation the capital balances of the partners will be equal.
What is the contributed capital of B?
A. 500,000
B. 550,000
C. 600,000
D. 675,000
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Number 6
Partners A and B formed a partnership on January 1, 2025, with original capital contributions of
P1,000,000 and P750,000 respectively. They agreed to distribute profits and losses with the following
provisions:
a) 10% on their original capital contributions
b) Monthly salaries of P7,500 and P10,000 respectively for A and B
c) The remainder shall be shared at 60:40
At the end of the year, due to unfavorable circumstances, the partnership generated a net loss of
P150,000.
What is the share of A in the net loss?
A. 49,000
B. 131,000
C. 19,000
D. 101,000

Number 7
The following were ascertained for the given period in the statement of realization and liquidation:
Assets to be realized 50,000
Assets realized 40,000
Assets not realized 10,000
Increase in asset 25,000
Liabilities liquidated 17,500
Liabilities not liquidated 20,000
Liabilities assumed 12,500
Liabilities to be liquidated 25,000
Supplementary credits 85,000
Supplementary debits 40,000
What is the gain or loss for the period?
A. 20,000 gain
B. 20,000 loss
C. 50,000 gain
D. 50,000 loss

Number 8
Unrealized holding gain or loss on derivatives designated as fair value hedge shall be recognized in
A. Profit or loss
B. Other comprehensive income with reclassification adjustment
C. Retained earnings
D. Other comprehensive income without reclassification adjustment

Number 9
Unrealized holding gain or loss on time value (ineffective portion) of derivatives designated as cash
flow hedge shall be recognized in
A. Profit or loss
B. Other comprehensive income with reclassification adjustment
C. Retained earnings
D. Other comprehensive income without reclassification adjustment
 Page 3
Number 10
It refers to the newest system adopted by the Commission on Audit for analyzing, classifying,
summarizing, and communicating all transactions that are involved in the receipt and disbursement of
all government funds and properties, and interpreting the results thereof.
A. New government accounting system
B. Government accounting manual
C. Fund accounting
D. Public fund accounting

Number 11
Which of the following cash in bank accounts is used by national government agencies for
disbursement?
A. Cash Treasury/Agency Deposit Regular
B. Cash – Modified Disbursement System – Regular
C. Cash in Bank Land Bank of the Philippines
D. Cash in Bank Bangko Sentral ng Pilipinas

Number 12
The receipt of notice of cash allocation by a national government agency shall be credited by the said
agency to
A. Cash – Modified Disbursement System – Regular
B. Cash Treasury/Agency Deposit Regular
C. Subsidy income from national government
D. Advances from national government

Number 13
This phase in the national government budgetary process involves the enactment of the General
Appropriations Act by the Congress of the Philippines based on the proposed national budget submitted
by the President of the Republic of the Philippines.
A. Budget Preparation
B. Budget Legislation
C. Budget Execution
D. Budget Accountability

Number 14
In the statement of activities, expenses of nonprofit organizations shall be recorded only as reductions
from
A. Temporarily restricted net assets
B. Unrestricted net assets
C. Permanently restricted net assets
D. Current Liability

Number 15
Under IAS 21, when translating foreign currency-denominated transactions to functional currency,
which of the following items shall be measured in the financial statement at the exchange rate
prevailing at the end of the reporting period?
A. Sales
B. Interest payable
C. Common stocks
D. Prepaid asset
 Page 4

Number 16
Partners A, B, and C have capital balances of P150,000, P100,000, and P50,000 respectively. The
following were also loan balances present in the partnership books: a loan to A in the amount of
P25,000 and a loan from C in the amount of P15,000. Partner B decided to retire from the partnership
and they agreed to pay P85,000 for his interest. They share profits and losses 30:30:40 respectively.
Assuming there was an asset that needed to be revalued, what is the capital balance of Partner C
after retirement?
A. 50,000
B. 70,000
C. 58,572
D. 30,000

Number 17
Partners A, B, and C have capital balances of P300,000, P200,000, and P100,000 respectively. The
total liabilities of the partnership were P150,000 and the cash balance was P250,000. They agreed to
liquidate the partnership. Non-cash assets were sold at a gain of P125,000 and liquidation expenses
were paid in the amount of P40,000. They share profits and losses 40:40:20.
What is the amount of cash that Partner B received after liquidation?
A. 200,000
B. 234,000
C. 166,000
D. 184,000

Number 18
Partners A, B, and C have capital balances of P300,000, P200,000, and P100,000 respectively. The
total liabilities of the partnership were P150,000 and the cash balance was P250,000. They agreed to
liquidate the partnership. Only P150,000 of the non-cash assets were sold for P50,000 and liquidation
expenses were paid in the amount of P40,000. Cash withheld for future liquidation expenses was
P10,000. They share profits and losses 40:40:20.
What is the amount of cash that Partner C received after the 1st installment liquidation?
A. 72,000
B. 100,000
C. 28,000
D. 0

Number 19
Book value Estimated realizable value
Cash 50,000 50,000
Inventory 40,000 35,000
Building 250,000 375,000
The inventory was pledged to accounts payable in the amount of P25,000. The building was pledged to
a mortgage payable including its interest in the amount of P400,000. Salaries and taxes had a total
amount of P100,000. Other liabilities not mentioned were P75,000.
What was the amount paid to the holder of the mortgage payable?
A. 400,000
B. 250,000
C. 375,000
D. 0
 Page 5

Numbers 20 and 21

At the beginning of 2024, the company enters into a contract to build an establishment for a client. The
contract price (CP) for the said establishment is P4,000,000. The client has given the company until the
end of 2026 to finish the establishment. The following data were ascertained:
2024 2025 2026
Costs incurred to date P1,250,000 P2,250,000 P3,000,000
Estimated costs to complete P1,875,000 P562,500 -

20. Under IFRS 15, what is the realized gross profit/(loss) for the year ended December 31, 2024?
A. 875,000
B. 850,000
C. 350,000
D. 1,100,000

21. Under IFRS 15, what is the construction-in-progress as of December 31, 2025?
A. 4,800,000
B. 3,200,000
C. 3,550,000
D. 4,450,000

Number 22

On January 1, 2024, a franchisor entered into a franchise agreement with a franchisee which requires
the latter to pay a non-refundable upfront fee of P400,000 at the signing of the contract and ongoing
payment of royalty equal to 5% of the sales of the franchisee. On the date of the signing of the contract,
the franchisee paid the non-refundable upfront fee. As part of the franchise agreement, the franchisor
shall render the following performance obligations which are considered separate and distinct from one
another:
a) Training ten personnel of the franchisee with stand stand-alone selling price of P100,000.
b) Construction of the franchisee's building and landscape with stand stand-alone selling price of
P400,000.
c) Delivery of 1,000 units of raw materials to franchisee with stand stand-alone selling price of
P300,000.
d) Allowing the franchisee to access the franchisor's trademark and tradename for a term of 10 years
starting from January 1, 2024, with stand-alone. selling price of P200,000.
As of the end of December 31, 2024, the accounting department of the franchisor obtained the
following information:
a) The franchisor was able to train seven out of ten personnel of the franchisee.
b) The percentage of completion of construction of the franchisee's building and landscape was
estimated by the engineer and architect at 90% although the building was fully completed because
the landscape was not yet started.
c) 600 units of raw materials were already delivered to the franchisee.
d) For the year ended December 31, 2024, the franchisor reported sales revenue amounting to P50,000
because it already started operation upon the construction of the building on October 1, 2024.

What is the revenue from franchise fees from continuing services?

A. 254,500
B. 252,000
C. 400,000
D. 2,500
 Page 6

Number 23
Under IFRS for SMEs, the income of the SME-venturer for its investment in a joint venture under the
cost method consists of
A. Share in net income of joint venture
B. Dividend income
C. Gain on changes in fair value of investment
D. Both B and C

Number 24
Under IFRS for SMEs, the income of the SME-venturer for its investment in a joint venture under the
fair value model consists of
A. Share in net income of joint venture
B. Dividend income
C. Gain on changes in fair value of investment
D. Dividend income and gain on changes in a fair value of investment

Number 25
Partners A and B have capital balances of P250,000 and P150,000 respectively before admitting
incoming Partner C. The new partner will invest P100,000 for 25% capital interest and 20% in the
profits and losses.
What is the capital credit of C upon his admission?
A. 125,000
B. 100,000
C. 80,000
D. 75,000

Number 26
Which of the following items will affect both consolidated net income attributable to parent’s
shareholders and noncontrolling interest in net income?
A. Dividend income from subsidiary
B. Realized gain on the downstream transaction
C. Realized loss on the upstream transaction
D. Gain on bargain purchase

Number 27
Ravenol Manufacturing Company makes three products: A and B were considered main products and
C was a by-product. The joint cost was P69,150. It was the company’s policy to allocate the joint cost
using the net realizable value method and the by-product was accounted during the point of sale. The
following data were given:
Product Production (lbs) Sales price per lbs Separable Costs
A 220,000 P1.50 P80,000
B 180,000 P0.75 P47,500
C 50,000 P0.225 P1,725
What is the joint cost allocated to Product A?
A. 48,448
B. 44,167
C. 49,074
D. 51,222
 Page 7
Number 28
Entity A consigned his goods costing P25,000 to Entity B. Entity A paid freight of P1,500 to ship the
goods to Entity B. At the end of the period, only 40% of the consigned goods remained in the shop of
Entity B. Total cash sale received by Entity B from the customer was P25,000. Entity B incurred and
paid a total of P750 freight to deliver the goods to the customer. Also the terms of their contract were
10% commission based on sales and any payment made by Entity B was to be reimbursed by Entity A.
What is the net income of Entity A at the end of the period?
A. 11,150
B. 13,650
C. 8,350
D. 5,850

Numbers 29 and 30
A certain company manufactures a certain product and uses a job order costing system. There is always
spoilage during production. The following are the costs related to the current production:
Total cost exclusive of allowance for spoilage P50,000
Allowance for spoilage P10,000
Units produced 5,000

At the end of the production, 100 units are spoiled and the total cost is P4,000. The spoiled units can be
sold for P3,000.

29. Assuming the spoilage is due to internal failure, what is the cost transferred to the Finished
Goods Inventory account?
A. 46,000
B. 57,000
C. 56,000
D. 57,500

30. Assuming the spoilage is due to exacting specifications, what is the cost per good unit?
A. 11.73
B. 9.59
C. 11.64
D. 9.39

Number 31

BPI bank has the following traceable costs and cost drivers:
Activities Traceable costs Budgeted cost driver
New accounts P250,000 1,000 accounts
Deposits P180,000 400,000 deposits
Loans P135,000 900 applications
The activities were being used by the Ayala branch and Ortigas branch:
Activities Ayala Ortigas
New accounts 200 accounts 400 accounts
Deposits 40,000 deposits 20,000 deposits
Loans 100 applications 160 applications
What amount of Deposits will be assigned to the Ortigas branch?
A. 60,000
B. 9,000
C. 120,000
D. 18,000
 Page 8

Number 32
Under IAS 21, foreign exchange differences arising from translating financial statements in functional
currency to presentation currency shall be recognized in
A. Profit or loss
B. Other comprehensive income with reclassification adjustment
C. Retained earnings
D. Other comprehensive income without reclassification adjustment

Numbers 33 and 34

Andi Manufacturing Corp. uses a process costing system to account for its production and the policy is
to use the Weighted Average method. The following data are ascertained for the period:
Units
Beginning inventory (45% complete) 7,500
Started 25,000
Ending inventory (60% to complete) 4,000
Completed 26,000
The normal spoilage is 10% of the units started. All of the materials were added at the start of
production.

33. What is the EUP for Direct materials?

A. 32,500
B. 30,000
C. 25,000
D. 26,000

34. What is the EUP for Conversion?

A. 27,600
B. 28,400
C. 30,100
D. 30,900

Number 35
The Home Office in Manila established a branch in Bacolod. At the end of the year the reciprocal
account in the books of Manila was P175,000, however, the following transactions were not recorded
by the receiving party:
a) A debit memo in the amount of P5,000 was sent by Bacolod
b) A credit memo in the amount of P10,000 was sent by Manila
c) A credit memo in the amount of P15,000 was sent by Bacolod
What is the adjusted balance of the reciprocal account at the end of the year?
A. 175,000
B. 185,000
C. 165,000
D. 195,000
 Page 9

Number 36

Which of the following statements regarding the consolidation working paper is true?
A. It is used in eliminating both the pre-existing goodwill of the parent and the subsidiary.
B. It is used in amortizing the excess of the fair value differentials of the group.
C. It is used in allocating the share of the non-controlling interest in the net income of the subsidiary
D. It is used in recognizing the intercompany dividend revenue of the acquired company from the
acquirer company.

Number 37

Which of the following statements regarding group reporting is true?

A. The consolidated retained earnings is increased by the consolidated net income.
B. The non-controlling interest in the net assets of the subsidiary is a component of the consolidated
stockholders’ equity.
C. The consolidated cost of goods sold is affected by the excess of fair value over the book value or
book value over the fair value in the merchandise of the subsidiary.
D. The consolidated gross profit is increased upon recognizing an intercompany gain on sale of land
through sale to outsiders.

Number 38

Which of the following statements regarding business combination is true?

A. Acquisition-related costs are debited directly to retained earnings in the books of the acquirer
company.
B. The stockholders’ equity of any acquired company is eliminated in its separate books.
C. In the statement of financial position prepared by the acquiring company immediately after the
merger, the retained earnings may be affected by the stock issuance costs and bond issue costs.
D. Any increase or decrease in the amount of the contingent consideration classified as a financial
liability during the measurement period affects the resulting goodwill.

Number 39

Which of the following statements regarding business combination is true?

A. The control premium is part of the price paid debited to the Investment in Subsidiary account in
the separate books of the acquirer company.
B. After the acquisition of all the outstanding voting shares of another company, the acquired
company is not required to prepare separate financial statements.
C. Non-controlling interest may be recognized at fair value or proportionate share, whichever is
higher.
D. A partial goodwill is a goodwill resulting from a partially owned subsidiary.
 Page 10

Number 40

GHI Company acquired 75% of EFG Company’s outstanding voting shares for P2,550,000 cash. At
that date, the acquired company reports identifiable assets with a book value of P5,200,000 and a fair
value of P6,400,000, and it has liabilities with a book value and fair value of P3,580,000.
Compute the goodwill or (gain on bargain purchase) arising on consolidation if non-controlling
interest is measured at fair value and control premium of P150,000 is excluded in the price paid.
A. 580,000
B. 530,000
C. (435,000)
D. 730,000

Number 41

KLM Corporation paid P18,000,000 for a 90% interest in CDE Corporation on January 1, 2024. The
excess of the aggregate amount over the book value of the identifiable net assets of the acquired
company amount to P960,000. The excess was allocated as follows: P640,000 to an undervalued
equipment with a five-year remaining useful life and the balance to goodwill. Non-controlling interest
is measured at fair market value. Net income of KLM in 2024 is P8,000,000; Net income of CDE in
2024 is P2,000,000. Dividends declared by CDE to KLM amount to P192,000.
Compute the consolidated net income in 2024.
A. 9,872,000
B. 9,360,000
C. 9,680,000
D. 9,532,800

Number 42
MNO owns 70% of DEF Company’s outstanding ordinary shares. DEF Company, in turn, owns 20%
investment in RST Corporation. During 2024, MNO earned a net income of P32,060,000 while DEF
suffered a loss of P6,000,000 excluding its share in the earnings of associates, if any. RST reported a
net income of P4,350,000. DEF declared dividends of P2,500,000 from its accumulated profits in
previous years.
Compute the consolidated net income attributable to controlling interest for the year 2024.
A. 28,469,000
B. 26,930,000
C. 26,719,000
D. 26,110,000

Number 43
DEF Corp. owns 70% of PQR Corp’s ordinary shares. On August 1, 2024, DEF Corp. acquired a
building from PQR Corp. for P40,600,000. The carrying amount of the building is P23,800,000 and has
a remaining life of 8 years.
Due to this intercompany transaction, compute the net adjustment (increase/decrease) in the
consolidated net income attributable to controlling interest for 2024
A. 15,925,000 decrease
B. 14,700,000 increase
C. 11,147,500 decrease
D. 10,290,000 increase
 Page 11

Number 44
UVW Corp. owns 80% of FGH Corp’s ordinary shares. On June 1, 2024, FGH Corp. sold machinery
to UVW Corp. for P21,000,000. The carrying amount of the machinery is P22,800,000 and has a
remaining life of 5 years.
Due to this intercompany transaction, compute the net adjustment (increase/decrease) in the non-
controlling interest in net income 2024
A. 1,590,000 decrease
B. 318,000 increase
C. 288,000 decrease
D. 1,272,000 increase

Number 45

RST Company acquired a 75% interest in JKL Company in 2022. For years ended December 31, 2023,
and 2024, JKL reported net income of P22,960,000 and P26,000,000, respectively. During 2023, JKL
sold merchandise to RST for P6,080,000 at a cost of P4,160,000. Two-fifths of the merchandise was
later resold by RST to outsiders for P2,800,000 during 2024. In 2024, RST purchased merchandise
from JKL for P7,040,000 at a profit of P2,560,000. One-fourth of the merchandise was resold by RST
to outsiders for P2,160,000 during 2024.
Compute the non-controlling interest in net income in 2024
A. 6,692,000
B. 6,628,000
C. 6,308,000
D. 6,212,000

Number 46
Condensed statements of the financial position of HIJ Corp. and LMN Corp. as of December 31, 2023,
were as follows:
HIJ LMN
Current assets P 175,000 P 65,000
Noncurrent assets 725,000 425,000

Liabilities P 85,000 P 35,000

Ordinary shares, P20 par 550,000 300,000
Share premium 5,000 25,000
Retained earnings 260,000 130,000
On January 1, 2024, HIJ Corp. issued 29,000 shares with a market value of P22/share for the
identifiable assets and liabilities of LMN Corp. The book value reflects the fair value of the assets and
liabilities, except that the noncurrent assets of LMN have a fair value of P630,000, and P30,000
overstates the noncurrent assets of HIJ. Contingent consideration to the extent probable on the date of
acquisition amounts to P15,000. HIJ also paid for the share issue costs worth P84,000 and other
acquisition costs of P59,000.
Compute the retained earnings in the books of the surviving company immediately after the
merger
A. 251,000
B. 201,000
C. 192,000
D. 187,000
 Page 12

Number 47
ABC Co. had the following transactions with two subsidiaries, S1 and S2, during 2024: Sales of
P23,520,000 to S1, Inc., resulting in a P7,056,000 gross profit. S1 had P5,880,000 of this inventory on
hand at year-end. Purchases of raw materials totaling P94,080,000 from S2 Corp., a wholly owned
subsidiary. S2’s gross profit on the sale was P18,816,000. ABC had P21,952,000 of this inventory
remaining on December 31, 2024. Before working paper entries, ABC had combined current assets of
P117,600,000.
Compute the amount ABC should report in its December 31, 2024, consolidated financial
position for current assets
A. 89,768,000
B. 111,445,600
C. 117,600,000
D. 123,754,400

Number 48
The Statement of Financial Position of ABC Company as of December 31, 2023, were as follows:
Book Value
Cash P 6,000,000
Accounts Receivable 7,500,000
Inventories 12,600,000
Plant & Equipment, net 15,000,000
Goodwill 1,500,000
Liabilities 21,000,000
Share Capital, P200 par 15,600,000
Retained Earnings 6,000,000
On January 2, 2024, LMN Company acquired all the identifiable net assets of ABC Company for
P27,000,000 cash. A contingent consideration of P1,500,000 is to be paid to the stockholders of the
dissolved company, depending on the outcome of the specific target. Only 60% of the consideration to
be transferred is probable on the date of acquisition. The fair value of the inventories of ABC is
undervalued by 900,000, and P1,500,000 undervalues its plant & equipment. Out-of-pocket costs of
the business combination were paid in the amount of P600,000.
On the date of acquisition, the goodwill in the acquirer's books amounted to P1,200,000. On August 1,
2024, the amount of contingent consideration was increased by P450,000 due to an improved
information regarding relevant facts and circumstances on January 2, 2024. On October 31, 2024, the
amount of contingent consideration was decreased by P240,000 due to the massive destruction brought
about by the calamities that recently hit the country.
Compute the amount of goodwill shown on the statement of financial position of LMN Company
as of December 31, 2024.
A. 7,050,000
B. 5,850,000
C. 6,810,000
D. 4,350,000

Number 49

Which of the following statements regarding derivatives is true?

A. In a firm commitment to purchase an asset, the gain on firm commitment at the reporting date is a
result of an increase in the spot rate from the transaction date to the reporting date.
B. All derivative instruments may be classified either as an asset or a liability to the holder.
C. A forward contract to buy is a liability to the holder if the current forward rate is higher than the
contracted forward rate at the reporting date.
D. A call option is an asset to the holder in an out-of-the money situation.
 Page 13

Number 50

Which of the following statements regarding foreign currency transactions is true?

A. Appreciation in a foreign currency result in a foreign exchange loss to an entity with liability
exposure.
B. Foreign currency transactions result in an accounting exposure.
C. The statement of financial position accounts is remeasured at year-end.
D. The strengthening of the local currency will result in a loss to an exporter.

Number 51

On December 1, 2024, HIJ Company paid cash to purchase a 90–day “at the money” call option for
375,000 Canadian Dollars. The option’s purpose is to protect an exposed liability of 375,000 CAD
relating to an inventory purchased, received on December 1, 2024, and to be paid on March 1, 2025.

12/1/24 12/31/24 3/1/25

Spot rate 41.22 41.56 41.48
Fair value of call option P74,000 P156,000 ?
Compute the gain or loss on option contract due to change in the time value on December 31,
2024
A. 28,500 loss
B. 127,500 gain
C. 83,000 gain
D. 44,500 loss

Number 52
On October 1, 2024, QRS Company paid a premium to purchase a 120-day “at the money” put option
for 640,000 Malaysian Ringgits. The option’s purpose is to protect an exposed asset of 640,000 MYR
relating to a merchandise sold, delivered on October 1, 2024, and to be collected on January 31, 2025.

10/1/24 12/31/24 1/31/25

Spot rate 13.86 13.77 13.73
Fair value of put option P14200 P182,500 ?

Compute the gain or loss on option contract due to change in the effective portion in 2025
A. 99,300 loss
B. 83,200 gain
C. 25,600 gain
D. 124,900 loss

Number 53
On January 1, 2024, NOP Inc. paid a premium to acquire a put option from a writer. This is in relation
to a forecasted sale of merchandise worth $390,000. (option price = P54.965)
1/1/24 3/31/24 6/30/24
Spot rate P54.934 P54.908 P54.75
Fair value of option P58,800 P68,400 P83,850
Compute the gain/loss affecting other comprehensive income on the first quarter of 2024
A. 10,140
B. (540)
C. 9,600
D. (10,140)
 Page 14

Numbers 54 and 55

XYZ Corporation, a trading company located in Manila, imports merchandise from foreign suppliers
and exports its own products to other foreign customers. The unadjusted accounts denominated in
foreign currencies on December 31, 2024 were as follows:
● Accounts receivable from the sale of merchandise on December 10 to RST Corporation and due
on January 15, 2025. Billing is for 750,000 foreign currencies amounting to P517,500
● Accounts payable to JKL Corporation for merchandise received December 5 and payable on
January 20, 2025. Billing is for 1,375,000 foreign currencies amounting to P976,250
Applicable exchange rates on the above transactions were as follows:
2024 Closing rate P 0.680
January 2025 selling spot rate 0.685
January 2025 buying spot rate 0.675

54. The net exchange gain (loss) from the two transactions that will be included in the statement
of comprehensive income of XYZ Corporation for 2024
A. (33,750)
B. 33,750
C. 41,250
D. 48,750
55. The net exchange gain (loss) from the two transactions that will be included in the statement
of comprehensive income of XYZ Corporation for 2025
A. 10,625
B. (10,625)
C. (3,125)
D. (6,875)

Number 56

TUV Company sold merchandise for €125,000 to a French company on December 1, 2024. Collection
in Euros was due on February 28, 2025. On the same date, TUV entered a 90-day forward contract to
sell €125,000 to a bank. Exchange rates for Euros on different dates are as follows:
spread is P0.15 12/1/24 12/31/24 2/28/25
Selling spot rate P 61.55 P 62.85 P 62.05
30-day forward selling rate 62.45 62.65 63.35
60-day forward selling rate 61.95 62.35 62.75
90-day forward selling rate 60.75 62.75 63.55

Compute the gain or loss on the forward contract on December 31, 2024.
A. 200,000 gain
B. 200,000 loss
C. 37,500 gain
D. 37,500 loss
 Page 15
Number 57

On December 1, 2024, LMN Company, an exporter from the Philippines made a credit sale to STU
Company, an importer from Korea. The amount of sale was worth 200,000 Korean won. LMN will
collect the foreign currency denominated account on January 01, 2025. On December 1, the spot rate
was 25 Korean won for one Philippine peso. Also on December 1, LMN entered a forward contract to
sell 200,000 Korean won on January 01, 2025, at a forward rate of 50 Korean won for one Philippine
peso. The spot rate and forward rate for one Philippine peso on December 31, 2024, is 40 Korean won.

Compute for the effect in 2024 earnings

A. 4,000 increase
B. 1,000 decrease
C. 3,000 decrease
D. 4,000 decrease

Numbers 58 and 59
On December 31, 2024, a foreign subsidiary in Hong Kong submitted the following accounts stated in
its local currency which is the functional currency of the foreign operation. The subsidiary in Hong
Kong acquired in the prior year is not integrated with the operations of the parent in the Philippines.

Total Assets HK$ 1,470,000

Total liabilities 294,000
Ordinary Shares 735,000
Retained Earnings 441,000

Dividends declared in 2024 amount to HK$18,000. Net income in 2024 amount to HK$320,000.

The exchange rates in 2024 were: Closing rate, P8.75; Historical rate, P8.40; Weighted average rate,
P8.50. The exchange rates in 2023 were: Closing rate, P8.20; Historical rate, P8.10; Weighted
average rate, P8.00.

58. Compute the cumulative translation adjustment (Dr)/Cr on December 31, 2024
A. (588,000)
B. 632,100
C. 655,700
D. 588,000

59. Compute the translation gain or loss in for the year ended December 31, 2023
A. 101,300
B. 33,600
C. 77,700
D. 554,400
 Page 16

Numbers 60 and 61
On January 15, 2024, the Department of Science and Technology received a P15,200,000 appropriation
from the national government for the acquisition of laboratory equipment. On January 30, 2024, the
said Department received the obligational authority which is 75% of the expenditure authority from the
Department of Budget and Management. On February 9, 2024, the DOST entered a commitment with
the accredited supplier for the purchase of the laboratory equipment with an agreed contract price of
90% of the amount authorized. On February 27, 2024, the Department received the disbursement
authority from the Department of Budget and Management in the amount equal to the agreed contract
price. During the month of March there were contract adjustments and modifications resulting in total
disbursements equivalent to only 80% of the original contract price.

60. Compute the amount of allotment

A. 15,200,000
B. 11,400,000
C. 10,260,000
D. 13,680,000

61. Compute the amount credited to Subsidy Income from National Government
A. 11,400,000
B. 10,260,000
C. 15,200,000
D. 13,680,000

Numbers 62, 63, and 64

LMN College, a not-for-profit private higher educational institution had the following contributions
and activities during 2024:
a. Received P1,280,000 cash from a benefactor. Although no specific instruction was given by the
donor as to its use, the Board of Trustees voted to set aside the said fund for the acquisition of air
purifier units in the administration office.
b. Received P120,000 worth of office supplies from a publisher, designated by the board to be used
for its operations. As of the end of the year, three-fourths of the supplies were used up.
c. Received P1,600,000 cash with donor restriction intended for administrative related training and
conferences. During the year, P1,040,000 of this amount was used for several training and
conferences.
d. Received P3,200,000 cash and equity securities with a fair value of P800,000 from the alumni
association. The donor stipulated that the amount of cash be used for the acquisition of the vending
machine. The donor explicitly stated that only the investment income from the equity securities
can be used by LMN College which was internally imposed for use in current operations.
e. Received an unconditional pledge from donors worth P720,000. Based on past experience, 5% of
the pledges are considered doubtful of collection.
f. During the specific period, the equity securities from the alumni association yielded earnings
amounting to P64,000. LMN College also purchased P1,400,000 worth of a vending machine at
the end of the year.
g. Mr. CIG, a Certified Public Accountant, rendered LMN College its accounting services for free.
Mr. CIG normally charges his clients P200,000 per engagement for such service.

Compute the following in the Statement of Activities for the year ended 2024:

62. Total unrestricted contributions revenue

A. 2,320,000
B. 2,384,000
C. 3,840,000
D. 1,994,000
 Page 17
63. Change in the temporarily restricted net assets
A. 4,360,000
B. 6,800,000
C. 2,360,000
D. 560,000

64. Change in the unrestricted net assets

A. 4,434,000
B. 3,458,000
C. 4,634,000
D. 3,394,000

Number 65

On April 1, 2024, SME A and SME B acquired 40% (each) of the ordinary shares that carry voting
rights at a general meeting of shareholders of Entity Z for P640,000 and transaction cost of P20,000.
SME A and SME B immediately agreed to share control over Entity Z. For the year ended December
31, 2024, Entity Z recognized a loss of P520,000. On December 30, 2024, Entity Z paid a dividend of
P50,000 declared in the prior year. On December 31, 2024, the fair value of each venturers’
investment in Entity Z was P509,000 and cost to sell amounted to P15,000. The amount of value in
use is P490,000. There is a published price quotation for Entity Z.
The effect in profit or loss to be reported by SME A in 2024 using the equity model
A. 146,600
B. 156,000
C. 208,000
D. 166,000

Numbers 66 and 67

On January 1, 2024, Entity A and Entity B incorporated Entity C by investing P1,500,000 and
P300,000 for a capital interest ratio of 60:40. The contractual agreement of the incorporating entities
provided that the decisions on relevant activities of Entity C will require the unanimous consent of both
entities. Entity A and Entity B will have rights to the net assets of Entity C.
In 2024, Entity C sold merchandise to Entity A resulting in a gross profit of P200,000. Only 30% of
the said inventories were sold by Entity A to third parties during the same year and the remaining
inventories were sold in 2025. On September 1, 2024, Entity C sold machinery to Entity B resulting in
a loss of P435,000. The remaining life of the machinery was 8 years
Entity C reported net income of P600,000 in 2024 and declared dividends in 2024 in the amount of
P187,500.

66. Compute the amount of investment income/(loss) to be reported by Entity B for the year
ended December 31, 2024.
A. 240,000
B. 406,750
C. 414,000
D. 392,250

67. Compute the amount of Investment in Entity C to be reported by Entity A on December 31,
2024.
A. 1,663,500
B. 1,776,000
C. 1,627,500
D. 1,711,500
 Page 18

Number 68
GHI and MNO established a joint arrangement in TUV, a separate vehicle. The legal form of the
separate vehicle does not confer separation between the parties and the separate vehicle itself. GHI and
MNO have rights to the assets and obligations for the liabilities of TUV. Neither the contractual terms
nor the other facts and circumstances indicate otherwise. Accordingly, the operators account for their
rights to assets and their obligations for liabilities relating to TUV in accordance with IFRS 11. Each
of the operators own 40% of the outstanding shares of TUV. However, the contractual terms of the
joint arrangement state that GHI has the rights to all of Warehouse X and the obligation to pay all the
third-party Debt A of TUV. GHI and MNO have rights to all other assets in TUV and obligations for
all other liabilities in proportion to their equity interests.

TUV’s Statement of Financial Position is as follows:

Assets Liabilities and Equity

Cash 3,000,000 Debt A 18,000,000
Warehouse X 18,000,000 Debt B 7,500,000
Warehouse Y 15,000,000 Equity 10,500,000
Total Assets 36,000,000 Total liab. and equity 36,000,000

Compute the amount of total assets of GHI as shown in its own Statement of Financial Position to
account for its rights and obligations in TUV.
A. 18,000,000
B. 27,000,000
C. 25,200,000
D. 21,000,000

Number 69

Which is not a requirement of IFRS 17 Insurance Contract?

A. Nonoffsetting of reinsurance assets against related insurance liabilities
B. An annual assessment of the adequacy of recognized insurance liabilities
C. An impairment test for reinsurance assets
D. Recognition of provisions for future claims relating to a catastrophe

Number 70

The Philippine Government granted a concession arrangement to MRT Company which shall construct
the mass train transportation. MRT Company was authorized to operate it for 50 years. The
arrangement provided that MRT Company shall receive a right or license to charge users of the public
service but there is no unconditional right to receive cash because the amounts shall be contingent on
the extent that the public uses the service. How should MRT Company account for the infrastructure
asset?
A. Property, plant and equipment
B. Financial asset at fair value
C. Financial asset at amortized cost
D. Intangible asset

END