PREFINAL ROUND

Advanced Financial Accounting and Reporting

Answer Section

MULTIPLE CHOICE
1. ANS: D TOP: Acquiree’s Net Assets, Contingent Liability
2. ANS: C DIF: Easy TOP: Consolidation Date of Acquisition, Push-down
Accounting
3. ANS: C
4. ANS: B
Acquisition interest of STRONG (150/250) = 60%
Consideration (60,000/60% x 40%) x 40 1,600,000
Net Assets (500 + 1,500 – 700) 1,300,000
Goodwill 300,000

TOP: Business Combination, Reverse Acquisition

5. ANS: D
Contract Price 6,000,000
Total Cost (3,600,000 + 1,200,000) 4,800,000
Gross Profit 1,200,000
POC (3,600/4,800) 75%
Gross Profit to Date 900,000
Prev. Gross Profit (600,000)
Recognized GP 300,000

TOP: Construction Contracts, Percentage of Completion, Recognized Income

6. ANS: B
> Coco, Loan Bob, Cap Coco, Cap Dhi, Cap
Loan 100,000 100,000 200,000 200,000
Revaluation - 20,000 30,000 50,000
Adj. Bal 100,000 120,000 230,000 250,000
Payment of Loan (100,000)
Payment to Coco (244,000)
Bal - 120,000 (14,000) 250,000
Absorption - (4,000) 14,000 (10,000)
Balance - 116,000 240,000

TOP: Partnership, Dissolution, Withdrawal

 7. ANS: A
Equity, in NA 25% (1/4)
Equity in P/L 37.5 (3/8)
Dif. In Rate 12.5%
x Implied GW 600,000
Adv. of BONUS 75,000
Agreed Cap (600K/1/4) 2,400,000
Less: Contribution 1,800,000
Implied GW 600,000

TOP: Partnership

8. ANS: C
Contract Price P400 billion
Total actual cost (120 + 216) 336 billion
Actual total gross profit P 64
Less: Gross profit prior year (120/336 x 64) (22.857) billion
Gross profit this year 20x2 P41.143 billion

TOP: Long Term Construction Contracts

9. ANS:C

10. ANS: B

11. D

12. A

13. B

14. B

15. C

16. B

17. C

18. D

19. C
 20. D

FINAL
Advanced Financial Accounting and Reporting
Answer Section

MULTIPLE CHOICE

1. ANS: D

2. ANS: D

2. ANS: A

4. ANS: A
> ¥ Exchange rate Peso
Net assets, 1/1/x1 115,000 45 P5,175,000
Net income, 20x1 90,000 43.75 3,937,500
Div. declared, 9/1/x1 (15,000) 40 (600,000)
Net income, 20x2 22,500 45 1,012,500
> 9,525,000
Net assets translated using the
rate at the end of the year 212,500 47.50 10,093,750
Exchange difference (Translation adjustment) 56,8750

5. ANS: C
Contract Price 2017 P65 million
Total estimated cost (25 + 33 + 4) 62 million
Estimated gross profit P 3 million
Percent completed (25 + 33/62) x 93.55%
Gross profit to date P2.806 million
Less: Gross profit prior year:
Contract price P70 million
Total estimated cost (25 + 35) 60 million
Estimated gross profit prior year P10 million
Percent completed (25/60) x 41.67% P4.166 million.
Gross profit (loss) this year 2017 P(1.360) million

6. ANS: A
Franchise revenue earned
Down payment (300,000 x 4) 1,200,000
Installments (100,000 x 3.79) = 379,000 x 4 1,516,000
> 2,716,000
Less: Franchise costs (300,000 x 4) 1,200,000
 Discounts (50,000 x .38) 4 76,000
Franchise profit 1,440,000

7. ANS: A
GP rate 2017 = 7,5.00,000 - 5,250,000/7,500,000 = 30%
GP rate 2018 = 8,400,000 - 6,048,000/8,400,000 = 28%
Realized gross profit;
Collections
- 2017 sales (4,400,000 - 1,400,000 - 120,000) x 30% = P864,000
- 2018 sales (8,400,000 - 4,000,000) x 28% 1,232,000
> P2,096,000
Less; General and administrative expenses P840,000
Loss on repossession
Recovered value 80,000
Unrecovered cost (120,000x70%) 84,000 4,000 844,000
Net income under the instalment method P1,252,000
Installment sales - 2018 P8,400,000
Cost of instalment sales (6,048,000)
Gross profit realized P2,352,000
Less: General and administrative expenses (840,000)
Loss on bad accounts:
Installment balance P120,000
Fair value of repossessed inventory 80,000 (40,000)
Net income under the full accrual method P1,472,000

8. ANS: C
CNI before Adj. 400,000
UP beg. (112,5x50/150) 37,500
UP end (33x50/150) (11,000)
Impairment (20,000)
CNI 406,500
MI* (67,950)
CNI to Parent 338,550
* (200k + 37.5 - 11) 30% 67,950

9. ANS: C
Accounts receivable Unadjusted Adjusted'
Receivable denominated in Philippine Pesos P28,500,000 P28,500,000
Receivable denominated in 34,700,000 Japanese Yen 11,800,000 11,992,320
Receivable denominated in 804,000 U.S. Dollars 41,000,000 41,317,560
> P81,300,000 P81,809,880
Foreign currency transaction gain P509,880
Accounts payable
Payable denominated in Philippine Pesos P 6,850,000 P 6,850,000
Payable denominated in 200,000 Canadian Dollars 7,600,000 7,710,000
Payable denominated in 72,000,000 Japanese Yen 24,450,000 24,883,200
> P38,900,000 P39.443,200
Foreign currency, transaction loss P543,200
Presented in the income statement is the net transaction loss of P33,320
TOP: Translation of Foreign Operation

10. ANS: C TOP: Partnership, Creditor's Claims

11. B
12. C
13. A
14. D
15. A

16. ANS: B
> T/in Mat CC
Units Completed 50,000 50,000 50,000
Ending WIP 20,000 20,000 19,000
Spoiled Units 10,000 - 8,000
EUP 80,000 70,000 77,000

17. ANS: B
GPR = (800,000 – 480,000)/800,000 = 40%
IAR, Balance (800,000 – 300,000) 500,000
GPR 40%
Deferred Gross Profit 200,000

18. ANS: A
Ownership interest in Z
Direct 40%
Indirect through Y (80% x 35%) 28%
Controlling interest in Z 68%

NCI share in net income of Z (100 – 68) x 25,000 8,000

NCI share in net income of Y (50,000 x 20%) 10,000
NCI Share in Net Income 18,000

19. ANS: A
Secured portion 4,000,000
Unsecured portion 2,000,000
Multiply by recovery ratio 50% 1,000,000
Expect to Receive 5,000,000

20. ANS: D
Contract Price 6,000,000
Total Cost (3,600,000 + 1,200,000) 4,800,000
Gross Profit 1,200,000
POC (3,600/4,800) 75%
Gross Profit to Date 900,000
Prev. Gross Profit (600,000)
Recognized GP 300,000