JPIA AFAR

Multiple Choice
Identify the choice that best completes the statement or answers the question.

____ 1. Goodwill represents the excess cost of an acquisition over the

a. book value of an acquired company.
b. sum of the fair values assigned to intangible assets less
liabilities assumed.
c. sum of the fair values assigned to tangible and intangible assets
acquired less liabilities assumed.
d. sum of the fair values assigned to intangibles acquired less
liabilities assumed.

____ 2. The translation adjustment from translating a foreign subsidiary's financial statements should be shown as
a. a component of cash flows from financing activities on the consolidated statement of cash
flows
b. an asset or liability (depending on the balance) on the consolidated balance sheet
c. a component of stockholders' equity on the consolidated balance sheet
d. an element of the notes which accompany the consolidated financial statements
e. a revenue or expense (depending on the balance) on the consolidated income statement

____ 3. When a company purchases another company that has existing goodwill and the transaction is accounted for
as a stock acquisition, the goodwill should be treated in the following manner.
a. Goodwill is not recorded until all assets are stated at full fair value.
b. Goodwill is treated consistent with other tangible assets.
c. Goodwill on the books of an acquired company should be disregarded.
d. Goodwill is recorded prior to recording fixed assets

Jose Inc., a Portugese firm was acquired by a U.S. company on January 1, 2013. Selected account balances
are available for the year ended December 31, 2014, and are stated in euro, the local currency:

Sales 400,000
Inventory (bought on February 1, 2014) 20,000
Equipment (bought on January 1, 2013) 90,000
Dividends (paid on September 1, 2014) 20.000
Accumulated depreciation - Equipment 12/31/13 45,000
Depreciation expense - Equipment, 2014 9,000
Relevant exchange rates are given below:
January 1, 2013 P .91
January 1, 2014 .93
February 1, 2014 .94
September 1, 2014 .97
December 31, 2014 1.01
4th quarter average, 2013 .90
4th quarter average, 2014 .98
 Average, 2014 .95

____ 4. Assume the functional currency is the euro, compute the restated amount for inventory for 2014
a. 19,600
b. 18,000
c. 18,600
d. 20,200
e. 19,000

____ 5. When translating Jose' financial statements, which of the following statements is true?
a. There will be a remeasurement loss reported on the consolidated income statement
b. There will be a positive cumulative translation adjustment reported on the consolidated
balance sheet
c. There will be a remeasurement gain reported on the consolidated income statement
d. There will be a transaction gain reported on the consolidated income statement
e. There will be a positive cumulative translation adjustment reported on the consolidated
income statement

____ 6. The cash available for distribution to the partners on July 31, 2019 is
a. 2,000
b. 11,000
c. 7,000
d. 4,000

____ 7. Which method of translating a foreign subsidiary's financial statements is correct?

a. Remeasurement
b. Working capital method
c. Temporal method
d. Current rate method
e. Historical rate method.

____ 8. Which of the following costs of a business combination are included in the value charged to paid-in-capital in
excess of par?
a. direct and indirect acquisition costs
b. direct acquisition costs and stock issue costs if stock is issued as consideration
c. direct acquisition costs
d. stock issue costs if stock is issued as consideration

____ 9. Under the current rate method, how would cost of goods sold be restated?
a. Historical rate
b. Current rate
c. Composite amount
d. Beginning of the year rate
e. Average rate

Certain balance sheet accounts of a foreign subsidiary of Parker Company at December 31, 2014, have been
restated into U.S. dollars as follows:

Restated at
 Current rates Historical rates
Cash 47,500 45,000
Accounts receivable 95,000 90,000
Inventory, at market 76,000 72,000
Land 57,000 54,000
Equipment (net) 142,500 135,000
Total 418,000 396,000

____ 10. If the current rate used to restate these balances is P.95, what was the historical rate used to restate the same
balances?
a. 1.0556
b. .95
c. 1.00
d. .9474
e. .90

____ 11. Accounting recognition should be given to some or all of the gain realized on a nonmonetary exchange of
plant assets except when the exchange has
a. no commercial substance and additional cash is received.
b. no commercial substance and additional cash is paid.
c. commercial substance and additional cash is paid.
d. commercial substance and additional cash is received.

____ 12. A net asset balance sheet exposure exists and the foreign currency appreciates. Which of the following
statements is true?
a. There is a negative translation adjustment
b. There is no translation adjustment
c. There is a transaction gain
d. There is a transaction loss
e. There is a positive translation adjustment

The following account balances are available for Esposito, an Italian U.S. subsidiary for 2015:

Beginning inventory 20,000

Purchases 400,000
Ending inventory 15,000
Relevant exchange rates follow:
4th quarter average, 2014 P.93 = 1
December 31, 2014 . 94 = 1
Average 2015 .96 = 1
4th quarter average, 2015 .99 = 1
December 31, 2015 1.01 = 1

____ 13. Compute ending inventory for 2015 under the temporal method
a. 15,150
b. 13,950
c. 14,400
d. 14,850
 e. 14,100

____ 14. Compute the cost of goods sold for 2015 in U.S. dollars using the current rate method
a. 400,950
b. 388,800
c. 409,050
d. 376,550
e. 387,750

____ 15. Compute ending inventory for 2015 under the current rate method
a. 14,100
b. 15,150
c. 14,400
d. 13,950
e. 14,850

____ 16. Corporation X has a number of exporting transactions with companies based in Vietnam. Exporting activities
result in receivables. If the settlement currency is the US dollar, which of the following will happen by
changes in the direct or indirect exchange rates?

Direct Exchange Rate Indirect Exchange Rate

Increase Decreases Increases Decreases
a) Loss Gain NA NA
b) Loss Gain Gain Loss
c) NA NA NA NA
d) Gain Loss Loss Gain

a. Option A
b. Option D
c. Option C
d. Option B

____ 17. The PQR Partnership is being dissolved. All liabilities have been paid and the remaining assets are being
realized gradually. The equity of the partners is as follows:

Partners Loans to (from) Profit & Loss

Accounts partnership ratio
P 24,000 6,000 3
Q 36,000 - 3
R 60,000 (10,000) 4

The second cash payment to any partners under a program of priorities shall be made thus:
a. To R P8,000
b. To Q P6,000
c. To R P2,000
d. To Q P6,000 and R P8,000
____ 18. Jane Inc. purchased chocolates from Switzerland for 200,000 Swiss francs (SFr) on December 1, 2013.
Payment is due on January 30, 2014. On December 1, 2013, the company also entered into a 60-day forward
contract to purchase 100,000 Swiss francs. The forward contract is not designated as a hedge. The rates were
as follows:

Spot Rate Forward Rate

December 1, 2013 $0.89 $0.90 (60 days)
December 31, 2013 0.91 0.93 (30 days)
January 30, 2014 0.92

The entries on January 30, 2014, include a

a. Credit to Cash, P180,000
b. Debit to Foreign Currency Transaction Loss, P4,000
c. Credit to Foreign Currency Units (SFr), P184,000
d. Debit to Dollars Payable to Exchange Broker, P184,000

____ 19. Chris Company was formed on January 1, 2015 as a wholly owned foreign subsidiary of a U.S. corporation.
Chris' functional currency was the stickle (). The following transactions and events occurred during 2013:

Jan 1 Chris issued common stock for 1,000,000.

June 30 Chris paid dividends of 20,000.
Dec. 31 Chris reported net income of 80,000 for the year.

Exchange rates for 2015 were:

Jan 1 P1 = .48
June 30 P1 = .46
Dec. 31 P1 = .42
Weighted average rate for the year P1 = .44

What exchange rate should have been used in translating Chris revenues and expenses for 2015?
a. .46
b. .48
c. .45
d. .42
e. .44

____ 20. In a statement of financial affairs, assets are classified

a. according to whether they are pledged with particular creditors
b. as current or noncurrent
c. as operating or nonoperating
d. as monetary or nonmonetary
e. as direct or indirect
 On December 1, 2013, Robert Corporation acquired 100 shares of Paul Corporation at a cost of P40 per share.
Robert classifies them as available-for-sale securities. On this same date, it decides to hedge against a possible
decline in the value of the securities by purchasing, at a cost of P250, an at-the-money put option to sell the
100 shares at P40 per share. The option expires on February 20, 2014. Selected information concerning the
fair values of the investment and the options follow:

December 1 December 31 February 20

2013 2013 2014
Paul Corporation
Per Share P40 ? ?
Put Option (100 shares)
Market Value P250 P400 P400
Intrinsic Value 0 ? 400
Time Value P250 P100 ?

Assume that Robert exercises the put option and sells Paul shares on February 20, 2014.

____ 21. What is the market price of Paul Corporation stock on December 31, 2013?
a. 40
b. 38
c. 37
d. 36

____ 22. Which of the following journal entries will be made on February 20, 2014?

a Cash 4,000
Available-for-sale securities 4,000
b Cash 4,000
Put Option 400
Available-for-sale securities 3,600
c Loss on Hedge Activity 150
Put Option 150
d Loss on Hedge Activity 400
Available-for-sale securities 400

a. Option B
b. Option A
c. Option C
d. Option D

Jet Company develops and markets organic food products to natural foods retailers. The following
information is available for the company for the year 2013

Sales 450,000
Cost of goods sold 275,000
Increase in acounts receivable 25,000
Decrease in inventory 13,000
 Decrease in accounts payable 30,000

____ 23. What amount will be reported by the company as cash received from customers during the year?
a. 455,000
b. 425,000
c. 475,000
d. 450,000

____ 24. Earl company entered into a forward contract to speculate in the foreign currency. It sold 100,000 foreign
currency units under a contract dated November 1, 2013, for delivery on January 31, 2014:

11/1/2013 12/31/2013
Spot rates $0.035 $0.037
30-day forward rate 0.034 0.036
90-day forwad rate 0.033 0.035

In its income statement for the year ended December 31, 2013, what amount of loss should Earl report from
this forward contract?
a. 0
b. 200
c. 300
d. 100

____ 25. A highly inflationary economy is defined as

a. Cumulative 3-year inflation in excess of 90%.
b. Cumulative 5-year inflation in excess of 100%.
c. Any country designated as a company operating in an underworld economy
d. Cumulative 3-year inflation in excess of 100%.
e. Cumulative 5-year inflation in excess of 90%.

On June 30, 2019, the Garry, Michi, and George partnership had the following fiscal year-end balance sheet:

Cash 4,000 Accounts payable 7,000

Accounts receivable 6,000 Loan from Michi 5,000
Inventory 14,000 Garry, capital(20%) 14,000
Plant assets-net 12,000 Michi, capital(30%) 10,000
Loan to Garry 6,000 George, capital(50%) 6,000
Total assets 42,000 Total liab./equity 42,000

The percentages shown are the residual profit and loss sharing ratios. The partners dissolved the partnership
on July 1, 2019,. and began the liquidation process. During July the following events occurred:

a Receivables of P3,000 were collected.

b The inventory was sold for P4,000.
c All available cash was distributed on
d July 31, except for P2,000 that was set aside for contingent expenses.
____ 26. How much cash would Garry receive from the cash that is available for distribution on July 31?
a. 0
b. 2,000
c. 600
d. 1,000

____ 27. On October 1, 2013, Gabriel Company forecasts the purchase of inventory from a British supplier on
February 1, 2014, at a price of 100,000 British pounds. On October 1, 2013, Gabriel pays P1,800 for a three-
month call option on 100,000 pounds with a strike price of P2.00 per pound. The option is considered to be a
cash flow hedge of a forecasted foreign currency transaction. On December 31, 2013, the option has a fair
value of P1,600. The following spot exchange rates apply:

Date Spot Rate

October 1, 2013 2.00
December 31, 2013 1.97
February 1, 2014 2.01

What is the 2014 effect on net income as a result of these transactions?

a. 201,000
b. 195,000
c. 203,000
d. 202,600
e. 201,600

____ 28. Jason Corporation about to be liquidated, has the following amounts for its assets and liabilities:

Book value Net realizable value

Current assets 200,000 140,000
Land 70,000 100,000
Building 500,000 350,000
Equipment 300,000 160,000
Accounts payable 240,000 -
Income taxes payable 60,000 -
Mortgage payments 510,000 -
Note payable 80,000 -

The mortgage is secured by the land and building, and the note payable is secured by the equipment. Jason
expects that the expenses of administering the liquidation will total P40,000

How much should Jason expect to pay on the accounts payable?

a. 120,000
b. 128,000
c. 240,000
d. 96,000
e. 146,000

____ 29. Which of the following is a potential abuse that may arise when a business combination is accounted for as a
pooling of interests?
 a. Earnings of the pooled entity may be increased because of the combination only and not as
a result of efficient operations.
b. An undue amount of cost may be assigned to goodwill, thus potentially allowing an
understatement of pooled earnings.
c. Liabilities may be undervalued when the price paid by the investor is allocated to specific
liabilities.
d. Assets of the buyer may be overvalued when the price paid by the investor is allocated
among specific assets.

Toto Corporation has just finished preparing a consolidated balance sheet, income statement, and statement of
changes in retained earnings for 2014. The following items are proposed for inclusion in the consolidated cash
flow statement.

Decrease in accounts receievable 15,000

Increase in accounts receievable 18,000
Increase in inventory 20,000
Increase in bonds payable 50,000
Equipment purchased 200,000
Common stock repurchased 40,000
Depreciation reported for current period 50,000
Gain recorded on sale of equipment 12,000
Book value of equipment sold 58,000
Goodwill impairment loss 12,000
Sales 800,000
Cost of goods sold 350,000
Dividends paid by parent 45,000
Dividends paid by subsidiary 20,000
Consolidated net income for the year 400,000
Income assigned to the noncontrolling interest 20,000

Toto holds 75 percent of the voting stock of Ven Pharmaceuticals, acquired at book value on June 21, 2006.
On the date of the acquisition, the fair value of the noncontrolling interest was equal to 25 percent of the book
value of Ven.

____ 30. What was the change in cash balance for the consolidated entity for 2014?
a. Increase of P150,000
b. Increase of P293,000
c. Increase of P450,000
d. Decrease of P153,000

____ 31. Junior Company sold equipment to a Canadian company for 100,000 Canadian dollars (CP) on January 1,
2014 with settlement to be in 60 days. On the same date, Alman entered into a 60-day forward contract to sell
100,000 Canadian dollars at a forward rate of 1 CP = P.94 in order to manage its exposed foreign currency
receivable. The forward contract is not designated as a hedge. The spot rates were:

January 1 1 CP 0.945
 March 1 1 CP 0.930

The entry to revalue foreign currency payable to current U.S. dollar value on March 1 will have:
a. a debit to Foreign Currency Transaction Loss for P1,500
b. a debit to Foreign Currency Transaction Loss for P2,500
c. a credit to Foreign Currency Transaction Gain for P1,000
d. a credit to Foreign Currency Transaction Gain for P1,500.

____ 32. On December 5, 2016, Bar Heating and Air Conditioning Service repaired the heating system in the building
occupied by Likhalusugan, a voluntary health and welfare organization. An invoice for P 1,500 was received
by Likhalusugan for the repairs on December 15, 2016. On December 30, 2016, Bar notified Likhalusugan
that the invoice was canceled and that repairs were being donated without charge.

For the year ended December 31, 2016 how should Likhalusugan report these contributed services?
a. Only in the notes to the financial statements.
b. As an increase in unrestricted revenues and as an increase in expenses on the statement of
activities.
c. No disclosure is required either in the financial statements or in the notes.
d. As an increase in temporarily restricted net assets on the statement of activities.

____ 33. The company is a golf course developer that constructs approximately 10 courses per year. Next year the
company will buy 10,000 trees in the courses it builds. In recent years, the price of trees has fluctuated wildly.
To eliminate this uncertainty, the company has found a reputable financial institution that will enter into a
forward contract for 10,000 trees. On January 1, 2016, the company agrees o buy 10,000 trees on January 1,
2017 from the financial institution. The price is set at P500 per tree. Of course, the financial institution
doesnt own any trees.

As with most derivative contract, this agreement will be settled by an exchange of cash on January 1, 2017
based on the price of trees on that date.

What net amount will the golf course developer pay or receive on January 1, 2017 under the forward contract
if the price of each tree on that date is P850.
a. 3,500,000 net pay
b. 8,500,000net receipt
c. 3,500,000 net receipt
d. 5,000,000 net pay

____ 34. Gardo and Gordo formed a partnership on July 1, 2010 to operate 2 stores to be managed by each of them.
They invested P30,000 and P20,000 and agreed to share earnings 60% and 40% respectively. All their
transactions were for cash and all their subsequent transactions were handled through their respective bank
accounts as summarized below:

Gardo Gordo
Cash receipts 79,100 65,245
Cash disbursements 62,275 70,695
 On October 31, 2010, all remaining non cash assets in the 2 stores were sold for cash of P60,000. The
partnership was dissolved, and cash settlement was effected. In the distribution of the P60,000 cash, Gardo
received?
a. 26,000
b. 36,000
c. 24,000
d. 34,000

____ 35. Which statement is true regarding a foreign currency option?

a. A foreign currency option gives the holder the right but not the obligation to buy or sell
foreign currency in the future
b. A foreign currency option gives the holder the obligation to buy or sell foreign currency in
the future
c. A foreign currency option gives the holder the obligation only sell foreign currency in the
future
d. A foreign currency option gives the holder the obligation to only buy foreign currency in
the future
e. A foreign currency option gives the holder the obligation to buy or sell foreign currency in
the future at the spot rate

____ 36. A construction company signed a contract to build a theater over a period of 2 years, and with this contract
also signed a maintenance contract for 5 years. Both the contracts are negotiated as a single package and are
closely interrelated to each other. The two contracts should be
a. Recognized under the completed contracted method.
b. Combined and treated as a single contract.
c. Treated differently, the building contract under the completed contract method and
maintenance contract under the percentage of completion method.
d. Segmented and considered 2 separate contracts.

____ 37. In partnership liquidation, how are partner salary allocations treated?
a. Salary allocations take precedence over amounts due to partners with respect to their
capital interests, but not profits.
b. Salary allocations take precedence over creditor payments.
c. Salary allocations take precedence over amounts due to partners with respect to their
capital profits, but not capital interests.
d. Salary allocations are disregarded

____ 38. The cost recovery method of accounting for long-term construction contract is preferable when
a. Estimates of costs to complete construction toward completion are reasonably dependable.
b. The contract entails relatively long period of construction.
c. A contractor is involved in numerous projects.
d. Lack of dependable estimates or inherent hazards cause forecasts to be doubtful.

____ 39. The following inventory balances for 2014 in local currency units (LCU) are given:

Inventory at cost 320,000 LCU

Inventory at replacement cost 300,000
Inventory at net realizable value 420,000
 Inventory at net realizable value
Less normal profit margin 400,000
The following exchange rates are given for 2014:
January 1, 2014 P1.50 = 1 LCU
Average, 2014 1.48 = 1
4th quarter average, 2014 1.43 = 1
December 31, 2014 1.42 = 1

Compute the December 31, 2014, inventory balance using the lower of cost or market method under the
temporal method
a. 429,000
b. 473,600
c. 457,600
d. 596,000
e. 568,000

____ 40.
Account Investor Investee
Sales 500,000 300,000
Cost of Goods Sold 230,000 170,000
Gross Profit 270,000 130,000
Selling & Admin expenses 120,000 100,000
Net Income 150,000 30,000
Dividends paid 50,000 10,000

Assuming Investor owns 70% of Investee. What is the amount that will be recorded as Net Income for the
Controlling Interest?
a. 164,000
b. 180,000
c. 171,000
d. 178,000

____ 41. A construction company signed a contract to build a theater over a period of 2 years, and with this contract
also signed a maintenance contract for 5 years. Both the contracts are negotiated as a single package and are
closely interrelated to each other. The two contracts should be
a. Recognized under the completed contracted method.
b. Combined and treated as a single contract.
c. Segmented and considered 2 separate contracts.
d. Treated differently, the building contract under the completed contract method and
maintenance contract under the percentage of completion method.

____ 42. Mel Company issued nonvoting preferred stock with a fair value of P1,500,000 in exchange for all the
outstanding common stock of the Bath Corporation. On the date of the exchange, Bath had tangible net assets
with a book value of P900,000 and a fair value of P1,400,000. In addition, Mel issued preferred stock valued
at P100,000 to an individual as a finder's fee for arranging the transaction. As a result of these transactions,
Mel should report an increase in net assets of __________.
a. 1,400,000
b. 900,000
 c. 1,500,000
d. 1,600,000

____ 43. On its balance sheet, a company undergoing reorganization should

a. report its assets at fair market value, so that financial statement users can estimate whether
creditors' claims will be met
b. report its assets as pledged or free
c. report its assets at current replacement cost
d. continue to report its assets at book value
e. report its assets at net realizable value because there is reason to doubt that the
organization is a going concern

____ 44. On December 5, 2013, Texas based Kit Corporation purchased goods from a Saudi Arabian firm for 100,000
riyals (SAR), to be paid on January 10, 2014. The transaction is denominated in Saudi riyals. Kit's fiscal year
ends on December 31, and its reporting currency is the U.S. dollar. The exchange rates are:

December 5, 2013 1 riyal .265

December 31, 2013 1 riyal .262
January 10, 2014 1 riyal .264

What journal entry would Kit make on January 10, 2014, to revalue foreign currency payable to equivalent
U.S. dollar value?
a Accounts Payable (SAR) 300
Foreign Currency Transaction Gain 300
b Accounts Payable (SAR) 100
Foreign Currency Transaction Gain 100
c Foreign Currency Transaction Loss 100
Accounts Payable (SAR) 100
d Foreign Currency Transaction Loss 200
Accounts Payable (SAR) 200

a. Option D
b. Option B
c. Option A
d. Option C

____ 45. Consolidated financial statements are designed to provide:

a. subsidiary information for the subsidiary shareholders.
b. the results of operations, cash flow, and the balance sheet in an understandable and
informative manor for creditors.
c. informative information to all shareholders.
d. the results of operations, cash flow, and the balance sheet as if there was a single entity.

____ 46. Chicago based Corporation X has a number of importing transactions with companies based in UK. Importing
activities result in payables. If the settlement currency is the British Pound, which of the following will
happen by changes in the direct or indirect exchange rates?

Direct Exchange Rate Indirect Exchange Rate

 Increase Decreases Increases Decreases
a) NA NA NA NA
b) Loss Gain Gain Loss
c) Loss Gain NA NA
d) Gain Loss Loss Gain

a. Option A
b. Option B
c. Option D
d. Option C

____ 47. Which of the following procedures is acceptable when accounting for a deficit balance in a partners capital
account during partnership liquidation?
a. If a partner with a negative capital balance is personally insolvent, the negative capital
balance may be absorbed by those partners having a positive capital balance according to
the residual profit and loss sharing ratios that apply to those partners having positive
balances.
b. A partner with a negative capital balance must contribute personal assets to the partnership
that are sufficient to bring the capital account to zero.
c. If a partner with a negative capital balance is personally insolvent, the negative capital
balance may be absorbed by those partners having a positive capital balance according to
the residual profit and loss sharing ratios that apply to all the partners.
d. All of the procedures are acceptable.

____ 48. For a subsidiary to be eligible to be included in a consolidated tax return, at least _____ of its stock must be
held by the parent company or another company included in the consolidated return
a. 50 percent
b. 40 percent
c. 80 percent
d. 75 percent

____ 49. Under the temporal method, retained earnings would be restated at what rate?
a. Historical rate
b. Composite amount
c. Average rate
d. Current rate
e. Beginning of the year rate

____ 50. Romeo is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus a bonus of 10% of
net income after salary and bonus as a means of allocating profit among the partners. Salaries traceable to the
other partners are estimated to be P100,000. What amount of income would be necessary so that Romeo
would consider the choices equal:
a. 305,000
b. 165,000
c. 290,000
d. 265,000
JPIA RMYC
Answer Section

MULTIPLE CHOICE

1. ANS: C OBJ: Business combination

2. ANS: C OBJ: Foreign currency transactions and translations
3. ANS: A OBJ: Business combination
4. ANS: D

OBJ: Foreign currency transactions and translations

5. ANS: B

OBJ: Foreign currency transactions and translations

6. ANS: A
SOL:
Beginning balance 4,000
Cash collected 3,000
Inventory sold 4,000
Accounts payable (7,000)
Expenses (2,000)
Cash available 2,000

OBJ: Partnership
7. ANS: D OBJ: Foreign currency transactions and translations
8. ANS: D OBJ: Business combination
9. ANS: E OBJ: Foreign currency transactions and translations
10. ANS: E

OBJ: Foreign currency transactions and translations

11. ANS: B
12. ANS: E OBJ: Foreign currency transactions and translations
13. ANS: D OBJ: Foreign currency transactions and translations
14. ANS: B OBJ: Foreign currency transactions and translations
15. ANS: B

OBJ: Foreign currency transactions and translations

16. ANS: C OBJ: Foreign currency transactions and translations
17. ANS: D
SOL:
P Q R P Q R Total
Loans 6,000 (10,000)
Capital 24,000 36,000 60,000
Total interests 30,000 36,000 50,000
Divide by PL ratio 3/10 3/10 4/10
Loss absorption 100,000 120,000 125,000
facility
Priority 1 (5,000) 2,000 2,000
100,000 120,000 120,000
Priority 11 (20,000) (20,000) 8,000 6,000 14,000
100,000 100,000 100,000 - 6,000 10,000 16,000

OBJ: Partnership
18. ANS: A OBJ: Derivatives
19. ANS: E OBJ: Foreign currency transactions and translations
20. ANS: A OBJ: Corporate liquidation
21. ANS: C OBJ: Derivatives
22. ANS: A OBJ: Derivatives
23. ANS: B OBJ: Consolidation after acquisition
24. ANS: C OBJ: Derivatives
25. ANS: D OBJ: Foreign currency transactions and translations
26. ANS: A
SOL:
Garry Michi George Total
Equities,Jun 30 8,000 15,000 6,000 29,000
Inventory loss (2,000) (3,000) (5,000) (10,000)
Contingency fund (400) (600) (1,000) (2,000)
Subtotals 5,600 11,400 0 17,000

Possible losses on
remaining assets (3,000) (4,500) (7,500) (15,000)
Subtotals 2,600 6,900 (7,500) 2,000

Eliminate Georges
Deficit (3,000) (4,500) 7,500
Subtotals (400) 2,400 0 2,000

Eliminate Garrys
Deficit 400 (400)
Cash distribution 0 2,000 0 2,000

OBJ: Partnership
27. ANS: E OBJ: Derivatives
28. ANS: D
SOL:
Free assets P220,000 - priority claims P100,000 = P120,000
P120,000/P300,000 unsecured = payment of 40% on unsecured dollars.
40% x P240,000 A/P = P96,000

OBJ: Corporate liquidation

29. ANS: A OBJ: Business combination
30. ANS: B OBJ: Consolidation after acquisition
31. ANS: C OBJ: Derivatives
32. ANS: B
33. ANS: C
34. ANS: A
SOL:
Gardo (60%) Gordo (40%) Total
Initial investments 30,000 20,000 50,000
Investments (personal disbursements) 62,275 70,695 132,970
Withdrawals (personal receipts) (79,100) (65,245) (144,345)
Balance after Partnership 13,175 25,450 38,625
Gain on realization (P60,000-P38,625) 12,825 8,550 21,375
Balances before payment to partners 26,000 34,000 60,000
Payment to partner (26,000) (34,000) (60,000)

OBJ: Partnership
35. ANS: A OBJ: Foreign currency transactions and translations
36. ANS: B
37. ANS: D OBJ: Partnership
38. ANS: D
39. ANS: A

OBJ: Foreign currency transactions and translations

40. ANS: C OBJ: Business combination
41. ANS: B
42. ANS: D OBJ: Business combination
43. ANS: D OBJ: Corporate liquidation
44. ANS: A OBJ: Foreign currency transactions and translations
45. ANS: B OBJ: Business combination
46. ANS: B OBJ: Foreign currency transactions and translations
47. ANS: A OBJ: Partnership
48. ANS: C OBJ: Consolidation after acquisition
49. ANS: B OBJ: Foreign currency transactions and translations
50. ANS: C
SOL:
Bonus 10% (NI-Salaries-Bonus)
15,000 10% (NI-(100,000=25,000)-15,000)
15,000 10% (NI-140,000)
15,000 10% NI-14,000
29,000/.1 NI
Net income 290,000

OBJ: Partnership