NJPIA REGION 3 COUNCIL

21st ANNUAL REGIONAL CONVENTION

PRACTICAL ACCOUNTING 2
1. Two Wives Corporation, a manufacturing firm produces two joint products,
YVONNE and JANINE. The records show that the joint production costs for the
month of May 2014 were P45,000. During May 2014 further processing costs
beyond the split-off point, necessary to convert the products into salable
form, were P24,000 for 2,400 units of YVONNE and P36,000 for 1,200 units of
JANINE. YVONNE sells for P25 per unit and JANINE for P50 per unit.
Assuming that the company uses the net realizable value method for allocating
joint product costs, the joint costs allocated to YVONNE for the month of May
2014 is:
A. P15,000 C. P27,000
B. P18,000 D. P30,000

2. Certain balance sheet accounts in a foreign subsidiary of Jonathan Company at

December 31, 2014, have been stated into Philippines pesos as follows:
Stated at
Current Rates Historical Rates
Accounts receivable, long term P 200,000 P 220,000
Accounts receivable, long term 100,000 110,000
Prepaid insurance 50,000 55,000
Goodwill 80,000 85,000
P 430,000 P 470,000
This subsidiarys functional currency is a foreign currency. What total
amount Jonathans balance sheet include for the preceding items?
A. P430,000 C. P440,000
B. P435,000 D. P450,000
3. Using the same information in No. 2, and the subsidiarys functional currency
is peso. What total amount Jonathans balance sheet include for the preceding
items?
A. P430,000 C. P440,000
B. P435,000 D. P450,000
4. On March 1, 2014, Xander and Agnes decide to combine their business and form a
partnership. The balance sheets of Xander and Agnes on March 1, 2014 before
adjustments show the following:
Xander Agnes
Cash P 9,000 P 3,750
Accounts receivable 18,500 13,500
Inventories 30,000 19,500
Furniture and fixtures (net) 30,000 9,000
Office equipment (net) 11,500 2,750
Prepaid expenses 6,375 3,000
P105,375 P 51,500
Accounts payable P 45,750 P 18,000
Xander, capital 59,625
Agnes, capital ________ 33,500
P105,375 P 51,500
They agreed to provide 3% for doubtful accounts of their accounts receivables
and found Agness furniture and fixtures to be under-depreciated by P900.
If each partners share in equity is to be equal to the net assets invested,
the capital accounts of Xander and Agnes respectively would be:
A. P58,170 and P33,095 C. P 59,070 and P32,195
B. P58,320 and P32,495 D. P104,820 and P50,195

5. Grande Corporation is a manufacturing company engaged in the production of a

single special product known as There is Forever. Production costs are
accumulated with the use of a job-order-cost system.
The following information is available as of June 1, 2014:
Work-in process.........................................P 10,710
Direct materials inventory.............................. 48,600
In analyzing the job-order cost sheets, the records disclosed that the
compositions of the work-in-process inventory on June 1, 2014 were as
follows:
REGIONAL MOCK BOARD EXAMINATION Page 2 of 6
Direct materials used...................................P 3,960
Direct labor (900 hours)................................ 4,500
Factory overhead applied................................ 2,250
P 10,710
The following manufacturing activity occurred during the month of June 2008:
Purchased direct materials costing P 60,000
Direct labor worked 9,900 hours at P 5 per hour
Factory overhead of P 2.50 per direct labor hour was applied to production.
At the end of June 2014, the following information was gathered in connection
with the inventories:
Inventory of work-in-process:
Direct materials used..........................P 12,960
Direct labor (1,500 hours)..................... 7,500
Factory overhead applied....................... 3,750
P 24,210
Inventory of direct materials........................P 51,000
Compute the cost of goods manufactured:
A. P 142,560 C. P 131,850
B. P 118,350 D. P 108,600

Items 6 to 8 are based on the following:

The La Presa Products Company manufactures a single product being used for heavy
industrial machineries. It operates on three shifts under two departments.
Cutting Department and Soothing Department. Materials are added to the product in
each department; however, the number of units produced is not increased in the
process.
The following records for each department were obtained from the books of
Precision Company for the month of January 2010:
Cutting Smoothing
Department Department
Units in process, January 1, 2010 - -
Units transferred from preceding department - 80,000
Units started in production 100,000 -
Units completed and transferred out 80,000 60,000
Units in process, January 31, 2010 20,000 18,000
Units spoiled in production - 2,000
Spoiled units are 50% complete as to materials, labor and overhead. Its cost is
treated as a separate cost element (expense) in the department where the spoilage
occurs. Spoiled units have no recoverable value.
Percentage of completion of units in process on January 31, 2010 follows:
Cutting Smoothing
Department Department
Materials 100% 100%
Labor 60% 80%
Overhead 20% 40%
The following charges were indicated in the cost records for the month of January
2010:
Cutting Smoothing
Department Department
Materials P300,000 P118,500
Labor 184,000 203,580
Overhead 100,800 75,020
6. The total cost transferred to next department - Smoothing:
A. P496,000 C. P584,800
B. P556,000 D. P690,000
7. The cost of work-in-process ending in Cutting Department:
A. P88,800 C. P60,000
B. P84,000 D. P 4,800
8. The cost of work-in-process ending in Smoothing Department:
A. P185,400 C. P 73,800
B. P111,600 D. P138,600

9. The following information summarizes the standard cost for producing one metal
tennis racket frame. In addition, the variances for one month's production are
given. Assume that all inventory accounts have zero balances at the beginning
of the month:
Standard Cost Standard Monthly
Per Unit Costs _____

PRACTICAL ACCOUNTING 2
REGIONAL MOCK BOARD EXAMINATION Page 3 of 6
Materials P 4.00 P 8,400
Direct labor 2 hrs @P2.60 5.20 10,920
Factory overhead:
Variable 1.80 3,780
Fixed 5.00 10,500
Variances:
Materials price, P244.75 unfavorable
Materials quantity, P500.00 unfavorable
Labor rate, P520.00 unfavorable
Labor efficiency, P2,080.00 unfavorable
What were the actual direct labor hours worked during the month?
A. 5,000 C. 4,000
B. 4,800 D. 3,400
10. The joint venture accounts in the books of the venturers (participants) M, N
and O, show the balances below, upon termination of the joint venture and
distribution of the profits:
BOOKS of
M N O
Accounts with Dr Cr Dr Cr Dr Cr
M 900 900
N 750 750
O 1,650 1,650
Final settlement of the joint venture will require payments as follows;
A. M pays P900 to O and N pays P750 to O
B. O pays P900 to M and P750 to N
C. N pays P1,650 to M and O pays P900 to N
D. M pays P900 to N and N pays P750 to O

11. The Gilbert Company acquired 80% of The Torres Company for a consideration
transferred of P100 million. The consideration was estimated to include a
control premium of P24 million. Torres's net assets were P85 million at the
acquisition date. Are the following statements true or false, according to
PFRS3 Business combinations?
(1) Goodwill should be measured at P32 million if the non-controlling
interest is measured at its share of Torres's net assets.
(2) Goodwill should be measured at P34 million if the non-controlling
interest is measured at fair value.
Statement (1) Statement (2) Statement (1) Statement (2)
A. False False C. True False
B. False True D. True True

Items 12 and 13 are based on the following information:

The income statement submitted by the Pampanga Branch to the Home Office for
the month of December, 2010 is shown below. After effecting the necessary
adjustments the true net income of the Branch was ascertained to be P156,000.
Sales P 600,000
Cost of sales:
Inventory, December 1 P 80,000
Shipments from Home Office 350,000
Local purchases 30,000
Total available for sale P460,000
Inventory, December 31 100,000 360,000
Gross margin P240,000
Operating expenses 180,000
Net income P 60,000
The branch inventories were:
12/01/2010 12/31/2010
Merchandise from home office P 70,000 P 84,000
Local purchases 10,000 16,000
Total P 80,000 P100,000
12. The billing price based on cost imposed by the home office to the branch,
and
A. 140% C. 40%
B. 100% D. 29%
13. The balance of allowance for overvaluation of branch December 31, 2008
after adjustment.
A. P10,000 C. P16,000

PRACTICAL ACCOUNTING 2
REGIONAL MOCK BOARD EXAMINATION Page 4 of 6
B. P24,000 D. None of the above

14. Following data pertain to Gilbert Company which sells appliances on an

installment basis:
2008 2009 2010
Installment sales P390,000 P420,000 P480,000
Cost of sales 237,900 243,600 288,000
From Sales Made in:
Installment accounts
receivable balances: 2008 2009 2010
January 1, 2010 P 24,000 P 300,000
December 31, 2010 - P 60,000 P 320,000
Repossessions on defaulted accounts were made during 2010, as follows:
From Sales Made in:
2009 2010
Account balance P 10,000 P 5,000
Net resale value of
repossessed merchandise 4,500 3,500
The total realized gross profit in 2010 on the collections of 2008, 2009, and
2010 sales was:
A. P 9,360 C. P 96,600
B. P62,000 D. P167,960

15. The Snipes Company owns 65% of The Genie Company. On the last day of the
accounting period Genie sold to Snipes a non-current asset for P200,000. The
asset originally cost P500,000 and at the end of the reporting period its
carrying amount in Genie's books was P160,000. The group's consolidated
statement of financial position has been drafted without any adjustments in
relation to this non-current asset.
Under PAS27 Consolidated and separate financial statements, what adjustments
should be made to the consolidated statement of financial position figures
for non-current assets and retained earnings?
Non-current assets Retained earnings
A. Increase by P300,000 Increase by P195,000
B. Reduce by P40,000 Reduce by P26,000
C. Reduce by P40,000 Reduce by P40,000
D. Increase by P300,000 Increase by P300,000

16. Bonifacio contractors had a 3-year construction contract in 2012 for

P900,000. The company uses the percentage-of-completion method for financial
statement purposes. Income to be recognized each year is based on the ratio of
cost incurred to total estimated cost to complete the contract. Data on this
contract follows:
Accounts receivable construction contract billings P 30,000
Construction in progressP 93,750
Less: Amounts billed 84,375
10% retention 9,375
Net income recognized in 2012 (before tax) 15,000
Bonifacio Contractors maintains a separate bank account for each construction
contract. Bank deposits to this contract amounted to P50,000.
What was the estimated total income before tax on this contract?
A. P45,000 C. P135,000
B. P94,000 D. P144,000

17. The Kimmy Heart Company acquired equipment on January 1, 2009 at a cost of
P800,000, depreciating it over 8 years with a nil residual value. On January
1, 2012 The Ginny Company acquired 100% of Kimmy Heart and estimated the fair
value of the equipment at P460,000, with a remaining life of 5 years. This
fair value was not incorporated into Kimmy Heart's books and the depreciation
expense continued to be calculated by reference to original cost.
Under PFRS 10 Consolidated financial statements, what adjustments should be
made to the depreciation expense for the year and the statement of financial
position carrying amount in preparing the consolidated financial statements
for the year ended December 31, 2013?
Depreciation expense Carrying amount
A. Increase by P8,000 Increase by P24,000
B. Increase by P8,000 Decrease by P24,000

PRACTICAL ACCOUNTING 2
REGIONAL MOCK BOARD EXAMINATION Page 5 of 6
C. Decrease by P8,000 Increase by P24,000
D. Decrease by P8,000 Decrease by P24,000

Items 18 and 19 are based on the following information:

MNC Corp. (a Philippine-based company) sold parts to a foreign customer on
December 1, 2009, with payment of 10 million foreign currencies to be
received on March 31, 2010. The following exchange rates apply:
Forward rate
Dates Spot Rate (for 3/31/2010)
December 1, 2009 P.0035 P.0034 (4 months)
December 31, 2009 .0033 .0032 (3 month)
March 31, 2010 .0038 N/A
MNCs incremental borrowing rate is 12 percent. The present value factor for
three months at an annual rate of interest of 12 percent (1 percent per
month) is 0.9706.
18. Assuming that MNC entered into no forward contract, how much foreign
exchange gain or loss should it report on its 2009 income statement with
regard to this transaction?
A. P5,000 gain C. P2,000 loss
B. P3,000 gain D. P1,000 loss
19. Assuming that MNC entered into a forward contract to sell 10 million
foreign currencies on December 1, 2009, as a fair value hedge of a foreign
currency receivable, what is the net impact on its net income in 2009
resulting from a fluctuation in the value of the foreign currencies?
A. No impact on net income.
B. P58.80 decrease in net income.
C. P2,000 decrease in net income.
D. P1,941.20 increase in net income.

20. A hospital has the following account balances:

Revenue from newsstand P 50,000
Amount charged to patients 800,000
Interest income 30,000
Salary expense nurses 100,000
Bad debts 10,000
Undesignated gifts 80,000
Contractual adjustments 110,000
What is the hospitals net patient service revenue?
A. P880,000 C. P690,000
B. P800,000 D. P680,000

21. Pista Hut granted a franchise to Eat-N-Run for the Rainbowbelt area. Eat-N-
Run was to pay a franchise fee of P100,000 payable in five equal installments
starting with the payment upon signing of the agreement. The franchisee was to
pay monthly 1% of gross sales of the preceding month. Should the operation of
the outlet prove to be unprofitable, the franchise may be cancelled with
whatever obligation owing to Pista Hut, in connection with the P100,000
franchise fee, waived.
The first years operation generated a gross sales of P500,000. For the first
year, Pista Hut earned franchise fee of:
A. P 5,000 C. P 25,000
B. P20,000 D. P105,000

22. Kuchen Manufacturing uses backflush costing to account for an electronic

meter it makes. During August 2011, the firm produced 16,000 meters of which
it sold 15,800. The standard cost for each meter is:
Direct material P 20
Conversion costs 44
Total P 64
Assume that the company had no inventory on August 1. The following event
took place in August:
1. Purchased P320,000 of direct materials.
2. Incurred P708,000 of conversion costs.
3. Applied P704,000 of conversion costs to Raw and In Process Inventory.
4. Finished 16,000 meters.
5. Sold 15,800 meters for P100 each.
The amount of ending finished goods:

PRACTICAL ACCOUNTING 2
REGIONAL MOCK BOARD EXAMINATION Page 6 of 6
A. Nil or zero C. P12,800
B. P12,775 D. P12,850

23. Agency 007 received a request for replenishment of petty cash fund for the
following expenses:
Office supplies P 500
Transportation fares 100
Repair of aircon 200
JRS mail 160
The entry for this transaction would be:
A. No entry
B. Memorandum entry to the RAOMO
C. Office supplies expense 500
Travelling expense 100
Repairs and maintenance 200
Other maintenance and operating expenses 160
Cash National Treasury, MDS 960
D. Office supplies expense 500
Travelling expense 100
Repairs and maintenance 200
Other maintenance and operating expenses 160
Petty Cash Fund 960
24. X and Y Inc. owes the Xylo Corporation P60,000 on account, which is secured
by account receivable with a book value of P50,000. The unsecured portion is
considered a claim under the bankruptcy law, X and Y has filed for bankruptcy.
Its statement of affairs lists the accounts receivable securing the Xylo
account with an estimated realizable value of P45,000. If the dividend to
general unsecured creditors is 80% how much can Xylo expect to received?
A. P60,000 C. P57,000
B. P58,000 D. P48,000

25. On September 30, 2014, Jaja Inc. was awarded to contract to build a 1,000-room
hotel for P120 million. Among others, the parties agreed to the following:
1. Ten percent mobilization fee (deductible from final billing) payable within
ten days from the signing of the contract;
2. Retention of ten percent on all billings (to be paid within the final billing
upon completion and acceptance of the project); and
3. Progress billings are to be paid within 2 weeks upon acceptance.
By the end of 2014, the company had presented one progress billing, corresponding
10% completion, which was evaluated and accepted by the client on December 29,
2014 for payment in January of next year. In 2014, assuming use of the
percentage-of-completion method of accounting, Jaja Inc. received cash a total
fee of:
A. P 1,200,000 C. P12,000,000
B. P11,880,000 D. P13,200,000

PRACTICAL ACCOUNTING 2