Professional Documents
Culture Documents
NAME:______________________________________________ DATE:___________
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b. The branch office account on the books of the home office
represents the equity interest of the branch office in the net
assets of the home office.
c. The home office and branch office accounts are reciprocal
accounts that must be eliminated in the preparation of the
enterprise’s financial statements that are presented in
accordance with GAAP.
d. Unrealized profit from internal transfer between the home
office and a branch must be eliminated in the preparation of the
enterprise’s financial statements that are presented in
accordance with GAAP.
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a. When the partnership assets are insufficient to meet
partnership liabilities.
b. When the partnership assets are insufficient to meet
partnership liabilities and at least one partner is personally
insolvent.
c. When all the partners are personally insolvent.
d. When the assets of the partnership plus the assets of all
partners are insufficient to meet partnership liabilities plus
the individual partners’ liabilities.
9. On July 10, 2011, Toyota Motors, Inc. sold a new car to Mr. Sy
for P850,000. The car costs Toyota P650,625. Mr. Sy paid 25% cash
down payment and traded in his old car. Toyota granted an
allowance of P80,000 on the old car traded, the balance payable
in equal monthly installment payments. The monthly installment
amounts to P30,000 inclusive of 12% interest on the unpaid
balance of the principal amount of obligation. The old car traded
in has a selling price of P120,000 after expending reconditioning
cost of P22,500.
After paying three installments, Mr. Sy suffered major financial
setback incapacitating him to continue paying. The car was
subsequently repossessed. When acquired, the car was appraised to
have a fair value of P300,000. What is the gain (loss) on
repossession?
a. (62,617.50) c. (62,716.50)
b. 62,617.50 d. 62,716.50
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Income recognized to date 500,000 1,200,000
13. When the initial franchise fee is not paid in full and he
collectability of the note for the balance is not reasonably
assured, the method to be used by franchisor to recognize revenue
from the initial fee is
a. installment method. c. accrual basis.
b. gross profit method. d. cost method.
Cash P150,000
Accounts Receivable 180,000
Capitalized software 320,000
Goodwill 100,000
Liabilities (130,000)
Net assets 620,000
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17. According to PAS 21 The effects of changes in foreign
exchange rates, at which rate should an entity’s non-current
assets be translated when its functional currency figures are
being translated into a different presentation currency?
a. the historical exchange rate
b. the average rate
c. the closing rate
d. the spot exchange rate
18. The Jenai Company acquired all the net assets of the Joy
Company by issuing its own share of P25 par value, and an
agreement for additional payment of 300,000 in the event that the
profit generated by Joy reaches 50% of Jenai Company’s profit.
Jenai’s common stock has current market value of P40 per share.
Joy’s balance sheet accounts are: Current assets, P320,000;
property and equipment, P880,000; Liabilites, P400,000; Common
Stock, P4 par, P80,000; APIC, P320,000; and Retained earnings,
P400,000.
The fair value of current assets is P400,000 while that of
property and equipment is P1,600,000. All the liabilities are
correctly stated. Jenai issued sufficient shares so that the fair
market value of the stock equals the fair market value of Joy’s
net assets. How many shares must Jenai Co. issue?
a. 40,000 c. 64,000
b. 76,000 d. 160,000
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valued at P1,200,000 composed of capital stock, P600,000; APIC,
P180,000; and RE, P420,000. At the time of acquisition, Eros
building is undervalued by P100,000 and has still remaining life
of 30 years. Any other excess is allocated to goodwill with an
amortization period of 30 years. Eros Company reported net income
of P140,000 and paid dividends of P20,000 during the year. How
much is the income from investment to be reported by Noel in its
separate FS?
a. 16,000 c. 100,533
b. 99,733 d. 112,000
22. Using the same information above, if Noel accounts for its
investment in Eros under the equity method, how much is included
in its separate Statement of Profit or Loss as investment income
from Eros?
a. 16,000 c. 109,333
b. 99,733 d. 112,000
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the subsidiary. If the parent uses the cost method of accounting
investment in subsidiary, what are the consolidated retained
earnings on December 31, 2011?
a. 446,000 c. 486,000
b. 470,000 d. 510,000
28. On July 1, 2011, Husband Ltd. Acquired all the issued share
capital of Wife Unlimited giving in exchange P500,000 cash. At
acquisition date, the financial position of Husband Ltd and Wife
Unlimited and their fair values are as follow:
HUSBAND LTD WIFE UNLIMITED
EQUITY AND LIAB Carrying Amount CA FV
Share Capital (50k shares) 550,000 300,000
Retained Earnings 350,000 140,000
Total Equity 900,000 440,000
Liabilities:
Provision 30,000 60,000 60,000
Payable 27,000 34,000 34,000
Tax Liability 10,000 6,000 6,000
Total Liability 67,000 100,000
Total Equity and Liab 967,000 540,000
ASSETS
Land 120,000 150,000 170,000
Equipment 620,000 480,000 330,000
Acc. Dep’n (180,000) (170,000)
Investment in Wife Unltd 500,000
Inventory 92,000 75,000 80,000
Cash 15,000 5,000 5,000
Total Assets 967,000 540,000
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30. In partnership liquidation on the realization, losses
result in a debit balance in one partner’s capital account. If
this partner fails to contribute personal assets to makeup this
deficit, how should the debit be handled by the partners?
a. It should be written off against partnership profits like any
other bad debts.
b. It should be allocated to all partners in their profit and
loss ratio.
c. It should be allocated to the remaining partners in their
remaining profit or loss ratio.
d. It should be set up a receivable and turned over to a
collection agency.
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consolidated financial statement if the parent’s functional
currency is the
Foreign currency Local currency
a. No No
b. No Yes
c. Yes No
d. Yes Yes
42. Presented below are the information taken from the books of
Four Sisters Company:
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2010 2011
Sales:
Regular 125,000 187,500
Installment 62,500 100,000
Cost of Goods Sold:
Regular 75,000 112,500
Installment 31,250 45,000
Operating Expenses 25,000 31,250
Collections on accounts from:
Regular sales 100,000 137,500
Installment sales – 2010 37,500 25,000
Installment sales – 2011 - 62,500
What is the net income for the year ended December 31, 2011?
a. 78,125 c. 98,750
b. 93,750 d. 90, 625
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48. In accounting for branch operations, it is improper for the
home office to
a. credit cash received from a branch to the Investment in
Branch ledger account.
b. maintain Common Stock and Retained Earning ledger accounts for
only the home office.
c. debit Shipments of merchandise to the branch from the home
office to the Investment in Branch ledger account.
d. credit shipments of merchandise to the branch to the Sales
ledger account.
49. The conflict between the two political groups that arose
during the meeting was not ____; these groups have often ____
each other on key issues.
a. surprising; supported
b. unusual; copied
c. explicit; evaluated
d. unique; opposed
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