ADVANCED ACCOUNTING Problem 1. The ELI Corporation is undergoing liquidation and its statement of financial position as of January 2, 2013 is as follows: ELI Corporation Statement of Financial Position As of January 2, 2013 Assets Cash Receivables, net Inventory Prepaid Expenses Building, net Goodwill
P 124,200 340,800 70,000 22,500 360,000 82,000
Total Assets
P 999,500
Liabilities and Equity Accounts Payable Salaries Payable Bank Loan Payable Note Payable Bonds Payable Ordinary Shares Capital Deficit Total Liabilities and Equity
P 118,500 50,000 222,000 80,000 450,000 120,000 (41,000) P 999,500
The inventory has a realizable value of P53,000. Of the accounts payable, P60,000 is secured by 1/4 of the receivable which is 30% not collectible. The balance in the book value of the receivables which has a realizable value of P235,000 is used to secure the bank loan payable. The bonds payable is secured by the building having a book value of P360,000 and a realizable value of P375,000. Unrecognized liabilities as of Jan. 2, 2013 are as follows: accrued interest on bonds payable and taxes amounting to P4,000 each, and trustee’s salary amounting to P9,500. (Use two decimal places for the recovery percentage) How much will be paid to the partially secured creditors of ELI corporation? A. B. C. D.
P477,595 P479,102 P478,349 P480,669
Problem 2. On November 1, 2013, Goodbye To You (GTY) Inc.’s trustee prepares a Statement of Affairs with the following information:
P340,000 cash will be received by the unsecured creditors whose claims totaled P1360000
A received a 12% note of P124,000 from GTY on March 1, 2013, secured with machinery with a market value of P115,000
GTY issued to B a 12%, 1-year note of P136,000 on January 1, 2013. Nothing has been pledged to this note.
C holds a note of P137,500 on which interest of P7,452 is accrued, secured with equipment with a book value of P153,000. The fair value of the equipment is determined to be P173,250
GTY still owes D, its cashier, with her salary worth P12,220
Which of the following statements about the creditors of Goodbye To You is false? A. B. C. D.
The unsecured creditor without priority will receive P37,400 The unsecured creditor with priority will receive P3,055 The fully secured creditor will be paid an amount of P144,952 The partially secured creditor will be paid an amount of P119,730
Page 2 Problem 3. Agency AA’s allotment and Notice of Cash Allocation (NCA) for the year were P5,000,000 and P3,000,000, respectively. Checks issued amounted to P1,500,000. What closing entry should be made for the unused NCA as of year-end? A. Cash – National Treasury, MDS Subsidy income from National Government B. Subsidy income from National Government Cash – National Treasury, MDS C. Subsidy income from National Government Cash – National Treasury, MDS D. Memorandum entry
P (1,000,000) P (1,000,000) P 1,500,000 P 1,500,000 P 3,500,000 P 3,500,000
Problem 4. CC Corp. owns a subsidiary in Japan whose balance sheet in Japanese Yen for the last years follow: December 31, 2012 Assets Cash and Cash equivalents Receivables Inventory Property and Equipment, net Total Assets Liabilities and Equity Accounts Payable Long-term debt Common stock Retained earnings Total Liabilities and Equity
December 31, 2013
¥ 30,000 122,500 160,000 255,000 ¥ 567,500
¥ 25,000 147,500 170,000 230,000 ¥ 572,500
¥ 55,000 322,500 115,000 75,000 ¥ 567,500
¥ 75,000 285,000 115,000 97,500 ¥ 572,500
Relevant exchange rates are: January 1, 2012 December 31, 2012 December 31, 2013 September 12, 2012
¥ 1 = P 45 ¥ 1 = P 42.50 ¥ 1 = P 47.50 ¥ 1 = P 40
CC formed the subsidiary on January 1, 2012. Income of the subsidiary was earned evenly throughout the years and the subsidiary declared dividends worth ¥15,000 on September 12, 2012 and none were declared during 2011. How much is the cumulative translation adjustment for 2013? A. B. C. D.
P568,750 P875,000 P625,000 P1,006,250
Page 3 Problem 5. On October 31, 2013, Pyramid Philippines took delivery from a British firm of inventory costing £725,000. Payment is due on January 31, 2014. At the same time, Pyramid paid P8,250 cash to acquire a 90-day call option for £725,000. Strike Price Spot Rate Forward Rate Fair Value of Call Option
October 31, 2013 P 3.60 3.61 3.72 P 8,250
December 31, 2013 P 3.60 3.62 3.77 P 17,000
January 31, 2014 P 3.60 3.64 3.78 ?
Given the information above, compute for the following: Foreign exchange gain or loss on option contract due to change in time value on December 31, 2013 if changes in the time value will be excluded from the assessment of hedge effectiveness, and foreign exchange gain or loss due to change in intrinsic value on January 31, 2014 if changes in the time value will be excluded from the assessment of hedge effectiveness. A. B. C. D.
P1,500 gain ; P7,250 gain P1,500 gain ; P14,500 gain P5,250 loss ; P7,250 gain P5,250 loss ; P14,500 gain
Problem 6. On May 1, 2013, PERFECT Co. anticipated the purchase of 85,000 units of merchandise from a foreign vendor. The purchase would probably occur on October 28, 2013 and require the payment of 1,250,000 foreign currencies (FC). On May 1, 2013, the company purchased a call option to buy 1,250,000FC at a strike price of 1FC = P0.27. An option premium of P14000 was paid. Changes in the value of the option will be excluded from the assessment of hedge effectiveness. For the year 2013, the following rates are as follows: Spot Rate Strike Price FV of call option
May 1 P 0.25 0.27 P14,000
May 31 P 0.28 0.27 P17,500
June 30 P 0.30 0.27 P39,000
October 28 P 0.32 0.27 ?
The foreign exchange gain (loss) on option contract to be recognized in (1) equity and (2) earnings on June 30: A. B. C. D.
P(25,000) ; P3,500 P(37,500) ; P21,500 P25,000 ; P(21,500) P37,500 ; P(3,500)
Problem 7. USX Company bought merchandise for €125,000 from a French company on December 1, 2013. Payment in Euros was due on February 28, 2014. On the same date, USX entered into a 90-day futures contract to buy €125,000 from a bank. Exchange rates for Euros on different dates are as follows: Spot Rate 30-day futures 60-day futures 90-day futures
December 1, 2013 P 91.40 92.30 91.80 90.60
December 31, 2013 P 92.70 92.50 92.20 92.60
How much is the forex gain/loss on the forward contract on February 28, 2014? A. B. C. D.
P1,000,000 loss P100,000 gain P37,500 gain P37,500 loss
February 28, 2014 P 91.90 93.20 92.60 93.40
Page 4 Problem 8. Given the following information (For ¥1): SPOT RATES Transaction Date Balance Sheet Date Settlement Date
Transaction Date Balance Sheet Date Settlement Date
120-day futures P 43 42 45
Bid Rate P 43 48 49
Offer Rate P 45 49 55
FORWARD RATES 90-day futures 60-day futures P 45 P 44 46 47 48 49
30-day futures P 46 49 52
On October 1, 2013, KEL Co. sold merchandise worth ¥2,750 to a Japanese company, payable on January 31, 2014. To hedge this foreign currency exposure, KEL contracted to sell ¥2,750 on October 1, 2013 to be delivered on January 31, 2014. On balance sheet date, how much is the net forex gain/loss from this hedging activity? A. B. C. D.
P2,750 loss P2,750 gain P30,250 loss P30,250 gain
Problem 9. Condensed statements of financial position of Love Corp. and You Corp. as of December 31, 2013 are as follows: Current assets Noncurrent assets Total assets
Love P 175,000 725,000 P 900,000
You P 65,000 425,000 P 490,000
Liabilities Common stocks, P20 par Additional Paid-in capital Retained earnings
P 65,000 550,000 35,000 250,000
P 35,000 300,000 25,000 130,000
On January 1, 2014, Love Corp. issued 35,000 stocks with a market value of P25/share for the assets and liabilities of You Corp. The book value reflects the fair value of the assets and liabilities, except that the noncurrent assets of You have fair value of P630,000 and the noncurrent assets of Love are overstated by P30,000. Contingent consideration, which is determinable, is equal to P15,000. Love also paid for the stock issuance costs worth P34,000 and other acquisition costs amounting to P19,000. How much is the combined total assets after the merger? A. B. C. D.
P1,825,000 P1,742,000 P1,772,000 P1,567,000
Page 5 Problem 10. The following are the condensed statement of financial position of Ayiziel and Vianney on January 1, 2013: Total Assets Liabilities Common Stocks Additional Paid-in Capital Retained Earnings
Ayiziel P4,100,000
Vianney P 1,223,000
1,110,000 1,240,000 500,000 1,250,000
320,000 518,000 40,000 345,000
Cido Corp. acquired the net assets of both Ayiziel and Vianney by issuing 81,250 shares to Ayiziel and 22,550 shares to Vianney. The par value of these shares is P35/share and market value as of January 1, 2013 is P40/share. Cido also paid for the following expenses: Indirect costs Finder’s fee Acctg. And legal fees for SEC registration Printing costs of stock certificates
Ayiziel P37,500 26,500 137,500 50,000
Vianney P 40,500 14,000 145,000 37,500
If Cido’s retained earnings has a balance of P4,300,000 on January 1, 2013, how much is the (1) goodwill and (2) adjusted retained earnings to be presented in the statement of financial position of Cido? A. B. C. D.
P259,000 ; P4,118,500 P260,000 ; P4,112,750 P 0 ; P4,112,750 P260,000 ; P4,182,500
Problem 11. Agency X have an obligation for equipment per purchase order amounting to P800,000. Subsequently, the agency liquidates the equipment acquired in full. The entry to record this transaction would be (ignore tax implication) A. Memorandum entry in RAOCO B. Accounts Payable Cash – National Treasury, MDS C. Subsidy Income from National Government Cash – National Treasury, MDS D. Obligation Liquidated Cash – National Treasury, MDS
800,000 800,000 800,000 800,000 800,000 800,000
Problem 12. Gion Corporation has identified activity centers to which overhead costs are assigned. The cost pool amounts for these centers and their selected activity drivers for 2013 follow: Activity Centers Set-ups Utilities No. of parts
Costs P620,000 P950,000 P320,000
Activity Drivers 24,800 set-ups 125,000 machine hours 16,000 parts
Direct costs of producing product GG amounted to P75,000. The said product took 17,000 direct labor hours and 15,000 machine hours to finish. Also, the product needed 7,500 set-ups and 550 parts to complete. 25,000 units of product GG were produced during 2013. How much was the full cost per unit of product GG using ABC? A. B. C. D.
P19.07 P16.07 P15.50 P12.50
Page 6 Problem 13. During April 2013, Faithfully Inc. incurred the following costs for Job 522 (450 drum sets): Direct materials Direct labor Factory overhead
P42,500 P65,250 P78,300
45 units of drum sets were found to be defective and Faithfully Inc. had to incur the following to remedy the said defects: Direct materials Direct Labor
P13,550 P15,250
If the rework cost is normal but specific to Job 522, the cost per finished unit is: A. B. C. D.
P575.68 P497.75 P484.22 P518.11
Problem 14. Superhuman Co. provided the following data: Direct materials Direct labor Overhead rate without spoilage Overhead rate with spoilage Units produced
P450,000 P520,000 P5.50 per unit P7.50 per unit 120,000
Superhuman do not typically expect spoilage in its production process. On Job 912, the cost of the spoiled units is P52,200, but the disposal value of these units were determined to be P24,000 and P17,000 were found to be abnormal costs of spoilage. How much is the total cost of good units? A. B. C. D.
P1,577,800 P1,817,800 P1,606,000 P1,846,000
Problem 15. Analog Heart Inc. makes three products from mangoes it harvests: Units of output Mango shake Dried mangoes Ice candy
5,250 2,000 750
Selling price split-off P3 P1.50 P2.50
at Incremental processing costs P2 P2.50 P0.50
Final selling price P7.50 P3 P3
Which of the following is false regarding processing the three products beyond split-off point? A. The company can either sell the ice candy at split-off or process it further and sell it at P3 because the incremental profit is zero B. If the dried mangoes are processed beyond split-off, the company will have an incremental profit of P1 C. The company should process the mango shake further because an incremental profit of P2.50 would be realized D. None of the statements is false
Page 7 Problem 16. GBX Inc.’s capacity for a month is 40,000 machine hours. Overhead is 40% variable and 60% fixed. During June 2011, GBX produced 3,500 units of its product and incurred 38,000 machine hours. Each unit of a product requires 12 machine hours. Unfavorable non-controllable variance for the month of June is P28,500. What is the company’s variable overhead rate? A. B. C. D.
P23.75 P19.75 P14.25 P 9.50
Problem 17. The following data were taken from the records of Sweet Serendipity Co. before the accounts are closed for the year ended December 31, 2013. The company uses the installment method of recognizing revenue and it sells goods exclusively on installment basis. December 31, 2011 ? 300000
Installment Sales Cost of Goods Sold
December 31, 2011 P350,000
Installment AR, 2011 Installment AR, 2012 Installment AR, 2013 DGP, 2011 DGP, 2012 DGP, 2013
P122,500
For the year ended: December 31, 2012 P500,000 ? Balances as of: December 31, 2012 P125,000 P307,500 P43,750 P123,000
December 31, 2013 P600,000 ? December 31, 2013 P35,000 P140,000 P490,000 P43,750 P120,000 P210,000
On January 2013, a customer defaulted and Sweet Serendipity repossessed the merchandise. The merchandise was assessed to have a cost of P4,200 after costs of reconditioning amounting to P800. The repossessed merchandise was purchased by the customer in 2012 and the said customer still owed the company a certain amount at the date of repossession. How much was the realized gross profit and loss on repossession in 2013? A. B. C. D.
P134,000 ; P 300 P134,000 ; P1,100 P137,000 ; P3,300 P137,000 ; P4,100
Problem 18. Mabi Corp. was contracted by Mr. Tristan P. to construct 35 condominium units. The estimated total cost of construction was P28,000,000. Mabi bills its clients at 120% of total costs estimated to complete a project. Details regarding the contract are given below: Units finished 10 18 7
2011 2012 2013
Costs incurred to date P8,412,500 P20,735,000 P31,500,000
What is the RGP during 2012 using the output measures? A. B. C. D.
P1,105,000 P1,700,000 P1,360,000 P1,410,000
Estimated cost at completion P33,650,000 P31,900,000 ?
Page 8 Problem 19. On December 1, 2013, Dewyze Inc. authorized Cook to operate as a franchise for an initial franchise fee of P3,400,000. P900,000 was received upon signing the contract, and the balance is to be paid by a non-interest bearing note, due in five equal annual installments beginning December 31, 2014. Prevailing market rate is 12%. PV factor is 3.60478. The down payment is nonrefundable and it represents a fair measure of the services already performed by Dewyze, however, with regards to the balance, substantial future services are still required. How much is the deferred franchise revenue to be recognized as of December 31, 2013? A. B. C. D.
P1,802,390 P2,702,390 P2,500,000 P1,518,677
Problem 20. Artemus Co. operates a branch in Manila City. On December 31, 2013, the Manila branch in the home office books showed a debit balance of P522,110. The interoffice accounts were in agreement at the beginning of the year. For purposes of reconciling the interoffice accounts, the following facts were given:
Shipments from home office to Manila branch costing P72,500 were in transit as of year-end. Manila recorded the said transfer twice at cost: one on December 31, 2013 and the other on January 1, 2014. The home office allocated to the Manila branch ¾ of the rent expenses it paid for the year ended 2013. The rent expense was P24,000. The home office sent a debit memo to Manila for the allocated amount, but the branch recorded the said debit memo by debiting the home office – current account and crediting rent payable. The branch wrote-off uncollectible accounts amounting to P10,120. The allowance for doubtful accounts is maintained in the books of the home office. The home office recorded the write-off as a write-off of its own accounts receivable. The branch collected accounts receivable from home office’s customers amounting to P52,920, net of 2% cash discount. The branch treated the said transaction as if it was a collection from its own customers. The home office was not yet notified of the said collection.
It is the policy of the home office to bill its branches at 20% above cost. What is the unadjusted balance of the home office-current account in the books of Manila branch on December 31, 2013? A. B. C. D.
P475,990 P461,490 P459,070 P463,650
-end of examination-
