AFAR Flashcards
What is the classification of the joint arrangement when the assets and liabilities relating to the arrangement are held by a separate vehicle or when the arrangement is established with a separate vehicle?
It can be either a joint operation or joint venture depending on the legal form of the separate vehicle, terms of the contractual arrangement or other relevant facts and circumstances.
Peza Company uses a predetermined factory overhead application rate based on direct labor cost. For the year ended December 31, 20X1, Peza’s budgeted factory overhead was P600,000, based on a budgeted volume of 50,000 direct labor hours at a standard direct labor rate of P6.00 per hour. Actual factory overhead amounted to P620,000, with an actual direct labor cost of P325,000. For 20X1, overapplied factory overhead was:
P30,000
Magic Corp. has its main office in Marikina City and established a branch in Bacolod. During 20x1 its first year of operations, the home office in Marikina shipped goods to the branch in Bacolod at a total billing price of P303,050, which was 10% above the cost. On December 31, 20x1. The branch reported a net income from its operations of P5,500 and an ending inventory of P61,050. How much is the net income (loss) of the branch insofar as the home office is concerned?
P27,500
XYZ entered into a long-term construction contract to construct an underpass for an initial contract price of P75,000,000. During 200B, the contract price decreased due to the change in the project design.
The following data were available:
200A
200B
200C
Cost incurred
P18,000,000
P30,000,000
?
Realized gross profit/(loss)
?
(12,000,000)
P4,000,000
Percentage of completion as of year end
30%
60%
80%
Compute the cost of construction presented in the Statement of Comprehensive Income of XYZ for the year ended December 31, 200C.
P10,500,000
Juwan Manufacturing has the following account balances at the beginning of the current year:
Raw Materials Inventory
P 112,500.00
Work in Process Inventory
P 337,500.00
Finished Goods Inventory
P 270,000.00
Additional information:
Issuance of Raw Materials to the production department, 10% are indirect materials.
P 405,000.00
Direct Labor
P 270,000.00
Indirect Labor
P 45,000.00
Overhead Charged
P 166,500.00
At the end of the month:
Unfinished jobs
P 168,750.00
Unsold finished goods
P 202,500.00
Which of the following is the amount to be reported as the cost of goods sold?
P1,037,250.00
Which of the following are constant amounts per unit basis as activity changes within a relevant range?
Variable Costs
Alvin Corporation is undergoing liquidation. On January 1, 200A, its Statement of Financial Position showed the following accounts:
Cash
P150,000
Salaries Payable
P85,000
Accounts Receivable-net
290,600
Accounts Payable
120,700
Inventory
50,000
Mortgages Payable
428,000
Prepaid Expenses
10,400
Loan Payable
130,000
Building
380,000
Notes Payable
84,300
Goodwill
80,000
Ordinary Shares
170,000
Deficit
(57,000)
Total Assets
P961,000
Total Liabilities & Equity
P961,000
The mortgage payable is secured by the Building having a realizable value of P400,000. Accounts Payable amounting to P75,000 is secured by receivables amounting to P90,600 (P9,900 of which is uncollectible). The balance of receivables which has a realizable value of P187,500 is used to secure the loan payable. Inventory has a realizable value of P41,200. In addition to recorded liabilities are: accrued interest on mortgage payable amounting to P4,280, liquidation expenses amounting to P11,300 and taxes amounting to P5,600.
What is the estimated payment to unsecured creditors without priority? (Use 2 decimal place for estimated recovery percentage. example: 88.89%)
P122,161
Morning Manufacturing has the following account balances at the beginning of the current year:
Raw Materials Inventory
P 112,500.00
Work in Process Inventory
P 337,500.00
Finished Goods Inventory
P 270,000.00
Additional information:
Issuance of Raw Materials to the production department, 10% are indirect materials.
P 405,000.00
Direct Labor
P 270,000.00
Indirect Labor
P 45,000.00
Overhead Charged
P 166,500.00
At the end of the month:
Unfinished jobs
P 168,750.00
Unsold finished goods
P 202,500.00
Which of the following is the amount to be reported as the cost of goods manufactured?
P969,750.00
Theo and Mat have stipulated in their partnership agreement the following:
a. Salary allowances of P60,000 each.
b. 20% bonus to Theo out of the net income after deducting the salary allowances but before deducting the bonus.
c. Remaining profit to be shared equally.
The partnership has produced a profit of P360,000. What amount is the share of Mat in the profit?
P156,000
If the trade-in value is less than the fair value of the asset, there is:
Under Allowance
Parc Links Development builds replicas of residences of famous and infamous people. The company is highly automated, and the new accountant-owner has decided to use machine hours as the basis for predicting maintenance costs. The following data are available from the company’s most recent four (4) months of operations:
Month
Machine Hours
Maintenance Costs
1
460
P 6,836.50
2
399
P 5,324.00
3
496
P 5,989.50
4
424
P 5,505.50
Using the high-low method, which of the following is the variable cost per unit?
P6.86
Which of the following combines direct material and direct labor actual costs with the overhead assigned using a predetermined rate/s?
Normal Cost System
Shoyu Development builds replicas of residences of famous and infamous people. The company is highly automated, and the new accountant-owner has decided to use machine hours as the basis for predicting maintenance costs. The following data are available from the company’s most recent six (6) months of operations:
Month
Machine Hours
Maintenance Costs
1
289
P 5,783.00
2
319
P 6,176.25
3
344
P 5,041.88
4
334
P 6,478.75
5
387
P 7,272.81
6
350
P 6,327.50
Using the high-low method, the variable cost per unit is P15.20. Which of the following are the fixed costs of the highest and lowest level of activity?
P 1,389.57
Malolos Corporation bills its newly established branch for merchandise at 140% of the cost. At the end of its first month, the branch reported the following:
Merchandise from the home office, at billed price – P28,000;
Merchandise purchased locally by the branch, P10,000;
Inventory, January 31, of which P2,000 are of local purchases, P9,000;
Net sales for the month, P43,500.
What is the branch ending inventory at cost?
P7,000
Partners Carlo, Julia, Michael, and Oslo have decided to liquidate their partnership. The liquidation process will commence on January 1, 200B. Their statement of financial position as of December 31, 200A shows the following balances:
Cash
P123,000
Trade Receivables
542,000
Inventory
342,000
Equipment
738,000
Advances to Carlo
31,000
Receivable from Michael
55,000
Total Assets
1,831,000
Trade Payable
367,000
Long-term Debt
599,000
Payable to Julia
46,000
Carlo, Capital
361,000
Julia, Capital
341,000
Michael, Capital
345,000
Oslo, Capital
(228,000)
Total Liabilities & Equity
1,831,000
Partners share the profits and losses of the partnership equally. During 200B, trade receivables of P300,000 were collected and the rest were deemed uncollectible. Inventories were sold for a total gross profit of P13,000. Equipment was first refurbished for a cost of P8,000 cash before ultimately being sold to a buyer for P740,000. Creditors of trade payable amounting to P7,000 condoned the amount owed to them. Long-term debt incurred interests amounting to P1,000.
Assume that all partners are insolvent, how much cash will Carlo receive?
P177,667
Cologna Center reported the following information regarding its inventories:
Products in the beginning WIP Inventory (40% complete as to labor and overhead or conversion)
16,500
Products started during the current period
662,310
Products completed and transferred to FG Inventory
669,900
Products in ending WIP Inventory (80% complete as to labor and overhead or conversion)
8,910
Which of the following is the amount to be reported as the total physical units to account for?
678,810
On March 1, 20x1, Ana, Ben, and Ced formed a partnership by combining their separate business proprietorships. Ana contributed cash of P100,000. Ben contributed property with a P72,000 carrying amount, a P80,000 original cost, and P160,000 fair value. The partnership accepted responsibility for the P70,000 mortgage attached to the property. Ced contributed equipment with a P60,000 carrying amount, P80,000 original cost, and P110,000 fair value. The partnership agreement specifies that profits and losses are to be divided equally but is silent regarding capital contributions. Which partner has the largest capital account balance on March 1, 20x1?
Ced
Liwanag Company has provided the following information:
Estimated MOH
P 405,000.00
Materials cost
P 675,000.00
DL cost (100,000 DLH)
P 225,000.00
Machine hours
22,500
Units produced (est.)
90,000
Which of the following is the predetermined rate based on direct labor hours?
P4.05
A not-for-profit organization receives two gifts. One is P80,000 and is restricted for paying salaries of teachers who help children learn to read. The other is P110,000, which is restricted to purchasing playground equipment. The organization spends both amounts properly at the end of this year. The organization records no depreciation during this period and has elected to view the equipment as having a time restriction. On the statement of activities, what is reported for unrestricted net assets?
An increase of P80,000 and a decrease of P80,000.
SBN Company has provided the following information:
Estimated MOH
P 405,000.00
Materials cost
P 675,000.00
DL cost (100,000 DLH)
P 225,000.00
Machine hours
22,500
Units produced (est.)
90,000
Which of the following is the predetermined rate based on units of production?
P4.50
Samurai Development builds replicas of residences of famous and infamous people. The company is highly automated, and the new accountant-owner has decided to use machine hours as the basis for predicting maintenance costs. The following data are available from the company’s most recent eight (8) months of operations:
Month
Machine Hours
Maintenance Costs
1
275
P 4,048.00
2
319
P 4,620.00
3
209
P 2,970.00
4
341
P 5,060.00
5
418
P 6,215.00
6
363
P 4,840.00
7
451
P 5,445.00
8
385
P 5,005.00
Using the high-low method, which is the change in cost compared to the change in activity within the relevant range?
Machine Hours 242; Maintenance Costs P 2,475.00
A controlling interest in a company implies that the parent company:
Has acquired a majority of the subsidiary’s ordinary shares
A national government agency (NGA) in the Philippines paid one of its accounts payable and withheld cash of P9,000, which represents the 5% withholding VAT per relevant tax laws. The entry of the national government agency will include a debit to:
Accounts payable P180,000
On October 17, 20X1, Levis, Inc. purchased an inventory costing 10,000 baht from a Thailand firm. Payment is due on January 15, 20X2. Also, on October 17, Levis, Inc. entered into a foreign exchange forward to buy 10,000 baht on January 15, 20X2.
Spot rate (baht)
10/17/X1 P1.30
12/31/X1 P1.42
1/15/X2 P1.40
Forward rate (baht)
10/17/X1 1.36
12/31/X1 1.43
1/15/X2 1.40
In the profit and loss statement, foreign exchange gain or loss due to the forward contract amounted to:
20X1: P700 gain; 20X2: P300 loss
Loy Company uses job-order costing. Factory overhead is applied to production at a predetermined rate of 150% of direct labor cost. Any over or underapplied factory overhead is closed to the cost of goods sold account at the end of each month. Additional information is available as follows:
Direct materials
P4,000
Direct labor
2,000
Applied factory overhead
3,000
Total
P9,000
· Jobs 102, 103, and 104 were started in February.
· Direct materials requisitions for February totaled P26,000.
· Direct labor cost of P20,000 was incurred for February.
· Actual factory overhead was P32,000 for February.
The only job still in process on February 28 was Job 104, with costs of P2,800 for direct materials and P1,800 for direct labor. The cost of goods manufactured for February was:
P77,700
These are liabilities that are entirely covered by the pledged assets.
Fully secured liabilities
On January 1, the Municipality of Pateros purchased a 5-year P900,000 face value bond. The issuer pays 10% interest at the end of each year. The prevailing interest rate is 12%. What is the entry to be made by the Municipality of Pateros on January 1?
Credit to Cash in Bank – Local Currency Account, P835,114
Woody and Citrus, Inc. reported the following information regarding its inventories:
Products in the beginning WIP Inventory (40% complete as to labor and overhead or conversion)
16,500
Products started during the current period
662,310
Products completed and transferred to FG Inventory
669,900
Products in ending WIP Inventory (80% complete as to labor and overhead or conversion)
8,910
Which of the following is the amount to be reported as the physical units accounted for?
678,810
Mirana Manufacturing Co. consigned 12 Xtreme colored TV sets costing P9,000 each to Medusa Trading Corporation. The freight charges were paid by the consignor amounting to P600. Medusa Trading sold eight (8) sets and remitted P82,600 to the consignor after deducting the following from the selling price of the sets sold:
Commission on selling price – 12%; Selling expenses – P1,200; cost of antennae given free – P1,400; delivery and installation – P2,800
What is the net income of Mirana Manufacturing Co.?
P10,200
Mark and Darrel are partners who share profits and losses in the ratio of 6:4, respectively. On May 1, 20x1, their respective capital accounts were as follows:
Mark – P120,000; Darrel – P100,000.
On that date, Rosbert was admitted as a partner with one-third (1/3) interest in capital and profits for an investment of P80,000. The new partnership began with a total capital of P300,000. Immediately after Rosbert’s admission, Mark’s capital should be:
P108,000
Manahan manufactures two (2) versions of a product. Production and cost information show the following:
Model A
Model B
Units produced
100
200
Material moves
10
40
Direct labor hours per unit
1
3
Material handling costs total P100,000. Direct labor hours are used to allocate overhead costs. The material handling costs allocated to each unit of Model A would be:
P143
A company uses the installment method of accounting to recognize income, and pertinent data are as follows:
Installment sales
20x1 P300,000
20x2 P375,000
20x3 P360,000
Cost of sales
20x1 225,000
20x2 285,000
20x3 252,000
Balance of gross profit at year-end
20x1
52,500
15,000
20x2
54,000
9,000
What is the total realized gross profit in 20x2?
P73,500
What is the cash account used by national government agencies for cash payments?
Cash Modified Disbursement System Regular
Willy & Sons specializes in selling and installing upscale home theater systems. On March 1, 20X6, Willy sold a premium home theater package that includes a projector, set of surround speakers, high-quality leather seats, and complete installation service for P32,500. If sold separately, each of these goods and services would have cost P15,000 (projector), P12,500 (speakers), P17,500 (seats), and P3,000 (installation), respectively. How much of the transaction price would be allocated to the projector, the speakers, the leather seats, and the installation service, respectively, assuming that each of these four (4) parts of the contract is a separate performance obligation:
P10,156; P8,463; P11,849; P2,031
A branch journal entry debiting Home Office and crediting Cash may be prepared for a:
The branch’s acquisition for cash of plant assets is to be carried in the home office accounting records
In a business combination, the acquiree is the party that:
Gives up control over the net assets acquired
It is maintained in the branch’s books as an equity account.
Home office
On October 5, 20X1, the PC Trading Co. consigned 30 computer units, costing P8,000 each, to Olongapo, Inc. The units were to be sold on either a cash or credit basis at a commission of 15% of net sales. The consignor paid freight of P1,800 on the shipment. On November 11, the consignee received the goods. Sales were made as follows:
October 15: 10 units for cash at P13,000 each
October 28: 12 units on account at P14,000 each
On October 31, 20X1, collections on accounts amounted to P95,000, and an allowance of P2,000 was given to a credit customer for a defective unit. On November 15, 20X1, a receivable balance of P7,000 was determined to be uncollectible. On December 21, 20X1, the consignee made the proper remittance.
The consignment profit is:
P67,280
Max and Tim, who share profits and losses equally, decided to liquidate their partnership when their net assets amounted to P260,000 and capital balances of P170,000 and P90,000, respectively. If noncash assets were sold for an amount equal to its book value, what amount of cash should Max and Tim receive, respectively?
P170,000 and P90,000
This method recognizes revenue based on the direct measurement of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract.
Output method
Jake and Janine were partners before they admitted John. The share profits and losses 7:3. John was admitted into the partnership by contributing cash for 35% interest and 15% share in the profits and losses. The capital balances of Jake and Janine combined were P390,000 after the admission of John. Upon admission, John had a capital credit of P60,000 in addition to his contribution. How much is the cash contribution of John?
P150,000
The conventional system assigns the Product Development Department’s human resources costs to products using direct labor hours (DLHs). The department had 20 employees, and incurred P500,000 (or P25,000 per employee) of human resources costs in 20CY. During the same year, expected DLHs had been 150,000, and 15,000 units of B1430 were produced using 5,000 DLHs. Using the traditional costing method, which of the following is the production cost per unit for product B1430?
1.11
The national government (NG) received a grant from the World Bank amounting to P150 million to construct railways. Under the terms of the grant, the construction project shall be completed within three (3) years from the receipt of the grant. Otherwise, the money shall be returned to the grantor. The money can only be used as stipulated, and the NG is required to include a note in the financial statement detailing how the money was spent. The Department of Public Works and Highways (DPWH) will be the implementing entity. What is the account title to be debited in a journal entry to record the Notice of Cash Allocation (NCA) receipt for the construction of railways?
Debit to Cash – Modified Disbursement System (MDS), Regular, P150,000,000
On January 1, 20X1, the Gomez Company sold equipment to its wholly owned subsidiary, Olandez Company, for P1,800,000. The equipment cost Gomez P2,000,000; accumulated depreciation at the time of sale was P500,000. Gomez was depreciating the equipment using the straight-line method for over 20 years with no salvage value, a procedure Olandez continued. On the consolidated balance sheet on December 31, 20X1, the cost and accumulated depreciation, respectively, should be
P2,000,000 and P600,000
Gladius Industries received a P300,000 prepayment from Epson Associates for selling new equipment. Gladius will bill Epson an additional P100,000 upon delivery of the equipment. Upon receipt of the P300,000 prepayment, how much should Gladius recognize for a contract asset, a contract liability, and accounts receivable?
Contract asset: P0; contract liability: P300,000, accounts receivable, P100,000.
A company purchased merchandise to be resold at increasing costs during the year 202b. The purchases were made at the following costs:
Jan. 01, 202b (from 202a)
200
units
@
P 9.00
Jan. 25, 202b purchase
300
units
@
P10.00
June 20, 202b purchase
400
units
@
P11.00
Oct. 10, 202b purchase
400
units
@
P12.00
Assuming that the company uses FIFO, which will be the company’s cost of goods sold for the 500 items sold in 202b?
P4,800.00
The partnership of Yawi, Kiel, and Karltzy was liquidated. The partners have shared profits and losses in the ratio of 3:4:3. Prior to liquidation, the capital balances were the following:
Yawi
P(30,000)
Kiel
60,000
Karltzy
(5,000)
Cash and other assets totaled P100,000, with liabilities amounting to P75,000. Liquidation left the partnership with P60,000, which is insufficient to pay the liabilities. Each partner can contribute P10,000 (but not more) from personal assets. Determine how much cash Yawi receives or pays in (invest) as a result of the liquidation.
Receives (collects): P0; Pays-in (invest): P10,000
This method of installment liquidation is used to determine the safest amount of cash that can be distributed to the partners as of an installment period.
Safe payment schedule
At the end of 20x1, the branch reported an inventory of P15,625. The home office bills this branch at 125% of the cost. During 20x2, goods costing P300,000 were shipped to the branch. The allowance for overvaluation after adjustment shows a balance of P16,250 at the end of the year.
What is the realized markup on shipments sold to external parties?
P61,875
Foodie Manufacturing has the following account balances at the beginning of the current year:
Raw Materials Inventory
P 25,000.00
Work in Process Inventory
P 75,000.00
Finished Goods Inventory
P 60,000.00
Purchased of Raw Materials:
On account
P 100,000.00
Cash
P 40,000.00
Issuance of Raw Materials to the production department, 10% are indirect materials.
P 90,000.00
Which of the following is the amount to be reported as raw materials inventory for January 31?
P75,000.00
