RIZAL TECHNOLOGICAL UNIVERSITY
Junior Philippine Institute of Accountants
Boni Avenue, Brgy. Malamig, Mandaluyong City
SET A
NAME: 1ST SEM._SY. 17-18
MOCK COMPREHENSIVE EXAMINATION ADVANCED ACCOUNTING 1
Subject in the Actual CPA Board Examination:
Advanced Financial Accounting and Reporting (AFAR)
Pray before taking the examination. God Bless us!
MULTIPLE CHOICE THEORIES: Indicate your answers by writing the letter of your answer choice on
the provided answer sheet.
1. A form of joint venture where there is a separate establishment of a corporation, partnership, or other entity in
which each venturer has an interest.
a. Joint Arrangement c. Jointly Controlled Asset
b. Jointly Controlled Entity d. Jointly Controlled Operations
2. Under this treatment, the share of the venturer over the assets, liabilities, income, and expenses of the jointly
controlled entity are combined in a line by line basis in its consolidated financial statements.
a. Combined Method c. Equity Method
b. Installment Method d. Proportionate Consolidation
3. Generally, a managing venturer is designated to undertake the following, EXCEPT ONE:
a. To receive all remaining cash for managing the venture.
b. To maintain real accounts of the venture.
c. To make cash settlement to venturers upon termination of a completed venture.
d. To handle venture cash, making sales and or purchases.
4. The IAS recommends the use of the benchmark treatment (Proportionate Consolidation) because:
a. It is inappropriate to combine controlled items with jointly controlled items
b. It better reflects the substance and economic reality of a venturer’s interest over the Jointly Controlled
Entity.
c. Venturers have significant influence, rather than joint control, in a Jointly Controlled Entity.
d. All of the above.
5. An arrangement whereby the owner or seller delivers or transfers merchandise to another party who acts as an
agent for selling the goods.
a. Branch c. Consignment
b. Franchise d. None of the above
6. Goods on consignment should be included in the inventory of:
a. Both consignor and the consignee c. The consignee but not the consignor
b. The consignor but not the consignee d. Neither the consignor nor the consignee
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7. In consignment, revenue is normally recognized upon which transaction as stated in PAS 18 (Revenue):
a. When the goods are shipped to the consignee.
b. When cash is received from the customer.
c. When goods are sold by the consignee.
d. When an account sales report is received by the consignor and goods are sold.
8. It is the initial amount of revenue agreed in the contract and variations in contract work, claims, and
incentives.
a. Contract Revenue c. Total Estimated Gross Profit
b. Contract Price d. Claim
9. It is the agreed price upon by the contractor and the client for the construction of a specific project.
a. Contract Revenue c. Variation in Contract Work
b. Contract Price d. Total Estimated Cost
10. How should the balances of Progress Billings and Construction in Progress be shown at reporting dates prior
to the completion of a long-term contract?
a. Progress Billings as deferred income, Construction in Progress as a current asset
b. Net, as income from construction if credit balance, and loss fom construction if debit balance
c. Progress Billings as income, Construction in Progress as inventory
d. Net, as a current asset if debit balance and current liability if credit balance
11. The theoretical support for using the percentage-of-completion method of accounting for long-term
construction projects is that it:
a. Is conservative c. Closely conforms to the cost principle
b. Reports a lower net income d. Produces a realistic matching of expenses
with revenues
12. What is the basis for determining the gross profit to be recognized in the second year of a three-year contract
under the percentage-of-completion method?
a. Cumulative actual costs incurred only
b. Incremental cost for the second year only
c. Cumulative actual costs and estimated costs to complete
d. No gross profit would be recognized in year 2
13. It carries merchandise in stock obtained exclusively from the home office or purchased directly from
suppliers.
a. Agency c. Consignment
b. Branch d. Franchise
14. It carries samples or displays merchandise for sales promotion but does not carry stocks of such merchandise.
a. Agency c. Consignment
b. Branch d. Franchise
15. Which of the following is an exception for application of IFRS 15?
a. Insurance contracts c. Financial audit contracts
b. Pharmaceutical contracts d. All of the above
16. What is the entry required in the Branch books when an equipment is purchased by Home Office for the
branch? (Note: Records of plant assets are kept by Home Office)
a. Dr: Equipment, Cr: Home Office c. Memorandum Entry only
b. Dr: Home Office, Cr: Cash d. None of the Above
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17. A contract under which one party accepts significant insurance risk from another party by agreeing to
compensate the policyholder if a specified uncertain future event adversely affects the policyholder.
a. Liability Contract c. Insurance Contract
b. Assurance Contract d. Security
18. Two individuals who were previously sole proprietors formed a partnership. Property other than cash which is
part of the initial investment in the partnership would be recorded for financial accounting purposes at the
a. proprietors’ book values or the fair value of the property at the date of the investment, whichever is
higher.
b. proprietors’ book values or the fair value of the property at the date of investment, whichever is lower.
c. proprietors’ book values of the property at the date of investment.
d. fair value of the property at the date of the investment
19. Anton and Garcia formed a partnership, each contributing assets to the business. Anton contributed inventory
with a current market value in excess of its carrying amount. Garcia contributed real estate with a carrying
amount in excess of its current market value. At what amount should the partnership record each of the
following assets?
Inventory Real Estate
a. Carrying amount Market value
b. Market value Carrying amount
c. Carrying amount Carrying amount
d. Market value Market value
20. On June 30, 2016, a partnership was formed by Mendoza and Lopez. Mendoza contributed cash. Lopez,
previously a sole proprietor, contributed non-cash assets including realty subject to a mortgage which was
assumed by the partnership. Lopez’s capital account at June 30, 2016 should recorded at
a. The fair value of the property on June 30,2016
b. Lopez’s carrying amount of the property on June 30.2016
c. The fair value of the property on June 30,2016 less the mortgage payable
d. Lopez’s carrying amount of the property on June 30,2016 less the mortgage payable
21. A contract is wholly unperformed if
a. The entity has not yet transferred any promised goods or services to the customer
b. The entity has not yet received any consideration in exchange for promised goods or services
c. The entity is not yet entitled to receive any consideration in exchange for promised goods or services
d. All of the above
22. According to IFRS 15, the asset is transferred to a customer
a. When the asset is physically delivered to the customer’s premises
b. On the day specified by a contract with the customer
c. When the customer obtains control over it
d. On the day when the entity satisfies all performance obligations, specified in the contract with the
customer
23. A good or service that is promised to a customer is distinct if
a. The customer can benefit from the good or service on its own
b. The customer can benefit from the good or service together with other resources that are readily available
to the customer
c. The entity’s promise to transfer the good or service to the customer is separately identifiable from other
promises in the contract
d. All of the above
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24. Which of the following statements is true concerning the treatment of salaries in partnership accounting?
a. Partner salaries are directly closed to the capital account.
b. Partner salaries are equal to the annual partner drawings.
c. Partner salaries may be used to allocate profits and losses; they are not considered expenses of the
partnership
d. The salary of a partner is treated as compensation.
25. According to the cost recovery method of accounting, gross profit on an installment sale is recognized as
income:
a. On the date the final cash collection is received.
b. On the date of sale.
c. In proportion to the cash collections.
d. After cash collections equal to the cost of sales have been received.
26. For financial statement purposes, the installment method of accounting may be used if the:
a. Ultimate amount collectible is undetermined.
b. Percentage of completion method is inappropriate.
c. Installments are due in different years.
d. Collection period extend over more than 12 months.
27. According to the installment method of accounting, the gross profit on an installment sale is recognized in
profit or loss.
a. In proportion to the cash collections received.
b. On the date the final cash collection is received.
c. After cash collections equal to the cost of sales have been received.
d. On the date of sale.
28. A contract modification is the change in the price and/or scope that is approved by the parties to the contract
in a written form only.
a. True
b. False
29. Esker Inc. specializes in real estate transactions other than retail land sales. On January 1, 2017, Esker
consummated a sale of property to Kame Ltd. The amount of profit on the sale is determinable and Esker is
not obligated to perform any additional activities to earn the profit. Kames initial and continuing investments
were adequate to demonstrate a commitment to pay for the property. However, Eskers receivable may be
subject to future subordination. Esker should account for the sale using the
a. Deposit method. c. Cost recovery method.
b. Full accrual method. d. Reduced profit method.
30. Drew Co. produces expensive equipment for sale on installment contracts. When there is doubt about eventual
collectibility, the income recognition method least likely to overstate income is;
a. At the time the equipment is completed. c. The cost recovery method.
b. At the time of delivery. d. The installment method.
PROBLEM SOLVING. Indicate your answers by writing the letter representing your answer of your choice on the
provided answer sheet. Show your solution in good form at the back of your paper.
31. Dora and Diego formed a partnership on Jan. 1, 2018, agreeing to share for profit and losses in the ratio of 2:3
respectively. Dora invested machinery that cost her Php. 80,000.00. Diego invested Php. 50,000.00 cash and
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Php. 35,000.00 offices supplies. Three hours after formation of the partnership, the machinery was sold for
Php. 100,000.00. How much should be the capital balance of Dora right after formation?
a. Php. 88,000.00 c. Php. 92,000.00
b. Php. 100.000.00 d. Php. 80,000.00
32. On March 10. 2018. Lester and Ericka formed a partnership with each contributing the following assets:
ASSET LESTER ERICKA
CASH Php. 800,000.00 Php. 1,200,000.00
EQUIPMENT 750,000.00 1,250,000.00
BUILDING ---- 2,750,000.00
SUPPLIES 600,000.00 100,000.00
The building is subject to mortgage loan of Php. 1,300,000.00, which is to be assumed by the partnership
agreement provides that Lester and Ericka share profits and losses 30% and 70% respectively. On March 10,
2018 the balance in Ericka’s capital account should be:
a. Php. 4,000,000.00 c. Php. 4,910,000.00
b. Php. 4,390,000.00 d. Php. 5,300.000.00
33. Armuela, Lunes, and Legarda are partners with capital balances on January 1, 2018 of Php. 800,000.00, Php.
800,000.00 and Php. 700,000.00, respectively. Profits are shared equally. Legarda wishes to withdraw and it is
agreed that Legarda is to take certain furniture and fixtures with second-hand value of Php. 100,000.00 and a
note for the balance of Legarda’s interest. The furniture and fixtures are carried on the books at Php.
115,000.00. Brand new furniture and fixtures may cost Php130, 000.00. Compute for Legarda’s acquisition of
the second-hand furniture and fixtures will result to reduction in capital.
a. Php. 15,000.00 each for Armuela, Lunes, and Legarda
b. Php. 10,000.00 each for Armuela, Lunes, and Legarda
c. Php. 5,000.00 each for Armuela, Lunes, and Legarda
d. Php. 5,000.00 for Legarda
34. The same information in Number 33, compute for the value of the note that will Legarda get from the
partnership’s liquidation.
a. Php. 600,000.00 c. Php. 495,000.00
b. Php. 645,000.00 d. Php. 595,000.00
35. On January 1, 2018, Ceng and Feng decided to form a partnership. At the end of the year, the partnership
made a net income of Php. 60,000.00. The capital accounts of the partnership show the following transactions.
Date Ceng, Capital Feng, Capital
DR CR DR CR
January 1 -- P50,000 -- P35,000
April 1 P15,000 -- -- --
August 1 -- 10,000 -- 20,000
September 1 -- -- P15,000 --
October 1 -- 5,000 10,000 --
December 1 -- 10,000 -- 5,000
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Assuming that an interest of 60% per annum is given on weighted average capital and the balance of the
profits is allocated equally, the allocation of profits should be:
a. Ceng, P32,625; Feng, P27,357 c. Ceng, P32,625; Feng, P27,375
b. Ceng, P32,652; Feng, P27,357 d. Ceng, P32,625; Feng, P27,375
36. Feola and Balogbog shae profits and losses equally, Feola and Balogbog receive salary allowances of P20,000
and P30,000, respectively, and both partners receive 10% interest on their average capital balances. Average
capital balances are calculated at the beginning of each month regardless of when the capital contributions and
capital withdrawals were made, and partners drawings are not used in determining the average capital
balances. Total net income for 2018 is P120, 000.
Feola Balogbog
January 1 capital balances P 100,000 P 120,000
Yearly drawings (P1,500 a month) 18,000 18,000
Permanent withdrawals of capital:
June 3 (12, 000)
May 2 (15,000)
Additional Investments of capital:
July 3 40,000
October 2 50,000
What is the weighted average capital for Feola and Balogbog respectively for 2018?
a. P110,667 and 119,583 c. P126,667 and 105,333
b. P 105,333 and 126,667 d. P100,000 and 105,333
37. The following condensed balance sheet is presented for the partnership of Luarez, Lew,and Ayson, who share
profits and losses in the ration of 4:3:3, respectively:
Cash P 90,000
Other Assets 830,000
Luarez, loan 20,000
P940,000
Accounts Payable P210,000
Ayson, loan 30,000
Luarez, Capital 310,000
Lew, Capital 200,000
Ayson, Capital 190,000
P940,000
Assume that the assets and liabilities are fairly valued on the balance sheet and that the partnership decides to
admit Danielle as a new partner, with a 20% interest. No goodwill or bonus is to be recorded. How much
should Danielle contribute in cash or other assets?
a. P 140,000 c. P175,000
b. P 142,000 d. P177,000
38. The A and B partnership agreement provides for A to receive a 20% bonus on profits before the bonus.
Remaining profits and losses are divided between A and B in the ratio of 2:3, respectively. Which partner has
a greater advantage when the partnership has a profit or when it has a loss?
Profit Loss
a. A B
b. A A
c. B A
d. B B
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39. Shing, Inah, and Moe decided to dissolve the partnership on November 30, 2018. Their capital balances and
profit ratio on this date, follow:
Capital Balances Profit Ratio
Shing P 50,000 40%
Inah 60,000 30%
Moe 20,000 30%
The net income from January 1 to November 20, 2018 is P44,000. Also, on this date, cash and liabilities are
P40,000 and P90,000, respectively. For Shing to receive P55,000 in full settlement of his interest in the firm,
how much must be realized from the sale of the firm’s non-cash assets?
a. P196,000 c. P193,000
b. P177,000 d. P187,000
40. As of December 31, 2018, the books of Ton partnership showed capital balances of: T P40,000; O, P25,000;
N P5,000. The partners’ profit and loss ratio was 3:2:1, respectively. The partners decided to liquidate and
they sold all non-cash assets for P37,000. After settlement of all liabilities amounting P12,000, they still have
cash of P28,000 left for distribution. Assuming that any capital debit balance is uncollectible, the share of T in
the distribution of the P28,000 cash would be:
a. P17,800 c. P19,000
b. P18,000 d. 17,000
41. Steve and Job, partners, divide profits and losses on the basis of average capital. Capital accounts for the year
ended December 31, 2017, are shown below. The net profit for 2017 is P135, 000. (Changes in capitals during
the first half of a month are regarded as effective as of the beginning of the month; changes during the second
half of the month are regarded as effective as of the beginning of the following month.)
Steve, Capital Job, Capital
Debit Credit Debit Credit
January 1 P 300,000 P 330,000
March 9 50,000
April 14 150,000
July 1 100,000
September 4 40,000
September 22 100,000
October 26 75,000
What is the weighted average capital for Steve and Job respectively for 2017?
a. P 320,833 and 429,168 c. P 429,167 and 320,833
b. P 320,833 and 429,169 d. P 320,833 and 429,167
42. Elijah, Azi, and Knoxx formed a joint venture. Elijah has been designated as manager of the venture, of which
he is to receive a bonus of 15% of the profit after the deduction of bonus as an expense. The net profit, after
bonus, has been agreed to be divided as follows:
Elijah – 25 %; Azi – 40 %; Knoxx 35 %
After five months, the joint venture is terminated as of May 31, 2017. On this date, the trial balance kept by
Elijah contains the following balances:
DEBIT CREDIT
Joint Venture P90,000
Azi P5,000
Knoxx 20,000
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The venture has still some undisposed merchandise which Elijah agreed to purchase at its cost of P25,000.
The bonus of Elijah has not yet been taken up. The bonus amounts to:
a. P100,000 c. P 15,000
b. P115,000 d. P11,500
43. Using the information in No. 42, the net profit of the joint venture AFTER BONUS to Elijah is
a. P100,000 c. P 15,000
b. P90,000 d. P115,000
44. Summer and Autumn, in a joint venture, contributed P150,000 each in order to purchase canned goods which
were sold by lots at a closing-out sale. They agreed to divide their profits equally and each shall record his
purchase, sales and expenses in his own books. After selling almost all the canned goods, they wind up their
venture.
The following data relate to the venture transactions:
• Joint venture credit balances are as follows: Summer – P120,000, and Autumn – P105,000
• Expenses paid from joint venture cash were P15,000 by Summer and P19,500 by Autumn.
•Cost of unsold canned goods which Summer and Autumn agreed to assume were P4,500 and P7,000
respectively.
The total sales of the joint venture were
a. P525,000 c. P559,500
b. P536,500 d. d. P595,500
45. Using the information in No. 44, the final settlement due to Autumn including his investment was
a. P256,050 c. P263,750
b. P260,000 d. P236,750
46. Fengseng Corp. consigned 400 dresses to Sheng Fashions at a suggested retail price of P500 each. Moda paid
shipping costs of P2,1000 subject to subsequent settlement. Fengseng Corp and Sheng Fashions agreed that
any sales in excess of the suggested retail price will accrue to the latter. Sheng submitted an account sales on
the sale of 215 dresses, 40% of which was sold at P580 each and the rest at P640 each. Fengseng Corp. has a
gross profit ratio of 25% based on sales.
How much must Sheng remit to Fengseng Corp?
a. P107,500 c. c. P104,500
b. P132,440 d. d. P105,400
47. Using the information on No. 46, the commission of the consignee is?
a. P13,236 c. P49,800
b. P24,940 d. d. P105,400
48. Violet consigned 10 dozens of fine men’s suits with a cost of P1, 000 a suit to Finch Shop. Violet incurred
freight cost of P30 per dozen. A month later, Finch reported sales of 7 dozens at P2,000 a suit and expenses of
P3,000. Finch remitted the proceeds to Violet, net of the agreed 15% commission on sales.
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How much was remitted by Finch to Violet?
a. P139,800 c. P142,500
b. P140,000 d. P142,800
49. Using the information on No. 48 the consignment profit is
a. P58,590 c. P55,590
b. P58,500 d. P55,800
50. On October 1, 2016, Price Corp., a real estate developer, sold land to Greene Co. for P5,000,000. Greene paid
P600,000 cash and signed a 10-year P4,400,000 note bearing interest at 12%. The carrying amount of the land
was P4,000,000 on date of sale. The note was payable in forty quarterly principal installments of P110,000
beginning January 2, 2017. Price appropriately accounts for the sale under the cost recovery method. On
January 2, 2017, Greene paid the first principal installment of P110,000 and interest of P132,000. For the year
ended December 31, 2016, what total amount of income should Price recognize from the land sale and
financing?
a. P0 c. P252,000
b. P132,000 d. P120,000
51. The Mitch Subdivision sells residential subdivision lots on installment basis. The following information was
taken from the company’s records as at December 31, 2016:
Installment Accounts Receivable:
January 1, 2016 755,000
December 31, 2016 840,000
Unrealized Gross Profit, January 1, 2016339,750
Installments Sales 950,000
How much is the balance of unrealized gross profit as at December 31, 2016?
a. P427,500 c. P378,000
b. P339,750 d. P389,250
52. Francis Enterprise uses the installment method of accounting and it has the following data at the year-end:
Gross margin on cost 66-2/3%
Unrealized gross profit 192,000
Cash collections including down payments 360,000
What was the total amount of sales on installment basis?
a. P840,000 c. P480,000
b. P552,000 d. P648,000
53. ABC Construction Company uses the Percentage-of-Completion method of accounting. In 2016, ABC began
work under contract #1348, which provided for a contract price of P20,000,000. Other details follows:
2015 2016
Costs incurred during the year P3,000,000 P15,750,000
Estimated costs to complete, as of 12,000,000 0
Dec. 31
Billing during the year 3,600,000 15,400,000
Collections during the year 2,500,000 15,500,000
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The portion of the total contract price to be recognized as revenue in 2016 is
a. P2,500,000 c. P2,000,000
b. P3,600,000 d. d. P4,000,000
54. DEF Construction Company uses the Percentage-of-Completion method of accounting for its long-term
construction contracts. In 2016, DEF started to construct a building for P10,500,000. The construction project
was completed in 2017. The following pertinent information were extracted from its accounting records:
2015 2016
Progress billings during the year P3,850,000 P6,650,000
Costs incurred during the year 3,150,000 6,300,000
Collected on billings during the 2,450,000 8,050,000
year
Estimated costs to complete the 6,300,000 0
project
How much income should DEF have recognized on this contract for the year ended 2016?
a. P385,000 c. P538,000
b. P835,000 d. d. P350,00
55. Alaska Construction Inc. has consistently used the P.O.C. method of recognizing income. During 2016,
Alaska started work on a P15,000,000 fixed-price construction contract. The accounting records disclosed the
following data for the year ended Dec. 31, 2016: cost incurred – P4,650,000; estimated cost to complete –
P10,850,000; progress billings – P5,500,000; collections P3,500,000.
How much loss should DDE have recognized in 2016?
a. P150,000 c. P750,000
b. P500,000 d. d. P350,000
56. You were engaged to audit the books of accounts of CTH Contractors which had a three-year construction
contract in 2016 for P9,000,000. CTH uses the POC 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 P300,000
Construction in Progress P937,500
Less: Accounts billed 843,750
10% Retention 93,750
Profit Recognized in 2016 (before tax) 150,000
CTH Contractors maintains a separate bank account for each construction contract. Bank deposits to this
contract amounted to P500,000.
How much cash collected on the contract was not yet deposited at Dec. 31, 2016?
a. P43,750 c. P47,350
b. P278,500 d. d. P287,500
57. Red Inc. opened an agency in Makati in 2016. The following is a summary of transactions of the agency:
Sales orders sent to home office P55,000
Sales orders filled by home office in 2016 46,500
Freight on shipment to agency 1,100
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Collections, net of 2% discount 39,690
Selling expenses paid from the agency working fund 2,820
Administrative expenses charged to agency 5% of sales
Samples shipped to agency:
Cost 3,000
Inventory, Dec. 31, 2016 1,100
The company maintains its gross margin on agency sales at 30% excluding freight cost on shipments to
agency. The agency cost of sales including freight was:
a. P3,000 c. P33,650
b. P39,600 d. P47,4300
58. Using the information on No. 57, the agency’s net income must be:
a. P4,995 c. P6,100
b. P1,100 d. P6,995
59. Baj Jaw Corp. has operated a branch in Cagayan de Oro for one year. Shipments are billed to the branch at
cost. The branch carries its own account receivable, makes its own collections and pays its own expenses. The
transactions for the year are given effect to in the December 31, 2016 trial balance shown as follows:
Cash P4,200
Home Office Current P17,500
Shipment from Home Office 67,680
Account Receivable 12,800
Expenses 6,820
Sales 74,000
P91,500 P91,500
The branch reported an inventory of December 31, 2016 of P9, 180. The net profit of the Cagayan de Oro
branch for 2016 was:
a. P8,680 c. P67,180
b. P9,180 d. P74,000
60. Using the information on No. 59, the January 1, 2017, balance of the Branch Current account in the home
office books should be :
a. Zero c. P26,180
b. P26,680 d. P67,680
Prepared by:
Checked by:
Diego Melo Buenconsejo Prof. Macrina Violeta Vicente-Mutuc, CPA
President, RTU-JPIA Faculty/ Adviser,RTU-JPIA
Recommending Approval:
Cedric Legaspi Tagala
VP for Information and Publicity, RTU-JPIA Prof. Elizabeth E. Salvador, CPA
Department Head, Accountancy
Approved by:
Prof. Amelia M. Arganda, CPA
CBET, Dean
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