BB 1x44 eoucarion ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 |i - Teacher's Guide Module #26 Name: Class number: Section: Schedule: Date: Materials: ‘ACC 110 - Accounting for Special Transactions ‘Student Activity Sheet; THIRD PERIODIC EXAMINATION calculator; pencil with eraser, ball pen and Scantron Answer Sheet 1. Asset contributions by partners to a partnership business are initially measured at a. fair amount. b. carrying value. ©. fair value. 4. fair lady. 2. Red and White formed a partnership in 2003. The partnership agreement provides for annual salary allowances of P55,000 for Red and 45,000 for White. The partners share profits equally and losses in a 60/40 ratio. The partnership had eamings of 80,000 for 2003 before any allowance to partners. What amount of these earings should be credited to each partner's capital account? Red White a. 40,000 40,000 b. 43,000 37,000 cc, 44,000 36,000 d. 45,000 35,000 ‘and B formed a partnership on March 1, 20x1. The partnership agreement stipulates the following: * Annual salary allowance of P100,000 for A. ‘* Interest of 10% on the weighted average capital balance of B. The partners share profits and losses on a 60:40 ratio. During the period the partnership earned a profit of 200,000. ‘The movements in B's capital account are as follows: B, Capital March 1 initial 160,000 investment July 34 60,000 | 80,000 _S2Pt. 30 additional withdrawal investment 20,000 _D8e. 31 additional investment end This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)> PHINMA EDUCATION ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 Teacher's Guide Module #26 Name: Class number: Section: Schedule: Date: How much is the interest on B's weighted average capital? a. 12,833 b. 13,443 ©, 11,323 d. 14,516 The next two items are based on the following information: The following condensed balance sheet is presented for the partnership of Alfa and Beda, who share profits and losses in the ratio of 60:40, respectively: Cash 45,000 Other assets 625,000 Beda, loan 30,000 Accounts payable 120,000 Alfa, capital 348,000 Beda, capital 700,000 4. The assets and liabilities are fairly valued. Alfa and Beda decide to admit Capp as a new partner with 20% interest, No goodwill or bonus is to be recorded. What amount should Capp contribute in cash or other assets? a. 110,000 b. 116,000 c. 140,000 d. 145,000 5. Instead of admitting a new partner, Alfa and Beda decide to liquidate the partnership. If the other assets are sold for 500,000, what amount of the available cash should be distributed to Alfa? a. 255,000 b. 273,000 ¢, 327,000 d. 348,000 6 ‘A and B decided to liquidate their partnership. The partnership's records show the following information: Cash 20,000 Non-cash assets 0.000 This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)S awa Eoocaron ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 Teacher's Guide Module #26 Name: Class number: Section: Date: Total assets Liabilities 15,000 Loan payable to Partner A 10,000 Loan payable to Partner B 17,000 A, capital (80%) 36,000 B, capital (20%) a Total liabilities and equity All the non-cash assets were sold for 50,000. Selling costs of 5,000 were incurred on the sale. How much did B receive in the cash distribution to the partners? a. 18,000 b. 22,000 ©. 32,000 d. 48,000 7. ‘ABC Co. is undergoing liquidation. Information before the start of the liquidation process is as follows: Cash 10,000 Accounts payable 20,000 Accounts reosivable 80,000 Payable to B 20,000 Receivable from A 10,000 A, Capital (50%) 250,000 Inventory 180,000 B, Capital (30%) 450,000 Equipment, net 320,000 C, Capital (20%) 400,000 Total 600,000 Total Liab. & Equity 600,000 Ifa cash priority program is used, which of the following partners has the most priority and how much is the total payment to that partner before everyone else share in the remaining cash based on the profit-sharing ratio? a. A, 26,000 B, 26,000 B, 20,000 b. © d. C,6,000 This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)HINA EOOCATION: ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 ~ acanaiae Teacher's Guide Module #26 Name: Class number: Section: Schedule: Dat 8. Which of the following is not considered an unsecured liability with priority? a. Administrative expenses relating to liquidation b. Unpaid employee salaries and other benefits ©. Liability with collateral security d. Taxes and assessments 9. The primary difference between a balance sheet and an accounting statement of affairs is that a balance sheet reflects book values, while a statement of affairs emphasizes realization values. assets are arranged in a different sequence. liabilities are arranged in a different sequence. owners’ equity is not considered in the statement of affairs, eege 10. Read Co, and Learn Co, are national distributors of textbooks. Read and Learn enters into a contract to acquire a warehouse in a particular region, Each party will use the warehouse to store its own inventories. The parties agree to share in the costs of acquiring and maintaining the warehouse. The arrangement between Read and Leam is most likely a a. joint operation b. jointly controlled asset «, joint venture d none of these 11. A party to a joint venture that has joint control of that joint venture. a. joint venturist b. joint operationer «, joint arrangementor d. joint venturer 12. On January 1, 20x1, ABC Co. enters into a contract with a customer for the construction of a building. The contract price is 1,000,000. The following are the transactions during 20x1 © Atcontract inception, the customer makes an advance payment of P100,000 as facilitation fee. ABC Co. incurs total contract costs of P300,000 during the period. The estimated costs to complete as of year-end amounts to P500,000. ABC Co. collects the billing, net of 10% retention by the customer to be used to rectify any unsatisfactory work determined at the completion of the contract. How much is the gross profit eared from the contract in 20x17 a. 75,000 b. 82,000 cc. 375,000 d. 482,000 This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)PHINMA EDUCATION ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 . nares Teacher's Guide Module #26 Name: Class number: Section: Schedule: Dat In 20x1, ABC Co. entered into a construction contract with a customer. The contract price is 10,000,000. Information on the contract follows: 20x14 20x2 20x3 Costs incurred to date 2,400,000 4,500,000 6,000,000 Estimated costs to - complete 3,600,000 1,500,000 13. At contract inception, ABC Co. assesses its performance obligations in the contract and concludes that it has a single performance obligation that is satisfied over time. ABC Co. determines that the measure of progress that best depicts its performance on the contract is “cost-to-cost’ method. How much is the revenue recognized in 20x17 a, 4,200,000 b. 4,000,000 ©, 2,800,000 do 14. On Jan. 1, 20x1, Pane Co. entered into a franchise agreement with Hero Co. The franchise contract gives Hero Co. the right to use Pane's trademark and proprietary processes for a period of 4 years. The franchise requires payment of an upfront fee of P1,000,000, payable at contract inception, and 5% monthly royalty based on sales. Aside from the granting of the license, the franchise agreement also requires Pane Co, to undertake pre-opening activities to setup the contract and post-commencement activities, such as research and development and marketing campaigns, to support the intellectual property. Although the activities do not result in the direct transfer of a good or service to Hero Co. as the activities occur, it is expected that Hero Co. will benefit from them. All the necessary preparations were completed and Hero Co. started business operations on January 31, 20x1 How should Pane Co. recognize revenue from the continuing franchise fee? a. Pane Co. shall estimate the variable consideration and amortize it as revenue in full on Jan. 1, 20x1 b. Pane Co, shall estimate the variable consideration and amortize it as revenue over the license period, ©, Pane Co, shall estimate the variable consideration, discount it to present value, subject it to “Constraining estimates of variable consideration,” and amortize it to revenue over the license period. d. Pane Co, shall recognize revenue equal to 5% of the franchise's sales as the sales occur. 16. On December 31, 20x1, Entity A enters into a contract with Customer X to transfer a license for a fixed fee of 100,000 payable as follows: © 20% payable upon signing of contract. * 80% due in four equal annual installments starting December 31, 20x2. The appropriate discount rate is, 12%, The license provides Customer X rights over Entity A’s patented processes. Customer X continues to operate This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)HINA EOOCATION: ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 . onset Teacher's Guide Module #26 Name: Class number: Section: Schedule: Da using its trade name and has the discretion of developing a new product name for the products it will produce using the patented processes. The license does not explicitly require Entity A to undertake activities that will significantly affect the intellectual property to which Customer X has rights. Neither does Customer X expect that Entity A will undertake such activities. Entity A grants the license to Customer X on December 31, 20x1 How much revenue from the franchise contract will Entity A recognize in 20x1? a, 80,747 b. 21,187 ©. 20,000 do 16. In accounting for sales on consignment, sales revenue and the related cost of goods sold should be recognized by the a. consignor when the goods are shipped to the consignee. b. consignee when the goods are shipped to the third party. ©, consignor when notification is received that the consignee has sold the goods. 4. consignee when cash is received from the customer. Use the following information for the next two questions: Schindler Co. consigned 20 water heaters to Parallax Co. on January 1, 20x1. The unit cost per water heater is 10,000. Schindler pays P3,000 in transporting the water heaters to Parallax. At month-end, Parallax remits 232,000 for the sale of 16 water heaters, after deduction for the following: 20% commission based on selling price Freight out 16,000 Installation costs 8,000 17. How much is the profit recognized by Schindler on the con: a. 60,600 b. 66,000 ©. 66,900 d. 69,600 nment arrangement? 18, How much is the total cost of the unsold water heaters? a. 40,600 b. 44,600 cc. 46,400 d. 46,000 Use the following information for the next two questions: CR Manufacturing Co. consigned to CE Trading Corp. twelve (12) Sony colored TV sets which cost 9,000 each, Freight out was paid by the consignor in the amount of P600. CE Trading sold eight (8) sets, rendered an account sales, and remitted the amount of P82,600 after deducting the following from the selling price of the This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)> PHINMA EDUCATION ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 Teacher's Guide Module #26 Name: Class number: Section: Date: sets sold Commission on selling price 12% Selling expenses 1,200 Cost of antennae given free 1,400 Delivery and installation 2,800 19. The total selling price of the eight (8) sets sold by CE Trading Corp. is a. 100,000 b. 88,000 ©, 98,560 d. 78,571.43 20. The net profit of CR Manufacturing Co. on the eight (8) sets sold by CE Trading Corp. is a. 40 b. 9,332.80 ©. 10,200 d. 10,600 Use the following information for the next two questions: Stainless Works Mfg. Co. consigned 5 dozens of stainless chairs to Urban Furniture Co. on April 1, 20x1. Each chair cost 120 and the consignor paid 600 for the shipment to the consignee. On August 15, 20x1, 36 were already sold and the consignee rendered an account sales, and remitted the balance due the consignor in the amount of P5,580 after deducting the following: Commission at 15% of the selling price Selling expenses 360 Delivery and installation 180 21, How much is Stainless Works Mfg. Co.'s profit on the consignment? a. 660 b. 900 ©. 1,000 d. 1,260 22, The cost of the inventory on consignment in the hands of Urban Furniture Co. is a. 2,880 b. 3,120 ©, 3,480 This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)\CCOUNTING FOR SPECIAL TRANSACTIONS Part 1 PHINMA Et . Teacher's Guide Module #26 AMON Accit0: Name: Class number: Section: Schedule: Da . 4,320 Use the following for the next two questions: On January 1, 20x1, Pete Electrical Shop received from Marion Trading 300 pieces of bread toasters. Pele was to sell these on consignment at 50% above original cost, for a 15% commission on the selling price. After selling 200 pieces, Pete had the remaining unsold units repaired for some electrical defects for which he spent 2,000. Marion subsequently increased the selling price of the remaining units to 330 per unit. On January 31, 20x1, Pete remitted P64,980 to Marion after deducting the 15% commission, P850 for delivery expenses of sold units, and 2,000 for the repair of 100 units. The consigned goods cost Marion Trading P200 per unit, and 900 had been paid to ship them to Pete Electrical Shop. All expenses in connection with the consignment were reimbursable to the consignee. 23, The consignment profit on the units sold was a. 12,200 b. 12,880 ¢, 13,000 d. None of these 24. The value of inventory on consignment was a. 8,120 b. 8,800 ©, 8,920 d. None of these 25. In September 20x1, DEF Co. consigned 3,200 books costing P60 and retailing for P100 each to GHI Co., debiting Accounts Receivable and crediting Sales for the retail sales price. Freight cost of P3,200 was debited to Freight Expenses by the consignor. On September 30, 20x1, DEF Co. received from GHI Co. the amount of 142,020 in full settlement of the balance due, and Accounts Receivable was credited for this, amount. The consignor deducted a commission of 20 for each book sold, a total of 180 for delivery expenses and a total of P200 for advertising expense. How many books were actually sold by GHI. Co.? a. 1,424 b. 1,780 ©, 2,064 d. 3,200 26 Leaf Co. began operations on January 1, 20x1. Leaf uses the “installment sales method” of accounting. Data for 20x1 are as follows: Installment accounts receivable, Dec. 31, 20x1 500,000 Installment sales This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)> PHINMA EDUCATION ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 Teacher's Guide Module #26 Name: Class number: Section: Schedule: Date: 900,000 Cost ratio 60% How much is the realized gross profit in 20x1? a. 148,000 b. 152,000 c. 160,000 d. 162,000 27. BUCOLIC RURAL Co. uses the “installment sales method," Information on BUCOLIC’s transactions during 20x1 and 20x2 is shown below: 20x17 20x2 Installment sales 2,000,000 2,400,000 Cost of sales 1,200,000 1,320,000 Gross profit 800,000 1,080,000 Cash collections from: 20x1 sales 800,000 400,000 20x2 sales 960,000 How much is the total realized gross profit in 20x2? a. 160,000 b. 432,000 ©. 592,000 d. 642,000 28. Banana Co. began operations on January 2, 20x1. Banana uses the “installment sales method” of accounting, Banana's records on December 31, 20x1 show the following information: Installment accounts receivable, Dec. 31, 20x1 800,000 Deferred gross profit, before year-end adjustment 560,000 Gross profit on sales 40% How much is the realized gross profit in 20x1? This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)S rn eDucATON Name: Section: a. 240,000 b. 248,000 c, 256,000 d. 260,000 ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 Teacher's Guide Module #26 Class number: Date: Use the following information for the next three questions: Bell Co. uses the ‘installment sales method.” In 20x1, Bell Co. sells an inventory costing 450,000 for an installment sale price of 600,000. Bell makes the following collections: 20x! 400,000 20x2 150,000 20x3 P 50,000 29, How much are the realized gross profits in 20x1, 20x2 and 20x3, respectively? 20x1 20x2 20x3 a. 89,000 29,200 8,600 b. 92,000 37,500 10,500 . 100,000 26,800 12,500 d. 100,000 37,500 12,500 30. How much are the balances of installment accounts receivable at the end of 20x1, 20x2 and 20x3, respectively? 20x1 20x2 20x3 a. 200,000 42,000 10,000 b. 200,000 50,000 0 ©. 180,000 50,000 10,000 d. 180,000 30,000 ° 31. How much is the deferred gross profit at the end of 20x1, 20x2 and 20x3, respectively? 20x1 20x2 20x3 a. 48,000 12,500 6,000 b. 50,000 10,000 0 ©, 40,000 10,000 2,000 d. 50,000 12,500 0 32, Garden Co, uses the installment sales method. Garden Co, sells a good costing 10,000 for an installment sale price of 16,000. Garden Co. accepts old merchandise as down payment and gives the customer a trade-in value of 4,000 for this merchandise. The fair value of the old merchandise is 4,000. Subsequent cash collections during the period amount to P6,000. How much is the realized gross profit recognized in the year of sale? a. 3,750 b. 5,966 ©. 6,333 This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)> PHINMA EDUCATION ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 Teacher's Guide Module #26 Name: Class number: Section: Schedule: Date: d. 6,667 33, ABASE HUMILIATE Co. is currently preparing its combined financial statements for the year ended December 31, 20x1. As of this date, the “Investment in branch” account has a balance of 380,000 while the “Home office” account has a balance of P528,000. The following information has been gathered: (a) The home office allocated unpaid utilities expenses amounting to 40,000 to the branch which the branch did not record in full. Instead, the branch sent a wrong adjusting memo to the home office reducing the charge by 10,000 and setting up a liability for the remaining amount. (b) The home office erroneously credited the branch for a return of shipment of merchandise worth 100,000. The branch did not make any return of merchandise. (0) The branch mistakenly received a copy of the home office correcting entry for item (b) above dated January 3, 20x2 and entered a credit in favor of the home office on December 31, 20x1. (d) The branch mistakenly sent the home office a debit memo amounting to 12,000 for an apparent remittance of collections which did not happen. The home office did not record the debit memo, How much is the net adjustment to the “Investment in branch” account? increase (decrease) a. 100,000 b. 48,000 ©. (48,000) d. (62,000) Use the following information for the next eleven questions: The following information was taken from the records of a branch: Sales by branch 2,800,000 Beginning inventory - Billings to branch by home office 2,500,000 Operating expenses 400,000 Ending inventory at billed price 1,000,000 The following information was taken from the records of the home office: Branch current account 2,600,000 Shipments to branch 2,000,000 Allowance for markup - Unadjusted 500,000 This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)> PHINMA EDUCATION ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 Teacher's Guide Module #26 Name: Class number: Section: Date: 34, What is the billing rate based on cost? a. 20% b. 25% ©, 120% . 125% 35. What is markup percentage based on cost? a. 20% b. 25% ©, 120% . 125% 36, How much is the sales of branch to be included in the combined financial statements? a. 2,800,000 b. 2,240,000 ©. 2,333,333 4.0 37. How much is the realized markup of the branch? a. 300,000 b. 240,000 cc. 380,000 d. 270,000 38. How much is the cost of goods sold of the branch to be included in the combined financial statements? a. 1,500,000 b. 1,800,000 ¢, 1,200,000 . 900,000 39. How much is the ending inventory of the branch to be included in the combined financial statements? a. 1,000,000 b. 8333,333 ¢. 1,250,000 . 800,000 40. How much is the unrealized markup in ending inventory? a, 200,000 b. 166,667 ©, 230,000 d. 266,667 This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)> PHINMA EDUCATION ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 Teacher's Guide Module #26 Name: Class number: Section: Schedule: Date: 41,How much is the ending balance of the “allowance for markup" account before combining the financial statements? a. 200,000 b. 166,667 . 230,000 d. 266,667 42, How much is the individual profit of the branch? a. 880,000 b. 900,000 ¢, 920,000 d. 1,020,000 43. How much is the true profit of the branch? a. 1,200,000 b. 1,400,000 ¢, 1,250,000 d. 1,266,667 44, How much is the adjusted balance of the branch current account immediately prior to combining the financial statements? a. 3,800,000 b. 3,400,000 . 3,500,000 d. 3,666,667 45. The home office transfers inventory worth 600,000 to Branch #1. Freight paid by the home office is 40,000. Later on, the home office instructs Branch #1 to transfer the merchandise to Branch #2. Branch #1 pays freight of 12,000. If the merchandise had been shipped directly from the home office to Branch #2, the freight cost would have been P56,000. The entries to record the transactions described includes a. accredit to savings on freight of P4,000 in the books of Branch #1 b. a credit to savings on freight of 4,000 in the books of Branch #2. ©. acredit to savings on freight of P4,000 in the books of the home office. d. none of these Which of the following is a characteristic of an insurance contract? a, transfer of insignificant insurance risk from the policyholder to the issuer b. the policyholder pays the issuer in exchange for the transfer of financial risk ©, the issuer indemnifies the policyholder for losses when the insured event ocours d._ transfer of significant insurance risk from the issuer to the policyholder This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)\CCOUNTING FOR SPECIAL TRANSACTIONS Part 1 PHINMA EDUCATION ACC110: . noe Teacher's Guide Module #26 Name: Class number: Section: Schedule: Da Use the following information for the next two questions: Mr. X obtains life insurance from Entity A (an insurance company). Entity A cedes 40% of the insurance risk in the insurance contract with Mr. X to Entity B, another insurance company. 47. The contract between Entity A and Entity Bis a a. direct insurance contract. b. indirect insurance contract. ¢. reinsurance contract. d. retrocession 48, The 40% insurance risk transferred to Entity B is called the a. cession. b. retention limit. ¢, net retention. d._ session road, 49. The legal principle that precludes you from obtaining fire insurance on your neighbor's house with you as the beneficiary is a. Principle of Proximate Cause. b. Principle of Utmost Good Faith. ©. Principle of Insurable Interest. . Principle of Subrogation 50. Which of the following is not one of the groupings of insurance contracts under PFRS 17? a. those that are onerous at initial recognition b. those that, at initial recognition, have no sig Periods . those that are not onerous at initial recognition but can become onerous in subsequent periods d. those that pay premiums at initial recognition which are to be measured using the simplified approach icant possibility of becoming onerous in subsequent 51. According to PFRS 17, insurance service result is recognized in a. profit or loss. b. other comprehensive income. ©, aorb d. partly a and partly b Use the following information for the next two questions: Entity A obtains life insurance for its key employee from Entity B (an insurance company). Entity B cedes the insurance contract with Entity A to Entity C, another insurance company. 52. The contract between Entity A and Entity B is This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)\CCOUNTING FOR SPECIAL TRANSACTIONS Part 1 PHINMA EDUCATION ACC110: . noe Teacher's Guide Module #26 Name: Class number: Section: Schedule: Da a. direct insurance contract b. indirect insurance contract ¢, reinsurance contract d. retrocession 53, How should Entity 8 account for the insurance contract with Entity C? a. using the general model b. using the premium allocation approach ©. using the modified version of the general model applicable for onerous insurance contracts d._using a modified version of (a) or (b) applicable to reinsurance contracts held 54, Under the general model of PFRS 17, a group of insurance contracts is initially measured at a. the fulfillment cash flows. b. the contractual service margin ©. aorb, as an accounting policy choice d. sum of a and b 58. According to PFRS 17, insurance finance income or expenses are a. recognized in profit or loss. b. disaggregated into amounts recognized in profit or loss and in other comprehensive income. ©, aorb d. recognized directly in equity. Use the following information for the next six questions: Rainy August Afternoon Co. (RAA) enters into a service concession arrangement whereby RAA undertakes to build a public infrastructure, operate that infrastructure over a specified period, and thereafter transfer it to the government (the grantor). In addition, RAA is obligated to recondition the infrastructure a year before it is handed over to the government. This is regardless of the infrastructure's condition and level of usage. In return, the government promises to pay RAAa fixed amount of cash plus interest in each year during the operation period. 56, What standard should RAA apply in recognizing and measuring the revenue from the contract? a. IFRIC 15 b. PFRS 12 c. PFRSQ d. PFRS 15 57. How many performance obligations are there in the contract? a. one b. two ©. three This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)\CCOUNTING FOR SPECIAL TRANSACTIONS Part 1 PHINMA EDUCATION ACC110: . noe Teacher's Guide Module #26 Name: Class number: Section: Schedule: Da d. four 58, The revenue recognized in Year 3 is equal to a. the collection during that year. b. the fair value of the consideration received in that year. the transaction price allocated to the performance obligation(s) satisfied during that year. d. This is preposterous! How can | know? There are no monetary amounts given in the problem. 59. How should RAA account for the resurfacing services in the contract? a. as a separate performance obligation that is accounted for under PFRS 15 b. as a provision that is accounted for under PAS 37 ©. partly a and partly b d. not accounted for 60, During the construction period, RAA recognizes an asset that is reported in the financial statements as a. contract asset, b. receivable (a financial asset) c. intangible asset d. property, plant and equipment. 61. After the construction period, RAA accounts for the asset recognized on the contract using a. PFRS 15. b. PAS 16. c, PFRS9. d. PAS 38. 62. Entity A, a Philippine company, was sub-contracted to landfill a construction site by a contractor, a Chinese construction company. The contract states a fixed price for various landfilling activities that will take place in different stages of the construction during the first two to three years. In measuring and recognizing the revenue from the contract, Entity A will most likely refer to which of the following standards? PAS 11 PFRS 15 PAS 18 US GAAP Chinese GAAP. peoge 63. You are the accountant of Mang Jolly, a fast-growing fast-food restaurant. During the year, Mang Jolly granted Mr. A, an unrelated party, rights to operate a Mang Jolly restaurant in a specified location. The grant of rights includes the use of Mang Jolly's trade mark, trade processes, menu, and concept. Mr. A paid an upfront fee for the grant of rights and agreed to make additional payments equal to 5% of its sales from the restaurant, To account for the arrangement, which of the following standards is most likely to be relevant to you? This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)> PHINMA EDUCATION ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 Teacher's Guide Module #26 Name: Class number: Section: Schedule: Date: a. PAS 11 b. PFRS 11 c, PFRS 15 d. US GAAP. 64, You are an auditor. During the current audit season, you were engaged to perform an external audit for Entity X, an insurance company. When making an audit program, which of the following standards is most likely to be relevant to you? a. PAS4 b. PFRS 11 ©, PFRS 17 d. US GAAP End of Examination — Key to corrections: Acetg for Franchise Partnership Form: 1 oc 40. A Partnership Operations aA 2 8B 42. B 14. D 43. A 3A 15. A 44. C Partnership Dissolution Consignment sales 45. D 16. C Insurance contracts 17.D 46. 18. A 47. C 19, A 48. A 20. C 49. © 7 8B 21. B 50. D 22. B 51. A Corporate liquid: & oy A 52 A reorganization 8c 24.8 53. D aA 25. B 54, D Joint Arrangements Installment sales method 55. C 26. C Accounting for BOT 27. c 56. D 10. A 28. A 57. 1. D 29. D 58. C Construction contracts 30. B 59. A 31. D 60. A This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)DD eanwatovearion ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 . - Teacher's Guide Module #26 Name: Class number: Section: Date: 32. A 61. Cc Home office, Branch & Agency PFRS 33, A 62. B 34. D 63. 35. B 64. C 12.48 36. A 3. B 37. A 38. C 39D SOLUTIONS: Partnership Formation 1c Partnership Operations 2.8 Solution: Red White Total ‘Amount being allocated 80,000 Allocation 1. Salaries 55,000 45,000 100,000 2, Allocation of remaining profit (80K profit - 100K salaries) = -20K (-20 x 60%); (-20K x 40%) (12,000) (8,000) (20,000) As allocated 43,000 37,000 ‘80,000 3A Solution: This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)BB 1x44 eoucarion ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 |i - Teacher's Guide Module #26 Name: Class number: Section: Schedule: Date: Months Balances outstanding + Weighted Total months in a average year March 1 - beg. Balance 460,000 10112 133,333 July 31 withdrawal (60,000) 5112 (25,000) Sept. 30 additional investment 80,000 32 20,000 Dec. 31 additional investment 20,000 ona = Weighted average capital balance 128,333 Multiply by: Interest rate 10% Interest on weighted average capital 12,833, *Months outstanding (March 1 to December 31) Partnership Dissolution 4. D (348K + 232K) = 580K + 80% = 725K capital after admission x 20% = 145,000 5. B Solution: The total loss on the sale is computed as follows: Sale of other assets 500,000 Carrying amount of other assets (625,000) Total loss on sale (125,000) The partial settlement to partners is computed as follows: Alpha Beda Totals Capital balances before liquidation 348,000 232,000 ‘580,000 Receivable from Beda (30,000) (30,000) Total 348,000 202,000 550,000 Alllocation of loss. [125K x (60% & 40%)] (75,000) (50,000) (125,000) ‘Amounts received by the partners 273,000 152,000 425,000 Partnership Liquidation 6c Solution: Net cash proceeds (50,000 — 5,000) 45,000 Carrying amount of non-cash assets (80,000) This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)> ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 Teacher's Guide Module #26 Name: Class number: Section: Schedule: Date: Total loss on sale (35,000) ‘A (80%) B (20%) Totals Capital balances before liquidation 36,000 22,000 ‘58,000 Loans payable to partners 10,000 47,000 27,000 Total 46,000 39,000 85,000 Allocation of loss (35K x 80%): (5K x 20% (28,000) (7,000) (35,000) ‘Amounts received by the partners 18,000 32,000 50,000 7.8 Solution: ‘A (50%) B (30%) C (20%) Capital balance 250,000 150,000 100,000 Payable to (Receivable from) (10,000) 20,000 = Total interest in partnership 240,000 170,000 100,000 Divide by: PIL ratio 50% 30%. 20% MLAC 480,000 566,667 ‘500,000 Rank of payment 3rd 1st 2nd ‘A (50%) B (30%) C (20%) Rank of payment 3rd 1st ‘2nd Maximum loss absorption capacity 480,000 566,667 500,000 Difference of 1st and 2nd (66,667) Balance 480,000 500,000 500,000 Difference between 1st, 2nd and 3rd (20,000) (20,000) Equal balance of MLAC 480,000 480,000 480,000 Cash priority program ‘A (50%) B (30%) C (20%) ‘Rank of payment 3rd. 4st 2nd ‘1st priority (66,667 x 30%) 20,000 2nd priority (20K x 30% & 20%) 6,000 4,000. Totals z 26,000 4,000 This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)BB 1x44 eoucarion ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 |i - Teacher's Guide Module #26 Name: Class number: Section: Schedule: Date: Corporate liquidation & reorganization Bc 9A Joint Arrangements 10.A 11.0 Construction contracts 12. A Solution: Total contract price 1,000,000 (@) Costs incurred to date 300,000 Estimated costs to complete 500,000 (8) ___ Estimated total contract costs 800,000 Expected gross profit from contract 200,000 Multiply by: Percentage of completion (a) + (b) 37.50% Gross profit earned to date 75,000 Less: Gross profit earned in previous years - Gross profit for the year 75,000 13.B Solution: 20x1 20x2 20x3 Total contract price 10,000,000 10,000,000 10,000,000 Multiply by: % of completion ® 40% 75% 100% Contract revenue to date 4,000,000 7,500,000 10,000,000 Contract revenue in prior yrs. = (4,000,000) (7,500,000) ‘Contract revenue for the year 4,000,000 3,500,000. 2,500,000. = 20x1 20x2 20x3 Costs incurred to date 2,400,000 4,500,000 6,000,000 Estimated costs to complete 3,600,000 1,500,000 = Percentage of completion 40% 75% 100% This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)> PHINMA EDUCATION ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 Teacher's Guide Module #26 Name: Class number: Section: Schedule: Date: Accounting for Franchise Operations — Franchisor 14.D 15.A Solution: Cash down payment (100,000 x 20%) 20,000 PV of note receivable: {(100K x 80%) * 4] x PV of ordinary annuity @12%, n=4 60,747 Transaction price 80,747 The license provides the customer the “right to use” the entity's intellectual property as it exists at the time it was granted. Accordingly, the performance obligation is satisfied at a point in time (.¢., Dec. 31, 20x1 grant date) Consignment sales 16.C 17.D Solution: ‘The commission expense is computed as follows: Net remittance 232,000 Freight out 16,000 Installation costs 8,000 Total 256,000 Divide by: 80% Gross selling price of goods sold 320,000 Multiply by: 20% Commission expense 64,000 Cost of goods sold is computed as follows: Unit cost 10,000 Freight cost per unit (3,000 + 20) 150 Total unit cost 70,150 Multiply by: Number of water heaters sold 16 Cost of goods sold 162,400 Profit is computed as follows: This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)BO conwertoocanion ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 . noe Teacher's Guide Module #26 Name: Class number: Section: Schedule: Date: Gross selling price of goods sold 320,000 Cost of goods sold 162,400) Gross profit 157,600 Freight out (16,000) Installation costs (8,000) Commission expense Profit 18.A Solution: Unit cost 10,000 Freight cost per unit (3,000 + 20) 150 Total unit cost 70,150 Multiply by: Unsold units (20 - 16) 4 Ending inventory 19.A Solution: Net remittance 82,600 Selling expenses 1,200 Cost of antennae given free 1,400 Delivery and installation 2,800 Net remittance before other costs but after ‘commission 88,000 Commission (88K / 88%) x 12% 12,000 Sale price 100,000 20.¢ Solution: Sales 100,000 Cost of goods sold (9K x 8) + (600 x 8/12) (72,400) Gross profit 27,600 Commission expense (12,000) Selling expenses (1,200) Cost of antennae given free (1,400) Delivery and installation 2,800) Net profit 10,200 21.8 This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)S HINA EOOCATION: ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 Name: Section: Schedule: Solution: Net remittance Selling expenses Delivery and installation Net remittance before other costs but after commission Commission (6,120 / 85%) x 15% Sale price Sales Cost of goods sold (120 x 36) + (600 x 36/60) Gross profit Commission expense (see computation above) Selling expenses Delivery and installation Net profit 22. B (5 dozens x 12) = 60 — 36 sold = 24 unsold x [120 + (600/60)] = 3,120 23. Solution: Net remittance Delivery expense Repair costs Net remittance before other costs but after commission Commission (67,830 / 85%) x 15% Sales Sales Cost of goods sold (see computation below) Gross profit Commission expense (see above or 79,800 x 15%) Delivery expense Repair costs Profit Sales Sale of first 200 units at original price [200 units x (200 cost x 150%)] Subsequent sales at the increased price of 330 per unit Teacher's Guide Module #26 Class number: Date: (6,120) (360) (180) 900 64,980 850 2,000 67,830 11,970 79,800 79,800 (52,780) 27,020 (11,970) (850) (2,000) 42,200 79,800 (60,000) 19,800 This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)BD eanwatocemien ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 . nares Teacher's Guide Module #26 Name: Class number: Section: Schedule: Date: Divide by: Increased sale price 330 Sales at increased price (in units) 60 ‘Add back: Sales at original price (in units) 200 Total units sold 260 Multiply by: Cost per unit [200 + (900 freight + 300 units)] 203 Cost of goods sold 52,780 24. Solution: Unsold inventory (300 - 260) 40 Multiply by: Unit cost [200 + (900/300)] 203 Cost of unsold goods 8,120 25.8 Solution: Net remittance 142,020 Delivery expense 180 Advertising expense 200 Net remittance before other costs but after commission 142,400 Divide by: Sale price per book net of commission (100 - 20) 20 Total books sold 1,780 Installment sales method 26. C Solution: Installment sales 900,000 Installment accounts receivable, Dec. 31, 20x1 500,000 Collections in 20x1 400,000 Multiply by: (100% - 60%) 40% Realized gross profit - 20x1 760,000 27. C Solution: The gross profit rates based on sales are computed as follows: 20x4 20x2 Gross profit 800,000 1,080,000 Installment sales 2,000,000 2,400,000 This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)BD eanwatocemien ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 . nares Teacher's Guide Module #26 Name: Class number: Section: Schedule: Date: (Gross profit rates based on sales 40% 45% The realized gross profit in 20x2 is computed as follows: Collections in 20x2 from: 20x1 sales: (400,000 x 40%) 160,000 20x2 sales: (960,000 x 45% 432,000 Total realized gross profit in 20x2 592,000 28. A Solution: Deferred gross profit, before year-end adjustment 560,000 Divide by: Gross profit rate based on sales 40% Total sales 1,400,000 Installment accounts receivable, Dec. 31, 20x1 (800,000) Collections - 20x1 600,000 Multiply by: Gross profit on sales 40% Realized gross profit - 20x41 240,000 29. D Solution: 20x1 400,000 x 25% = 100,000 20x2 150,000 x 25% = 37,500 20x3 30. B Solution: 20x1 600K — 400K = 200,000 20x2 600K — 400K ~ 150K = 50,000 20x3 600K — 400K ~ 150K - 50K = 0 31. D Solution: 20x1 200,000, ending A/R x 25% = 50,000 20x2 500,000, ending A/R x 25% = 12,500 20x3 0, ending AIR x 25% = 0 32. A Solution: Trade-in value granted to customer 4,000 Fair value of merchandise (4,000 traded-in This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)BB 1x44 eoucarion ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 . - Teacher's Guide Module #26 Name: Class number: Section: Schedule: Date: Over (Under) allowance Installment sale price 16,000 (Over) Under allowance Adjusted installment sale price 16,000 Cost of sale (10,000 Gross profit 6,000 Gross profit rate 37.5% Fair value 4,000 ‘Subsequent collections 6,000 Total collections on installment sale 10,000 Multiply by: Gross profit rate 37.5% Realized gross profit - 20x1 3,750 Home office, Branch and Agency Accounting 33.4 Solution: (Home office books) (Branch books) Investment in branch Home office Dri(Cr) (Dry/cr. Unadjusted balance 380,000 528,000 (@) Allocated expense not recorded in full - 40,000 (b) Erroneous credit by home office 100,000 - (©) Erroneous correcting entry - (100,000) (d) Erroneous debit memo - 12,000 Net adjustments 100,000 (48,000) Adjusted balances - Requirement 480,000 480,000 34.D Solution: Billings to branch by home Billing rate based office on cost = ‘Shipments to branch’ = 2,500,000 + 2,000,000 = 125% 35.8 This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)S rn eDucATON ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 Teacher's Guide Module #26 Name: Class number: Section: Schedule: Date: Solution: Markup Allowance for markup percentage basedoncost — = Shipments to branch = 500,000 + 2,000,000 = 25% 36. A- 2,800,000 — the sales by branch 37. Solution: Total unrealized markup (or unadjusted balance of allowance account); (or 2,5M x 25%I125%) 500,000 Less: Unrealized markup in ending inventory (250K x 25%/125%) (200,000) Realized markup 300,000 38.c Solution: Inventory, beg. (at cost) : Shipments from home office (at cost) (2.5M + 125%) 2,000,000 Total goods available for sale Inventory, end (at cost) (1M + 125%) Cost of goods sold (at cost) 1,200,000 39. D (1,000,000 + 125%) = 800,000 40. A (1,000,000 x 25%/125%) = 200,000 ALA Solution: Allowance for markup — unadjusted 500,000 (300,000 Realized markup Allowance for markup - end. 200,000 42.8 Solution: Sales 2,800,000 Cost of sales: Inventory, beg. Shipments from home office Total goods available for sale 2,500,000 This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)BO conwertoocanion ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 . noe Teacher's Guide Module #26 Name: Class number: Section: Schedule: Date: Inventory, end. 1,000,000, 41,500,000, Individual gross profit of branch 1,300,000 Operating expenses (400,000) Individual profit of branch 900,000 43.4 Solution: Sales 2,800,000 Cost of sales. Inventory, beg. - Shipments from home office - at cost (625K + 125%) eco Total goods available for sale 2,000,000 Inventory, end. - at cost (250K * 125%) (800,000) (1,200,000) True gross profit of branch 7,600,000 Operating expenses (400,000) True profit of branch 1,200,000 44.C Solution: Branch current (or Investment in branch) — unadjusted 2,600,000 Individual profit of branch 900,000 Branch current - adjusted 3,500,000 45. D - Savings on freight are not accounted for. Insurance contracts 46.C 47.C 48, 49, 50, 51 62. 53. 54, 56. o00>>00> This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net)PHINMA EDUCATION, Name: Section: Accounting for BOT 56.D 67.C 58.C 59.A 60.A 61.C PFRS 62.8 63.C 64.C ACC110: ACCOUNTING FOR SPECIAL TRANSACTIONS Part 1 This document is the property of PHINMA EDUCATION Downloaded by Prensofe Xx (legdyif@neke?.net) Teacher's Guide Module #26 Class number: Date: