AFAR Solution.doc

# Revenue from delivery of raw materials p400000 x 2550

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Revenue from delivery of raw materials (P400,000 x 25/50) x 3,000/10,000 60,000 Number 43 Answer B Revenue from use of entity’s trade name (P400,000 x 5/50)/10years 4,000 Number 44 Answer D Cash downpayment 200,000 Present value of note receivable 240,183 Initial franchise fee revenue 440,183 Less: Direct cost of initial franchise fee 352,146 Gross profit under accrual basis 88,037 Page 9 Number 45 Answer A Gross profit under accrual basis 88,037 Add: Interest Income for year 2018 (P240,183 x 12%) 28,822 Add: Contingent franchise fee revenue (P50,000 x 8%) 4,000

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Less: Indirect cost – Expense as incurred (22,009) Net income under accrual basis 98,850 Number 46 Answer B Costs incurred to date as of December 31, 2018 440,000 Divided by total cost as of 2018 (440,000+P660,000) /1,100,000 Percentage of completion for 2018 40% Construction revenue for year 2018 (1,000,000 x 40%) 400,000 Number 47 Answer C Costs incurred to date as of December 31, 2019 (440,000+680,000) 1,120,000 Divided by total cost as of 2019 (440,000+680,000+280,000) / 1,400,000 Percentage of completion for 2019 80% Contract price 1,500,000 Total cost 2019 1,400,000 Gross profit 100,000 Multiply by ____80% Cumulative realized gross profit 2019 80,000 Add : Realized loss 2018 100,000 Realized gross profit 2019 180,000 Contract price 2018 1,000,000 Total cost 2018 1,100,00 Realized loss for 2018 ( 100,000) Number 48 Answer A Contract price as of December 31, 2019 1,500,000 Multiply by percentage of completion as of December 31, 2019 x 80% Construction in Progress on December 31, 2019 1,200,000 Number 49 Answer C Contract price as of 2019 1,000,000 Less: Total costs as of 2019 (800,000+250,000) (1,050,000) Cumulative gross loss for 2019 ( 50,000) Realized gross loss for 2018 ( 200,000) Realized gross profit for 2019 150,000 Contract price 1,000,000 Total cost 2018 (360,000 + 840,000) 1,200,000 Realized loss 2018 ( 200,000 ) Number 50 Answer A Progress Billings as of December 31, 2020 (P1,000,000) x (30%+20%+40%) 900,000 Less: Construction in Progress as of December 31, 2020 (Costs incurred to date) 870,000
Excess of Progress Billings over Construction in Progress on 12/31/2020 ( 30,000) Page 10 Number 51 Answer B Cumulative billings as of December 31, 2020 (P1,000,000) x (30%+20%+40%) 900,000 Mobilization fee deductible from first billing (P1,000,000 x 5%) ( 50,000) Total of receivables as of December 31, 2020 (120,000+450,000+180,000) (750,000) Balance of Accounts Receivable on December 31, 2020 100,000 Number 52 Answer A Sales revenue of the branch 500,000 Cost of goods sold of the branch (30,000+100,000+250,000-50,000) (330,000) Operating expenses of the branch ( 40,000) Net income reported by the branch in its separate income statement 130,000 Number 53 Answer D Ending inventory of the home office at cost 80,000 Ending inventory of the branch from outsider at cost (50,000 x 26%) 13,000 Ending inventory of the branch from home office last year at cost (50,000 x 24%) / 1.25) 9,600 Ending inventory of the branch from home office this year at cost (50,000 x 50%) / 1.25) 20,000 Ending inventory of the entity combined statement of financial position 122,600 Number 54 Answer D Overstatement of beginning inventory from home office 4,800 Overstatement of shipment during the year (250,000 – 200,000) 50,000 Unadjusted overvaluation of inventory from home office 54,800 Overstatement of ending inventory from home office ( 7,400) Overstatement of cost of goods sold 47,400 Beginning inventory from home office (80% x 30,000) 24,000 Cost (24,000 / 125%) 19,200 Overstatement of beginning inventory from home office 4,800 Ending inventory from home office (74% x 50,000) 37,000 Cost (37,000 / 125%) 29,600 Overstatement of ending inventory from home office 7,400 Number 55 Answer C Home Office account before branch profit 180,000 Branch loss Sales 225,500

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• Summer '18
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