BUSCOMBI - PREFI

Q: In years subsequent to date of sale, a 90% owned subsidiary sells equipment to its parent company at a gain, the NCI in consolidated income is computed by multiplying the NCI percentage by the subsidiary's reported net income plus/minus...

Choices:

a. Minus intercompany gain considered realized in the current period.

b. Minus the net amount of unrealized gain on the intercompany sale.

c. Plus intercompany gain considered realized in the current period.

d. Plus the net amount of unrealized gain on the intercompany sale.

c. Plus intercompany gain considered realized in the current period.

Q: In the translation of financial statements of a foreign operation?
I. When an entity keeps its books and records in a currency other than its functional currency, at the time the entity prepares its financial statements all amounts are translated into the functional currency.
II. The currency in which the financial statements are presented is called the presentation currency.
III. Current rate method is when the exchange differences (gains and losses) arising on shall be recognized in profit or loss.
IV. The purpose of the current rate method process is to achieve the same result as would have been the case had the transactions been originally recorded in the functional currency.
Choices:
a. I and II

b. II and III

c. III and IV

d. IV and I

a. I and II

Q: Average exchange rates are used to translate certain items from foreign financial statements into pesos. Such averages are used in order to:
I. Reflect economic reality.
II. Eliminate temporary fluctuation in exchange rates that may be reversed in the next fiscal period.
III. Avoid using different exchange rates for some revenue and expense accounts.
IV. Approximate the exchange rate in effect when the items were recognized.
Choices:
a. I and II

b. II and III

c. III and IV

d. IV and I

d. IV and I

Q: The objective of remeasurement is to:

I. Produce the same results as if the books were maintained solely in the functional currency.

II. Produce the same results as if the books were maintained in the currency of the foreign entity's largest customer.

III. Remeasurement can be avoided if an entity implements a dual accounting system by maintaining two sets of accounts, one to comply with the local laws and the other to comply with PAS 21.

IV. Produce the same results as if the books were maintained solely in the local currency

Choices:

a. I and II

b. II and III

c. III and IV

d. IV and I

Haha I and III kabogo

Q: Under closing rate method of foreign currency translation;

I. Equity investments are translated using the rate at the date of the revaluation.

II. Dividends are translated using the rate at the date of revaluation.

III. Accounts receivable are translated using the current rate.

IV. Depreciation are valued using the exchange rate at the dates of the transactions.

Choices:

a. I and II

b. II and III

c. III and IV

d. IV and I

c. III and IV

Q: Which of the following best describes the measurement of a gain or loss from sale of a depreciable asset by a foreign subsidiary whose functional currency is not the local currency?

I. Reconstruct the journal entry on the date of the sale using the historical rate for cash and the depreciable assets and its accumulated depreciation.

II. Reconstruct the journal entry on the date of the sale using the current rate for cash and historical rate for the depreciable asset and its accumulated depreciation.

III. Gains or losses are calculated as the difference between the depreciable asset sold and the cash received.

IV. Translate gains at the current rate and losses at the historical rate.

Choices:

a. I and II

b. II and III

c. III and IV

d. IV and I

b. II and III

Q: ML Company sells land to its 80% owned subsidiary, JM Company, at a gain of P120,000 (cost is P100,000). What is the effect of this sale of land on consolidated net income assuming JM Company still owns the land at the end of the year?

Choices:

a. Consolidated net income will be P120,000 greater than it would had the sale not occurred.

b. Consolidated net income will be P120,000 less than it would had the sale not occurred.

c. Consolidated net income will be the same as if the sale had not occurred.

d. Consolidated net income will be P100,000 less than it would have had the sale not occurred.

c. Consolidated net income will be the same as if the sale had not occurred.

Q: Which of the following statements is true concerning an intercompany transfer of a depreciable asset?

a. NCI interest in subsidiary's net income is affected by downstream gain only.

b. NCI in subsidiary's net income is increased by an upstream gain in the year of transfer.

c. NCI in subsidiary's net income is affected only when the transfers is upstream.

d. NCI in subsidiary's net income is always affected by gain on the transfer.

c. NCI in subsidiary's net income is affected only when the transfers is upstream

Q: On the date of acquisition, Goodwill arising from the acquisition of foreign subsidiaries;

I. If the goodwill is an asset of the acquired subsidiary, it is a foreign asset that should be translated in the same manner as any other asset of the acquired subsidiary.

II. If goodwill is treated as an asset in the acquirer's books, there is no need for translation.

III. If goodwill is treated as an asset in the acquired subsidiary, there is no need for translation.

IV. If the goodwill is an asset of the acquirer, it should be translated using temporal method.

Choices:

a. I and II only

b. II and III only

c. III and IV only

d. IV and I only

a. I and II only

Q: A working paper elimination to remove an intercompany profit or gain is not relevant for an intercompany:

Choices:

a. Sale of intangible asset

b. Acquisition of an affiliate's outstanding bonds payable in the open market

c. Sale of merchandise

d. Sales-type/capital lease

b. Acquisition of an affiliate's outstanding bonds payable in the open market

Q: Which of the following is not an effect of a working paper elimination for intercompany sales of merchandise by a parent company to a subsidiary?
Choices:
a. It reduces consolidated inventories to the cost incurred by the consolidated entity.

b. It eliminates the parent's Sales and intercompany cost of goods sold ledger accounts balances.

c. The intercompany profit portion of the subsidiary's cost of goods sold ledger account balance.

d. It eliminates the overstatement of the subsidiary's Sales ledger account balance.

d. It eliminates the overstatement of the subsidiary's Sales ledger account balance