Adv Acc NA

COMPREHENSIVE EXAM Review Questions
ADVANCED ACCOUNTING 1
1. First statement: A partners withdrawal of assets from a partnership that is considered permanent reduction in the
2. partners equity is debited to the drawing account.
Second statement: A partners drawing account is used to reduce the partners account balances at the end of
the period.
a. Both statements are correct c. Only second statement is correct

b. Only first statement is correct d. Both statements are incorrect
1. First statement: A partners drawing account is a contra-capital account.

e. Second statement: A partnership is a taxable entity.

2. First statement: Two accounts are generally maintained for each partner, a drawing account and a capital
3. account.
e. Second statement: The drawing account is credited with the partners withdrawals of cash or other assets during
f. the period.

4. First statement: The partners interest in the partnership is generally equal to fair value of net assets at date of
5. contribution.
e. Second statement: A partnership is a legal entity, separate and distinct from its partners.

6. First statement: Individual partners are jointly liable for the debts and obligations of the partnership.
e. Second statement: Tax on partnership income may be reflected in the individual income tax returns of the
f. partners.

7. First statement: The allocation of an error should be based on the profit and loss ratio in effect when the error
was made.
e. Second statement: The allocation of an error should be based on the profit and loss ratio in effect when the
error was discovered.

8. First statement: If there is a provision for the division in profits but not losses in the partnership agreement, it is
e. concluded that losses should be divided using the same approach as division of profits.
f. Second statement: If there is a provision for the division of losses but not profits in the partnership
agreement, it
g. is concluded that profits should be divided using the same approach as division of losses.

9. First statement: Acceptance of a new partner may result to legal dissolution of the partnership.
e. Second statement: When admitting a new partner into an existing partnership, any allocation of goodwill to the
f. old partners is based on the profit and loss ratio

10. First statement: A joint arrangement is an arrangement of which two or more parties have joint control.
e. Second statement: A separate vehicle is a separately identifiable financial structure, including separate legal
entities or entities recognized by statute

11. First statement: A joint venture is joint arrangement whereby the parties that have joint control of the arrangement
have rights to the assets and obligations for the liabilties.
e. Second statement: A joint operation is a joint arrangement whereby the parties that have joint control of the
arrangement have right to the net assets of the arrangement.

12. First statement: The number of classes of creditors in a corporate liquidation is 4.

e. Second statement: In a statement of affairs, assets pledged for partially secured creditors are offset against
partially secured creditors.

e.
13. First statement: Administrative expenses incurred in the liquidation is classified as liability with priority in the
statement of affairs.
f. Second statement: Salary payable owed to employees is classified as liability with priority in the statement of
affairs.

14. First statement: In statement of affairs liabilities are classified as current and non current.
e. Second statement: Insolvency means that the assets are less than the liabilities.
a. Both statements are correct
b. Only first statement is correct
c. Only second statement is correct
d. Both statements are incorrect
15. First statement: An installment sales is a type of sale which provides a series of payments over a period of time.
f. Second statement: In installment sales revenue is recognized after the point of sales.

16. First statement: The excess of construction in progress account over the contract billings is treated as non-
current assets.
e. Second statement: In long term contract, indicated loss is recognized in full regardless of the percentage of
completion.

e.
f. As of July 31, 2014, Sara and Becky, both sole proprietors, decided to form a partnership. Their statements
of conditions on this date are as follows:
g.
h. Account Title i. Sa j. Becky
ra
k. Cash in bank l. P m. P
130,000 250,000
n. Receivables (net) o. 54 p. 120,00
0,000 0
q. Inventories r. - s. 630,00
0
t. Prepaid expenses u. 25 v. 35,000
0,000
w. Property & equip. x. 80 y. 500,00
0,000 0
z. Total aa. P1 ac. P1,535
,720,000 ,000
ab. == ad. =====
====== ===
ae. Accounts payable af. P ag. P1,000
720,000 ,000
ah. Sara, Capital ai. 1,0 aj.
00,000
ak. Becky, Capital al. am. 535,00
0
an. Total ao. P1 aq. P1,535
,720,000 ,000
ap. == ar. =====
======= ===
as.
at. Since Sara and Becky are both accountants, they decided to first examine their accounting records to identify
items for adjustments and reflect proper balances of accounts for purposes of the partnership formation. They also
agreed that neither of the existing books will be used by the partnership. The partners agreed to share profits equally.
Below are the information gathered:
au.
Saras bank reconciliation statements is in a book to bank presentation, as follows:
av. Balance per book: P130,000
aw. Add/(deduct):
ax. Deposit in transit : ( 20,000)
ay. Outstanding checks: 10,000
az. Interest income: 1,300*
ba. ---------------
bb. Balance per bank: P121,300
bc. ========
bd.
be. *Interest income is net of 20% tax on bank deposit
Becky used adjusted balance method for her bank reconciliation and the following information were noted during
examination:
o Deposit in transit: P35,000
o Outstanding checks: P 5,000
o Interest income on deposit: P2,100*
o Adjusted cash balance: P250,000
bf.
bg. *Sara and Becky both noticed that the 20% tax on interest income was not yet considered, thus, they agreed
to make appropriate adjustments.
Receivables were presented net of allowance for doubtful accounts of P60,000 and P30,000. Sara used 10%, while
Becky used 20% of ending balance of receivables as basis of allowance, however, they both agreed to age their
receivables to have better valuation in relation to the partnership formation:
bh.
bi. Saras Aging:
bj. # of days past bk. Outst bl. Esti

due (% of anding mated
uncollectibility) Balances Uncollectibl
e
bm. 0-30 (10%) bn. P bo. P
200,000 20,000
bp. 31-60 (30%) bq. 200,0 br. 60,
00 000
bs. Over 160 (50%) bt. 200,0 bu. 100
00 ,000
bv. TOTAL bw. P bx. P
600,000 180,000
by.
bz. Beckys Aging:
ca. # of days past cb. Outst cc. Esti

due (% of anding mated
uncollectibility) Balances Uncollectibl
e
cd. 0-30 (10%) ce. P cf. P
130,000 13,000
cg. 31-60 (30%) ch. 20,00 ci. 6000
0
cj. Over 160 ck. - cl. -
(50%)
cm. TOTAL cn. P co. P
150,000 19,000
cp.
cq. Inventories
Inventories included obsolete items totaled to P150,000 and is expected to have a recoverable amount equivalent
to 50% of cost.
cr. Prepayments
The P250,000 on Saras books represents two-year rental of office space. They started renting on January 1,
2014.
The prepayments reflected on Beckys books represents a one month rental of office space paid July 1, 2014.
cs. Property and equipment
Both agreed that Property and equipment are to be valued at 80% of the balance sheet amount.
ct. Accounts payable

Both agreed that Accounts payable are to be valued at their current book value.
cu. Others
Both books failed to record income tax payable amounting to P 35,000 and P20,000 in the books of Sara and
Becky respectively.
cv.
1. What is the total amount of cash contributed to the partnership by the partners?
a. P380,880 c. P381,300 e. Answer not given
b. P380,000 d. P379,200
2. The total receivables (net of allowance for doubtbul accounts) contributed to the partnership after adjustments?
b. P660,000 d. P521,000
3. What is the amount of rental expense charged to Saras capital?
a. P 72,916.67 c. P250,000 e. Answer not given
b. P177,083.33 d. P 62,500
4. What is the amount of rental expense charged to Beckys capital?
a. P 35,000 c. P 2,916.67 e. Answer not given
b. P 0 d. P32,083.33
5. How much is the adjusted balance of Saras capital?
a. P 613,383 c. P500,000 e. Answer not given
b. P1,000,000 d. P648,383
6. How much is the adjusted balance of Beckys capital?
b. P535,000 d. P345,330
8. If the partners agreed that their capital contribution be adjusted to conform with their profit and loss ratio, bonus to
Becky would be recorded as:
b. P148,867 d. P149,904
9. If the partners agreed to use goodwill method for purposes of partnership formation, goodwill will be debited at:
b. P297,733 d. P299,807
10. JJ and KK are partners who shares profits and losses in the ratio of 60% and 40% respectively. JJs salary is
P60,000 and P30,000 for KK. The partners are also paid interest on their average capital balances. In 2008, JJ
received P30,000 of interest and KK, P12,000. The profit and loss allocation is determined after deductions for
the salary and interest payments. If KKs share in the residual income (income after deducting salaries and
interest)) was P60,000 in 2008, what was the total partnership income?
b. P345,000 d. P387,000
cw.
cx. Partners L.Javier and D.Manaloto formed a partnership on January 1, 2012 and agreed to share profits equally.
Net income of P55,000 and P70,000 were reflected in the income statements for 2012 and 2013 respectively and
distribution of profits based on the agreement was already made by the partners. However, in June 2014, the
following errors were discovered by the partners concerning the net income of previous years:
cy.
cz. Particulars da. 2012 db. 2013
dc. Overstatement of ending dd. P de. P
inventories 2,900 3,300
df. Omission of depreciation on dg. 1,50 dh. 1,500
newly acquired equipment 0
di. Understatement of dj. 2,20 dk. 1,800
commission receivable 0
dl. A purchase of merchandise dm. 6,00 dn. -
not recorded until the following year, 0
but included in the years inventory
do.
dp. Due to the foregoing, the partners agreed to compute for the correct net income and make necessary
adjustments in their capital accounts.
dq.
11. The adjusted net income for the year 2012 was:
b. P46,800 d. P55,000
b. P67,700 d. P70,800
13. Partners capital accounts should be:
a. Credited amounting to P2,250 for each of them
b. Debited amounting to P2,250 for each of them
c. Debited amounting to P4,500 for each of them
d. Credited amounting to P4,500 for each of them
dr.
ds. Below is the balance sheet of AB Partnership, a partnership that was formed in 2009 to manufacture burger
patties.
dt.
du. BALANCE SHEETS
dv. DECEMBER 31
dy. 2 dz. 2
0 0
1 1
dx. 1 2
ea. Current Assets eb. ec.
ef. P eg. P
2 2
, ,
9 5
2 1
4 6
, ,
9 3
2 8
ed. ee. Cash on hand and in banks 2 5
ej. 2 ek. 6
8 2
8 6
, ,
0 4
0 0
eh. ei. Accounts receivables-net 0 0
eo. 1
,
en. 8 5
7 7
2 1
, ,
8 0
0 5
el. em. Inventory 8 5
er. 4 es. 4
, ,
0 7
8 1
5 3
, ,
7 8
3 4
ep. eq. 1 0
et. Non - Current Assets eu. ev.
ey. 6 ez. 6
, ,
2 2
9 9
6 6
, ,
6 6
6 6
ew. ex. Property, Plant, & Equipment 6 6
fc. 1 fd. 4
7 8
9 8
, ,
6 3
6 6
fa. fb. less: Accumulated Depreciation 7 3
fe. ff. fg. 6 fh. 5
, ,
1 8
1 0
6 8
, ,
9 3
9 0
9 3
fj. 1 fk. 1
0 0
, ,
2 5
0 2
2 2
, ,
7 1
3 4
fi. TOTAL ASSETS 0 4
fl. LIABILITIES fm. fn.
fq. 4 fr. 8
5 1
, ,
5 9
0 0
fo. fp. Income tax payable 0 0
fu. 4 fv. 8
5 1
, ,
5 9
0 0
fs. ft. 0 0
fw. PARTNERS' EQUITY fx. fy.
gb. 6 gc. 6
, ,
0 2
9 6
4 4
, ,
3 1
3 4
fz. ga. A, Capital 8 6
gf. 4 gg. 4
, ,
0 1
6 7
2 6
, ,
8 0
9 9
gd. ge. B, Capital 2 8
gj. 1 gk. 1
0 0
, ,
1 4
5 4
7 0
, ,
2 2
3 4
gh. gi. 0 4
gm. 1 gn. 1
0 0
, ,
2 5
0 2
2 2
, ,
7 1
gl. TOTAL LIABILITIES AND 3 4
PARTNERS' EQUITY 0 4
go. gp. gq. gr.
o Net income for 2012 after tax is P283,014
o There were no other movements in the capital accounts but net income/loss for the period.
14. Cash provided by/ (used in) operating activities in 2012?
a. (P408,537) c. (P717,233) e. Answer not given
b. P 408,537 d. P717,233
15. Cash provided by/ (used in) investing activities in 2012?
a. Nil c. (P717,233) e. Answer not given
b. (P408,537) d. P717,233
16. Cash provided by/ (used in) financing activities in 2012?
a. Nil c. (P717,233) e. Answer not given
b. (P408,537) d. P717,233
17. Net increase/ (decrease) in cash in 2012 for cash flows purposes?
a. P2,924,922 c. (P717,233) e. Answer not given
b. (P408,537) d. P717,233
gs.
18. Presentaed below is the condesed balance sheet of the partnership of KK, LL and MM who share profits and
losses in the ratio of 6:3:1 respectively:
gt. Cash gu. P85,0 gv. Liabilities gw. P
00 80,000
gx. Other assets gy. 415,00 gz. KK, capital ha. 252,00
0 0
hb. hc. hd. LL, capital he. 126,00
0
hf. hg. hh. MM, capital hi. 42,000
hj. TOTAL hk. P hl. TOTAL hm. P
500,000 500,000
hn. The partners agree to sell NN 20% of their respective capital and profit and loss interest for a total payment of
P90,000. The payment by NN is to be made directly to the individual partners. The capital balance of KK, LL
and MM respectively after admission of NN are:
a. P198,000; P 99,000; P33,000 d. P255,600; P127,800; P42,600
b. P201,600; P100,800; P33,600 e. Answer not given
c. P216,000; P108,000; P36,000
f.
g. The following condensed balance sheet is presented for the partnership of AA, BB and CC, who share profits
and losses in the ratio of 4:3:3, respectively:
h.
i. Cash j. P k. Liabilities l. P
160,000 180,000
m. Other assets n. 320,00 o. AA, capital p. 48,000
0
q. r. s. BB, capital t. 216,00
0
u. v. w. CC, capital x. 36,000
y. TOTAL z. P aa. TOTAL ab. P
480,000 480,000
ac. The partners agreed to dissolve the partnership after selling the other assets for P200,000. Upon dissolution
of the partnership, AA should have received.
a. P 0 c. P72,000 e. Answer not given
b. P48,000 d. P84,000
ad.
19. The following statement of financial position was prepared for the Tan, Lim and Wan Partnership on March 31,
2013:
ae.
af. Cash ag. P ah. Liabilities ai. P
25,000 52,000
aj. Other assets ak. 180,00 al. Tan, capital (40%) am. 40,000
0
an. ao. ap. Lim, capital (40%) aq. 65,000
ar. as. at. Wan, capital (20%) au. 48,000
av. TOTAL aw. P ax. TOTAL ay. P
205,000 205,000
az.
ba. The partnership is being liquidated by the sale of assets in installments. The first sale of non-cash assets
having a book value of P90,000 realizes P50,000.
bb.
bc. The amount of cash each partner should receive in the first installment is:
a. Tan, P0 ;Lim, P5,000; Wan, P18,000
b. Tan, P12,000 ;Lim, P5,000; Wan, P18,000
c. Tan, P27,000 ;Lim, P5,000; Wan, P18,000
d. Tan, P0 ;Lim, P5,000; Wan, P18,000
e. Answer not given
bd.
be. Ayala Land, Inc. (ALI) and SM Development Corp.(SMDC) set up Multi-Realty Development Corporation
(MRDC) for the purpose of acquiring and operating a mall to be located in Lagro. The contractual
arrangement between the parties establishes joint control of the activities that are conducted by MRDC. ALI
and SMDC contributed P10 million each for 40 per cent interest in MRDC in 2013.
bf.
bg. Summary of transactions of the joint arrangement for 2013 and 2014 are as follows:
bh. 2013
Taxes and licenses paid amounted to P200,000;
Acquired office furniture and equipment on account, P2 million;
Acquired a land from Our Lady of Fatima University, P3 million;
Constructed a building at a cost of P12 million;
Operating expenses (including depreciation) for the year amounts to P1 million;
Rental from tenants, P5 million;
Net income or loss is distributed to the parties in accordance to their interest.
bi.
bj. 2014
Operating expenses (including depreciation) incurred for the year, P500,000;
Rental from tenants, P8 million;
Declared and paid dividends, P3 million;
Each venture receives a share of the income or loss from rental income net of operating expenses.
20. What is the net income (loss) of MRDC for the year 2013?
a. P3.8 million c. (P3.8 million) e. Answer not given
b. P4.0 million d. P5.0 million
21. What is the net income (loss) of MRDC for the year 2014?
a. P7.5 million c. P7.0 million e. Answer not given
b. P8.0 million d. (P7.5) million
22. What is the interest of ALI in MRDC for the year ended December 31, 2013?
23. What is the interest of SMDC in MRDC for the year ended December 31, 2013?
b. P15.65 million d.P13.32 million
bk.
bl. The Palubog Company has decided to seek liquidation after previous restructuring and quasi-reorganization
attempts failed. The Company has the following condensed balance sheet as of May 1, 2008:
bm.
bn. ASSETS bo. LIABILITIES AND
STOCKHOLDERS EQUITY
bp. Cash bq. P br. Accrued bs. P
12,000 payroll 40,000
bt. Receivables bu. 280,000 bv. Loans from bw. 50,000
(net) officer
bx. Inventory by. 70,000 bz. Accounts ca. 60,000
payable
cb. Prepaid cc. 1,000 cd. Equipment ce. 360,00
expenses loan payable 0
cf. Plant assets cg. 300,000 ch. Business ci. 180,00
loan payable 0
cj. Goodwill ck. 39,000 cl. Common cm.60,000
stock
cn. co. cp. Deficit cq. ( 48
,000)
cr. TOTAL cs. P ct. TOTAL cu. P
702,000 702,00
0
cv.
cw. The equipment loan payable is secured by specific plant assets having a book value of P300,000 and a
realizable value of P350,000. Of the accounts payable, P40,000 is secured by inventory which has a cost of
P40,000 and a liquidation value of P44,000. The balance of the inventory has a realizable value of P32,000.
Receivables with a book value and market value of P100,000 and P80,000 respectively have been pledged as
collateral on the business loan payable. The balance of the receivables have a realizable value of P150,000.
cx.
24. Assuming trustee expenses of P12,000 in addition to recorded liabilities, which of the remaining unsecured
creditors has the next highest order of priority.
a. Accrued payroll c. Loan from officer e. Answer not given
b. Equipment loan payable d. Business loan payable
25. The realizeable value of assets pledged with fully secured creditors is:
a. P459,000 c. P 40,000 e. Answer not given
b. P 44,000 d. P 489,000
26. Of those creditors who are partially secured, their unsecured amounts are:
b. P110,000 d. P120,000
27. The total realizable value of free assets to unsecured creditors before unsecured creditors with priority is:
b. P232,000 d. P198,000
28. The dividend to unsecured creditors or the expected recovery percentage of unsecured creditors (rounded) is:
a. 90% c. 88% e. Answer not given
b. 100% d. 76%
29. Estimated deficiency to unsecured creditors is:
a. Nil c. P2,000 e. Answer not given
b. P22,000 d. P12,000
30. Estimated loss on asset disposition is:
b. P89,000 d. P90,000
31. Estimated gain on asset disposition is:
b. P54,000 d. P 6,000
32. Estimated amount paid to unsecured creditors with priority is:
a. P10,000 c. P 40,000 e. Answer not given
b. P30,000 d. P110,000
33. Estimated amount paid to fully secured creditors is:
a. P 40,000 c. P470,000 e. Answer not given
b. P390,000 d. P430,000
34. Estimated amount paid to unsecured creditors without priority is:
b. P61,600 d. P50,000
35. Estimated payment to partially secured creditors is:
b. P526,800 d. P430,000
36. Estimated payment to creditors is (discrepancy is expected due to rounding off)
b. P659,600 d. P668,400
cy.
cz.King Company borrowed P300,000 from the Metro Bank on December 31, 2010. The interest rate was 10% and
interest was due and payable December 31, each year. According to the terms of the contract, King was required to
repay the amount borrowed on December 31, 2014. Due to financial difficulties in 2013, King was not able to pay the
accrued interest on December 31, 2013 (it had paid the interest in 2011 and 2012). Kings debt was restructured in
the following way:
da.
1. 70% of the December 31, 2013, interest was forgiven
2. The interest rate was reduced to 8%
3. Principal of the debt was reduced to P260,000
4. The due date for the repayment of the principal was delayed until December 31, 2015.
37. What is the carrying value of Kings debt as of December 31, 2013?
b. P269,000 d. P300,000
38. What is the total of the future cash flows required to liquidate the debt?
b. P301,000 d. P260,000
39. How much interest expense will King report on its income statement for the year 2014?
b. P51,000 d. Nil
40. SM Corporation started operations on January 2, 2012 selling home appliances and furniture on installment basis.
For 2012 and 2013, the following data represented operational details:
db.
dc. PARTICULAR dd. 20 de. 20
S 12 13
df. Installment sales dg. P1 dh. P1
,200,000 ,500,000
di. Cost of dj. 72 dk. 1,
installment sales 0,000 050,000
dl. Collections on dm. dn.
installment sales
do. dp. 2012 dq. 63 dr. 45
sales 0,000 0,000
ds. dt. 2013 du. - dv. 90
sales 0,000
dw.
dx. On January 8, 2013, an installment sale account in 2012 defaulted and the merchandise with fair value of
P15,000 was repossessed. The related installment receivable balance as of date of default and repossession
was P24,000. What is the balance of the Unrealized gross profit account as of the end of 2013?
b. P218,400 d. P275,000
41. Microstation, Inc. sold computer equipment on installment basis on October 1 2013. The cost to the company
was P60,000 but the installment sales price was set at P85,000. Terms of payment included the acceptance of a
used computer equipment with a trade-in value of P30,000. Cash of P5,000 was paid in addition to the trade-in
equipment with the balance to be paid in ten (10) monthly installments due at the end of each month commencing
the month of sale. The estimated selling price of the used computer equipment after reconditioning cost of
P1,250 is P25,000. A 15 percent gross profit was usual from sale of used equipment. What is the gross profit to
be realized from the 2013 collections?
b. P10,000 d. P4,000
42. On December 31, 2012, Jacinto Steel Inc. sold construction equipment to Anthony Company for P3,600,000. The
equipment had cost of P2,400,000. Anthony Company paid P600,000 cash on December 31, 2013 and signed a
P3,000,000 note bearing interest at 10 percent payable in five annual installments of P600,000. Jacinto Steel,
Inc. appropriately accounted for the sale under the installment method. On December 31, 2013, Anthony
Company paid P900,000 including interest of P300,000. For the year ended December 31, 2013, what total
amount of revenue should Jacinto Steel, Inc. recognized from the construction equipment sale and financing?
b. P200,000 d. P240,000
43. Yanni Company recognize construction revenue and expenses using the percentage of completion method.
During 2007, a single long-term project was begun which continued through 2009. Information on the project was
as follows:
dy. dz. 2 ea. 2 eb. 2
0 0 0
0 0 0
7 8 9
ec. AR from ed. P ee. P ef. P
const.contract 1 3 3
0 0 2
0 0 0
, , ,
0 0 0
0 0 0
0 0 0
eg. Construction eh. 1 ei. 1 ej. ?
expenses per year 0 9
5 2
, ,
0 0
0 0
0 0
ek. Construction in el. 1 em. en. 6
progress 2 364 1
2 , 0
, 0 ,
0 0 0
0 0 0
0 0
eo. Partial billings on ep. 1 eq. 4 er. 5
contracts 0 2 0
0 0 0
, , ,
0 0 0
0 0 0
0 0 0
es. Gross profit et. ? eu. ? ev. 2
recognized for the 0
year ,
0
0
0
ew.
ex. Compute the gross profit recognized from long term construction contracts in 2007 and 2008?
a. 2007, P17,000; 2008, P50,000 c. 2007, P17,000; 2008, P60,000
d. 2007, P22,000; 2008, P56,000
b. 2007, P22,000; 2008, P64,000 e. Answer not given
44. Using the same information in no. 43, compute the construction expense in 2009:
b. P246,000 d. P610,000
f.
g. In 2008 PJD Construction Corporation began construction work under a 3-year contract. The contract price was
P4,000,000. PJD uses the percentage of completion method for financial accounting purposes. The income to be
recognized each year is based on the proportion of costs incurred to total estimated costs for completing the contract.
The financial statement presentation relating to this contract at December 31, 2008 was as follows:
h.
i. Balance Sheet
j. Accounts receivable ... P86,000
k. CIP.. P260,000
l. Less: Contract billings.. 246,000
m. Excess14,000
n.
o. Income Statement
p. Gross profit before tax recognized in 200872,800
q.
45. How much is the collection in 2008 for this contract?
b. P174,000 d. P246,000
46. Compute for the initial estimated gross profit:
b. 30% d. 27%
47. What is the percentage of completion at 12/31/08?
a. 5.5% c. 10% e.Answer not given
b. 7.5% d. 8.5%
48. On March 1, 2013, Baliwags Lechon, Inc. a franchisor, entered into franchise agreement with Mr. Gordobe. The
initial franchise fee is P500,000 of which P100,000 is payable in cash upon signing of the franchise agreement
and the balance evidence by a 12% promissory note. As of December 31, 2013 the franchisor fails to render
substantial services and none thus far had been rendered to the franchisee. When Baliwags Lechon, Inc.
prepares its financial statements on December 31, 2013, the revenue from the franchise fee to be reported is:
b. Nil d. P400,000
49. On August 1, 2013, KFC Company sells a franchise that requires an initial franchise fee of P5,000,000. On
September 15, 2013 the contract was signed and the franchisee paid the initial franchise fee in full. On November
2, the franchisee commenced operations after substantial services have rendered by the franchisor at a cost of
P50,000. What is the net income from franchise fee of the franchisor in its December 31 statement of
comprehnsive income?
a. P5,000,000 c. P4,950,000 e. Answer not given
b. Nil d. P 50,000
50. On July 1, 2013, Ms. Tiam signed an agreement to operate as franchisee of Andoks Lechon Manok, Inc. for an
initial franchise fee of P500,000. Of this amount, P100,000 was paid upon signing of the franchise agreement and
the balance evidence by a 12% promissory note is payable in two annual payments of P200,000 each beginning
December 31, 2013. Ms. Tiam commenced operations of the franchise on November 2, 2013. The first
installment was collected on due date. Assuming the collectibility of the note is reasonably assured, what is the
revenue from franchise fee to be reported by Andoks in its December 31, 2013 statement of comprehensive
income?
b. Nil d. P400,000
r.
s. DJ Builders Construction Company has used the cost-to-cost percentage of completion method of
recognizing revenue. Ambrose assumed leadership of the business after the recent death of his father. In
reviewing the records, Ambrose finds the following information regarding a recently completed building project
for which the total contract was P2,000,000.
t.
u. Particulars v. 2007 w. 2008 x. 2009
y. Gross profit (loss) each year z. P aa. P ab. (P20,
40,000 140,000 000)
ac. Costs incurred each year ad. 360,000 ae. ? af. 820,
000
ag.
ah. Ambrose wants to know how effectively the company operated during the last 3 years on this project and since
the information is not complete, has asked for answers for the following questions:
ai.
1. How much cost was incurred in 2008?
b. P 820,000 d. P 660,000
2. What percentage of the project was completed by the end of 2008?
b. 40% d. 60%
3. What was the estimated gross profit on the project by the end of 2008?
b. P160,000 d. P 300,000
aj. Changi Builders was tapped to build two private power plant in Iloilo and Davao. The following information relates
to those projects which were started in 2008.
ak.
al. am. an.
Iloil Da
o
ao. Contract ap. P aq.
Price 1 P7,
0
,
5
0
0
,
0
0
0
ar. Cost incurred as. 6 at.
to date , 7,0
0
0
0
,
0
0
0
au. Estimated av. 3 aw.
cost to , 1,0
complete 0
0
0
,
0
0
0
ax. Billings ay. 3 az.
during the , 6,7
year 7
5
0
,
0
0
0
ba. Collections bb. 2 bc.
during the , 6,2
year 2
5
0
,
0
0
0
bd.
be. General and administrative expense for the year amounted to P100,000 and are to be recorded as period cost.
bf.
4. Net income /(loss) using Percentage of completion?
b. P400,000 d. P550,000
5. Net income /(loss) using zero profit approach?
a. (P500,000) c. Nil e. Answer not given
b. (P100,000) d. (P600,000)
bg. Kent, Inc. has forced into bankruptcy and has begun to liquidate. Unsecured claims will be paid at the rate of
40 cents on the peso. Apex Co. holds a non-interest bearing note receivable from Kent in the amount of
P100,000, collateralized by machinery with a liquidation value of P25,000. The total amount to be realized by
Apex on this note receivable is:
b. P40,000 d. P65,000
6. The following data were taken from the statement of affairs for Liquo Company:
bh.
bi. PARTICULARS bj. AMOUNT
bk. Assets pledged for fully secured liabilities (fair bl. P90,000
value, P75,000)
bm. Assets pledged to partially secured liabilities (fair bn. 74,000
value, P52,000)
bo. Free Assets (fair value, P40,000) bp. 70,000
bq. Unsecured liabilities with priority br. 7,000
bs. Fully secured liabilities bt. 30,000
bu. Partially secured liabilities bv. 60,000
bw. Unsecured liabilities without priority bx. 112,000
by.
bz. The expected recovery pecentage of unsecured claims should be:
a. P0.65 c. P0.98 e. Answer not given
b. P0.70 d. P1.00
7. Ube Construction Company has consistently used pecentage of completion method. On January 10, 2007, Ube
began work on a P6,000,000 construction contract. At the inception date, the estimated cost of construction was
P4,500,000. The following data relate to the progress of the contract:
ca.
cb. Income recognized at 12/31/2007 cc. P
600,000
cd. Cost incurred 1/1/2007 through 12/31/2008 ce. 3,600,000
cf. Estimated cost to complete at 12/31/2008 cg. 1,200,000
ch.
ci. How much income should Ube recognize for the year ended December 31, 2008?
b. P525,000 d. P900,000
8. The Palubog Company has decided to seek liquidation after previous restructuring and quasi-reorganization
attempts failed. The Company has the following condensed balance sheet as of May 1, 2008:
cj.
ck. ASSETS cl. LIABILITIES AND
STOCKHOLDERS EQUITY
cm.Cash cn. P co. Accrued cp. P
12,000 payroll 40,000
cq. Receivables cr. 280,000 cs. Loans from ct. 50,000
(net) officer
cu. Inventory cv. 70,000 cw. Accounts cx. 60,000
payable
cy. Prepaid cz. 1,000 da. Equipment db. 360,00
expenses loan payable 0
dc. Plant assets dd. 300,000 de. Business df. 180,00
loan payable 0
dg. Goodwill dh. 39,000 di. Common dj. 60,000
stock
dk. dl. dm. Deficit dn. ( 48
,000)
do. TOTAL dp. P dq. TOTAL dr. P
702,000 702,00
0
ds.
dt. The equipment loan payable is secured by specific plant assets having a book value of P300,000 and a realizable
value of P350,000. Of the accounts payable, P40,000 is secured by inventory which has a cost of P40,000 and a
liquidation value of P44,000. The balance of the inventory has a realizable value of P32,000. Receivables with a
book value and market value of P100,000 and P80,000 respectively have been pledged as collateral on the business
loan payable. The balance of the receivables have a realizable value of P150,000.
du.
9. Assuming trustee expenses of P12,000 in addition to recorded liabilities, which of the remaining unsecured
creditors has the next highest order of priority.
c. Accrued payroll c. Loan from officer e. Answer not given
d. Equipment loan payable d. Business loan payable
10. The realizeable value of assets pledged with fully secured creditors is:
c. P459,000 c. P 40,000 e. Answer not given
d. P 44,000 d. P 489,000
dv.
11. Of those creditors who are partially secured, their unsecured amounts are:
c. P430,000 c. P540,000 e. Answer not given
d. P110,000 d. P120,000
dw.
12. The total realizable value of free assets to unsecured creditors before unsecured creditors with priority is:
d. P232,000 d. P198,000
13. The dividend to unsecured creditors or the expected recovery percentage of unsecured creditors (rounded) is:
c. 90% c. 88% e. Answer not given
d. 100% d. 76%
14. Estimated deficiency to unsecured creditors is:
c. Nil c. P2,000 e. Answer not given
d. P22,000 d. P12,000
15. Estimated loss on asset disposition is:
d. P89,000 d. P90,000
16. Estimated gain on asset disposition is:
d. P54,000 d. P 6,000
17. Estimated amount paid to unsecured creditors with priority is:
c. P10,000 c. P 40,000 e. Answer not given
d. P30,000 d. P110,000
18. Estimated amount paid to fully secured creditors is:
c. P 40,000 c. P470,000 e. Answer not given
d. P390,000 d. P430,000
19. Estimated amount paid to unsecured creditors without priority is:
d. P61,600 d. P50,000
20. Estimated payment to partially secured creditors is:
d. P526,800 d. P430,000
21. Estimated payment to creditors is (discrepancy is expected due to rounding off)
d. P659,600 d. P668,400
22. On January 2, 2008, RR Enterprises, Inc. authorized XX Company to operate as a franchisee over a twenty-year
period for an initial franchise fee of P60,000 received on signing the agreement. XX started operations on June
30, 2008, by which date RR had performed all of the required initial services. In its income statement for the six
months ended June 30, 2008, what amount should RR report as revenue from franchise fees in connection with
XX Franchise?
b. P1,500 d. P60,000
23. On January 3, 2008, PP Services, Inc. signed an agreement authorizing CC Company to operate as a franchisee
over a 20-year period for an initial franchise fee of P50,000 received when the agreement was signed. CC
commenced operations on July 1, 2008 at which date all of the initial services required of PP had been performed.
The agreement also provides that CC must pay annually to PP a continuing franchise fee equal to 5% of the
revenue from the franchise. CCs franchise revenue for 2008 was P400,000. For the year ended December 31,
2008, how much should PP record as revenue from franchise fees in respect of the CCs franchise?
b. P50,000 d. P22,500
24. On December 31, 2008, RR, Inc. authorized Fay to operate as a franchisee for an initial franchise fee of P75,000.
Of this amount, P30,000 was received upon signing the agreement, and the balance, represented by a note, is
due in three annual payments of P15,000 each, beginning December 31, 2009. The present value on December
31, 2008 of the three annual payments appropriately discounted is P36,000. According to the agreement, the
nonrefundable down payment represents a fair measure of the services already performed by RR, however,
substantial future services are required of RR. Collectibility of the note is reasonably certain. On December 31,
2008. RR should record unearned franchsie fees in respect of the Fay franchise of:
b. P36,000 d. P75,000
25. On December 31, 2008, RR, Inc. authorized GG to operate as a franchisee for an initial franchise fee of
P150,000. Of this amount, P60,000 was received upon signing the agreement and the balance, represented by a
note, is due in three annual payments of P30,000 each beginning December 31, 2009. The present value on
December 31, 2008 of the three annual payments appropriately discounted is P72,000. According to the
agreement, the nonrefundable down payment represents a fair measure of the services already performed by RR,
however, substantial future services are required of RR. Collectibility of the note is reasonably certain. In RRs
December 31, 2008, balance sheet, unearned franchise fees from GGs franchise should be reported as:
b. P132,000 d. P 72,000
dx.
dy.King Company borrowed P300,000 from the Metro Bank on December 31, 2010. The interest rate was 10% and
interest was due and payable December 31, each year. According to the terms of the contract, King was required to
repay the amount borrowed on December 31, 2014. Due to financial difficulties in 2013, King was not able to pay the
accrued interest on December 31, 2013 (it had paid the interest in 2011 and 2012). Kings debt was restructured in
the following way:
dz.
5. 70% of the December 31, 2013, interest was forgiven
6. The interest rate was reduced to 8%
7. Principal of the debt was reduced to P260,000
8. The due date for the repayment of the principal was delayed until December 31, 2015.
26. What is the carrying value of Kings debt as of December 31, 2013?
d. P269,000 d. P300,000
27. What is the total of the future cash flows required to liquidate the debt?
d. P301,000 d. P260,000
28. How much interest expense will King report on its income statement for the year 2014?
d. P51,000 d. Nil
ea.
eb. The following data pertains to the transfer of real estate pursuant to the troubled debt restructuring by May Co. to
Tanny Corp. in full liquidation of Mays liability to Tanny:
ec.
ed. Carrying amount of liability liquidated ee. P150,000
ef. Carrying amount of real estate trasferred eg. 100,000
eh. Fair value of real estate transferred ei. 90,000
ej.
29. What amount should May report as a gain on restructuring payables?
b. Nil d. (P10,000)
30. What amount should May report as a gain (loss) on transfer of real estate?
a. (P10,000) c. P50,000 e. Answer not given
b. Nil d. P60,000
31. On March 1, 2013, Baliwags Lechon, Inc. a franchisor, entered into franchise agreement with Mr. Gordobe. The
initial franchise fee is P500,000 of which P100,000 is payable in cash upon signing of the franchise agreement
and the balance evidence by a 12% promissory note. As of December 31, 2013 the franchisor fails to render
substantial services and none thus far had been rendered to the franchisee. When Baliwags Lechon, Inc.
prepares its financial statements on December 31, 2013, the revenue from the franchise fee to be reported is:
d. Nil d. P400,000
32. On August 1, 2013, KFC Company sells a franchise that requires an initial franchise fee of P5,000,000. On
September 15, 2013 the contract was signed and the franchisee paid the initial franchise fee in full. On November
2, the franchisee commenced operations after substantial services have rendered by the franchisor at a cost of
P50,000. What is the net income from franchise fee of the franchisor in its December 31 statement of
comprehnsive income?
c. P5,000,000 c. P4,950,000 e. Answer not given
d. Nil d. P 50,000
33. On July 1, 2013, Ms. Tiam signed an agreement to operate as franchisee of Andoks Lechon Manok, Inc. for an
initial franchise fee of P500,000. Of this amount, P100,000 was paid upon signing of the franchise agreement and
the balance evidence by a 12% promissory note is payable in two annual payments of P200,000 each beginning
December 31, 2013. Ms. Tiam commenced operations of the franchise on November 2, 2013. The first
installment was collected on due date. Assuming the collectibility of the note is reasonably assured, what is the
revenue from franchise fee to be reported by Andoks in its December 31, 2013 statement of comprehensive
income?
d. Nil d. P400,000
34. Using date in 38. Assuming the collectibility of the note is not reasonably assured, using cash basis of revenue
recognition, what is the revenue from the initial franchise fee to be recognized by Andoks on December 31, 2013?
a. P500,000 c. Pnil e. Answer not given
b. P300,000 d. P100,000
35. On January 2, 2013, Pizza Inc. signed an agreement authorizing Ms. Janice to operate as a franchisee for an
initial franchise fee of P5,000,000. Of this amount, P2,000,000 was received upon signing of the agreement and
the balance evidence by a 24% promissory note is due in three annual installments of P1,000,000 each beginning
December 31, 2013. Ms. Janice started franchise operations on September 1, 2013 after Pizza Inc. rendered
initial services required at total costs of P500,000. The first installment was collected on due date. The
collectibility of the note is not reasonably assured. Using the installment method, what is the realized gross profit
to be recognized on December 31, 2013?
b. P4,500,000 d. P5,000,000
36. In accounting for a long term construction contract using the percentage of completion method, the progress
billings on contract account is a:
a. Contra current asset account d. Revenue account
b. Contra noncurrent asset account e. Answer not given
c. Noncurrent liability account
37. The excess of the Costruction in Progress account over the Contract Billings is treated as:
a. Current liability c. Other asset e. Answer not given
b. Current assets d. Non current liability
38. Before the year of completion, under the percentage of completion method, the year end balance of the
Construction in Progress account equal to:
a. Cost incurred to date d. Gross profit earned to date
b. Cost incurred in the current year e. Answer not given
c. Cost incurred to date plus gross profit
earned to date
39. Before the year of completion, under zero profit method, the year end balance of the Construction in Progress
account is equal to:
a. Cost incurred to date d. Gross profit earned to date
b. Cost incurred in the current year e. Answer not given
c. Cost incurred to date plus gross profit
earned to date
40. The number of classes of creditors in a corporate liquidation is:
a. Two c. Four e. Answer not given
b. Three d. Five
41. A category of assets that typically has zero in the Free Assets column of a statement of affairs:
a. Inventories c. Equipment e. Answer not given
b. Land d. Building
42. In a statement of affairs, assets pledged for partially secured creditors are:
a. Included with assets pledged for fully secured creditors
b. Offset against partially secured creditors
c. Included with free assets
d. Disregarded
e. Answer not given
43. In reporting of a corporate liquidation, assets are shown at:
a. Present value calcualated using an c. Historical cost
appropriate effective rate d. Book value
b. Net realizable values e. Answer not given
44. Which of the following is not a liability that has priority in corporate liquidation?
a. Administrative expenses incurred in the liquidation
b. Salary payable owed to employees
c. Payroll taxes due to the government
d. Advertising expense incurred before the company became insolvent
e. Answer not given
45. On statement of affairs, how are liabilities classified?
a. Current and non-current d. Historic and futuristic
b. Secured and unsecured e. Answer not given
c. Monetary and non-monetary
f.
g. On December 1, 2014, A. Corbilla and J. Modino formed a partnership, agreeing to share for profits and losses in the ratio
of 2:3 respectively. A. Corbilla invested a parcel of land that cost him P25,000. J. Modino invested P30,000 cash. The
land was sold for P50,000 on the same date, 5 hours after formation of the partnership. How much should be the capital
balance of A. Corbilla?
a. P25,000 c. P60,000
b. P60,000 d. P50,000
h.
2. On March 1, 2014, L.Caballero and J.Bartolome formed a partnership with each contributing the following assets:
i.
j. Description k. L.Cabal l. J.Bartolo

lero me
m. Cash n. P300,0 o. P700,000
00
p. Machinery and q. 250,000 r. 750,000
equipment
s. Building t. - u. 2,250,00
0
v. Furniture and w. 100,000 x.
fixtures
y.
z. The building is subject to mortgage loan of P800,000, contacted with C.Cruz Financing Company in 2013, which is to be
assumed by the partnership. Partnership agreement provided that L. Caballero and J. Bartolome share profits and losses
30% and 70% respectively. On March 1, 2014 the balance of J.Bartolome capital account should be:
a. P3,700,000 c. P3,050,000
b. P3,140,000 d. P2,900,000
3. The same information in Number 2, except that the mortage loan is not assumed by the partnership. On March 1, 2014, the
balance in J.Bartolome capital account should be:
a. P3,700,000 c. P3,050,000
b. P3,140,000 d. P2,900,000
4. As of July 1, 2014, J.San Jose and W.Fax decided to form a partnership. Their balance sheets on this date are:
aa.
ab. Account Title ac. J.S ad. W.F
an Jose ax
ae. Cash af. P ag. P
15,000 37,500
ah. Accounts ai. 540 aj. 225
receivable ,000 ,000
ak. Merchandise al. - am. 202
inventory ,500
an. Machinery ao. 150 ap. 270
and equip. ,000 ,000
aq. Total ar. P at. P
705,000 735,000
as. === au. ===
===== =====
av. Accounts aw. P ax. P
payable 135,000 240,000
ay. J. San Jose, az. 570 ba.
capital ,000
bb. W. Fax, bc. - bd. 495
capital ,000
be. Total bf. P bh. P
705,000 735,000
bg. === bi. ===
====== =====
bj.
bk. The partners agreed that the machinery and equipment of J. San Jose is under depreciated by P15,000 and that of W.Fax
by P45,000. Allowance for doubtful accounts is to be set up amounting to P120,000 for J. San Jose and P45,000 for W.
Fax. The partnership agreement provides for a profit and loss ratio and capital interest of 60% to J.San Jose and 40% to
W. Fax. How much cash must J. San Jose invest to bring the partners capital balances proportionate to their profit and
loss ratio?
a. P142,500 c. P172,500
b. P52,500 d. P102,500
5. On August 1, C. Bequillo and R. Llanita pooled their assets to form a partnership with the firm to take over their business
assets and assume the liabilities. Partners capital are to be based on net assets transferred after the following adjustments.
(Profit and loss are allocated equally).
bl.
bm. R. Llanitas inventory is to be increase by P4,000; an allowance for doubtful accounts of P1,000 and P1,500 are to be set
up in books of C. Bequillo and R. Llanita, respectively, and accounts payable of P4,000 is to be recognized in C.Bequillos
books. The individual trial balances on August, before adjustments, follow:
bn.
bo. Description bp. C. bq. R.
Bequillo Llanita
br. Assets bs. P7 bt. P11
5,000 3,000
bu. Liabilities bv. 5,0 bw. 34,
00 500
bx.
by. What is the capital of C. Bequillo and R. Llanita after the above adjustments?
a. C. Bequillo, P68,750; R. Llanita, P77,250 c. C. Bequillo, P65,000; R. Llanita, P76,000
b. C. Bequillo, P75,000; R. Llanita, P81,000 d. C. Bequillo, P65,000; R. Llanita, P81,000
e.
6. R. Lomibao and D. Juan decide to combine their businesses and form a partnership on July 1, 2013. The following are their
assets andliabilities on July 1, 2013 before formation:
f.
g. Description h. R. i. D.J
Lomibao uan
j. Assets k. P l. P
210,750 103,000
m. Liabilities n. 91, o. 36,
500 000
p.
q. The following agreements are made to adjust assets and liabilities:
Both partners will provide P5,000 allowance for doubtful accounts.
R. Lomibaos fixed assets were over-depreciated by P1,000 and D. Juans fixed assets were under-depreciated by P500.
Accrued expenses are to be recognized in the books of R. Lomibao and D. Juan in the amount of P1,200 and P1,000,
respectively.
Obsolete inventory to be written off by R. Lomibao amounts to P3,500.
R. Lomibao and D. Juan also agreed to share profits and losses equally.
r.
s. What is the total asset of the partnership after the formation?
a. P297,550 c.P303,750
b. P300,750 d.P298,550
t. 7. Gibo and Edu each operating a separate business agreed to form partnership on July 1, 2013. The assets and liabilities of the
two sole proprietorships on the date of formation are as follows:
u.
v. Account Title w. Gib x. Edu
o
y. Cash z. P aa. P
19,200 72,000
ab. Accounts ac. 192 ad. 144
receivable ,000 ,000
ae. Merchandise af. 240 ag. 216
inventory ,000 ,000
ah. Equipment ai. 60, aj. 72,
000 000
ak. Accounts al. 60, am. 96,
payable 000 000
an. Notes ao. 12, ap. -
payable 000
aq.
ar. The partners agreed on the following adjustments:
as.
at. Gibos accounts receivable are to be taken over at book value less 15% and Edus accounts receivable at book value less
10%. Gibos equipment is new and considered adequate for the new business. Edus equipment is disposed at 90% of its book
value. It is agreed that Gibo bear one-fourth of the loss resulting from the sale.
au.
av. Assuming Edu invest sufficient cash to give him a one-half interest in the partnership after charging to Gibos capital account
his share of the loss on the sale by Edu of the equipment, how much must Edu invest?
a. P16,800 c. P12,400
b. P20,400 d. P18,200
aw. _________________________________________
ax. Partners L.Javier and D.Manaloto formed a partnership on January 1, 2012 and agreed to share profits equally. Net income of
P55,000 and P70,000 were reflected in the income statements for 2012 and 2013 respectively and distribution of profits based on
the agreement was already made by the partners. However, in June 2014, the following errors were discovered by the partners
concerning the net income of previous years:
ay.
az. Particulars ba. 2012 bb. 2013
bc. Overstatement of ending inventories bd. P be. P
2,900 3,300
bf. Omission of depreciation on newly bg. 1,500 bh. 1,500
acquired equipment
bi. Understatement of commission bj. 2,200 bk. 1,800
receivable
bl. A purchase of merchandise not bm. 6,000 bn. -
recorded until the following year, but included
in the years inventory
bo.
bp. Due to the foregoing, the partners agreed to compute for the correct net income and make necessary adjustments in their
capital accounts.
bq.
c. P47,500 c. P49,000
d. P46,800 d. P55,000
a. P70,000 c. P73,700
b. P67,700 d. P70,800
a. Credited amounting to P2,250 for each of them
b. Debited amounting to P2,250 for each of them
c. Debited amounting to P4,500 for each of them
d. Credited amounting to P4,500 for each of them
54. JJ and KK are partners who shares profits and losses in the ration of 60%:40% respectively. JJs salary is P60,000 and
P30,000 for KK. The partners are also paid interest on their average capital balances. In 2008, JJ received P30,000 and
KK, P12,000. The profit and loss allocation is determined after deductions for the salary and interest payments. If KKs
share in the residual income (income after deducting salaries and interest) was P60,000 in 2008, what was the total
partnership income?
a. P192,000 c. P282,000
b. P345,000 d. P387,000
55. The partnership has the following accounting amounts:
1. Sales=P70,000
2. Cost of Good Sold=P40,000
3. Operating expenses=P10,000
4. Salary allocation to partners=P13,000
5. Interest paid to banks=P2,000
6. Partners withdrawals=P8,000
7. Interest income on bank deposit (net of 20% tax) =P2,000
8. Provision for income tax (30% of P18,000) = P5,400
br.
bs. The partnership net income (loss) is:
a. P12,600 c. P14,600
b. P18,000 d.(P3,000)
56. Lancelot is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus a bonus of 10% of net
income after salary and bonus as a means of allocating profit among the partners. Salaries traceable to the other
partners are estimated to be P100,000. What amount of income would be necessary so that Lancelot would consider the
coices to be equal?
a. P165,000 c. P265,000
b. P290,000 d. P305,000
57. Cab and Jo are considering forming a prtnership whereby profits will be allocated through the use of salaries and
bonuses. Bonuses will be 10% of net income after total salaries and bonuses. Cab will receive a salary of P30,000 and a
bonus. Jo has the option of receiving a salary of P40,000 and a 10% bonus or simply receiving a salary of P52,000. Both
partners will receive the same amount of bonus.
bt.
bu. Determine the level of net income that would be necessary so that Jo would be indifferent to the profit sharing option
selected.
a. P240,000 c. P94,000
b. P300,000 d. P334,000
58. The partnership agreement of XX,YY &ZZ provides for the year-end allocation of net income in the following order:.
o First, XX is to receive 10% of net income up to P200,000 and 20% over P200,000.
o Second, YY and ZZ each are to receive 5% of the remaining income over P300,000.
o The balance of income is to be allocated equally among the three partners.
bv.
bw. The partnerships 2008 net income was P500,000 before any allocations to partners. What amount should be
allocated to XX?
a. P202,000 c. P206,000
b. P216,000 d. P220,000
59. The partnership agreement of RR and SS provides that interest at 10% per year is to be credited to each partner on the basis
of weighted-average capital balances. A summary of SS capital account for the year ended December 31, 2008 is as follows:
bx.
by. Particulars bz. A
mount
ca. Balance, January cb. P
1 420,000
cc. Additional cd. 1
investment, July 1 20,000
ce. Withdrawal, cf. (
August 1 45,000)
cg. Balance, ch. P
December 31 495,000
ci.
cj. What amount of interest should be credited so SSs capital account for 2008?
a. P45,750 c. P46,125
b. P49,500 d. P51,750
60. AA, BB, and CC are partners with average capital balances during 2008 of P360,000, P180,000, and P120,000
respectively. Partners receive 10% interest on their average capital balances. After deducting salaries of P90,000 to AA
and P60,000 to CC the residual profit or loss is divided equally. In 2008 the partnership sustained a P99,000 loss before
interest and salaries to partners. By what amount should AAs capital account change?
a. P21,000 increase c. P105,000 decrease
b. P33,000 decrease d. P126,000 increase
ck.
cl. AB partnership, with A and B as partners, has determined its 2012 and 2013 net income figures to be P115,000 and
P110,000, respectively. The profits were shared equally between the partners. In a first-time audit of the partnerships
financial statements, the following errors were determined:
Merchandise inventory was incorrectly determined: P5,000 overstatement for 2012 and P15,000 overstatement for 2013.
Revenue received in advance in 2012 of P25, 000 was credited to a revenue account when received. Of the P25,000, P5,000
was earned in 2012, P12,000 was earned in 2013 and the remainder will be earned in 2014.
A P12,000 gain on sale of plant assets in 2013 was erroneously credited to accumlated depreciation account.
cm.
61. The adjusted net income for 2012 was
a. P115,000 c. P95,000
b. P110,000 d. P90,000
62. The adjusted net income for 2013 was
a. P110,000 c. P124,000
b. P100,000 d. P138,000
a. Credited by P5,500 for each of them c. Credited by P11,000 for each of them
b. Debited by P5,500 for each of them d. Debited by P11,000 for each of them
64. AA and DD created a partnership to own and operate a health-food store. The partnership agreement provided that AA
receive a salary of P10,000 and DD a salary of P5,000 to recognize their relative time spent in operating the store.
Remaining profits and losses were divided 60:40 to AA and DD, repectively. Income for 2007, the first year of operations, of
P13,000 was allocated P8,800 to AA and P4,200 to DD. On January 2008, the partnership agreement was changed to reflect
the fact that DD could no long devote any time to the stores operations. The new agreement allows AA a salary of P18,000
and the remaining profits and losses are divided equally. In 2008 an error was discovered such that the 2007 reported
income was understated by P4,000. The partnerhip income of P25,000 for 2008 included the P4,000 related to year 2007.
a.
b. In the reported net income of P25,000 for the year 2008, AA and DD would have:
c. AA- P21,900;DD-P3,100 e. AA- P0;DD-P0
d. AA- P17,100;DD-P17,100 f. AA- P12,500;DD-P12,500
65. On January 1, 2008, DD and EE decided to form a partnership. At the end of the year, the partnership made a net income of
P120,000. The capital accounts of the partnership shows the following transactions.
a.
b. DD, Capital
c. January 1 d. P
40,000
e. April 1 f. (
5,000)
g. August 1 h. 1
0,000
i. October 1 j. 5
,000 a. EE, Capital
k. December 1 l. 4 b. January 1 c. P
,000 25,000
m. d. June 1 e. 1
n.
0,000
o.
p. f. September 1 g. (
q. Assuming that an interest of20% per annum is given on average 3,000)
capital and the balance of the profits is allocated equally, the allocation h. October 1 i. (
of profits should be: 1,000)
r. DD, P60,000; EE, P59,400 j. December 1 k. 5
c. DD, P67,200; EE, P58,200 ,000
s. DD, P61,200; EE, P58,800
d. DD, P68,800; EE, P51,200
66. Kris and Boy partnership show the following amounts in its cash flow statement for the year ended December 31, 2013:
a. Net cash used in operating activities P1,000,000
b. Net cash used in investing activities 4,000,000
c. Net cash provided by financing activities 3,500,000
d. Cash and cash equivalents, January 1 6,000,000
e.
f. What would be the balance of cash and cash equivalents at December 31, 2013?
a. P7,500,000 c. P4,500,000
b. P5,500,000 d. P6,500,000
67. Mara and Clara Parntership provided the following 2013 current account balances for the preparation of annual cash flow
statement:
a.
b. Particulars c. January d. Decem
1 ber 31
e. Accounts receivable f. P g. P
1,150,000 1,450,000
h. Allowance for uncollectible accounts i. 40,000 j. 50,000
k. Prepaid rent expense l. 620,000 m. 410,00
0
n. Accounts payable o. 970,000 p. 1,120,0
00
q.
r. Partnerships net income is P7,500,000. Net cash provided by operating activities should be:
a. P7,270,000 c. P7,550,000
b. P7,430,000 d. P7,570,000
68. Partner A first contributed P50,000 of capital into an existing partnership on March 1, 2008. On June 1, 2008, the partner
contributed another P20,000. On September 1, 2008, the partner withdrew P15,000 from the partnership. Withdrawals in
excess of P10,000 are charged to the partners capital account. The annual weighted average capital balance is
a. P62,000 c. P60,000
b. P51,667 d. P48,333
69. Merlina partner in the Camelot Partnership, has a 30% participation in partnership profits and losses. Merlins capital account
has a net decrease of P1,200,000 during the calendar year 2008. During 2008, Merlin withdrew P2,600,000 (charged against
his capital account) and contributed property valued at P500,000 to the partnership. What was the net income of the Camelot
Partnership for year 2008?
a. P3,000,000 c. P7,000,000
b. P4,666,667 d. P11,000,000
70. On January 1, 2008, A, B,C and D formed Bakya Trading Co., a partnership, with capital contributions as follows: A, P50,000;
B, P25,000; C,P25,000; and D, P20,000. The partnership contract provided that each partner shall receive a 5% interest on
contributed capital, and that A and B shall receive salaries of P5,000 and P3,000 respectively. The contract also provided that
C shall receive a minimum of P2,500 per annum, and D a minimum of P6,000 per annum, which is inclusive of amounts
representing interest and share of remaining profits. The balance of the profits shall be distributed to A, B, C, and D in a
3:3:2:2 ratio.
a.
b. What amount must be earned by the partnership before any charge for interest and salaries so that A may receive an
aggregate of P12,500 includeing interest, salary and share of profits?
c. P16,667 c. P30,667
d. P30,000 d. P32,333
71. AA, BB, and CC are partners with average capital balances during 2008 of P472,500, P238,650 and P162,350 respectively.
The partners receive 10% interest on their average capital balances;after deducting salaries of P122,325 to AA and P82,625
to CC, the residual profits or loss is divided equally.
a.
b. In 2008, the partnership had a net loss of P125,624 before the interest and salaries to partners. By what amount should
AAs and CCs capital account change increase (decrease)?
c. AA, P30,267; CC, (P40,448) c. AA, (P40,844); CC, P31,325
d. AA, P29,476; CC, P17,536 d. AA, P28,358; CC, P32,458
72. The same information in Number 36, except the partnership had a loss of P125,624 after the interest and salaries to partners,
by what amount should BBs capital account change-increase (decrease)?
a. (P115,443) c. (P41,875)
b. P23,865 d (P18,010)
c.
d.
e.
f.
g.
h.
73. Presented below is the condensed balance sheet of the partnership of KK, LL and MM who share profits and losses in the
ratio of 6:3:1, respectively:
a. Cash b. c. Liabilities d. P
P 85,000 80,000
e. Other assets f. g. KK, capital h. 252
415,000 ,000
i. j. k. LL, capital l. 126
,000
m. n. o. MM, capital p. 42,
000
q. TOTAL r. s. TOTAL t. P50
P 500,000 0,000
u.
v. The partners agree to sell NN 20% of their respective capital and profit and loss interest for a total payment of P90,000.
The payment by NN is to be made directly to the individual partners. The capital balance of KK, LL and MM respectively after
admission of NN are:
a. P198,000; P99,000; P33,000
b. P201,600; P100,800; P33,600
c. P216,000; P108,000; P36,000
d. P255,600; P127,800; P42,600
74. On June 30, 2008, the balance sheet of Western Marketing, a partnership, is summarized as follows:
a. Sundry assets: P150,000
b. West, capital 90,000
c. Tern, capital 60,000
d.
e. West and Tern share profit and losses a 60:40 ratio, respectively. They agreed to take in Cuba as a new partner, who
purchases 1/8 interest of West and Tern for P25,000. What is the amount of Cubas capital to be taken up in the partnership
books if book value method is used?
a. P12,500 c. P25,000
b. P18,750 d. P31,250
75. The capital accounts of the partnership of NN, VV, and JJ on June 1, 2008 are presented below with their respective profit
and loss ratios:
a.
b. NN c. P139,200 d.
1/2
e. VV f. 208,800 g.
1/3
h. JJ i. 96,000 j.
1/6
k.
l. On June 1, 2008, LL is admitted to the partnership when LL purchased, for P132,000, a proportionate interest from NN
and JJ in the net assets and profits of the partnership. As a result of a transaction LL acquired a one-fifth interest in the net
assets and profit of the firm. What is the combined gain realized by NN and JJ upon the sale of a portion of their interest in
the partership to LL?
a. P0 c. P62,400
b. P43,200 d. P82,000
76. PP contributed P24,000 and CC contributed P48,000 to form a partnership, and they agreed to share profits in the ratio of
their original capital contributions. During the first year of operations, they made a profit of P16,290; PP withdrew P5,050 and
CC P8,000. At the start of the following year, they agreed to admit GG into the partnership. He was to receive interest in
the capital and profits upon payments of P30,000 to PP and CC, whose capital accounts were to be reduced by transfers to
GGs capital account of amounts sufficient to bring them back to their original capital ratio.
a.
b. How should the P30,000 paid by GG be divided between PP and CC.
c. PP, P9,825; CC, P20,175 c. PP, P10,000; CC, P20,000
d. PP, P15,000; CC, P15,000 d. PP, P9,300; CC, P20,700
77. DJ partnership had a net income of P2,000 for the month ended September 30, 2008. Ambo purchased an interest in the DJ
partnership of Day and Jar by paying Day P8,000 for half of his capital and half of his 50% profit sharing interest on October
1, 2008. At this time Day capital balance was P6,000 and Jar capital balance was P14,000.
a.
b. Ambo should receive credit to his capital account balance of:
c. P4,000 c. P5,000
d. P3,000 d. P6,667
78. On January 31, 2008, partners of Lon, Mac and Nan, LLP, had the following loan and capital account balances (after closing
entries for January).
a.
b. Loan receivable from Lon c. P d.
20,000 Dr
e. Loan payable to Nan f. 60,000 g.
Cr
h. Lon, capital i. 30,000 j.
Dr
k. Mac, capital l. 120,00 m.
0 Cr
n. Nan, capital o. 70,000 p.
Cr
q.
r. The partnerships income sharing was Lon, 50%; Mac, 20% and Nan 30%. On January 31, 2008, Ole was admitted to
the partnership for a 20% interest in total capital of the partnership in exchange for an investment of P40,000 cash. Prior to
Oles admission, the existing partners agreed to increase the carrying amoung of the partnerships inventories to current fair
value, a P60,000 increase. The capital account to be credited to Ole:
a. P60,000 c. P52,000
b. P40,000 d. P46,000
79. Partnership AA, BB, and CC divide profits and losses 5:3:2, respectively, and their balance sheet on September 30, 2008 are
as follows:
a.
b. Cash c. P 80,000
d. Other assets e. 720,000
f. g.
h. TOTAL ASSETS i. P 800,000
j. ========
k. Accounts payable l. P 200,000
m. AA, capital n. 148,000
o. BB, capital p. 260,000
q. CC, capital r. 192,000
s. t.
u. TOTAL LIABILITIES AND CAPITAL v. P 800,000
w. ========
x.
y. The assets and liabilities are recorded at approximate current fair values. DD is to be admitted as a new partner with a
20% interest in capital and earnings in exchange for a cash investment. Goodwill or bonus will not be considered.
z.
aa. How much cash should DD contribute?
a. P120,000 c. P150,000
b. P144,000 d. P160,000
80. The following condensed balance sheet is presented for the partnership of LL, PP, and QQ, who share profits and losses in
the ratio of 4:3:3 respectively:
a.
b. Cash c. P 90,000
d. Other assets e. 830,000
f. LL, loan g. 20,000
h. TOTAL ASSETS i. P 940,000
j. ========
k. Accounts payable l. P 210,000
m. QQ, loan n. 30,000
o. LL, capital p. 310,000
q. PP, capital r. 200,000
s. QQ,capital t. 190,000
u. TOTAL LIABILITIES AND CAPITAL v. P 940,000
w. ========
x.
y. Assume that the assets and liabilites are fairly valued on the balance sheet and that the partnership decides to admit FF
as a new partner, with a 20% interest. No goodwill or bonus is to be recorded. How much should FF contribute in cas or
other assets?
a. P140,000 c. P175,000
b. P142,000 d. P177,500
81. CC and DD are partners whose profits and losses in the ratio of 7:3 respectively. On October 21, 2008, their respective
capital accounts were as follows:
a.
b. CC c. P
35,000
d. DD e. 30,0
00
f. TOTAL g. P
65,000
h. ===
=====
i.
j. On that date they agreed to admit EE as a partner with one-third interest in the capital and profits and losses, and upon
his investment of P25,000. The new partnership will begin with a total capital of P90,000. Immediately after EEs admission,
what are the capital balance of CC, DD and EE, respectively?
a. P30,000; P30,000, P30,000 c. P31,667; P28,333; P30,000
b. P31,500, P28,500, P30,000 d. P35,000; P30,000; P25,000
82. On June 30, 2008, the balance sheet for the partnership of CC, MM, and PP together with their respective profit and loss
ratios, were as follows:
a.
b. Assets at cost c. P
180,000
d. =========
e. f.
g. CC, loan h. P
9,000
i. CC, capital (20%) j. 42,000
k. MM, capital (20%) l. 39,000
m. PP, capital (60%) n. 90,000
o. TOTAL p. P
180,000
q. =========
r.
s. CC has decide to retire from the partnership. By mutual agreement, the assets are to be adjusted to their fair value of
P216,000 at June 30, 2008. It was agreed that the partnership would pay CC P61,200 cash for CCs partnership interest,
including CCs loan which is to be repaid in full. No goodwill is to be recorded. After CCs retirement, what is the balance of
MMs capital account?
a. P36,450 c. P45,450
b. P39,000 d. P46,200
t.
83. The December 31, 2008, balance sheet of BB, CC, and DD partnership is summarized as follows:
a.
b. Cash c. P d. CC, loan e. P
100,000 100,000
f. Other assets g. 5 h. BB, capital i. 1
at cost 00,000 00,000
j. k. l. CC, capital m. 2
00,000
n. o. p. DD, capital q. 2
00,000
r. TOTAL s. P u. TOTAL v. P
600,000 600,000
t. = w. =
======= =======
x.
y. The partners share profits and losses as follows: BB, 20%; CC,30% and DD, 50%. CC is retiring from the partnership
and the partners have agreed that other assets should be adjusted to the fair value of P600,000 at December 31, 2008.
They further agree that CC will receive P244,000 cash for his partnership interest exclusive of the loan, which is to be paid in
full, and that no goodwill implied by CCs payment will be recorded. After CCs retirement the capital balances of BB and DD
respectively will be:
a. P116,000 and P240,000 c. P100,000 and P200,000
b. P101,714 and P254,286 d. P73,143 and P182,857
z.
84. The partners capital (income sharing ratio in parentheses) of Nunn, Owen, Park & Wuan LLP on May 31, 2008 was as
follows:
a. Nunn (20%) b. P
60,000
c. Owen (20%) d. 8
0,000
e. Park (20%) f. 7
0,000
g. Quan (40%) h. 4
0,000
i. Total partners capital (20%) j. P
250,000
k.
l. On May 31, 2008, with the consent of Nunn, Owenand Quan:
Sam Park retired from the partnership and was paid P50,000 cash in full settlement of his interest in the partnership.
Lois Reed was admitted to the partnership with a P20,000 cash investment for a 10% interest in the net assets of Nunn,
Owen, Quan & Reed LLP.
m.
n. The capital account to be credited to Reed:
a. P 22,000 c. P20,000
b. P 27,000 d. P25,000
85. When MM retired from partnership of MM, YY and LL. The settlement of MMs interest exceeded MMs capital balance, under
the bonus method, the excess:
a. Was recorded as goodwill
b. Was recorded as an expense
c. Reduced the capital balances of YY and LL
d. Has no effect on the capital balance of YY and LL.
e.
f. Ayala Land Inc. (ALI) and SM Development Corporation (SMDC) establish a joint arrangement through Multi Realty Development
Corporation (MRDC). The legal form of the separate vehicle does not confer separation between the parties and the separate vehicle
itself. That is, ALI and SMDC have the rights to the assets and obligations for the liabilities of MRDC. Neither the contractual terms,
nor the other facts and circumstances indicate otherwise.
g.
h. ALI and SMDC each owns 50% of the equity in MRDC. However, the contractual terms of the joint arrangement state that ALI has
rights to all of the transportation equipment and the obligation to pay the accounts payable in MRDC. ALI and SMDC have rights to all
other assets in MRDC and obligations for all other liabilities in MRDC in proportion to their equity interest.
i.
j. For the year ended December 31, 2013, the statement of financial position of MRDC is as follows:
k.
l. ASSETS m. LIABILITIES and EQUITY
n. Cash o. P p. Accounts q. P
10 payable 600
0, ,00
00 0
0
r. Transpo s. 60 t. Other u. 200
rtation 0, liabilities ,00
equipm 00 0
ent 0
v. Furnitur w. 50 x. Equity y. 400
e and 0, ,00
fixtures 00 0
0
z. TOTAL aa. P ab. TOTAL ac. P
ASSET 1, LIABILITIES 1,2
S 20 AND EQUITY 00,
0, 000
00
0
ad.
ae.
af.
1. On December 31, 2013, the total assets of ALI in his separate statement of financial position would show:
b. P900,000 d. P300,000
2. On December 31, 2013, the total assets of SMDC in his separate statement of financial position is:
b. P250,000 d. P900,000
ag.
ah. Bank of Tokyo Mitsubishi (BTM) and Hong Kong Shanghai Banking Corporation (HSBC) agreed to combine their
corporate, investment banking, asset management and service activities by establishing Trust Banking Corporation
(TBC). Both parties expect the arrangement to benefit them in different ways.
ai.
aj. BTM and HSBC each have 40 per cent ownership of TBC . The remaining 20 per cent was held by outside parties.
The stockholders agreement between BTM and HSBC establishes joint control of the activities of TBC.
ak.
al. Summary transactions for year ended December 31, 2013 and 2014 are as follows:
am. an. ao.
2 2
ap. Investment: BTM aq. ar.

P P
as. HSBC at. au.

5 5
av. Revenues aw. ax.

1 1
ay. Cost and expenses az. ba.

6 7
bb. Dividends paid by BTM bc. bd.

4
be.
3. What is the interest of BTM in the joint arrangement at December 2013?
4. What is the interest of HSBC in the joint arrangement at December 31, 2014?
bf.
bg. On January 1, 2013, entities A, B and C (the joint operators) jointly buy a Yacht for P30million cash. The joint arrangement
includes the following agreements:
The partities are joint owners of the yacht.
The yacht is at the disposal of each party.
The parties may decide to use the yacht or lease it to a third party.
The maintenance and disposal of the yacht require the unanimous consent of the parties.
The contractual arrangement is for the expected life (20 years) of the yacht and can be change only if all the parties agree. The
residual value of the yacht is P2 million.
Revenues and expenses are to be shared equally among the parties.
bh.
bi. Summary transactions during 2013 are as follows:
The parties paid P300,000 to meet the costs of maintaining the yacht.
Each party incurred costs when they use the yacht personally. Entity A use the helicopter and incurred costs of P400,000 on pilot
fees, aviation fuel and landing costs.
Rental income earned by renting the yacht to outsiders amounted to P3 million.
bj.
5. What is the total assets of the joint arrangement?
b. P28,600,000 d. P31,000,000
6. What is the interest of each party in the joint arrangement for the year ended December 31, 2013?
b. P10,300,000 d. P15,300,000
7. On January 1, 2013, entities A and B each acquired 30 per cent of the ordinary voting shares of entity X for P300,000. Entities A
and B immediately agreed to share control over entity X.
bk.
bl. For the year ended December 31, 2013 entity X reported a profit of P400,000 and declared a dividend of P150,000.
At December 31, 2013 the fair value of each venturers investment in entity X is P425,000. Entities A and B uses the
cost model to account for its investment in jointly controlled entities. However, there is no published price quotation
for entity X. Investments are accounted for using the cost model.
bm.
bn. At December 31, 2013, the venturers must report their investment in entity X at:
b. P255,000 d. P420,000
bo.
8. Using the same data in 11, assuming on January 2, 2013 entity X also declared a dividend of P100,000 for year 2012 and at
December 31, 2013 the fair value of each venturers investment in entity X is P400,000.
bp.
bq. How much is dividend income each venture should recognize on December 31, 2013?
b. P30,000 d. P15,000
9. Using the same data in 11. However there is published price quotation for entity X. At December 31, 2013, the venturers must
each report its investment in entity X at:
b. P300,000 d. P400,000
br.
bs. On March 1, 2013 entities A and B each acquired 30 per cent of the ordinary voting shares of entity AB for P300,000. Entities A
and B immediately agreed to share control over entity AB.
bt.
bu. On December 31, 2013 entity AB reported a profit of P80,000 and declared a dividend of P100,000. At December 31, 2013 the
fair value of each venturers investment in entity AB is P293,000 and the cost to sell amounts to P3,000. There is no published price
quotation for entity AB. Entity AB uses the cost model of accounting for investments.
bv.
10. At December 31, 2013 entities A and B must each report their investment in enity AB at:
b. P293,000 d. P296,000
11. How much impairment loss should be recognized in profit and loss for the year ended December 31, 2013?
b. P3,000 d. P7,000
12. On January 1, 2013 entities A and B each acquired 30 per cent of the ordinary voting shares of entity X for P600,000. Entities A
and B immediately agreed to share control over entity X.
bw.
bx. For the year ended December 31, 2013 entity X reported a profit of P800,000 and declared and paid dividend of
P300,000. At December 31, 2013 the fair value of each venturers investment in entity X is P850,000. However, there is no
published price quotation for entity X. Investments are accounted for using the fair value model.
by.
bz. For the year ended December 31, 2013, profit or loss is to be increased by:
b. P90,000 d. P300,000
13. Using the same data in 16, entities A and B must each report their investment in entity X at:
b. P850,000 d. P750,000
14. On January 1, 2013 entities X and Y each acquired 30 per cent of the ordinary voting shares of entity Z for P300,000. Entities X
and Y immediately agreed to share control over entity Z.
ca.
cb. On January 2, 2013, entity Z declared a dividend of P100,000 for the year 2012. On December 31, 2013 entity Z
reported a profit of P400,000 and declared and paid dividend of P150,000 for the year 2013. At December 31, 2013
the fair value of each venturers investment in entity Z is P425,000. However, there is no published price quotation
for entity Z.
cc.
cd. Investment in entity Z are accounted for using the equity method.
ce.
cf. At December 31, 2013 entities X and Y must report their investment in entity Z (a jointly controlled entity) at:
b. P375,000 d. P420,000
15. On January 1, 2013 entities A and B each acquired 30 per cent of the ordinary voting shares of entity Z for P300,000. Entities A
and B immediately agreed to share control over entity Z.
cg.
ch. For the year ended December 31, 2013 entity Z incurred a loss of P100,000. No dividend was declared. At December
31, 2013 the recoverable amount of each venturers investment in Z is P310,000 (fair value of P325,000 less P15,000 estimated
costs to sell). There is no published price quotation for entity Z. Investment in entity Z are accounted for using the equity method.
ci.
cj. At December 31, 2013, what is the carrying amount of the venturers investment in entity Z?
b. P325,000 d. P265,000
16. Assume the same facts in 19. However, at December 31, 2013 the recoverable amount of each venturers investment in entity Z
is P265,000 (fair value of P275,000 less P10,000 estimated costs to sell).
ck.
cl. At December 31, 2013 entities A and B must each report its investment in entity Z:
b. P265,000 d. P265,000
17. On January 1, 2013 entities R and S (the venturers) form a joint venture (entity RS). Upon incorporation of entity RS, entities R
and S each take up 50 percent of the share capital of entity RS. In return for their interests in entity RS, entity R contributes a
machine with fair value of P200,000 and carrying amount of PP160,000 while entity X contributes cash of P200,000.
cm.
cn. The machine contributed by entity R has an estimated useful life of 10 years with no residual value.
co.
cp. For the year ended Deceber 31, 2013 entity RS reported a profit of P60,000 (after dedcting a depreciation expense
of P20,000 on the machine contributed by entity R). Entity R accounts for jointly controlled entities using the equity
method.
cq.
cr. At December 31, 2013, what is the carrying amount of entity Rs investments in entity RS?
b. P180,000 d. P200,000
18. On January 1, 2013, entities L and M each acquired 30 percent of the ordinary voting shares of entity O for P450,000. Entities L
and M immediately agreed to share control over entity O.
cs.
ct. For the year ended December 31, 2013 entity O recognized a profit of P600,000 and declared and paid dividend of
P225,000. On December 31, 2013 entity L sells goods for P90,000 to entity O. These goods at December 31, 2103
were in entity Os inventories (they had not been sold to outsiders by entity O). Entity L sells goods at a 50 percent
mark up on cost.
cu.
cv. At December 31, 2013 the fair value of each venturers investment in entity O is P637,500. However, there is no
published price quotation for entity O.
cw.
cx. At December 31, 2013 entity L would report its investment in enity O at::
b. P450,000 d. P630,000
19. On January 1, 2013 entities R and S each acquired 40% of the ordinary voting shares of entity Z for P600,000. Entities R and S
immediately agreed to share control over entity Z.
cy.
cz. For the year ended December, 2013 entity Z recognized a profit of P800,000 and declared and paid dividend for
P300,000. In 2013 entity R purchased goods for P200,000 from entity Z. At December 31, 2013 P120,000 of the
goods purchased from entiry Z were in entity Rs inventories (they had not been sold by entity R). Entity Z sells
goods at 40 per cent mark up on cost.
da.
db. At December 31, 2013 the fair value of each venturers investment in entity Z is P850,000. However, there is no
published price quotation for entity Z.
dc.
dd. Investment in jointly controlled entities are accounted for using the equity method.
de.
df. At December 31, 2013 entity R and S would report its investment in entity Z at:
b. P784,000 d P637,500
20. Superman Company started operations on January 2, 2013. The following information is gathered:
Installment accounts receivable, December 31 - P1,500,000
Deferred gross profit, December 31 before adjustment - P1,050,000
Gross profit based on sales - 25%
dg. What is the relized gross profit on sales for 2013?
a. P1,350,000 c. P810,000 e. Answer not given
b. P1,125,000 d. P675,000
21. Gross profit rates Batman Company were 35%, 33%, and 30% of sales for 2011, 2012, and 2013, respectively. The following
accounts balances are available at the end of 2013.
dh.
di. Year of Sale dj. Installment dk. Deferred Gross
Account Receivable Profit Before Adjustment
dl. 2011 dm. P 6,000 dn. P 7,230
do. 2012 dp. 61,500 dq. 60,750
dr. 2013 ds. 195,000 dt. 120,150
du.
dv. What is the total realized gross profit to be reported in the Statement of Comprehsive Income for the year ended
December 31, 2013?
b. P102,105 d. P97,235
22. The following information are obtained from the books of accounts of Robin. Inc. on June 30, 2013:
Deferred gross profit balance-after adjustment - P202,000
Total collections on installment sales P440,000
Gross profit rate based on cost 25%
dw. Robin, Inc. uses the installment method of accounting. What is Robins total installment sales for 2013?
b. P1,440,000 d. P1,010,000
23. MW Corporation sells car on a three year installment sales contract. On December 31, 2013, the last day of BMWs first year of
operations, the results of operations before adjustment are summarized below:
Sales P1,000,000
Cost of installment sales P700,000
Operating expenses P80,000
dx. The total collections during the year including interest and financing charges of P100,000 is P500,000. What is the net
income of BMW Corporation for the year ended December 31, 2013?
b. P140,000 d. P120,000
24. In 2012, a merchandise was sold on installment basis by MB Company for P80,000 at a gross profit of 25% on cost. During the
year, a total of P42,500 including interest of P12,500 was collected on this contract. In 2013, no collection was made on this sale,
and the merchandise was repossessed. The fair value of the merchandise is P34,000 after reconditioning cost of P4,000. What
is the gain (loss) on repossession?
a. (P10,000) c. P10,000 e. Answer not given
b. (P14,000) d.(P20,000)
25. Casablanca, Inc. which began operations on January 2, 2013, appropriately uses the installment method of accounting. The
following information pertains to Casablancas operations for the year 2013:
Installment sales P1,000,000
Regular sales P600,000
Cost of installment sales P500,000
Cost of regular sales P300,000
Operating expenses P100,000
Collection on installment sales P200,000
dy. In its December 31, 2013, what amount should Casablanca, Inc. report as deferred gross profit?
b. P500,000 d. P150,000
26. JJ Company sold goods on installment. For the year just ended, the following were reported:
Installment sales P3,000,000
Cost of installment sales P2,025,000
Collections on installment sales P1,800,000
Repossessed accounts P200,000
Fair value of repossessed merchandise P120,000
dz. The repossession resulted to:
a. Gain of P5,000 c. No gain, no loss e. Answer not given
b. Loss of P80,000 d. Loss of P15,000
27. In July 2012, Sta. Lucia Company who uses the installment method of accounting sold land costing P90,000 for P240,000,
receiving P35,000 cash as down payment and a mortgage for the balance payable in monthly installments. Installment received
in 2012 reduced the principal of the note to a balance ofP200,000. The buyer defaulted on the note at the beginning of 2013 and
the property was repossessed. The property had appraised value of P165,000 at the time of repossession. The realized gross
profit in 2012 and the gain (loss) on repossession in 2013 amounted to:
a. Realized gross profit of P15,000 and gain (loss) on repossession (P90,000)
b. Realized gross profit of P25,000 and gain (loss) on repossession P90,000
c. Realized gross profit of P9,000 and gain (loss) on repossession (P2,500)
d. Realized gross profit of P2,500 and gain (loss) on repossession P3,500
e. Answer not given
28. On April 1, 2013, GE Company sold for P7,000 a refrigerator which had a cost of P4,550. A downpayment of P750 was made with
the provision that additional payments of P625 be made monthly thereafter. Interest was to be charged at a monthly rate of 2
percent on the unpaid balance of the principal; the monthly installment was to apply first to the interest then to the balance of the
principal. After completing four months installment the customer defaulted and the refrigerator was repossessed. At this time, the
fair value of the refrigerator (used) was estimated to be P1,875. The gain (loss) on repossession and the realized gross profit to
be recognized in 2013 are:
a. Gain (loss) on repossession of (P847.98) and realized gross profit of P1,137.50
b. Gain (loss) on repossession of (P847.98) and realized gross profit of P983.78
c. Gain (loss) on repossession of (P562.50) and realized gross profit of P875.00
d. Gain (loss) on repossession of P562.50 and realized gross profit of P983.78
e. Answer not given
ea.
29. Lexus Company, which began operations on January 3, 2012, appropriately used the installment method of revenue recognition.
The following information pertains to Lexus Companys operations for 2012 and 2013:
eb.
ec. PARTICULARS ed. 2012 ee. 2013
ef. Sales eg. P300,000 eh. P450,00
0
ei. Collection from: ej. ek.
el. em. 2012 sales en. 100,000 eo. 50,000
ep. eq. 2013 sales er. - es. 150,000
et. Accounts written off: eu. ev.
ew. ex. 2012 sales ey. 25,000 ez. 75,000
fa. fb. 2013 sales fc. - fd. 150,000
fe. Gross profit rates ff. 30% fg. 40%
fh.
fi. What amount should Lexus Company report as deferred gross profit in its December 31, 2013 Statement of
Financial Position for 2012 and 2013 sales?
b. P125,000 d. P80,000
30. On January 2, 2012, Mustang Company sold a car to Mr. De Jesus for P1,050,000. On this date, the car cost P735,000. Mr. De
Jesus paid P150,000 as down payment and signed a P900,000 interest bearing note at 10 percent. The note was payable in
three annual installments of P300,000 beginning January 1, 2013. Mr. De Jesus paid P150,000 as down-payment and signed a
P900,000 interest bearing note at 10 percent. The note was payable in three annual installments of P300,000 beginning January
1, 2013. Mr. De Jesus made a timely payment for the first installment on Janurary 1, 2013 of P390,000 which included interest of
P90,000 to date of payment. Mustang Company uses the installment method of accounting. In its December 31, 2013 Statement
of Financial Position, what amount should Mustang Company report as deferred gross profit?
b. P153,000 d. P225,000
31. SM Corporation started operations on January 2, 2012 selling home appliances and furniture on installment basis. For 2012 and
2013, the following data represented operational details:
fj.
fk. PARTICULARS fl. 2012 fm. 2013
fn. Installment sales fo. P1,200,000 fp. P1,500,0
00
fq. Cost of installment sales fr. 720,000 fs. 1,050,00
0
ft. Collections on installment fu. fv.
sales
fw. fx. 2012 sales fy. 630,000 fz. 450,000
ga. gb. 2013 sales gc. - gd. 900,000
ge.
gf. On January 8, 2013, an installment sale account in 2012 defaulted and the merchandise with fair value of P15,000
was repossessed. The related installment receivable balance as of date of default and repossession was P24,000.
What is the balance of the Unrealized gross profit account as of the end of 2013?
d. P218,400 d. P275,000
32. Microstation, Inc. sold computer equipment on installment basis on October 1 2013. The cost to the company was P60,000 but
the installment sales price was set at P85,000. Terms of payment included the acceptance of a used computer equipment with a
trade-in value of P30,000. Cash of P5,000 was paid in addition to the trade-in equipment with the balance to be paid in ten (10)
monthly installments due at the end of each month commencing the month of sale. The estimated selling price of the used
computer equipment after reconditioning cost of P1,250 is P25,000. A 15 percent gross profit was usual from sale of used
equipment. What is the gross profit to be realized from the 2013 collections?
d. P10,000 d. P4,000
33. On December 31, 2012, Jacinto Steel Inc. sold construction equipment to Anthony Company for P3,600,000. The equipment had
cost of P2,400,000. Anthony Company paid P600,000 cash on December 31, 2013 and signed a P3,000,000 note bearing
interest at 10 percent payable in five annual installments of P600,000. Jacinto Steel, Inc. appropriately accounted for the sale
under the installment method. On December 31, 2013, Anthony Company paid P900,000 including interest of P300,000. For the
year ended December 31, 2013, what total amount of revenue should Jacinto Steel, Inc. recognized from the construction
equipment sale and financing?
d. P200,000 d. P240,000
34. ACA Video Company sells home appliances. It maintains its accounting records on a calendar year basis. On October 1, 2012,
ACA Video Company sold a television set to Mr. Santiago. The cost of the set was P18,000, and the set was sold for P24,000. A
down-payment of P6,000 was received along with a contract calling for the subsequent payment of P1,000 on the first day of each
month starting on the following month. No interest was added to the contract. Mr. Santiago paid the monthly installments
promptly on November 1 and December 1 in 2012. He also made seven installments payments in 2013 after which he defaulted
on the contract. The set was then repossessed on November 1, 2013. Assuming the repossessed set has a fair value of P4,000,
what is the gain (loss) on repossession to be recognized?
a. P(2,750) c. P750 e. Answer not given
b. P2,750 d. P1,500
35. Gothong, Inc. sells automatic voltage regulators costing P700 at a price of P1,200. Cardinal Audio buys a dozen of voltage
regulators on installment and trade-in six (6) of its old units at a trade-in value of P300 each. Gothong, Inc. spends P25 to
recondition the old units and sell them for P315. Gothong, Inc. expects a 10 percent gross profit from the sale of used voltage
regulators. Howmuch is the over-allowance granted by Gothong, Inc. on the trade in?
a. P249 c. P339 e. Answer not given
b. P150 d. P189
36. The books of Concepcion, Inc. show the following balances on December 31, 2013:
Accounts receivable P627,500
Deferred gross profit (before adjustment) P76,000
gg.
gh. Analysis of the aging of the accounts receivable reveal the following:
Regular accounts P415,000
2012 Installment accounts P32,500
2013 Installment accounts P180,000
gi.
gj. Sales on an installment basis in 2012 were made at 30 percent above cost, in 2013, at 33 1/3 percent above cost. What
is the total realized gross profit for the year ended December 31, 2013:
b. P52,500 d. P69,750
gk.

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COMPREHENSIVE EXAM Review Questions

a. Both statements are correct c. Only second statement is correct

1. First statement: A partners drawing account is a contra-capital account.

a. Both statements are correct c. Only second statement is correct

a. Both statements are correct c. Only second statement is correct

a. Both statements are correct c. Only second statement is correct

a. Both statements are correct c. Only second statement is correct

a. Both statements are correct c. Only second statement is correct

a. Both statements are correct c. Only second statement is correct

a. Both statements are correct c. Only second statement is correct

a. Both statements are correct c. Only second statement is correct

a. Both statements are correct c. Only second statement is correct

12. First statement: The number of classes of creditors in a corporate liquidation is 4.

a. Both statements are correct c. Only second statement is correct

a. Both statements are correct c. Only second statement is correct

a. Both statements are correct c. Only second statement is correct

a. Both statements are correct c. Only second statement is correct

bj. # of days past bk. Outst bl. Esti

ca. # of days past cb. Outst cc. Esti

ct. Accounts payable

j. Description k. L.Cabal l. J.Bartolo

ap. Investment: BTM aq. ar.

as. HSBC at. au.

av. Revenues aw. ax.

ay. Cost and expenses az. ba.

bb. Dividends paid by BTM bc. bd.

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