20 Day Drill Testbank P2
Short Description
....
Description
PRACTICAL ACCOUNTING ACCOUNTING TWO REVIEWERS/ TESTBANKS 1.
Jinky is trying to decide whether to accept a bonus of 25% of net income after salaries and bonus or a salary of P975!! plus a bonus of 1!% of net income after salaries and bonus as a means of allocating profit among the partners. "alaries traceable to the other partners are estimated to be P#5!!!!. $hat amount of inco income me woul would d be nece necess ssary ary so that that Jink Jinky y would would cons consid ider er the the choices to be eual& a. P11!!!!! b. P11975!! c. P'5!!!! d. P12'25!!
2.
Jamb Jamby y and (inam (inam )ust )ust form formed ed a part partne ners rshi hip. p. Jamby Jamby cont contri ribut buted ed cash of P22!5!!! P22!5!!! and office office euipment that cost P9#5!!!. P9#5!!!. *he euipment had been used in her sole proprietorship and had been 7!% 7!% depr deprec ecia iate ted d the app apprais raised ed +alue alue of the the eui euipm pmen entt is P',!!!!. Jamby also contributed a note payable of P21!!!! to be assumed by the partnership. Jamby is to ha+e '!% interest in the partnership. partnership. (iriam contributed contributed only P1575!!! P1575!!! merchandise merchandise in+entory at fair market +alue. -ssume the use of bonus method the partners capital must be in conformity with their profit and loss ratio upon formation. /n the formation of a partnership which of the following is true& a. *he agreed agreed capital capital of Jamby Jamby upon formation formation is is P2'25!!! P2'25!!! b. *he total total agreed capital capital of of the partnershi partnership p is P#,75!!! P#,75!!! c. *he capita capitall of (iriam will will increas increase e by P1!5!!! P1!5!!! as a res result ult of the transfer of capital d. *here *here is either an in+estm in+estment ent or withdraw withdrawal al of asset under under the bonus method
,.
0atanes onstruction ompany recognied gross loss of P#2!!! on its long3term pro)ect which has accumulated costs of P#9!!!!. *o finish the pro)ect the company estimates that it has to incur additional cost of P7,5!!!. *he contract price is4 a. P79!!! b. P1,,!!!! c. P1225!!! d. P11,!!!
#.
6ste 6sterr Judi Judith th and (art (artha ha were were part partner ners s wit with h capi capita tall bal balanc ances es on January 2 2!!9 of P7!!!! P#!!! and P'2!!! respecti+ely.
*heir loss sharing ratio is ,4542. n may 1 2!!9 6ster retires form the partnership. n the date of retirement the partnership net profit form operations is P#!!!. *he partners agreed further to pay 6ster P7'5'! in settlement of her interest. 8pon retirement of 6ster 6ster which of the following will result& a. oodwil oodwilll of 6ste 6sterr is P7 P7#! #! b. Judith Judith capital capital after after retire retirement ment of 6ster 6ster is P,'#! P,'#!! ! higher higher than (artha. c. 0on 0onus us from from 6st 6ster er is is P9# P9##! #! d. 0onus 0onus to to Judit Judith h is P5'!! P5'!! 5.
*he *he fol follo lowi wing ng sele select cted ed acco account unts s appe appeare ared d in in the the trail trail balan balance ce of :alentines ompany as of ;ecember ,1 2!!94 /nstallment recei+able < 2!! sales P 12!!! =epossessions P 2#!! /nstallment recei+able < 2!!9 sales 1'!!!! /nstallment sales ,#!!!! /n+entory ;ecember ,1 2!! 5'!!! =egular sales ,!!!! Purchases ##!!!! ;eferred gross profit < 2!! #,!!! per perat atin ing g e>pe e>pens nses es 92!!! -dditional information4 /nstallment recei+able < 2!! sales ;ecember as of ;ecember ,1 2!! /n+entory of new and repossessed merchandise as of ;ecember ,1 2!!9 ross profit percentage on installment sales in 2!! is 1!% higher than the gross profit percentage on regular sales in 2!!9. =epos =eposse sess ssio ions ns was was made made duri during ng the the year year and and was was reco recorde rded d correctly. /t was a 2!! sale and the corresponding uncollected account at the time of repossession was P'2!!. $hat is the net income for 2!!9 a. P1!,'! b. P1,#! d. P1!72!!
c. P1!5!
*heir loss sharing ratio is ,4542. n may 1 2!!9 6ster retires form the partnership. n the date of retirement the partnership net profit form operations is P#!!!. *he partners agreed further to pay 6ster P7'5'! in settlement of her interest. 8pon retirement of 6ster 6ster which of the following will result& a. oodwil oodwilll of 6ste 6sterr is P7 P7#! #! b. Judith Judith capital capital after after retire retirement ment of 6ster 6ster is P,'#! P,'#!! ! higher higher than (artha. c. 0on 0onus us from from 6st 6ster er is is P9# P9##! #! d. 0onus 0onus to to Judit Judith h is P5'!! P5'!! 5.
*he *he fol follo lowi wing ng sele select cted ed acco account unts s appe appeare ared d in in the the trail trail balan balance ce of :alentines ompany as of ;ecember ,1 2!!94 /nstallment recei+able < 2!! sales P 12!!! =epossessions P 2#!! /nstallment recei+able < 2!!9 sales 1'!!!! /nstallment sales ,#!!!! /n+entory ;ecember ,1 2!! 5'!!! =egular sales ,!!!! Purchases ##!!!! ;eferred gross profit < 2!! #,!!! per perat atin ing g e>pe e>pens nses es 92!!! -dditional information4 /nstallment recei+able < 2!! sales ;ecember as of ;ecember ,1 2!! /n+entory of new and repossessed merchandise as of ;ecember ,1 2!!9 ross profit percentage on installment sales in 2!! is 1!% higher than the gross profit percentage on regular sales in 2!!9. =epos =eposse sess ssio ions ns was was made made duri during ng the the year year and and was was reco recorde rded d correctly. /t was a 2!! sale and the corresponding uncollected account at the time of repossession was P'2!!. $hat is the net income for 2!!9 a. P1!,'! b. P1,#! d. P1!72!!
c. P1!5!
'.
n ?o+ ?o+em embe berr ,! 2!! 2!!9 9 @o+ @o+el eles ess s omp ompan any y auth author ori ied ed ?0 ?0"0 orp. to operate as a franchisee for an initial franchise fee of P195!!!!. f his amount P75!!!! was recei+ed upon signing the agreement and the balance represented by a note is due in four annual payments payments starting ?o+ember ,! 2!1!. Present +alue of P1 at 12% for # periods is !.',55. Present +alue of an ordinary annuity of P1 at 12% for # periods is ,.!,7#. *he period of refund will elapsed on January ,1 2!1!. *he franchisor has performed substantially all of the initial ser+ices but the operations of the store ha+e yet to start. ollectibility of the note is reasonably certain. Aow much is the unearned franchise fee on the year ended ;ecember ,1 2!!9& a. P1''122! d. P!
7.
c. P99122!
n -pr -pril ,! 2!!9 the capital accounts of P B shows the following balances4 P < P15!!!! B < 75!!! and = < P#5!!!. P#5 !!!. -t this time " is admitted admitted to the firm when he purchases purchases a one3si>th one3si>th interest in the firm for P275!!!. *he old partners eualied their capital in+estments. -fterwards all the partners agree to di+ide profits and losses eually. *he new partnership closes its books boo ks on June June ,! 2!!9 reportin reporting g a profit profit of P#2!! P#2!! for two months. months. *he partn partners ers made made the the foll follow owin ing g with withdra drawa wals ls44 P and = P#5! P#5! per monthC B and " per month. n June ,! 2!!9 " in+ests enough cash cash to incre ncreas ase e his his capit apital al to a one3t ne3thi hird rd inter nteres estt in the the partnership. Aow much cash is to be in+ested by "& a. P1!!25 P1!7#25
.
b. P75!!!!
b. P'!25
c. P'7#25
d.
Dore Dore+e +err /nc. /nc. gra grant nted ed a fran franch chis ise e to Aope Aopele less ss =om =oman anti tic c for for the the mani manila la area area.. *he fran franc chise hise was was to pay pay a franc ranchi his se fee fee of P25!!!! payable in fi+e eual annual installments starting with the payment upon signing of the agreement. *he franchise franchise was to pay monthly ,% of gross sales of the preceding month. "hould the operations of the outlet pro+e to be unprofitable the franchise may be canc cancel eled ed with with what whate+ e+er er obliga obligati tions ons owin owing g Dore+ Dore+er er /nc. /nc. in
interest bearing note is 1#%. *he first year generated a gross sales of P125!!!!. $hat is the amount of unearned franchise fee after the first year of operations& a. P275!! d. P25!!!! 9.
b. P1#57!!
c.
P1957!!
@o+ebirds orporation sells goods on the installment basis. Dor the year )ust ended the following were reported4 ost of installment sales @oss on repossession Dair +alue of repossessed merchandise -ccount defaulted ;eferred gross profit end
P 525!!! 1,5!! 1125!! 1!!!! 1!!!!
Aow much was the collections for the year& a. P21!!!! b. P2'#!!! d. P#15715
c.
P,9!!!!
1!. ;6D ompany which began operations on January 1 2!!9 appropriately uses the instalment method of accounting. *he following data pertain to ;6Ds operations for year 2!!94 /nstalment sales E0efore ad)ustmentF e>penses Ebefore write3off
P#5!!!! perating -nd
repossessionsF
P,'!!! =egular sales instalment sales ost of regular sales of P12!!! 15'!!! ost of instalment sale recei+ables written3off
175!! 1!75!! ,15!!!
ash
collections
including interest /nstalments ;ue to defaults
22!!! D(: of repossessed (erchandise accounts -ctual +alue of trade3in
27!!! 5!!!!
on
=epossessed
(erchandise
#!!!! 7!!!!
trade3in
allowance
Aow much is the deferred gross profit at ;ecember ,1 2!!9& $hat is the net income for the year ended ;ecember ,1 2!!9& a. P5!5!! C P'5!!! c. P#1!!! C P',!!! P5!5!! C P915!! d. P#1!!! C P75!!! b. 11. *he partnership agreement of G H and I pro+ides for the di+ision of net income as follows4 /. H who manages the partnership is to recei+e a salary of P1'5!! monthly. //. 6ach partner is to be allowed interest at 15% on ending capital. ///. 0alance is to be di+ided 254,!4#5. ;uring 2!!9 G in+ested an additional P9'!!! in the partnership. H made an additional in+estment of P'!!!! and withdrew P9!!!! and I withdrew P7!!!!. ?o other in+estments or withdrawals were made during 2!!9. n January 1 2!!9 the capital balances were G P2!!!!C H P,!!!!!C and I P17!!!!. *otal capital at year3end was P975!!!. ompute the capital balance of each partner at year3end4 G H I a. P ,'75! P21#92! PE2!'7!F b. #1275! ##92! 77,,! c. ,1'75! 51#92! 1#9,,! d. ,975! #125!! 725! 12. *he balance sheet as of "eptember ,! 2!!9 for the partnership of ; 6 and D shows the following information4 -ssets P,'!!!!C ; loan P2!!!!C ; capital P,!!!C 6 capital P77!!!C D capital P1!!!!. /t was agreed among the partners that ; retires from the partnership and it was also further agreed that the assets should be ad)usted to their fair +alue of P,#5!!! as of "eptember ,! 2!!9. ?et loss prior to the retirement of ; amount to P7!!!!. *he partnership is to pay ; P'2!!! cash for ;s partnership interest which would include the payment of his
loan. ?o goodwill is to be recorded. ; 6 and D share profit #!% 15% and #5% respecti+ely. -fter ;s retirement how much would Ds capital balance be& a. P''!!! c. P1,'5!! b. P1#7!!! d. P1225! 1,. Partners - 0 and share profits and losses in the ratio of 54,42. -t the end of a +ery unprofitable year they decided to liuidate the firm. *he partners capital account balances at this time are as follows4 - P'1'!!!C 0 P'972!!C P#2!!!!. *he liabilities accumulate to P#!!!! including a loan of P2!!!! from -. *he cash balance is P1'!!!. -ll the partners are personally sol+ent. *he partners plan to sell the assets in instalment. /f 0 recei+ed P1!!!! from the first distribution of cash how much did recei+e at that time& a. P5'!!! c. P,,'!! b. P22#!! d. P'1'!! 1#. n July 1 2!!7 ?= onstruction orp. contracted to build an office building for D( /nc. for a total contract price of P1275. 2!!7 2!! 2!!9 ontract cost incurred P 9,75 P '5'25 P 5'25! 6stimated costs to complete the contract #,75 5!!!! 3 0illings to D( /nc. 1275! 7#75! ,#,75 Aow much is the onstruction in Progress account balance at ;ecember ,1 2!! using the percentage of completion method& Aow much is the onstruction in Progress net of Progress 0illings at ;ecember ,1 2!! using the ero3profit method& Aow much is the realied gross profitElossF using percentage of completion method in 2!!9& a. P7175C P275C PE9,75F c. P7175C P15'25C PE9,75F
b.
P7#'7.5!C P275C PE'25!F P15'25C PE'25!F
d. P7175C
15. n January 2 2!!9 "; ompany signed an agreement to operate as a franchisee of *B Products inc. for an initial franchise fee of P9,75!! for 7 years. f this amount P175!!! was paid when the agreement was signed and the balance payable in four annual payments beginning on ;ecember ,1 2!!9. "; signed a non3interest bearing note for the balance. ";s rating indicates that he can borrow money at 1'% for the loan of this type. -ssume that substantial ser+ices amounting to P2,5!! had already been rendered by *B Products and that additional indirect franchise cost of P255!! was also incurred. PV factor is 2.!. /f the collection of the note is not reasonably assured the net income for the year ended ;ecember ,1 2!!9 is a. P,1,#,5 c. P1'1,5 b. P22!,5 d. P25,5,5 1'. mega /nc. started a #3year contract to build a dam. -cti+ities commenced on Debruary 1 2!!7. *he total contract price amounted to P12 million and it was estimated that the work would be completed at a total cost of P9.5 million. /n the construction agreement the customer agreed to accept increases in wage tariffs additional to the contract price. *he following information refers contract acti+ities for the financial year ending ;ecember ,1 2!!74 a. osts for the year4 P’000 (aterialsKKKKKKKKKKKKKKK.. P1#!! @aborKKKKKKKKKKKKKKKKK.. !! perating o+erheadsKKKKKKKKK. 15! "ubcontractorsKKKKKKKKKKKK.. 1! b. urrent estimate of total contract costs indicates the following4
(aterials are to be P1!!!! higher than e>pected. *otal labor costs are to be P,!!!!! higher than e>pected. f this amount only P2#!!!! would be brought about by increased wage tariffs. *he other amount would be due to inefficiencies. - sa+ings of P,!!!!! is e>pected on operating o+erheads.
c. ;uring the current financial year the customer reuested a +ariation to the original contract and it was agreed that the contract price would be to increased by P9!!!!!. *he total estimated cost of this e>tra work is P75!!!!. d. 0y the end of 2!!7 certificates issued by uantity sur+eyors indicated a 25% stage of completion. 17. ompute the amount of gross profit or loss to be recognied in 2!!7 using contract costs in proportion to estimated contract costs Epercentage of completion methodF4 a. P5'!!! c. P'1!!!! b. P577!!! d. P755!!! 1. ompute the amount of gross profit or loss to be recognied in 2!!7 using percentage of the work certified Epercentage of completion method < output method using actual cost approachF4 a. P5'!!! c. P'1!!!! b. P577!!! d. P755!!! 19. *ams Pia /nc. charges an initial franchise fee of P5!!!! for the right to operate as a franchisee of *ams Pia. f this amount P1!!!! is payable when the agreement was signed and the balance is payable in fi+e annual payments of P!!! each. /n return for the initial franchise fee the franchiser will help locate the site negotiate with the lease or purchase of the site super+ise the construction acti+ity and pro+ide the bookkeeping ser+ices. *he credit rating of the franchisee indicates that money can be borrowed at %. *he present +alue of an ordinary annuity of fi+e receipts of P!!! each discounted at % is P,19#1.'.
/f the initial downpayment is not refundable and no future ser+ices are reuired by the franchiser but collection of the note is so uncertain that recognition of the note as an asset is unwarranted the entry should be4 a.
ashKKKKKKKKKKKKKKKKKKKKKKK KK 1!!!!.!! ?otes =ecei+ableKKKKKKKKKKKKKKKKKK. #!!!!.!! ;iscounts on ?otes =ecei+ableKKKK. !5.,2 8nearned Dranchise DeesKKKKKKK. #19#1.'
b.
ashKKKKKKKKKKKKKKKKKKKKKKK K.. 1!!!!.!! ?otes =ecei+ableKKKKKKKKKKKKKKKKKK #!!!!.!! ;iscounts on ?otes =ecei+ableKKKK. !5.,2 =e+enue from Dranchise DeesKKKK.. #19#1.'
c.
ash KKKKKKKKKKKKKKKKKKKKKKKK 1!!!!.!! =e+enue from Dranchise DeesKKKKKKKK. 1!!!!.!!
d.
ashKKKKKKKKKKKKKKKKKKKKKKK K 1!!!!.!! 8nearned Dranchise DeesKKKKKKKKK. 1!!!!.!!
2!. n -pril 1 2!!# (otorola /nc. entered into a franchise agreement with a local businessman. *he franchisee paid P#5!!! and ga+e a P,!!!! % , years notes payable with interest due annually on (arch ,1. (otorola recorded the P75!!! initial franchise fee as re+enue on -pril 1 2!!#. n ;ecember ,! 2!!# the franchisee decided not to open the outlet under (otorolas
name. (otorola cancelled the franchisees note and refunded P2#!!! less accrued interest on the note of the P#5!!! paid on -pril 1. $hat entry should (otorola make on ;ecember ,! 2!!#& a. @oss on =epossessed DranchiseKKKKKKKK.. 2#!!! ashKKKKKKKKKKKKKKKKKKKK 2#!!! b.
@oss on =epossessed DranchiseKKKKKKKK.. 222!! ash KKKKKKKKKKKKKKKKKKKK 222!!
c.
@oss on =epossessed DranchiseKKKKKKKK.. 52!!! ashKKKKKKKKKKKKKKKKKKK.. 222!! ?otes =ecei+ableKKKKKKKKKKKKKK. ,!!!!
d.
=e+enue from Dranchise DeesKKKKKKKKK. 75!!! /nterest /ncomeKKKKKKKKKKKKKK 1!! ashKKKKKKKKKKKKKKKKKKKK 222!! ?otes =ecei+ableKKKKKKKKKKKKK.. ,!!!! =e+enue from =epossessed DranchiseKK.. 21!!!
21. (aranan (otors "ales cars on the installment basis. Presented below are data for the past three years4
/nstallment sales ost of sales ollection on4 2!!7 installment sales
2!!7 2!!' 2!!5 P2!!!! P2,!#!!! P15#,!!! 172!!! 1##!!!! 1!!295! 1!!!!!
2!!' installment sales 2!!5 installment sales
,91!!!
921!!!
#7!!!
#'2!!!
57!!!
=epossessions on defaulted accounts included one made on a 2!!5 sale for which the unpaid balance amounted to P2!!!!. *he depreciated +alue of the car repossessed was P1!!!!. *he unreco+ered cost of the car in 2!!5 and repossessed in 2!!7 is 4 a. b.
P'5!! 7!!!
c. P1!!!! d. 1,!!!
22. ndoy ompany began operations on January 1 2!11 and appropriately uses the installment method of accounting. *he following data are a+ailable for 2!11 and 2!12 2!11 2!12 /nstallment sales 12!!!!! 15!!!!! ash collections from4 2!!7 sales #!!!!! 5!!!!! 2!! sales '!!!!! ross profit on sales ,!% #!% *he realied gross profit for 2!12 is a. b. c. d.
'!!!!! 2#!!!! 390,000 ##!!!!
2,. n January 1 -w-w and 0e0e pooled their assets to form a partnership with the firm to take o+er their business assets and assume the liabilities. Partners capitals are to be based on net assets
transferred after the following ad)ustments. EProfit and loss are allocated eually.F 0e0eLs in+entory is to be increased by P#!!!C an allowance for doubtful of P 1!!! and Pl.5!! are to be set up in books of -w-w and 0e0e respecti+elyC and accounts payable of P#!!! is to be recognied in -w-wLs books. *he indi+idual trial balances on -ugust before ad)ustments follow4 -w-w 0e0e -ssets P75.!!! P11,!!! @iabilities 5!!! ,#5!! $hat is the capital of -w-w and 0e0e after the abo+e ad)ustments& a. b. c. d.
-w-w P'5!!!C 0e0e P7'.!!! AwAw, P65,000; BB, P!".000 -w-w P'75!4 0e0e P7725! -w-w P75.!!!C 0e0e P1.!!!
2#. *he Partnership has the following balances in their trial balance4
E1F "ales M P7!!!! E2F ost of oods "old M P#!!!! E,F perating 6>penses M P1!!!! E#F "alary allocations to partners M P1,!!! E5F /nterest paid to banks M P2!!! E'F PartnersL withdrawals M P!!! *he partnership net income ElossF is4 a. b. c. d.
E,!!!F "!,000 2!.!!! 5!!!
25. *he following data are pro+ided by the *roubled ompany4 -ssets at book +alue 15!.!!! -ssets at net realiable +alue 1!5!!! @iabilities at book +alue4 Dully secured mortgage '!!!! 8nsecured accounts and notes payable 7!!!! 8nrecorded liabilities4 /nterest on bank notes 5!! 6stimated cost of administering estate '!!! *he court has appointed a *rustee to liuidate the company. $hen the *rustee records the assets and liabilities it should include an estate deficit of4 a. b. c. #.
,15!! 25!!! ,1!!! $5,500
2'. (imi Jo)o and Naka are forming a new partnership. (imi is to in+est cash of P1!!!!! and stamping euipment originally costing P12!.!!! but has a second3hand +alue in the market at P5!!!!. Jo)o is to in+est cash of P1'!!!! while Naka whose family is engaged in selling stamping euipment is to contribute cash of P5!!!! and a brand new stamping euipment to be used by the partnership with a regular price of P 12!.!!! but which cost their familyLs business P1!!!!!. Partners agree to share profits eually. *he capital balances upon formation are4 a. b. c. #.
(imi P22!!!!C Jo)o P1'!!!!C and Naka P15!!!! (imi P17''''C Jo)o P17''''C and Naka P17''' (imi P1'!!!!C Jo)o P1'!!!!C and Naka P1'!!!! %&'&, P"50,000; ()*), P"60,000; +# K+-+, P"0,000
27. n June ,! 2!12 -ida @orna and De formed a partnership by combining their separate business proprietorship. -ida contributed cash of P75.!!!. @orna contributed property with a P5#!!! carrying amount a P'!.!!! original cost and P12!.!!! fair +alue. *he partnership accepted responsibility for the P52.5!! mortgage attached to the property. De contributed euipment with a P#5!!! carrying amount a P1125!! original cost and P2.5!! fair +alue. *he partnership agreement specifies that profits and losses are to be shared eually but is silent regarding capital contributions. $ho among the partners has the largest capital balance& a. b c. d.
@orna -ll capital account balances are eual -ida
2. ;imagiba ompany began operation at the beginning of 2!12. ;uring the year it had cash sales of '75!!! and sales on installment basis of 1'5!!!!!. ;imagiba adds a markup on cost of 25% on cash sales and 5!% on installment sales. /nstallments recei+able at the end of 2!! is ''!!!!!. *he resulting realied gross profit for 2!12 is4 a. b. c. d.
,,!!!!! 1,75!!! ,65,000 ,575!!!
29. n ctober 1 2!11 (ario orporation a real estate de+eloper sold land to ;iego ompany for 5!!!!!!. ;iego paid cash of '!!!!! and signed a ten3year ##!!!!! note bearing interest at 12%. *he carrying amount of the land was P#!!!!!! on the date of sale. *he note was payable in forty uarterly principal installments of 11!!!! beginning January 2 2!12. (ario appropriately accounts for the sale under the cost reco+ery method. n January 2 2!12 ;iego paid the first principal installment of 11!!!! and interest of 1,2!!!.
Dor the year ended ;ecember ,1 2!12 what total amount of income should (ario recognie from the land sale and the financing& a. b. c. #.
,!9'#! 5!.2!! 2!!!! 0
,!. Popoy has a dilemna. Ae is trying to decide whether to accept a salary of #!!!! or a salary of 25!!! plus a bonus of 1!% of net income after salary and bonus as a means of allocating profit among the partners. "alaries traceable to the other partners are estimated to be 1!!!!!. $hat amount of income would be necessary so that Popoy would consider the choices to be eual& a. b. c. #.
1'5!!! ,!5!!! 2'5!!! $90,000
3". ?onoy and (ar are considering forming a partnership whereby profits will be allocated through the use of salaries and bonuses. 0onuses will be 1!% of net income after total salaries and bonuses. ?onoy will recei+e a salary of P,!.!!! and a bonus. (ar has the option of recei+ing a salary of P#!!!! and a 1!% bonus or simply recei+ing a salary of P52!!!. 0oth partners will recei+e the same amount of bonus. ;etermine the le+el of net income that would be necessary so that Jo would be indifferent to the profit sharing option selected. a. b. c. d
,!!!!! 2#!!!! 33,000 9#!!!
,2. 0atanes onstruction ompany recognied gross loss of P#2!!! on its long3term pro)ect which has accumulated costs of P#9!!!!. *o finish the pro)ect the company estimates that it has to incur additional cost of P7,5!!!. *he contract price is4 a. P79!!! b. P1,,!!!! c. P1225!!! d. P11,!!! ,,. *he following selected accounts appeared in the trail balance of :alentines ompany as of ;ecember ,1 2!!94 /nstallment recei+able < 2!! sales P 12!!! =epossessions P 2#!! /nstallment recei+able < 2!!9 sales 1'!!!! /nstallment sales ,#!!!! /n+entory ;ecember ,1 2!! 5'!!! =egular sales ,!!!! Purchases ##!!!! ;eferred gross profit < 2!! #,!!! perating e>penses 92!!! -dditional information4 /nstallment recei+able < 2!! sales ;ecember as of ;ecember ,1 2!! /n+entory of new and repossessed merchandise as of ;ecember ,1 2!!9 ross profit percentage on installment sales in 2!! is 1!% higher than the gross profit percentage on regular sales in 2!!9. =epossessions was made during the year and was recorded correctly. /t was a 2!! sale and the corresponding uncollected account at the time of repossession was P'2!!. $hat is the net income for 2!!9 b. P1!,'! b. P1,#! d. P1!72!!
c. P1!5!
,#. n ?o+ember ,! 2!!9 @o+eless ompany authoried ?0"0 orp. to operate as a franchisee for an initial franchise fee of P195!!!!. f his amount P75!!!! was recei+ed upon signing
the agreement and the balance represented by a note is due in four annual payments starting ?o+ember ,! 2!1!. Present +alue of P1 at 12% for # periods is !.',55. Present +alue of an ordinary annuity of P1 at 12% for # periods is ,.!,7#. *he period of refund will elapsed on January ,1 2!1!. *he franchisor has performed substantially all of the initial ser+ices but the operations of the store ha+e yet to start. ollectibility of the note is reasonably certain. Aow much is the unearned franchise fee on the year ended ;ecember ,1 2!!9& a. P1''122! d. P!
b. P75!!!!
c. P99122!
,5. Dore+er /nc. granted a franchise to Aopeless =omantic for the manila area. *he franchise was to pay a franchise fee of P25!!!! payable in fi+e eual annual installments starting with the payment upon signing of the agreement. *he franchise was to pay monthly ,% of gross sales of the preceding month. "hould the operations of the outlet pro+e to be unprofitable the franchise may be canceled with whate+er obligations owing Dore+er /nc. in interest bearing note is 1#%. *he first year generated a gross sales of P125!!!!. $hat is the amount of unearned franchise fee after the first year of operations& a. P275!! d. P25!!!!
b. P1#57!!
c.
P1957!!
,'. @o+ebirds orporation sells goods on the installment basis. Dor the year )ust ended the following were reported4 ost of installment sales @oss on repossession Dair +alue of repossessed merchandise -ccount defaulted ;eferred gross profit end Aow much was the collections for the year& a. P21!!!! b. P2'#!!! d. P#15715
P 525!!! 1,5!! 1125!! 1!!!! 1!!!!
c.
P,9!!!!
,7. ;6D ompany which began operations on January 1 2!!9 appropriately uses the instalment method of accounting. *he following data pertain to ;6Ds operations for year 2!!94 /nstalment sales E0efore ad)ustmentF e>penses Ebefore write3off
P#5!!!! perating -nd
repossessionsF
P,'!!! =egular sales instalment sales ost of regular sales of P12!!! 15'!!! ost of instalment sale recei+ables written3off
175!! 1!75!! ,15!!!
ash
collections
on
including interest /nstalments ;ue to defaults
22!!! D(: of repossessed (erchandise 27!!! accounts 5!!!! -ctual +alue of trade3in (erchandise #!!!! 7!!!!
=epossessed
trade3in
allowance
Aow much is the deferred gross profit at ;ecember ,1 2!!9& $hat is the net income for the year ended ;ecember ,1 2!!9& c. P5!5!! C P'5!!! c. P#1!!! C P',!!! d. P5!5!! C P915!! d. P#1!!! C P75!!! ,. n July 1 2!!7 ?= onstruction orp. contracted to build an office building for D( /nc. for a total contract price of P1275. 2!!7 2!! 2!!9 ontract cost incurred P 9,75 P '5'25 P 5'25! 6stimated costs to complete the contract #,75 5!!!! 3 0illings to D( /nc. 1275! 7#75! ,#,75
Aow much is the onstruction in Progress account balance at ;ecember ,1 2!! using the percentage of completion method& Aow much is the onstruction in Progress net of Progress 0illings at ;ecember ,1 2!! using the ero3profit method& Aow much is the realied gross profitElossF using percentage of completion method in 2!!9& c. P7175C P275C PE9,75F c. P7175C P15'25C PE9,75F P7#'7.5!C P275C PE'25!F d. P7175C d. P15'25C PE'25!F ,9. n January 2 2!!9 "; ompany signed an agreement to operate as a franchisee of *B Products inc. for an initial franchise fee of P9,75!! for 7 years. f this amount P175!!! was paid when the agreement was signed and the balance payable in four annual payments beginning on ;ecember ,1 2!!9. "; signed a non3interest bearing note for the balance. ";s rating indicates that he can borrow money at 1'% for the loan of this type. -ssume that substantial ser+ices amounting to P2,5!! had already been rendered by *B Products and that additional indirect franchise cost of P255!! was also incurred. PV factor is 2.!. /f the collection of the note is not reasonably assured the net income for the year ended ;ecember ,1 2!!9 is a. P,1,#,5 c. P1'1,5 b. P22!,5 d. P25,5,5 mega /nc. started a #3year contract to build a dam. -cti+ities commenced on Debruary 1 2!!7. *he total contract price amounted to P12 million and it was estimated that the work would be completed at a total cost of P9.5 million. /n the construction agreement the customer agreed to accept increases in wage tariffs additional to the contract price. *he following information refers contract acti+ities for the financial year ending ;ecember ,1 2!!74 e. osts for the year4 P’000 (aterialsKKKKKKKKKKKKKKK.. P1#!!
@aborKKKKKKKKKKKKKKKKK.. !! perating o+erheadsKKKKKKKKK. 15! "ubcontractorsKKKKKKKKKKKK.. 1! f. urrent estimate of total contract costs indicates the following4 (aterials are to be P1!!!! higher than e>pected. *otal labor costs are to be P,!!!!! higher than e>pected. f this amount only P2#!!!! would be brought about by increased wage tariffs. *he other amount would be due to inefficiencies. - sa+ings of P,!!!!! is e>pected on operating o+erheads. g. ;uring the current financial year the customer reuested a +ariation to the original contract and it was agreed that the contract price would be to increased by P9!!!!!. *he total estimated cost of this e>tra work is P75!!!!. h. 0y the end of 2!!7 certificates issued by uantity sur+eyors indicated a 25% stage of completion. #!. ompute the amount of gross profit or loss to be recognied in 2!!7 using contract costs in proportion to estimated contract costs Epercentage of completion methodF4 c. P5'!!! c. P'1!!!! d. P577!!! d. P755!!! #1. ompute the amount of gross profit or loss to be recognied in 2!!7 using percentage of the work certified Epercentage of completion method < output method using actual cost approachF4 a. P5'!!! c. P'1!!!! b. P577!!! d. P755!!! #2. *ams Pia /nc. charges an initial franchise fee of P5!!!! for the right to operate as a franchisee of *ams Pia. f this amount P1!!!! is payable when the agreement was signed and the balance is payable in fi+e annual payments of P!!! each. /n
return for the initial franchise fee the franchiser will help locate the site negotiate with the lease or purchase of the site super+ise the construction acti+ity and pro+ide the bookkeeping ser+ices. *he credit rating of the franchisee indicates that money can be borrowed at %. *he present +alue of an ordinary annuity of fi+e receipts of P!!! each discounted at % is P,19#1.'. /f the initial downpayment is not refundable and no future ser+ices are reuired by the franchiser but collection of the note is so uncertain that recognition of the note as an asset is unwarranted the entry should be4 a. ashKKKKKKKKKKKKKKKKKKKKKKKK K 1!!!!.!! ?otes =ecei+ableKKKKKKKKKKKKKKKKKK. #!!!!.!! ;iscounts on ?otes =ecei+ableKKKK. !5.,2 8nearned Dranchise DeesKKKKKKK. #19#1.' b. ashKKKKKKKKKKKKKKKKKKKKKKKK.. 1!!!!.!! ?otes =ecei+ableKKKKKKKKKKKKKKKKKK #!!!!.!! ;iscounts on ?otes =ecei+ableKKKK. !5.,2 =e+enue from Dranchise DeesKKKK.. #19#1.' c. ash KKKKKKKKKKKKKKKKKKKKKKKK 1!!!!.!! =e+enue from Dranchise DeesKKKKKKKK. 1!!!!.!! d. ashKKKKKKKKKKKKKKKKKKKKKKKK 1!!!!.!! 8nearned Dranchise DeesKKKKKKKKK. 1!!!!.!!
#,. n -pril 1 2!!# (otorola /nc. entered into a franchise agreement with a local businessman. *he franchisee paid P#5!!! and ga+e a P,!!!! % , years notes payable with interest due annually on (arch ,1. (otorola recorded the P75!!! initial franchise fee as re+enue on -pril 1 2!!#. n ;ecember ,! 2!!# the franchisee decided not to open the outlet under (otorolas name. (otorola cancelled the franchisees note and refunded P2#!!! less accrued interest on the note of the P#5!!! paid on -pril 1. $hat entry should (otorola make on ;ecember ,! 2!!#& a. @oss on =epossessed DranchiseKKKKKKKK.. 2#!!! ashKKKKKKKKKKKKKKKKKKKK 2#!!! b. @oss on =epossessed DranchiseKKKKKKKK.. 222!! ash KKKKKKKKKKKKKKKKKKKK 222!! c. @oss on =epossessed DranchiseKKKKKKKK.. 52!!! ashKKKKKKKKKKKKKKKKKKK.. 222!! ?otes =ecei+ableKKKKKKKKKKKKKK. ,!!!! d. =e+enue from Dranchise DeesKKKKKKKKK. 75!!! /nterest /ncomeKKKKKKKKKKKKKK 1!! ashKKKKKKKKKKKKKKKKKKKK 222!! ?otes =ecei+ableKKKKKKKKKKKKK.. ,!!!! =e+enue from =epossessed DranchiseKK.. 21!!!
##. (aranan (otors "ales cars on the installment basis. Presented below are data for the past three years4
/nstallment sales ost of sales ollection on4 2!!7 installment sales 2!!' installment sales 2!!5 installment sales
2!!7 2!!' 2!!5 P2!!!! P2,!#!!! P15#,!!! 172!!! 1##!!!! 1!!295! 1!!!!! ,91!!!
921!!!
#7!!!
#'2!!!
57!!!
=epossessions on defaulted accounts included one made on a 2!!5 sale for which the unpaid balance amounted to P2!!!!. *he depreciated +alue of the car repossessed was P1!!!!. *he unreco+ered cost of the car in 2!!5 and repossessed in 2!!7 is 4 a. b.
P'5!! 7!!!
c. P1!!!! d. 1,!!!
Pere =eyes and "uare were partners with capital balances as of January 1 2!!9 of P1!!!!! P15!!!! and P2!!!!! respecti+ely. *hey share profits on a 54,42 ratio. n July 1 2!!9 Pere withdraw from the partnership. Dor the si> month period ending June ,! 2!!9 the partnership generated a net income P1#!!!!. Partners agreed that at the time of withdrawal certain in+entory had to be re+alued at P7!!!! from its cost of P5!!!!. Durther partners agreed to pay Pere P195!!! for his interest. #5. $hat are the capital balances of =eyes and "uare after Peres retirement& Reyes Suarez a. P217!!! P2,!!! b. P19!!! P22'!!! c. P177!!! P21!!! d. P175!! P22'!!!
#'. -ssuming goodwill to Pere is recorded what is the capital balance of =eyes after Peres retirement& a. P2,2!!! b. P1'!!! c. P19!!! d. P19!!!! #7. -ssuming total goodwill of the partnership is to be recorded what is the capital balance of "uare after Peres retirement& a. P2,!!! b. P22'!!! c. P2,#!!! d. P2,2!!! #. Pere Bue and =amos are partners sharing earnings in the ratio of 54,42 respecti+ely. -s of ;ecember ,1 2!! their capital balance showed P95!!! for Pere P!!!! for Bue and P'!!!! for =amos. n January 12!!9 the partnership admitted "antos as a new partner and according to the agreement "antos will in+est P!!!! in cash to the partnership and will also purchase 15% of Bues interest for P1!!!!. "-ctos will share 2!% in the earnings while the ratio of the original partners will remain proportionately the as before "antos admission. -fter "antos admission the total capital of the partnership will be P,,!!!! while "antos capital account will be P7!!!!. $hat is the balance of Bues capital account after the admission of "antos& a. P11!! b. P791!! c. P7#'!! d. P72'!! #9. n (arch 1 2!! -lma and 0etty formed a partnership with cash in+estments of -lma P#!!!! and 0etty P2#!!!!. *he partners agree to allocate profits and losses as follows4 1. -lma and 0etty will be allowed a monthly salary of P#!!! and P2#!!! respecti+ely. 2. *he partners will be allowed with interest of 1!% of their capital balances at the beginning of each year. ,. *he remainder will be di+ided on the basis of their beginning capital for the year of operation and eually for the subseuent years.
#. 6ach partner is allowed to withdraw up to P2#!!! a year. -ny withdrawal in e>cess of the figure will be treated as a direct reduction from their capital balances. /n 2!! the partnership suffered a net loss of P,'!!!. 0ut in 2!!9 they earned a profit of P1,2!!!. *he partners withdraw the ma>imum amount each year. n January 2 2!1! a new partner ora was admitted in the partnership for an in+estment of P#!!!!! for a #!% interest. ?o re+aluation of assets is to be recorded. -fter the admission of ora the partners agreed to di+ide profits and losses #424# to -lma 0etty and ora respecti+ely. n January 2 2!1! what is the entry to record the admission of ora& a. Cash P400,000 Alma, Capital 33,000 Betty, Capital 33,000 Cora, Capital P467,000 b. Cash
P400,000
Cora, Capital
P400,000
c. Cash Alma, Capital Betty, Capital Cora, Capital
P400,000 32,000 6,000
d. Cash
P44!,000
P44!,000
Cora, Capital
P44!,000
5!. n January 1 2!!9 (r. G and (s. H formed a partnership engaged in selling compact discs. *heir capital accounts during the year show the following in+estments and withdrawals4 %1. 2
%1.
"#$estme#ts
"#$estme#ts %ith&ra'als
%ith&ra'als
0eginning balance P2#!!! June 1 P1##!! -ugust 1 2#!! ;ecember 1
P,'!!! P1##!! 2#!!! '!!!
*he partnerships profit and loss agreement pro+ides for an annual salary of P,'!!! for each partner. /nterest of 1!% on a+erage capital balances. (r. G is also to recei+e a bonus of 5% on net income after bonus. -ssuming a net income of P1!5!!! before any allocations how much net income is allocated to (r. G& a. P5'125 b. P5#! c. P## 71! d. P,'9!! 51. (r. PP and (s. NN are partners in a construction business located in ebu ity. *he profit and loss agreement contains the following pro+isions4 1. "alaries of P,5!!! and P#!!!! for PP and NN respecti+ely. 2. - bonus to PP eual to 1!% of net income after the bonus. ,. /nterest on weighted a+erage capital at the rate of %. -nnual drawings in e>cess of P2!!!! are considered to be a reduction of capital for purposes of this calculation. #. Profit and loss percentage of #!% and '!% for PP and NN respecti+ely. apital and drawing acti+ity of the partners for the year 2!!9 are as follows4 PP Capital PP Drawing Capital KK Drawing 0eginning balance '!!!! P ! -pril 1 June 1 2!!!! "eptember 1
P12!!!!
P !
2!!!! 15!!! ,!!!!
KK P
?o+ember 1 #!!!! 6nding balance P1!!!!! P2!!!!
15!!! P17!!!!
P,!!!!
-ssuming net income for 2!!9 of P1,2!! before any allocations how much profit should be allocated to (r. PP& a. P'9''! b. P'97#7 c. P7277# d. P'977# 52. n January 2 2!!9 0elo and =eyes formed a partnership. 0elo contributed capital of P,5!!!! and =eyes P5!!!!. *hey agreed to share profits and losses !% and 2!% respecti+ely. =eyes is gi+en a salary of P1!!!! a monthC and interest of 5% of the beginning capital of both partners and a bonus of 15% of net income before the salary interest and bonus. *he income statement of the partnership for the year ended ;ecember ,1 2!!9 as follows4 =e+enues P175!!!! ost of goods sold 1#!!!!! ross profit ,5!!!! 6>penses Eincluding partners salary interest and bonusF 2'!!! ?et profit P '#!!! $hat is the amount of bonus to =eyes in 2!!9& a. P#1#!! b. P,2912 c. P,'!!!
d. P2'!!
Numbers 22 to 25 are based on the following data: -rman ompany has the following debit balances as of the year ended ;ecember ,1 2!!94 ;irect materials in+entory P 9!!!! $ork in process in+entory 2!7!!! Dinished goods in+entory 297!!!
8nder3applied factory o+erhead 2#!!! ost of goods sold ##7!!! -dditional information for 2!!9 ost of direct materials purchased P2#'!!! ost of direct materials reuisitioned 22!!! ost goods completed '12!!! -pplied factory o+erhead E12!% of direct labor costF 2!!! 5,. $hat is the ;irect (aterials /n+entory on January 1 2!!9& a. P1!!!! b. P1'2!!! c. P12'!!! d. P1!!!! 5#. $hat the $ork in Process /n+entory on January 1 2!!9& a. P95!!! b. P9!!!! c. P9!!! d. P!!! 55. $hat is the Dinished oods /n+entory on January 1 2!!9& a. P15!!!! b. P1##!!! c. P1,2!!! d. P1#5!!! 5'. $hat is the actual factory o+erhead incurred during 2!!9& a. P2'#!!! b. P2!!!! c. P,12!!! d. P,21!!! Numbers 57 and 58 are based on the following data: ;uring -ugust (arlon (achine ompany started production )ob orders 1'17 and 1. Job order 15 was in process at the beginning of the month with direct material costs of P,5!!! direct labor cost of P21!!! and applied factory o+erhead of P25,!!. ;uring the month direct materials were reuisitioned and direct labor was identified with the )ob orders as follows4 Job Order No #abor 15
Dire!t "aterials P 3
Dire!t P2'!!!
1' 17 1
,9!!! 5,!!! #7!!!
#5!!! #7!!! 1'!!!
Dactory o+erhead is applied to the orders at 12!% of direct labor cost. Job orders 1 was incomplete on -ugust ,1. 57. $hat is the cost of goods manufactured for -ugust& a. P#,29!! b. P,7''!! c. P,#2!! d. P,5'!! 5. $hat is the cost of work in process on -ugust ,1& a. P1,!!! b. P22!! c. P1#!! P15'#!!
d.
$uestions 5% and &' are based on the following data: *he data has been gathered from the records of (anufacturing ompany for -pril 2!!94
=oue
(nits $ork in process -pril 1 E#!% complete as to con+ersion costsF 5!!! units "tarted in (ay 9!#!! units $ork in process -pril ,! E7!% complete as to con+ersion costsF #!!! units Cost $ork in process -pril 1 2#75 (aterials cost incurred in -pril P#,,92! on+ersion costs incurred in -pril
P
P11525!
*he company uses the D/D process costing method. (aterials added at the beginning of processing while con+ersion costs is e+enly during the process.
59. a. b. c. d.
$hat are the eui+alent units of production of& "aterials Con)ersion Costs 9!#!! 922!! 95#!! 912!! '#!! 9#!! 92#!! 9!'!!
'!. $hat is the cost of units transferred out in -pril& a. P551,#5 b. P5#7595 c. P52272! d. P52'#7! '1. $hat is the cost of ending work in process& a. P227!! b. P2,7!! c. P192!!
d. P22!!!
$uestions *+ and ** are based on the following data: Jimmy ompany manufactures a highly sensiti+e smoke alarm and uses the D/D method for process costing. *he total manufacturing costs for the month of June is P2'#!!! and 275! units are completed during the month. *he in+entories at the beginning of June are4 8nits in process E!% completeF P12!!! 8nits on hand EcompleteF 7'!! *he in+entories at the end of June are4 8nits in process E5!% completeF 8nits on hand EcompleteF
125! units '!! units
5!! units 7!! units
'2. $hat is the eui+alent unit of production& a. 2!!! c. 22!! b. ,!!! d. 175! ',. $hat is the total cost of the units completed& a. P92#!! c. P2,1!!! b. P792!! d. P,',!!! '#. $hat is the total cost of units in process at the end& a. P,,!!! c. P,2!!!
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