Adv-Acc-NA

COMPREHENSIVE EXAM Review Questions ADVANCED ACCOUNTING 1

1. First statement: A partner’s withdrawal of assets from a partnership that is considered permanent reduction in the 2. partner’s equity is debited to the drawing account. Second statement: A partner’s drawing account is used to reduce the partner’s account balances at the end of the period. a. Both statements are correct b. Only first statement is correct

c. Only second statement is correct d. Both statements are incorrect

1. First statement: A partner’s drawing account is a contra-capital account. e. Second statement: A partnership is a taxable entity. a. Both statements are correct b. Only first statement is correct

c. Only second statement is correct d. Both statements are incorrect

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 partner’s withdrawals of cash or other assets during f. the period. a. Both statements are correct b. Only first statement is correct

c. Only second statement is correct d. Both statements are incorrect

4. First statement: The partner’s 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. a. Both statements are correct b. Only first statement is correct

c. Only second statement is correct d. Both statements are incorrect

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. a. Both statements are correct b. Only first statement is correct

c. Only second statement is correct d. Both statements are incorrect

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. a. Both statements are correct b. Only first statement is correct

c. Only second statement is correct d. Both statements are incorrect

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. a. Both statements are correct b. Only first statement is correct

c. Only second statement is correct d. Both statements are incorrect

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 a. Both statements are correct b. Only first statement is correct

c. Only second statement is correct d. Both statements are incorrect

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 a. Both statements are correct b. Only first statement is correct

c. Only second statement is correct d. Both statements are incorrect

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. a. Both statements are correct b. Only first statement is correct

c. Only second statement is correct d. Both statements are incorrect

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. a. Both statements are correct b. Only first statement is correct

c. Only second statement is correct d. Both statements are incorrect

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. a. Both statements are correct b. Only first statement is correct

c. Only second statement is correct d. Both statements are incorrect

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. a. Both statements are correct b. Only first statement is correct

c. Only second statement is correct d. Both statements are incorrect

16. First statement: The excess of construction in progress account over the contract billings is treated as noncurrent assets. e. Second statement: In long term contract, indicated loss is recognized in full regardless of the percentage of completion. a. Both statements are correct b. Only first statement is correct

c. Only second statement is correct d. Both statements are incorrect

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

k.

Cash in bank

n.

Receivables (net)

q.

Inventories

ra l. P 130,000 o. 54 0,000 r. -

t.

Prepaid expenses

u.

w.

Property & equip.

z.

Total

ae.

Accounts payable

ah.

Sara, Capital

ak.

Becky, Capital

an.

Total

25 0,000 x. 80 0,000 aa. P1 ,720,000 ab. == ====== af. P 720,000 ai. 1,0 00,000 al. ao. P1 ,720,000 ap. == =======

j.

p. s. v. y. ac. ad. ag.

am. aq. ar.

Becky m. P 250,000 120,00 0 630,00 0 35,000 500,00 0 P1,535 ,000 ===== === P1,000 ,000 aj. 535,00 0 P1,535 ,000 ===== ===

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. Sara’s 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. Sara’s Aging:



bj.

# of days past due (% of uncollectibility)

bm.

0-30 (10%)

bp.

31-60 (30%)

bs.

Over 160 (50%)

bv.

TOTAL

bk. Outst anding Balances bn. P 200,000 bq. 200,0 00 bt. 200,0 00 bw. P 600,000

bl. Esti mated Uncollectibl e bo. P 20,000 br. 60, 000 bu. 100 ,000 bx. P 180,000

by. bz.

Becky’s Aging:

ca.

# of days past due (% of uncollectibility)

cd.

0-30 (10%)

cg.

31-60 (30%)

cj. cm.

Over 160 (50%) TOTAL

cb.

Outst anding Balances

ce. P 130,000 ch. 20,00 0 ck. cn. P 150,000

cc. Esti mated Uncollectibl e cf. P 13,000 ci. 6000 cl.

-

co. P 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 Sara’s books represents two-year rental of office space. They started renting on January 1, 2014.  The prepayments reflected on Becky’s 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? a. P551,000 c. P750,000 e. Answer not given b. P660,000 d. P521,000 3. What is the amount of rental expense charged to Sara’s 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 Becky’s 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 Sara’s 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 Becky’s capital? a. P315,580 c. P335,580 e. Answer not given 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: a. P148,902 c. P148,467 e. Answer not given 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: a. P297,803 c. P296,933 e. Answer not given 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. JJ’s 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 KK’s 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 e. Answer not given 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 dc. Overstatement of ending inventories df. Omission of depreciation on newly acquired equipment di. Understatement of commission receivable dl. A purchase of merchandise not recorded until the following year, but included in the year’s inventory

da. dd. dg. dj. dm.

2012 P 2,900 1,50 0 2,20 0 6,00 0

db.

2013 de. P 3,300 dh. 1,500 dk. dn.

1,800 -

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: a. P47,500 c. P49,000 e. Answer not given b. P46,800 d. P55,000 12. The adjusted net income for the year 2013 was: a. P70,000 c. P73,700 e. Answer not given b. P67,700 d. P70,800 13. Partner’s capital accounts should be:

a. b. c. d.

Credited amounting to P2,250 for each of them Debited amounting to P2,250 for each of them Debited amounting to P4,500 for each of them 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

fj.

fi. fl.

fo.

fs.

TOTAL ASSETS LIABILITIES

fp. Income tax payable

ft. fw. PARTNERS' EQUITY

fz.

ga. A, Capital

gd.

ge. B, Capital

gh.

gi.

, 9 9 9 1 0 , 2 0 2 , 7 3 0

fm. fq. 4 5 , 5 0 0 fu. 4 5 , 5 0 0 fx. gb. 6 , 0 9 4 , 3 3 8 gf. 4 , 0 6 2 , 8 9 2 gj. 1 0 , 1 5 7 , 2 3 0 gm. 1 0 , 2 0 2 , 7 3 0 gq.

, 3 0 3 fk. 1 0 , 5 2 2 , 1 4 4 fn. fr. 8 1 , 9 0 0 fv. 8 1 , 9 0 0 fy. gc. 6 , 2 6 4 , 1 4 6 gg. 4 , 1 7 6 , 0 9 8 gk. 1 0 , 4 4 0 , 2 4 4 gn. 1 0 , 5 2 2 , 1 4 4 gr.

gl. TOTAL LIABILITIES AND PARTNERS' EQUITY go. gp. 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

gx.

Other assets

gu. gy.

hb. hf. hj.

P85,0 gv. 00 415,00 gz. 0 hc. hd. hg. hk. P 500,000

TOTAL

hh. hl.

Liabilities KK, capital

ha.

LL, capital

he.

MM, capital TOTAL

hi.

gw. P 80,000 252,00 0 126,00 0 42,000 hm. P 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

m.

Other assets

q. u. y.

TOTAL

n.

j. P k. 160,000 320,00 o. 0 r. s.

Liabilities

v. z. P 480,000

w. aa.

AA, capital

p.

BB, capital

t.

CC, capital TOTAL

x.

l. P 180,000 48,000 216,00 0 36,000 ab. P 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

aj.

Other assets

an. ar. av.

TOTAL

ag. P 25,000 ak. 180,00 0 ao. as. aw. P 205,000

ah.

Liabilities

al.

Tan, capital (40%)

ap. at. ax.

Lim, capital (40%) Wan, capital (20%) TOTAL

ai. P 52,000 am. 40,000 aq. au.

65,000 48,000 ay. P 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? a. P11.52 million c. P8.2 million e. Answer not given b. P10.0 million d. P10.4 million 23. What is the interest of SMDC in MRDC for the year ended December 31, 2013? a. P14.52 million c. P17.15 million e. Answer not given 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 bp. Cash bt. Receivables (net) bx. Inventory cb. Prepaid expenses cf. Plant assets cj. Goodwill cn. cr. TOTAL

bq. P 12,000 bu. 280,000

br.

by. 70,000

bz.

cc. 1,000

cd.

cg. 300,000

ch.

ck. 39,000

cl.

bv.

co.

cp.

cs. P 702,000

ct.

bo. LIABILITIES AND STOCKHOLDERS’ EQUITY Accrued bs. P payroll 40,000 Loans from bw. 50,000 officer Accounts ca. 60,000 payable Equipment ce. 360,00 loan payable 0 Business ci. 180,00 loan payable 0 Common cm.60,000 stock Deficit cq. ( 48 ,000) TOTAL cu. P 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: a. P430,000 c. P540,000 e. Answer not given b. P110,000 d. P120,000 27. The total realizable value of free assets to unsecured creditors before unsecured creditors with priority is: a. P628,000 c. P220,000 e. Answer not given 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: a. P51,000 c. P51,000 e. Answer not given b. P89,000 d. P90,000 31. Estimated gain on asset disposition is: a. P56,000 c. P52,000 e. Answer not given 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: a. P70,000 c. P20,000 e. Answer not given b. P61,600 d. P50,000 35. Estimated payment to partially secured creditors is: a. P358,800 c. P168,000 e. Answer not given b. P526,800 d. P430,000 36. Estimated payment to creditors is (discrepancy is expected due to rounding off) a. P580,000 c. P571,000 e. Answer not given 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). King’s 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 King’s debt as of December 31, 2013? a. P260,000 c. P330,000 e. Answer not given b. P269,000 d. P300,000 38. What is the total of the future cash flows required to liquidate the debt? a. P290,000 c. P310,600 e. Answer not given b. P301,000 d. P260,000 39. How much interest expense will King report on its income statement for the year 2014? a. P60,000 c. P41,000 e. Answer not given 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 S df. Installment sales di. Cost of installment sales dl. Collections on installment sales do. dp. 2012 sales ds. dt. 2013 sales dw.

dd.

20

de.

20

12 dg. P1 ,200,000 dj. 72 0,000 dm.

13 dh. P1 ,500,000 dk. 1, 050,000 dn.

dq.

dr.

63 0,000 du. -

45 0,000 dv. 90 0,000

a. b. 41.

42.

43.

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? P228,000 c. P192,000 e. Answer not given P218,400 d. P275,000 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? a. P34,000 c. P8,000 e. Answer not given b. P10,000 d. P4,000 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? a. P300,000 c. P500,000 e. Answer not given b. P200,000 d. P240,000 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.

ec. AR const.contract

from

eg. Construction expenses per year

ek. Construction progress

in

eo. Partial billings contracts

es. Gross recognized year

on

profit for the

dz. 2 0 0 7 ed. P 1 0 0 , 0 0 0 eh. 1 0 5 , 0 0 0 el. 1 2 2 , 0 0 0 ep. 1 0 0 , 0 0 0 et. ?

ea. 2 0 0 8 ee. P 3 0 0 , 0 0 0 ei. 1 9 2 , 0 0 0 em. 364 , 0 0 0 eq. 4 2 0 , 0 0 0 eu. ?

eb. 2 0 0 9 ef. P 3 2 0 , 0 0 0 ej. ?

en. 6 1 0 , 0 0 0 er. 5 0 0 , 0 0 0 ev. 2 0 , 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 e. Answer not given b. 2007, P22,000; 2008, P64,000 44. Using the same information in no. 43, compute the construction expense in 2009: a. P226,000 c. P364,000 e. Answer not given 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. Excess…………………………………………………14,000 n. o. Income Statement p. Gross profit before tax recognized in 2008……72,800 q. 45. How much is the collection in 2008 for this contract? a. P86,000 c. P160,000 e. Answer not given b. P174,000 d. P246,000 46. Compute for the initial estimated gross profit: a. 28% c. 32% e. Answer not given 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, Baliwag’s 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 Baliwag’s Lechon, Inc. prepares its financial statements on December 31, 2013, the revenue from the franchise fee to be reported is: a. P500,000 c. P100,000 e. Answer not given 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 Andok’s 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 Andok’s in its December 31, 2013 statement of comprehensive income? a. P500,000 c. P100,000 e. Answer not given 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 y. Gross profit (loss) each year ac. Costs incurred each year ag.

v. 2007 z. P 40,000 ad. 360,000

w. 2008 aa. P 140,000 ae. ?

x. 2009 ab. (P20, 000) af. 820, 000

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? a. P1,840,000 c. P1,180,000 e. Answer not given b. P 820,000 d. P 660,000 2. What percentage of the project was completed by the end of 2008? a. 90% c. 51% e. Answer not given b. 40% d. 60% 3. What was the estimated gross profit on the project by the end of 2008? a. P140,000 c. P180,000 e. Answer not given 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.

ao. Contract Price

ar. Cost incurred to date

au. Estimated cost to complete

ax. Billings during year

the

ba. Collections during the year

am. Iloil o ap. P 1 0 , 5 0 0 , 0 0 0 as. 6 , 0 0 0 , 0 0 0 av. 3 , 0 0 0 , 0 0 0 ay. 3 , 7 5 0 , 0 0 0 bb. 2 , 2 5 0 ,

an. Da aq. P7,

at. 7,0

aw. 1,0

az. 6,7

bc. 6,2

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? a. P500,000 c. P350,000 e. Answer not given 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: a. P25,000 c. P55,000 e. Answer not given b. P40,000 d. P65,000 6. The following data were taken from the statement of affairs for Liquo Company: bh.

bi. PARTICULARS bk. Assets pledged for fully secured liabilities (fair value, P75,000) bm. Assets pledged to partially secured liabilities (fair value, P52,000) bo. Free Assets (fair value, P40,000) bq. Unsecured liabilities with priority bs. Fully secured liabilities bu. Partially secured liabilities bw. Unsecured liabilities without priority

bj. bl.

AMOUNT P90,000

bn.

74,000

bp. br. bt. bv. bx.

70,000 7,000 30,000 60,000 112,000

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

cd. cf.

Cost incurred 1/1/2007 through 12/31/2008 Estimated cost to complete at 12/31/2008

ce. cg.

cc. P 600,000 3,600,000 1,200,000

ch. ci. How much income should Ube recognize for the year ended December 31, 2008? a. P300,000 c. P600,000 e. Answer not given 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 cm.Cash cq. Receivables (net) cu. Inventory cy. Prepaid expenses dc. Plant assets dg. Goodwill dk. do. TOTAL

cn. P 12,000 cr. 280,000 cv. 70,000 cz. 1,000 dd. 300,000 dh. 39,000 dl. dp. P

cl. LIABILITIES AND STOCKHOLDERS’ EQUITY co. Accrued cp. P payroll 40,000 cs. Loans from ct. 50,000 officer cw. Accounts cx. 60,000 payable da. Equipment db. 360,00 loan payable 0 de. Business df. 180,00 loan payable 0 di. Common dj. 60,000 stock dm. Deficit dn. ( 48 ,000) 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: c. P628,000 c. P220,000 e. Answer not given 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: c. P51,000 c. P51,000 e. Answer not given d. P89,000 d. P90,000 16. Estimated gain on asset disposition is: c. P56,000 c. P52,000 e. Answer not given 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: c. P70,000 c. P20,000 e. Answer not given d. P61,600 d. P50,000 20. Estimated payment to partially secured creditors is: c. P358,800 c. P168,000 e. Answer not given d. P526,800 d. P430,000 21. Estimated payment to creditors is (discrepancy is expected due to rounding off) c. P580,000 c. P571,000 e. Answer not given 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? a. Nil c. P30,000 e. Answer not given 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. CC’s 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 CC’s franchise? a. P70,000 c. P45,000 e. Answer not given 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:

a. Nil c. P45,000 e. Answer not given 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 RR’s December 31, 2008, balance sheet, unearned franchise fees from GG’s franchise should be reported as: a. P120,000 c. P150,000 e. Answer not given 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). King’s 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 King’s debt as of December 31, 2013? c. P260,000 c. P330,000 e. Answer not given d. P269,000 d. P300,000 27. What is the total of the future cash flows required to liquidate the debt? c. P290,000 c. P310,600 e. Answer not given d. P301,000 d. P260,000 28. How much interest expense will King report on its income statement for the year 2014? c. P60,000 c. P41,000 e. Answer not given 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 May’s liability to Tanny: ec.

ed. ef. eh.

Carrying amount of liability liquidated Carrying amount of real estate trasferred Fair value of real estate transferred

ee. P150,000 eg. 100,000 ei. 90,000

ej. 29. What amount should May report as a gain on restructuring payables? a. P60,000 c. P50,000 e. Answer not given 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, Baliwag’s 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 Baliwag’s Lechon, Inc. prepares its financial statements on December 31, 2013, the revenue from the franchise fee to be reported is: c. P500,000 c. P100,000 e. Answer not given 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 Andok’s 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 Andok’s in its December 31, 2013 statement of comprehensive income? c. P500,000 c. P100,000 e. Answer not given 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 Andok’s 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? a. P2,700,000 c. P3,000,000 e. Answer not given 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.

2.

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. On March 1, 2014, L.Caballero and J.Bartolome formed a partnership with each contributing the following assets: i. j. m.

Description Cash

L.Cabal lero P300,0 00 250,000

n.

p. Machinery equipment s. Building

and

v.

and

Furniture

k.

q. t. w.

100,000

l. o.

J.Bartolo me P700,000

r.

750,000

u.

2,250,00 0

x.

fixtures y. z.

3.

4.

5.

6.

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 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 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 ba. ay. J. San Jose, az. 570 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 partner’s capital balances proportionate to their profit and loss ratio? a. P142,500 c. P172,500 b. P52,500 d. P102,500 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. Llanita’s 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.Bequillo’s 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. 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. Lomibao’s fixed assets were over-depreciated by P1,000 and D. Juan’s 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. Gibo’s accounts receivable are to be taken over at book value less 15% and Edu’s accounts receivable at book value less 10%. Gibo’s equipment is new and considered adequate for the new business. Edu’s 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 Gibo’s 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 year’s 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. 51. The adjusted net income for the year 2012 was: c. P47,500 c. P49,000 d. P46,800 d. P55,000 52. The adjusted net income for the year 2013 was: a. P70,000 c. P73,700 b. P67,700 d. P70,800 53. Partner’s 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 54. JJ and KK are partners who shares profits and losses in the ration of 60%:40% respectively. JJ’s 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 KK’s 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 The partnership has the following accounting amounts: Sales=P70,000 Cost of Good Sold=P40,000 Operating expenses=P10,000 Salary allocation to partners=P13,000 Interest paid to banks=P2,000 Partners withdrawals=P8,000 Interest income on bank deposit (net of 20% tax) =P2,000 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 partnership’s 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 SS’s 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 AA’s 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 partnership’s 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 63. Partner’s capital accounts should be: 55. 1. 2. 3. 4. 5. 6. 7. 8.

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 store’s 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. d. AA- P17,100;DD-P17,100 f.

AA- P0;DD-P0 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 a. EE, Capital ,000 k. December 1 l. 4 b. January 1 c. P ,000 25,000 m. d. June 1 e. 1 n. 0,000 o. f. September 1 g. ( p. 3,000) q. Assuming that an interest of20% per annum is given on average 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. Partnership’s 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 partner’s 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. Merlin’s 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.

74.

b. In 2008, the partnership had a net loss of P125,624 before the interest and salaries to partners. By what amount should AA’s and CC’s 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 BB’s 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 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 Cuba’s 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 ¼ 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 GG’s 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.

e.

Loan payable to Nan

f.

P 20,000 60,000

h.

Lon, capital

i.

30,000

k.

Mac, capital

l.

n.

Nan, capital

o.

120,00 0 70,000

d. Dr g. Cr j. Dr m. Cr p. Cr

q. r. The partnership’s 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 Ole’s admission, the existing partners agreed to increase the carrying amoung of the partnership’s 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 EE’s 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 CC’s partnership interest, including CC’s loan which is to be repaid in full. No goodwill is to be recorded. After CC’s retirement, what is the balance of MM’s 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 CC’s payment will be recorded. After CC’s 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 MM’s 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: a. P600,000 c. P700,000 e. Answer not given b. P900,000 d. P300,000 2. On December 31, 2013, the total assets of SMDC in his separate statement of financial position is: a. P50,000 c. P300,000 e. Answer not given 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 stockholder’s 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. P

ar. P

as.

at. 5

au. 5

av. Revenues

aw. 1

ax. 1

ay. Cost and expenses

az. 6

ba. 7

bb. Dividends paid by BTM

bc.

bd. 4

HSBC

be. What is the interest of BTM in the joint arrangement at December 2013? a. P48.40 million c. P50.00 million e. Answer not given b. P52.90 million d. P51.50 million 4. What is the interest of HSBC in the joint arrangement at December 31, 2014? a. P52.0 million c. P52.9 million e. Answer not given b. P48.4 million d. P50.0 million 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. 3.

   

5.

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. What is the total assets of the joint arrangement? a. P30,900,000 c. P30,000,000 e. Answer not given 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? a. P10,000,000 c. P15,000,000 e. Answer not given 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 venturer’s 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: a. P300,000 c. P255,000 e. Answer not given 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 venturer’s investment in entity X is P400,000. bp. bq. How much is dividend income each venture should recognize on December 31, 2013? a. P45,000 c. P75,000 e. Answer not given 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: a. P425,000 c. P330,000 e. Answer not given 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 venturer’s 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: a. P290,000 c. P300,000 e. Answer not given 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? a. P10,000 c. P13,000 e. Answer not given 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 venturer’s 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: a. P340,000 c. P250,000 e. Answer not given 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: a. P600,000 c. P800,000 e. Answer not given 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 venturer’s 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.

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cf. At December 31, 2013 entities X and Y must report their investment in entity Z (a jointly controlled entity) at: a. P300,000 c. P345,000 e. Answer not given b. P375,000 d. P420,000 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 venturer’s 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 venturer’s investment in entity Z? a. P270,000 c. P300,000 e. Answer not given b. P325,000 d. P265,000 Assume the same facts in 19. However, at December 31, 2013 the recoverable amount of each venturer’s 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: a. P270,000 c. P300,000 e. Answer not given b. P265,000 d. P265,000 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 R’s investments in entity RS? a. P212,000 c. P210,000 e. Answer not given b. P180,000 d. P200,000 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 O’s 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 venturer’s 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:: a. P562,500 c. P553,500 e. Answer not given b. P450,000 d. P630,000 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 R’s 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 venturer’s 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: a. P738,000 c. P800,000 e. Answer not given b. P784,000 d P637,500 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 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.

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dv. What is the total realized gross profit to be reported in the Statement of Comprehsive Income for the year ended December 31, 2013? a. P107,235 c. P61,650 e. Answer not given b. P102,105 d. P97,235 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 Robin’s total installment sales for 2013? a. P1,560,000 c. P1,450,000 e. Answer not given b. P1,440,000 d. P1,010,000 MW Corporation sells car on a three year installment sales contract. On December 31, 2013, the last day of BMW’s 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? a. P220,000 c. P150,000 e. Answer not given b. P140,000 d. P120,000 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) Casablanca, Inc. which began operations on January 2, 2013, appropriately uses the installment method of accounting. The following information pertains to Casablanca’s 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? a. P400,000 c. P320,000 e. Answer not given b. P500,000 d. P150,000 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 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 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. Lexus Company, which began operations on January 3, 2012, appropriately used the installment method of revenue recognition. The following information pertains to Lexus Company’s operations for 2012 and 2013: eb. ec. PARTICULARS ed. 2012 ee. 2013 ef. Sales eg. P300,000 eh. P450,00 0 ej. ek. ei. Collection from: el. em. 2012 sales en. 100,000 eo. 50,000 ep. eq. 2013 sales er. es. 150,000

eu. ev. Accounts written off: ex. 2012 sales ey. 25,000 ez. 75,000 fb. 2013 sales fc. fd. 150,000 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? a. P112,500 c. P75,000 e. Answer not given b. P125,000 d. P80,000 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? a. P180,000 c. P270,000 e. Answer not given b. P153,000 d. P225,000 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 fu. fv. ft. Collections on installment 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? c. P228,000 c. P192,000 e. Answer not given d. P218,400 d. P275,000 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? c. P34,000 c. P8,000 e. Answer not given d. P10,000 d. P4,000 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? c. P300,000 c. P500,000 e. Answer not given d. P200,000 d. P240,000 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 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 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. et. ew. fa. fe.

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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: a. P23,500 c. P45,000 e. Answer not given b. P52,500 d. P69,750

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