CPAR_P2 09.15.13

CPA REVIEW SCHOOT OF THE PHILIPPINES

MANITA

FnRCTICII ACCOUNTING PROBLEMS

Sunday, September 15, 2013 Batch 74

II

FINAL PREBOARD EXAMINATION

Pxosrcm

t

on August 1,20!4,the business accounts cf chris a untr Pai,l

DJ

appear below:

IAr*tt I c,;h Accounts Receivable 19?|E_s

La

_l|

60-r,000 20a3A5

nd

Build

428,267 I 384,789

I

;

23,60C

Other Assets Liabilities and Ca Accounts Payable

z+t.toz

P178,940

lr

Zaa,sso

Chris G., Capital

Pau!_!l!9p119! liabitities and paul DJ agreed to form a partnership cr:ntributing their respective assets and subject to the following adjustments:

chris

. r "

G

Accounts Receivable

of F20,000 ancl

P:.5,CC0 are uncciiectible

in Chris G and Paul DJ's respective

books.

lnventories of p5,500 and P6,700 are wortl,less in Chris G and Paul DJ's respective books Other assets of p2,2OO and P3,600 in Chris G arrri I'aul DJ's books are written off.

interest !n Afterfive days Brian L was offered to join Chris G antJ Paul Di and will contribute for a 20% on thqir the firm. They also agreed to divide profit and loss lr the ratio of 40:40:20, same ratio based transaction personal a capital credit as agreed upon formation, As a res;l't of the said agreement, as i

ir. c.

P34,388

P32,930

D.

P37,272 i

z.

I

PnoarcNl l On May I,2AL4,the capital accounts of 5, T anrJ C are P1,260,000; P787,50A and P477,500 , resPertivelY, At this time, I is admitted to the firm, he prrrchaseci a 1/6 interest in the firm for P288,750. The lld partners equalized their capital investntenls. lrterwar"ds, ali the partners agree to divlde profits a$d for trrfo losr;es equally. The new partnership closes its bor:ks cn jur-r3 3A,2014 reporting profit of P44,1"O0 P3,5fO l, and T per wirile month months. Each partner made the following vuithdrarvais:S and CP?,625 per month. On June 30,2OL4,l invest enough cash tc increase his capital to a 1/3 interest in tfe

partnership.

I

I

A. P211,165.50 B. P70,000

c.

D.

P632,642.50 P633,762.50

__i_l I

i

Z

Pnoagm

A business owned by C was shgrt of cash and C decided to form a pai"tnership with D and E, D was able to contribute cash thrice the iAterest of C in the partnershlp v,rhile E lvas able to contribute cash twice

the interest of D in the parthership' The assets contributed by C were as fcllows: Cash P18'000; Accounts receivable P378,000 with allowance for doubi:ul account of P12,C00, lrrverltory P840,000I i;t_ and store equipment of P300,000 with accumulated depreciatiorr of

P30,r-100

but with current worth ot

P250,000 and agreed value of P200,000.

I I

;

C, D and E agreed that the alloWance for doubtfulaccounts rlvas inadeqr;ate and sircuid be l'2C,C00 They also agreed tf,ut tf," fair value $f tf,u ]:

[-Th.

t"tri;tt"tr or tnu p.rtr"rll hip are: A. P7,880,000 B. P7,092,000

c.

D.

I

P14,960,000 P15,460,000

q.

lnosrcrw

A and B agreed the lists of the followirrg assets

t*

be coniributeci in the partnership.

Cash I

nve nto ry

Buildins #-

___1*

Lrrr11tgt"_q!qji*tg$_

- ___ijilOjqu

__-i!illl0(.,,

,

i

Ihe building is subject to a mortgage loan, alreaciy pa:t due ; in thc anrount of P1C,CCO. A oaid this out of his personal funds aside fronl his cash contriburion ii:rr-,o;L,ovo Fartners agrr:ecl that A should be credited forthis. Pertnersiiip agreei',rent calls ft,- e'ien ci:v;s;o:-r oi proiit lnd icss.

iwlgluglt':lqylg_lgjlgqjgqta i fo ea A. B.

c.

Als

P35,000

P85,000

P45,000

P75,UOA

P45,000

P85,000. P60,000

D. P60,000

Pnoarcwt

i

s.

i

Paul, lram, and lvonne are inlthe proce:s cf liq.rillaiing lheir par'n:rsnr;;. ivoni,,.. il;,s agreed to accept the inventory, which has a fair value cf p60,0cr0, as p.*:t of h::i :,'.itleri'ierit. A:lr;tc;^rrent of Financial Position and the residual profit and loss snaring psrc?ntagej wei. lr 1'ulir,,r': Cash

198,000 80,000 230,Occ

lnventory Plant assets

Total assets

508,000

,ti:ci:unts p;vi,i:!e lrarn, calrta ; (jt(\%i

L49,000 79,000 140,000

lvonne, canitai

140,C00

t,a,Ji,

capital(40i:) {107n)

Totalli;b.leqr;;tri,

lf the partners distribute the available cash, lvonrre vrill i eceive

A. P23,000 B P29,000 c, P30,000 D. P34,000

508,000

Pnoarcu

o.

initi:l franchise fee of

RAGE AGAINST THE MACHINE charges an

P75,000 for the right

to operate as a

franchise of Speed Racer. Of this amount, P25,000 is collected immediately. The remainder is collected annual installment payments of pl-2,500 each. These installments have a present value of

in four equal

P3g,623. There is reasonable expectation that the dorvn payment may be refunded ancl substantial future services are yet io be perforned by BAGi: AGAINST THE f\4ACHlNE.

[-rng-,:glgr"ntrv io iTgtq lh"-f*1.-Eg fu"*,:uiJ n;,

A.

25,000 50,000 Unearned lnterest lncome Franchise Revenue

Cash

- - *-

-- - ---

-i

Notes Receivable

i0,377 64,623

Cash Notes Receivable

25,000 50,000 Unearned lnterest lncome Unearned Franchise Revenue

LA,377

64,623

C. Cash

25,000 50,000 Notes Receivable Unearned lnterest lncome Unea rned Franchise Revenue Franchise Revenue

10,377

39,623 39,623

D. Cash

25,000 50,000 Ncles Receivable Unearned lnterest lncome Unearned Franchise Revenu : Franchise Revettue

3.A,377

3!1,623

25,000

PAaercAZ

On.lanuary L,2A1J, Federrer lnc. signed ari agreement authorizing Sculptured Body works to operate as a franchisee over ten years period for initial franchise fee of P100,00C plus P20,000 interest income received annually when the agreement was:!gn;:r.1. Sculptured Body works commenced operations on /l.ugt.rst t,2Ai3, at which date all the initiai :;e.rv!ces reouired of Federrer had been performed' The agreement also provides that Sculptured Body works inust pay annually to Federrer a continuing franchise fee equal to five percent of the rpverrrle irorn the franchise. Sculptured Body works sales revenue for 2013 was P800,000.

f_-- . I l-or the year ended December 3!,7013, how much shouid Federrer record as revenue from franchi t-

Lt-g'l

'.i

__l

A. B.

c.

D,

P100,000 P160,000 Pi,40,000 P500,000

Pnoaffrvt a. SugarFree has two construciiorr jobs, which .i)r',lnrerced ciuring 20L4: --t'_,.l-

- -

-

"--'

_-- *

"1--

-__-'-

^__"--l

l{Ji i Project 202 --1i.,,_rl,irm - I-lqgqq ._.'l a;;t;Tp'i.. " _ _l T-zoopoO 700,000 Cost inculrqg_{grI€:99_ incurred during iu I -,:OC,i'1, _ __l -l r _ i:o_c_,-i;0 Estimated sti nlgle c! ce:Llo t0OJt)C cgg!!o_c_omg!gtg_ qgl"n!lg!g__ l75r0g0_ 625,L'00 lgLl ji _ f?s,cot 725,OOO _ uring 20L4_L I _gs _coftlgq biLlIEtaglA?o_ll ----l

_

, Proiect

_

_E

6ii".tions Expelses

__-___

L 600,000 :

J-J

i

_.r:1,,I

i __

i

700,000

___4,090

____-,

lncome.

-*

D. C.

D.

::i'

,,

t su,r.

".* "" ,-.-;;il*;l

__ tl

Zero-Profit A.

-.:

;;l-";;

net rncome

P(150,000) P(150,000) P(100,000) P(200,000)

Percentage of Completir"rn P750,C00

P600,roc P675,00U

P603.000

Pnoarcrq g, Psalms sold fast food restaurant franchise to []eter. The lale aBreernent, sigrlsil cn January, 1,,2A13, calied foi'a P30,000 down payntent plus r:,-ln-;nitrr:st i:errin;-l ircie fr:r the halance rryhich it P20,000 payable in tr,vt rr,u6l 1,1y-..-,rl pa',.,rr.e ,lrs, ;ri.rr;5-,.",' tq {l-ie: liue;f rnitial fr tr chise sE.-vi:es rendered by Psalms. in atldttion, the agreslntenl i-equii"..d ii"e franclrs;€- fo .:r;y fil,e c.i'a nr ,;f it grtir revenues to Ihe franchisor, this was deemed sl'fficicnt to co\,er tl.t i:os:. '- rti ii..rr/:d€.ii r-c:t;;r,-,.:,hle ;.ictrt rnargin on coirtinuing franchise services lr i.re pe.tr::r^,;e,d b)r Fsairt.. [,:r'iits, ilcrt.i ej ::ir.l:i cr-,si ci P2f],C00 in providing the initiai services. The restar-,i'.,nt coeija,i ln ihe lir:' nicnih cl th+ i.r,.toili"l {juartei'of 2013, and its sales amounted to P500,000 each y;.,ar for \it iti.si i,,yr;'y'i..-r'r, .

Assuming a 1O% interest rate is appropriats and the coi!ectai.'ilrii i,i'he rr;te i: (the PV of annuity of P1 at 1,A%far 2 periods it I 7:155) t-tse tl,,-,o r-,e .',i.,ill , lrct:.

D,

r'e6sortably assured.

------t

l;h; totai :-errenue ri'r 201.4 is A 3. c.

rrlt

P7.+,09A

P31,161 P31,510 P35,000

PSpALEMJz. TtviCSSIY lnc. opened an agency ir, Marikina. Tlre f;iilowir.rg are lr.1nsac,:ior":i fcl,-Jiir7 2013. Sanrples worth P10,C100, advertising materials of P5,000 and ch,:cks for 75C,Lt0i \r/ere s(rnt tc the ag,enc\/, Agencr/ sales amounted to P22-0,000 (cost P150.000). The colte,.t;a,t f;;,'a.4zn:...rrnouni3C t( i11,7b,10A net of 2% discourit,-ih: agency's worl