Asia Pacific College of Advanced Studies
Finals Examination
Advanced Financial Accounting I
Name:
Professor: Gemine Ailna Panganiban
Date:
Raw Score:
1. Philippine National Bank holds a P500,000 note secured by a building owned by Luigi
Software, which has filed for bankruptcy. If the property has a book value of P600,000 and a
fair market value of P450,000, what is the best way to describe the notes held by Philippine
National Bank? The bank has
a. A secured claim of P500,000.
b. An unsecured claim of P500,000.
c. A secured claim of P450,000 and an unsecured claim of P50,000.
d. A secured claim of P50,000 and an unsecured claim of P50,000.
2. P Corporation is a parent, having purchased 60% of S Company's common stock at par
value for P600,000. S Company is in financial difficulty. The parent granted an unsecured
loan of P200,000 to the subsidiary. An accounting statement of affairs for S Company shows
a dividend of 30%. P Corporation can expect to receive on the loan of appropriately:
a. P120,000
c.
P36,000
b. 60,000
d.
48,000
3. P Corporation is a parent, having purchased 60% of S Company's common stock at par
value for P600,000. S Company is in financial difficulty. The parent granted as unsecured
loan of P200,000 to the subsidiary. An accounting statement of affairs for S Company shows
a dividend of 30%. P Corporation can expect to receive payment for its Investment in S
Company of approximately:
a. P600,000
c.
P108,000
b. 180,000
d.
0
4. 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
b. 40,000
d.
65,000
5. Seco Corp. was forced into bankruptcy and is in the process of liquidating assets and
paying claims. Unsecured claims will be paid at the rate of forty cents on the peso. Hale
holds a P30,000 noninterest-bearing note receivable from Seco collateralized by an asset
with a book value of P35,000 and a liquidation value of P5,000. The amount to be realized
by Hale on this note is:
a. P5,000
c.
P15,000
b. 12,000
d.
17,000
6. Blueprint, Inc. signed a note payable to its bank for PI 0,000. Accrued interest on the note
on February 28, 2004 amounts to P250. The note is secured by inventory with a book value
of P12,000. The inventory is sold for P8,000 and unsecured creditors receive 30 percent of
their claims. The bank should receive the following amount in settlement of the note and
interest:
a. P10,250
c.
P8,675
b. 10,000
d.
8,000
7. The trust for Ardolio, Inc. prepares a statement of affairs which shows that unsecured
creditors whose claims total P60,000 may expect to receive approximately P36,000 if
assets are sold for the benefit of creditors.
 Michael is an employee who is owed P750.
 Meldcan holds a note for P1,000 on which interest of P50 is accrued; nothing has
been pledged on the note.
 Compboy holds a note of P6,000 on which interest of P300 is accrued: securities
with a book value of P6,500 and a present market value of P5,000 are pledged on
the note.

Serpor holds a note for P2,500 on which interest of P150 is accrued property with
a book value of P2,000 and a present market value of P3,000 is pledged on the
note.
How much may each of the following creditors hope to receive?
Michael
a. P
0
b.
90
350
750
c.
d.
Meldcan
P
0
0
1,050
630
Compboy
Serpor
P
0
6,300
5,780
5,780
P
0
2,390
0
2,650
8. Erap Co. filed a voluntary bankruptcy petition on August 15, 2008, and the statement of
affairs reflects
the following amounts:
Estimated
Book
current
value
value
Assets:
Assets pledged with fully secured creditors
P
300,000
P370,000
Assets pledged with partially secured creditors
180,000
120,000
Free assets……………………………………………………..
420,000
320,000
P
900,000
P810,000
Liabilities:
Liabilities with priority………………………………….
P70,000
Fully secured creditors…………………………………..
260,000
Partially secured creditors……………………………..
200,000
Unsecured creditors………………………………………
540,000
P1,070,000
Assume that the assets are converted to cash at the estimated current values and the
business is liquidated. What amount of cash will be available to pay unsecured non-priority
claims?
a. P240,000
b. 280,000
c.
P320,000
d.
360,000
9. On December 18, 2011, the statement of affairs of Downside Company,which is in
bankruptcy liquidation, included the following:
Assets pledged for fully secured liabilities………………………………………………
P100,000
Assets pledged for partially secured liabilities………………………………………...
40,000
Free assets…………………………………………………………………………………………….
120,000
Fully secured liabilities………………………………………………………………………….
80,000
Partially secured liabilities…………………………………………………………………….
50,000
Unsecured liabilities with priority………………………………………………………….
60,000
Unsecured liabilities without priority…………………………………………………….
90,000
Compute the estimated amount to be paid to:
a.
b.
c.
d.
Fully
Secured
Liabilities
P80,000
64,000
80,000
80,000
Unsecured
Partially
Unsecured
Liabilities
Secured
Liabilities
w/ Priority
Liabilities
without priority
P60,000
P50,000
P70,000
60,000
48,000
88,000
48,000
60,000
72,000
60,000
48,000
72,000
10. Zero Na Corp. has been undergoing liquidation since January 1. As of March 31, its
condensed statement of realization and liquidation is presented below:
Assets:
Assets
P1,375,000
Assets
750,000
Assets
1,200,000
Assets
1,375,000
to be realized……………………………………………………………
acquired…………………………………………………………………..
realized……………………………………………………………………
not realized………………………………………………………………
Liabilities:
Liabilities
P1,875,000
Liabilities
1,700,000
Liabilities
2,250,000
Liabilities
1,625,000
liquidated…………………………………………………………..
not liquidated…………………………………………………….
to be liquidated………………………………………………….
assumed…………………………………………………………….
Revenues and Expenses:
Supplementary charge……………………………………………………….
P3,125,000
Supplementary credits……………………………………………………….
2,800,000
The net gain (loss) for the three-month period ending March 31 is:
a. P250,000
b. (325,000)
c. P425,000
d.
750,000
11. MM Company began operations on January 1, 2011 and appropriately uses the installment
method of accounting. The following data are available for 2011 and 2012
2011
2012
Installment sales…………………………………………
P1,200,000
P1,500,000
Cash collections from:
2011 sales……………………………………….
400,000
500,000
2012 sales……………………………………….
600,000
Gross profit on sales…………………………………….
30%
40%
The realized gross profit for 2012 is
a. P240,000
b. 390,000
c.
d.
P440,000
600,000
12. TT Company, which began business on January 1, 2011, appropriately uses the installment
sales method of accounting. The following data are available for 2008:
Installment
accounts
receivable,
12/31/11………………………………………….
P200,000
Deferred gross profit, 12/31/11 (before recognition of realized
gross
profit)………………………………………………………………………………………..
140,000
Gross profit on sales ……………………………………………………………………………
40%
The cash collections and the realized gross profit on installment sales for the year ended
December 31, 2011 should be
Cash collections
Realized gross profit
a. P100,000
P80,000
b. 100,000
60,000
c.
d.
150,000
150,000
80,000
60,000
13. Dipolog Company sells appliances on the installment basis. Below are information for the
past three years:
2012
2011
2010
Installment sales……………………………………… P750,000
P600,000
P400,000
Cost of sales……………………………………………..
450,000
375,000
260,000
Collections on:
2012 installment sales………………….
275,000
2011 installment sales………………….
180,000
240,000
2010 installment sales………………….
125,000
120,000
150,000
Repossessions on defaulted accounts included one made on a 2012 sale for which the
unpaid balance amounted to P5,000. The depreciated value of the appliance repossessed
was P2,500.
The realized gross profit in 2012 on collections of 2012 installment sales was:
a. P108,000
b. 110,000
c.
d.
P221,250
221,500
14. On January 1, 2011, Art Company sold its idle plant facility to Tony, Inc. for P1,050,000. On
this date, the plant had a depreciated cost of P735,000. Tony paid P150,000 cash on
January 1, 2011 and signed a P900,000 note bearing interest at 10%. The note was payable
in three annual installments of P300,000 beginning January 1, 2012. Art appropriately
accounted for the sale under the installment method. Tony made a timely payment of the
first installment on January 1, 2012 of P390,000 which included interest of P90,000 to date
of payment. At December 31, 2012, Art has deferred gross profit of
a. P153,000
b.
180,000
c.
d.
P225,000
270,000
15. On October 1, 2011, Rodel Corporation, a real estate developer, sold land to Gerry
Company for P5,000,000. Gerry paid cash of P600,000 and signed a ten-year P4,400,000
note bearing interest at 12%. The carrying amount of the land was P4,000,000 on the date
of sale. The note was payable in forty quarterly principal installments of P110,000
beginning January 2, 2012. Rodel appropriately accounts for the sale under the cost
recovery method. On January 2, 2012, Gerry paid the first principal installment of P110,000
and interest of P132,000. For the year ended December 31, 2012, what total amount of
income should Rodel recognize from the land sale and the financing?
a. P
0
b. 208,000
c.
d.
P508,200
309,640
16. Asser Computer Co. began operation at the beginning of 2012. During the year, it had cash
sales of P6,875,000 and sales on installment basis of P16,500,000. Asser adds a markup on
cost of 25% on cash sales and 50% on installment sales. Installments receivable at the end
of 2012 is P6,600,000. Total realized gross profit for 2012 is:
a. P1,375,000
b.
3,300,000
d.
c.
P4,675,000
3,575,000
17. EMC Motors, a dealer of motor vehicle, sales exclusively on installment basis. One of its
customers, Mr. Ambo purchased a motorcycle for P45,375. The cost to EMC was P25,410.
After making an initial payment of P6,050, Mr. Ambo defaulted on subsequent payments.
EMC lost no time in repossessing the motor vehicle which, by this time, was appraised at a
value of P12,650. EMC had to incur additional cost of repairs/ remodeling of P1,650 before
the motor vehicle was subsequently resold for P27,500 to Mr. Joey who made an initial
payment of P6,875.
How much profit was realized on the sale to Mr. Joey?
a. P3,025
c.
P3,575
b.
3,300
d.
3,850
18. The Central Plains Subdivision sells residential subdivision lots on installment basis. The
following information was taken from the company's records as at December 31, 2011:
Installment Accounts Receivable:
January 1, 2011………………………………………………………………………….
P755,000
December 31, 2011……………………………………………………………………
840,000
Unrealized Gross Profit, January 1, 2011………………………………………………….
339,750
Installment Sales…………………………………………………………………………………….
950,000
How much is the balance of Unrealized Gross Profit as at December 31, 2011?
a. P378,000
c.
P427,500
b.
339,750
d.
389,250
19. Vic Corporation, which began business on January 1, 2011, appropriately uses the
installment sales method of accounting. The following data are available:
12/31/2011
12/31/2012
Balance of deferred gross profit on sales account:
2011……………………………………………………..
P300,000
PI 20,000
2012……………………………………………………..
440,000
Gross profit rate on sales…………………………………..
30%
40%
The installment accounts receivable balance at December 31, 2012 is
a. P1,000,000
c.
P1,400,000
b.
1,000,000
d.
1,500,000
20. Cente, Inc. appropriately uses the installmentmethod of accounting to recognize income in
its financial statements. Some pertinent data relatingto this method of accounting include:
2010
2011
2012
Installment sales…………………………………..
P300,000
P375,000
P360,000
Cost of installment sales ……………………...
225,000
285,000
252,000
Gross profit…………………………………………
P 75,000
P
P108,000
Rate of gross profit on installment
Sales…………………………………………………….
25%
24%
30%
2010
Balance of deferred gross profit at year end:
From 2010 sales
P 52,500
From 2011 sales
From 2012 sales
Total………………………………………………….
HP 52,500
P 69,000
P 81,000
2011
2012
P 15,000
54,000
P
90,000
9,000
72,000
What amount of installment accounts receivable should be presented in Cente’s December
31, 2012 balance sheet?
a. P270,000
c.
P279,000
b.
277,000
d.
300,000
21. Mediocre Inc. has entered into a very profitable fixed price contract for constructing a highrise building over a period of three years. It incurs the following costs relating to the
contract during the first year:
 Cost of material = P2.5 million
 Site labor cost = P2.0 million
 Agreed administrative costs as per contract to be reimbursed by the customer =
P 1 million.
 Depreciation of the plant used for the construction = P0.5 million.
 Marketing costs for selling apartments, when they are ready = P1.0 million.
Total estimated cost of the project = P18 million.
The percentage of completion of this contract at the year-end is:
a. 33 I /3% (= 6.0/18.0)
b. 27% (= 4.5/16.5)
c.
25% (= 4.5/18.0)
d.
39% (= 7.0/18)
22. Dante Construction Company uses the percentage-of-completion method of accounting.
During 2011, Dante contracted to build an apartment house for Rizza for P10,000,000.
Dante estimated that total costs would amount to P8,000,000 over the period of
construction. In connection with this contract, Dante incurred P1,000,000 of construction
costs during 2011. Dante billed and collected P1,500,000 from Rizza in 2011. How much
gross profit should Dante recognize in 2011?
a. P300,000
b. 250,000
c.
d.
P187,500
125,000
23. DJ Builders, Inc. has consistently used the percentage-of-completion method of accounting
for construction-type contracts. During 2011, DJ started work on a P9,000,000 fixed-price
construction contract that was completed in 2012. DJ's accounting records disclosed the
following:
12/31/2011
12/31/2012
Cumulative contract costs incurred……………………………….
P6,300,000
Estimated total costs at completion………………………………
8,100,000
P3,900,000
7,800,000
How much income would DJ have recognized on this contract for the year ended December
31, 2012?
a. P100,000
b. 300,000
c.
d.
P600,000
700,000
24. DJ Builders Construction Corporation contracted to construct a building for P400,000.
Construction began in 2011 and was completed in 2012. Data relating to the contract are
summarized below:
Year endedDecember 31,
2011
Costs incurred ……………………………………………………………..
110,000
Estimated costs to complete…………………………………………
-
2012
P200,000P
100,000
DJ Builders uses the percentage-of-completion method as the basis for income recognition.
For the years ended December 31, 2011 and 2012, respectively, DJ Builders should report
recognized revenue of:
2011
2012
2011
2012
a.
P66,667
P 23,333
c.
P
-0P 90,000
b.
-0400,000
d.266,667
133,333
25. Bon Construction Company has consistently used the percentage-of-completion method of
recognizing income. During 2011, Bon started work on a P3,000,000 construction contract
which was completed in 2012. The accounting records provided the following data:
2011
Progress billings……………………………………………………………..
P1,900,000
Costs incurred each year…………………………………………………
1,800,000
Collections……………………………………………………………………..
2,300,000
Estimated cost to complete……………………………………………..
2012
P1,100,000
900,000
700,000
1,800,000
How much income should Bon have recognized in 2012?
a. P100,000
b.
110,000
c.
d.
P150,000
200,000
26. The following information relates to a flood control project of JJD Construction Co. which was
started in 2011 and completed in 2012:
Costs incurred to-date:
completion:
As at June 30, 2011……………….
2011…………….19,500.000
As at June 30, 2012……………….
2012…………….20,250,000
Estimated
total
cost
on
P 9,750,000
As
at
June
30,
15,750,000
As
at
June
30,
The project is a P22,500,000 fixed-price construction contract, and JJD uses the percentageof-completion method of revenue accounting. On June 30, 2012, how much income would
JJD report on the project?
a. P250,000
b. 300,000
d.
c.
P750,000
900,000
27. During 2011, Mitch Corporation started a construction job with a total contract price of
P600,000. Any costs incurred are expected to be recoverable. The job was completed on
December 15, 2012. Additional data are as follows:
2011
2012
Actual costs incurred……………………………………………………….
P255,000
Estimated remaining costs……………………………………………….
Billed to customer……………………………………………………………
360,000
P225,000
Received from customer…………………………………………………..
375,000
225,000
225,000
240,000
Under the cost recovery method of construction accounting (zero-profit approach) what
amount should Mitch recognize as gross profit for 2011 and 2012?
a.
b.
2011
P -075,000
2012
P -0120,000
c.
d.
2011
P -0120,000
2012
P120,000
120,000
28. The following data relate to a construction job started by Jay Company during 2011:
Total contract price………………………………………………………………………
P100,000
Actual costs during 2011………………………………………………………………
20,000
Estimated remaining costs…………………………………………………………….
40,000
Billed to customer during 2011…………………………………………………….
30,000
Received from customer during 2011……………………………………………
20,000
Any costs incurred are expected to be recoverable. Under the cost recovery methodconstruction accounting (zero-profit approach), what amount should Jay Company
recognize as gross profit for 2011:
a.
b.
P -04,000
c.
d.
P10,000
12,000
29. The Gamboa Construction Company started work on three job sites during the current year.
Any costs incurred are expected to be recoverable. Data relating to the three jobs are given
below:
Site
on contract
Batangas……..
Laguna………..
San Fernando
Contract
Costs
Estimated costs
Collections
price
incurred
to complete
P500,000
700,000
250,000
P375,000
100,000
100,000
P400,000
100,000
Billings
P500,000
100,000
150,000
on contract
P500,000
100,000
100,000
What would be the amount of construction in progress to be reported on the year-end
balance sheet if the percentage-of-completion method and cost recovery method construction accounting (zero-profit approach) is used?
(Zero-profit approach)
Percentage-ofCost Recovery Method
Completion Method
of Construction Accounting
a.
b.
c.
d.
P765,000
765,000
265,000
265,000
P700,000
765,000
265,000
200,000
30. Lovely Co. recognizes construction revenue and expenses using the percentage-ofcompletion method. During 2011, a single long-term project was begun, which continued
through 2012. Information on the project follows:
2011
2012
Accounts receivable from construction contract………………. P 100,000
P300,000
Construction expenses…………………………………………………….
105,000
192,000
Construction in progress…………………………………………………
122,000
364,000
Partial billings on contract………………………………………………
100,000
420,000
Profit recognized from the long-term construction contract in 2012 should be
a. P 50,000
c. P128,000
b. 108,000
d.
228,000
31. On January 2, 2011, 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, 2011, by which date RR had performed all of
the required initial services. In its income statement for the six months ended June 30,
2011, what amount should RR report as revenue from franchise fees in connection with XX
franchise?
a. P
0
c.
P30,000
b.
1,500
d.
60,000
32. On January 3, 2011, 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, 2011, 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 2011 was P400,000. For the year
ended December 31, 2011, how much should PP record as revenue from franchise fees in
respect of the CC's franchise?
a. P70,000
c.
P45,000
b.
50,000
d.
22,500
33. On December 31, 2011, 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 P
15,000 each, beginning December 31, 2012. The present value on December 31, 2011 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, 2011. RR should record
unearned franchise fees in respect of the Fay franchise of
a. P
0
b. 36,000
d.
c.
P45,000
75,000
34. On December 31, 2011, 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, 2012. The present value on December 31, 2011, 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, 2011, balance sheet,
unearned franchise fees from GG's franchise should be reported as
a. P90,000
c. P150,000
b. 132,000
d.
72,000
35. On December 31, 2011, PP Inc. signed an agreement authorizing ZZ Company to operate
as a franchisee for an initial franchise fee of P50,000. Of this amount, P20,000 was received
upon signing of the agreement and the balance is due in three annual payments of P10,000
each beginning December 31, 2012. The agreement provides that the down payment
(representing a fair measure of the services already performed by PP) is not refundable and
no substantial future services are required to be performed. ZZ Company's credit rating is
such that collection of the note is reasonably assured. The present value at December 31,
2011 of the three annual payments discounted at 14% (the implicit rate for a loan of this
type) is P23,220. On December 31, 2011, PP should record unearned franchise fees of
a. P
0
c.
P43,220
b.
23,220
d.
30,000
36. Zoe Corp. sells a franchise for an initial fee of P700,000. A down payment of P200,000 is
required, with the balance covered by a P500,000, 10% note payable in five equal annual
installments. If all the material services have been performed and collectibility of the notes
is reasonably assured, but the refund period has not yet expired, what journal entry is
needed to record the transaction?
a. Cash………………………………………………………….
Notes Receivable……………………………………….
Franchise Fees………………………………
700,000
200,000
500,000
b. Cash………………………………………………………….
Notes Receivable………………………………………
Unearned Franchise Fees………………
700,000
200,000
500,000
c. Cash………………………………………………………….
Notes Receivable……………………………………….
Franchise Fees………………………………
200,000
Unearned Franchise Fees………………
500,000
200,000
500,000
d. Cash………………………………………………………….
200,000
Notes Receivable……………………………………….
Franchise Fees………………………………
500,000
500,000
Unearned Franchise Fees………………
200,000
37. On May 31, 2011, Kenny received P200,000 from Rogers representing the down payment
on the franchise agreement signed on that date. Rogers issued promissory notes for the
balance of P1,000,000, payable in four equal semi-annual installments. Franchise services
are substantially completed by Kenny on semi-annual installment due on November 20,
2011 at an aggregate cost of P900,000. The first semi-annual installment due on November
30, 2011 was appropriately paid by Rogers. Accordingly, Kenny uses the accrual method in
recording franchise revenue. In its December 31, 2011 financial statements, how much
would Kenny report as deferred franchise revenue for the year?
a.
b.
P
0
300,000
c.
d.
P600,000
750,000
38. Jolibi, Inc. enters into an agreement with Ronald's Co., clothing the laterwith full authority to
operate as its franchise for a period of ten years. An initialfranchise fee of P275,000, among
others, was stipulated in the contract andwas promptly paid during the year 2011.
Assuming that Jolibi was able to perform the initial services during 2011, what is the
franchise revenue to be recognized in its year-end income statement?
a. P
0
b. 27,500 `
d.
c.
P137,500
275,000
39. Shake's, Inc., franchisor, enters into a franchising agreement with Sha, franchisee, on June
30, 2011. The agreement calls for a total franchise fee of P1,000,000 of which P100,000 is
payable upon signing of the contract and the balance in four equal semi-annual
installments. It is agreed that the down payment is nonrefundable notwithstanding lack of
substantial performance of services by the franchisor.
When Shake's, Inc. prepares its financial statements as of June 30, 2011, the unearned
franchise fee to be reported is:
a. P
0
c.
P 900,000
b. 100,000
d.
1,000,000
40. On September 30, 2011, Criselda's, Inc. received from Ambo P550,000 representing
franchise fee. Franchise services were immediately started by Criselda's and these were
completed on October 31, 2011 at cost amounting to P330,000. The franchise fee revenue
to be reported by Criselda's in its October 31, 2011 income statement is:
a. P
0
c.
P220,000
b. 137,500
d.
550,000
41. Noynoy invested cash of P60,000; land of P200,000 with an appraised value of P410,000;
store furniture costing P40,000 less accumulated depreciation of P10,000; mortgage note
payable P15,000 plus accrued interest for a year at 18%. If the mortgage note is to be
assumed by the partnership, Noynoy capital should be credited for
a. 485,000
b. 545,000
c. 482,300
d. 515,000
42. A partner invested into a partnership a building with a P500,000 carrying value and
P800,000 fair market value. The related mortgage payable of P250,000 was assumed by
the partnership. As a result of the investment, the partner’s capital account will be credited
for
a. 800,000
b. 500,000 c. 550,000
d. 250,000
43. On March 1, 2011, Lorezco, Narvasa and Soria formed a partnership by combining their
separate business proprietorships. Lorezco contributed cash ofP120,000. Narvasa
contributed property with a P70,000 carrying amount, a P80,000 original cost and P160,000
fair value. There is a mortgage liability of P60,000 assumed by the partnership. Soria
contributed equipment with a P60,000 carrying amount, a P150,000 original cost and
P110,000 fair value. The partnership agreement specifies that profits and losses are to be
shared equally. Which partner has the largest March 1, 2011, capital balance?
a. Lorezco
b. Narvasa
c. Soria
d. All capital account balances are equal
44. Aris, Terry and Fely have the following profit and loss agreement. Partners Aris and Terry will
receive salaries of P80,000 each. Partner Fely will get a bonus of 10% of profit after salaries
and bonus. Remaining profits are shared by Aris, Terry and Fely in the ratio of 3:4:3
respectively. The partnership had a profit of P182,000. How much should be allocated
toFely?
a. 54,600
b. 8,000
c. 8,140
d.
18,200
45. Garcia invested P200,000 for a 1/3 interest in a partnership in which the other partners
have capital totaling P520,000 before admitting Garcia. After distribution of the bonus,
what is Garcia’s capital?
a. 200,000
b. 240,000 c. 173,340
d. 106,660
46. RST Partnership is selling electronic equipment and supplies. Profits and losses are shared
5:3:2. The books are kept on a calendar basis. After the business has been in operation for
several years, Sonny died on September 30. The wife of Sonny desired to sell Sonny’s
interest to the partnership for P370,000. After the books were closed, the partners’ capital
accounts had credit balances as follows:
Roy
P500,000
Sonny
300,000
Troy
200,000
The capital balance of Roy after the cash settlement to Sonny’s wife is
a. P450,000
b. 465,000 c. 550,000
d. 535,000
47. On December 31, 2010, ABC Partnership was dissolved. The fair market values of its assets
and liabilities are as follows:
Current assets
P1,600,000
Equipment
2,100,000
Liabilities
700,000
On January 2, 2011, ABC Partnership was incorporated, with 5,000 shares of P100 par
value ordinary shares issued. How much should be credited to share premium?
a. 3,200,000
b. 2,500,000 c. 2,300,000 d. 2,000,000
48. E,G,L and D share profits in the ratio of 2:1:1:1. The partnership cannot meet its obligations
to creditors and dissolution is authorized on March31,2011. A balance sheet for the
partnership on this date shows balances as follows:
Cash
Other assets
P90,000
400,000
Liabilities
D, Loan
E, Capital
G, Capital
L, Capital
D, Capital
P265,000
25,000
50,000
50,000
50,000
50,000
Total Assets
P490,000
Total Liabilities and Capital P490,000
The personal status of partners on this date is determined to be as
follows:
Partners
Personal
Personal
E
P250,000
P150,000
G
100,000
150,000
L
150,000
125,000
D
200,000
250,000
Other assets of the partnership are sold and realized for P120,000. Additional
contribution by appropriate parties in meeting the claims of firm creditors were made.
The amount that will be paid to the personal creditors of D would be:
a. P250,000 b. 217,500 c. 200,000
d. 235,000
49. King, Queen and Prince are partners sharing profit and loss in the ratio of 1:1:2,
respectively. Their capital balances are P500,000 for King, P300,000 for Queen and
P200,000 for Prince. Liabilities amounted toP200,000. There is also a loan payable to
Prince, P50,000. The cash balance amounted to P300,000 and it increased to P1,400,000 as
a result of the sale of the non-cash assets. How much is the available cash for distribution
to the partners?
a. 1,400,000
b. 1,200,000 c. 1,150,000 d. 250,000
50. Annie, Emy and Mary are in the process of liquidating their partnership and their
account balances as of March 1, 2011 are as follows:
Debit
Cash
Non-cashassets
Emy,Loan
Annie,capital
Emy,capital
Mary,capital
Credit
15,000
35,000
7,000
5,000
17,500
20,500
The profit and loss sharing ratio has been 4:3:3 between Annie, Emy and Mary, respectively.
If Annie has personal assets of P25,000 and personal liabilities of P22,500 and that the
partnership realized P12,500 from the sale of its non-cash assets, Mary must receive
a. 20,500
b. 12,500
c. 13,000
d. Not given