P2 Pre-board Exams
1. On May 1, 2015, the business assets of John and Paul appear below:
Cash
Accounts receivable
Inventories
Land
Building
Furniture and fixtures
Other assets
Total
Accounts payable
Notes payable
John, capital
Paul, Capital
Total
John
11,000
234,536
120,035
603,000
50,345
2,000
1,020,916
Paul
22,354
567,890
260,102
428,267
34,789
3,600
1,317,002
178,940
200,000
641,976
1,020,916
243,650
345,000
728,352
1,317,002
John and Paul agreed to form a partnership contributing their respective assets and equities subject
to the following adjustments:
a. Accounts receivable of P20,000 in John’s books and P35,000 in Paul’s are uncollectible.
b. Inventories of P6,700 and P5,500 are worthless in Paul’s and John’s respective books.
c. Other assets of P2,000 and P3,600 in John’s and Paul’s respective books are to be
written off.
The capital accounts of the partners after the adjustments will be:
a.
b.
c.
d.
John
614,476
615,942
640,876
613,576
Paul
683,052
717,894
712,345
683,350
2. Refer to question #1. How much assets does the partnership have?
a. 2,337,918
b. 2,237,918
c. 2,265,118
d. 2,365,218
3. Refer to questions #1 and #2. Peter offered to join for a 20% interest in the firm. How much
cash should he contribute?
a. 330,870
b. 337,487
c. 344,237
d. 324,382
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P2 Pre-board Exams
4. Refer to questions #1 to #3. After Peter’s admission, the profit and loss sharing ratio was agreed
to be 40:40:20, based on capital credits. How much should the cash settlement be between John
and Paul?
a. 33,602
b. 32,930
c. 32,272
d. 34,288
5. Refer to questions #1 to #4. During the first year of their operations, the partnership earned
P325,000. Profits were distributed in the agreed manner. Drawings were made in these
amounts: John, P50,000; Paul P65,000; Peter, P28,000. How much are the capital balances after
the first year?
a.
b.
c.
d.
John
750,627
728,764
757,915
743,121
Paul
735,177
713,764
742,315
727,825
Peter
372,223
361,382
375,837
368,501
6. The Mia and Janna partnership agreement provides for Mia to receive a 20% bonus on profits
before bonus. Remaining profits and losses are divided between Janna and Mia in the ratio of
3:2 respectively. Which partner has a greater advantage when the partnership has a profit or
when it has a loss?
a.
b.
c.
d.
Profit
Mia
Mia
Janna
Janna
Loss
Janna
Mia
Mia
Janna
7. Partner Maa first contributed P50,000 of capital into existing partnership on March 1, 2015. On
June 1, 2015, said partner contributed another P20,000. On September 1, 2015, he withdrew
P15,000 from the partnership. Withdrawal in excess of P10,000 are charged to the partner’s
capital accounts. What is the annual weighted average capital balance of Partner Maa?
a. 32,500
b. 51,667
c. 60,000
d. 48,333
8. If a partnership has net income of P44,000 and Partner X is to be allowed bonus of 10% of net
income after bonus. What is the amount of bonus Partner X will received?
a. 3,000
b. 3,300
c. 4,000
d. 4,400
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P2 Pre-board Exams
9. Fox, Greg, and Hoe are partners with average capital balances during 2014 of P120,000, P60,000,
and P40,000, respectively. Partners receive 10% interest on their average capital balances. After
deducting salaries of P30,000 to Fox and P20,000 to Hoe, the residual profit and loss is divided
equally. In 2014, the partnership sustained a P33,000 loss before interest and salaries to
partners. By what amount should Fox’s capital account change?
a. 7,000 increase
b. 11,000 decrease
c. 35,000 decrease
d. 42,000 increase
10. Partners AA and BB have profit and loss agreement with the following provisions: salaries of
P30,000 and P45,000 for AA and BB, respectively; a bonus to AA of 10% of net income after
salaries and bonus; and interest of 10% on average capital balances of P20,000 and P35,000 for
AA and BB, respectively. One-third off any remaining profits will be allocated to AA and the
balance to BB. If the partnership had net income of P102,500, how much should be allocated to
partner AA?
a. 44,250
b. 47,500
c. 41,000
d. 41,167
11. Rando is trying to decide whether to accept a salary of P40,000 or salary of P25,000 plus a bonus
of 10% of net income after salaries and bonus as a means of allocating profits among partners.
Salaries traceable to the other partners are estimated to be P100,000. What amount of income
would be necessary so that Rando would consider choices to be equal?
a. 165,000
b. 290,000
c. 265,000
d. 305,000
12. A partnership has the following accounting amounts:
Sales
Cost of goods sold
Operaing expenses
Salary allocations to partners
Interest paid to banks
Partner's drawings
700,000
400,000
100,000
130,000
20,000
80,000
What is the partnership net income (loss)?
a.
b.
c.
d.
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200,000
180,000
50,000
(30,000)
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P2 Pre-board Exams
13. Citrine and Ruby are partners who share profits and losses in the ratio of 6:4, respectively. On
May 1, 2014, their respective capital accounts were as follows:
Citrine
Ruby
60,000
50,000
On that date, Emerald was admitted to the partner with one-third interest in capital, and profits
for an investment of P40,000. The new partnership began with total capital of P150,000.
Immediately after the Emerald’s admission, Citrine’s capital should be:
a. 50,000
b. 54,000
c. 56,667
d. 60,000
14. Digma purchases 50% of Dhaniel’s capital interest in the FD partnership for P22,000. If the
capital balances of Ferdinand and Dhaniel are P40,000 and P30,000 respectively, Digma’s capital
balance following the purchase is:
a. 22,000
b. 35,000
c. 20,000
d. 15,000
15. The capital balances in CPA Partnership are: C, capital P60,000; P, capital P50,000; and A, capital
P40,000 and income ratios are; 5:3:2, respectively. The CPAT Partnership is formed by admitting
T to the firm with cash investment of P60,000 for a 25% interest in capital. What is the amount
of bonus to be credited to A capital in admitting T?
a. 10,000
b. 7,500
c. 3,750
d. 1,500
16. In May 2015, Virgilio, a partner of the accounting firm, decided to withdraw when the partners’
capital balances were: Rio, P600,000; Mohammad, P600,000, and Virgilio, P400,000. It was
agreed that Virgilio is to take the partnership’s fully depreciated computer with a second hand
value of P24,000 that cost the partnership P36,000. If profits and losses are shared equally, what
would be the capital balances of the remaining partners after the retirement of Virgilio?
Rio
Mohammad
a. 608,000
608,000
b. 596,000
596,000
c. 592,000
592,000
d. 612,000
612,000
17. On June 30, 2014 the balance sheet for the partnership of ALL, MEL, and ABU, together with
their respective profit and loss ratios, were as follows:
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P2 Pre-board Exams
Assets, at cost
ALL, loan
ALL, capital (20%)
MEL, capital (20%)
ABU, capital (60%)
180,000
9,000
42,000
39,000
90,000
180,000
ALL decided to retire from the partnership. By mutual agreement, the assets are to be adjusted to
their fair value of P216,000 at June 30, 2014. It was agreed that the partnership would pay ALL
P61,200 cash for ALL’s partnership interest, including ALL’s loan which is to be paid in full. No
goodwill is to be recorded. After ALL’s retirement, what is the balance of MEL’s capital account?
a.
b.
c.
d.
36,450
39,000
45,450
46,200
18. On October 31, 2014, Mickey, retired from the partnership of Mickey, Mouse, and Minnie.
Mickey received P55,000 representing final settlement of his interest in the amount of P50,000.
Under the bonus method,
a. Credit P5,000 against the capital balances of Mouse and Minnie.
b. P5,000 was recorded as expense.
c. Charged P5,000 against the capital balances of Mouse and Minnie.
d. P55,000 was recorded as bonus.
19. Cohen, Butler, and Davis are partners in a partnership and share profits and losses 50%, 30%,
and 20%, respectively. The partners have agreed to liquidate the partnership and anticipate that
liquidation expenses will total P14,000. Prior to the liquidation, the partnership balance sheet
reflects the following book values:
Cash
Non-cash assets
Notes payable to Davis
Other liabilities
Cohen, capital
Butler, capital (deficit)
Davis, capital
21,000
248,000
32,000
154,000
60,000
(10,000)
33,000
Assuming that the actual liquidation expenses are P14,000 and that non-cash assets are sold for
P218,000, how would the assets be distributed to partners if Butler has net personal assets of
P8,500?
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P2 Pre-board Exams
Cohen
15,500
21,500
30,650
27,500
a.
b.
c.
d.
Butler
-
Davis
49,571
53,260
52,000
20. The condensed balance sheet of Alex, Jay, and John as of March 31, XXXX as follows:
Cash
Other Assets
28,000
265,000
Total
293,000
Liabilities
Alex, capital
Jay, capital
John, capital
Total
48,000
95,000
80,000
70,000
293,000
The income and loss ratio is 50:25:25, respectively. The partners voted to dissolve their
partnership and liquidate by selling other assets in installments. P70,000 was realized on the first
cash sale of other assets with a book value of P150,000 After settlement with creditors, all cash
available was distributed to partners. How much cash was received by John?
a. 10,500
b. 20,000
c. 21,250
d. 32,500
21. As of December 31, the books of AME Partnership showed capital balances of A – P40,000; M –
P25,000; and E – P5,000. The partners’ profit and loss ratio was 3:2:1, respectively. The partners
decided to dissolve and liquidate. They sold all the non-cash assets for P37,000 cash. After
settlement of all liabilities amounting to P12,000, they still have P28,000 cash left for
distribution.
The loss on the realization of non-cash assets was:
a. 40,000
b. 42,000
c. 44,000
d. 45,000
22. Refer to question # 21. Assuming that any partners’ capital debit balance is uncollectible, the
share of A in the P28,000 cash for distribution would be:
a. 19,000
b. 18,000
c. 17,800
d. 40,000
23. The Palace Co., a construction company, has December 31 year end. It is to build a factory for a
client and has scheduled its work as follows:
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P2 Pre-board Exams
March 20, 2014
April 25, 2014
November 27, 2014
December 30, 2014
Construction to be awarded and signed.
Construction work to commence.
Principal construction work to be completed.
Final completion of contract.
In accordance with IAS 11, Construction Contracts, the maximum expected period over which the
cost attributable to the contract should be accumulated is:
a.
b.
c.
d.
From March 20, 2014 to December 30, 2014
From April 25, 2014 to November 27, 2014
From April 25, 2014 to December 30, 2014
From March 20, 2014 to November 27, 2014
24. The company signed an P800,000 contract to build an environmentally friendly access trail to
Calamba, Laguna. The project was expected to take approximately 3 years. The following
information was collected for each year of the project – Year 1, Year 2, and Year 3:
Year 1
Year 2
Year 3
Cost
Expected
Support Additional Trail feet Additional
Expended additional timbers laid support constructed trail feet
during
cost to
during
timbers to
during
to be
the year completion the year
be laid
the year constructed
100,000
450,000
150
850
3,000
15,200
150,000
280,000
300
520
7,500
8,200
250,000
500
8,000
-
Compute the amount of revenue to be recognized in the year 2, assume that the company
employs the efforts-expended method of estimating percentage of completion and the
company measures its progress by the number of support timbers laid in the trail:
a. 428,866
b. 371,134
c. 251,134
d. 120,000
25. Using the same information in #24. Compute the amount of revenue to be recognized in year 3,
assume that the company employs the efforts-expended method of estimating percentage of
completion and the company measures its progress by the number of support timbers laid in the
trail:
a. 371,134
c. 120,000
b. 428,866
d. 251,134
26. Using the same information in #24. Compute the amount of revenue to be recognized in year 3,
assume that the company employs an output measure and the company measures its progress
by the number of trail feet that have been completed:
c. 129,730
c. 350,802
d. 319,730
d. 449,198
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P2 Pre-board Exams
27. If the value of the pledged property is lesser than the obligation, what is the treatment of the
liability?
a. Partially secured
b. Fully secured
c. Collateralized
d. Unsecured
28. The trust for Dandan, Inc. prepares a statement of affairs which shows that unsecured creditors
whose claims total P600,000 may expect to receive approximately P360,000 if assets are sold for
the benefit of the creditors.
 Francis is an employee who is owed P7,500.
 Mercuria holds a note for P10,000 on which interest of P500 is accrued; nothing
has been pledge on the note.
 William holds a note of P60,000 on which interest of P3,000 is accrued;
securities with a book value of P65,000 and a present market value of P50,000
are pledge on the note.
 Flora holds a note for P25,000 on which interest of P1,500 is accrued properly
with a book value of P20,000 and a present market value of P30,000 is pledged
on the note.
How much may each of the following creditors hope to receive?
a.
b.
c.
d.
Francis
7,500
4,500
4,500
7,500
Mercuria
6,300
6,300
6,300
6,300
William
57,800
87,800
57,800
87,800
Flora
26,500
26,500
26,500
26,500
29. On December 31, 2014, the statement of affairs of Pasawwey company, which is in bankruptcy
liquidation, included the following:
Assets pledged for fully secured liabilities
Assets pledged for partially secured liabilities
Free assets
Fully secured liabilities
Partially secured liabilities
Unsecured liabilities with priority
Unsecured liabilities without priority
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100,000
40,000
120,000
80,000
50,000
60,000
90,000
12-June-15
P2 Pre-board Exams
Compute the estimated amount to be paid to:
a.
b.
c.
d.
Fully
Secured
Liabilities
80,000
64,000
80,000
80,000
Unsecured
Liabilities
w/ Priority
60,000
60,000
48,000
60,000
Partially
Secured
Liabilities
50,000
48,000
60,000
48,000
Unsecured
Liabilities
w/o priority
70,000
88,000
72,000
72,000
30. In 2013, AIC Construction Co. started construction of a building with a contract price of
P100,000,000 and estimated total cost of P80,000,000. For 2013, AIC incurred construction cost
in the amount of P33,000,000.
Using the zero profit method of accounting, what is the amount of revenue to be recognized in
2013?
a.
6,600,000
b. 100,000,000
c.
-0d. 33,000,000
“My God, please let me understand the topics that I am supposed to remember, and correctly apply
them to get the right answers, and to enable me to pass the SPLBE CPA board exams this coming
September 2015. Amen”
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