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Aleah admits Merie as a partner in business. Accounts in the ledger for Aleah on Nov.
30, 2012, just before the admission of Merie, show the following balances:

Cash P 13,600
Accounts Receivable 28,400
Merchandise Inventory 40,000

PRACTICAL Accounts Payable

Aleah, Capital

It is agreed that for purposes of establishing Aleah’s interest, the following

ACCOUNTING agreements shall be made:

a. An allowance for doubtful accounts of 3% of accounts receivable is to be
b. The merchandise inventory is to be valued at P 46,000.

c. Prepaid salary expenses of P 1,200 and accrued rent expense of P1,600 are
to be recognized.

Merie is to invest sufficient cash to obtain 1/3 interest in the partnership.

C 1. Aleah’s adjusted capital before the admission of Merie; and the amount of
cash investment by Merie?
a. 70,694 ; 23,942 c. 70,748 ; 35,374
b. 72,694 ; 36,974 d. 56,348 ; 28,174
Problem 2

On March 1, 2012, Ness and Francis formed a partnership with each contributing the
following assets:

Cash 600,000 1,400,000
Machinery and Equipment 250,000 1,500,000
Building -- 4,500,000 For Jinky : P 59,000
Furniture and Fixtures 200,000 -- For Ira : 42,000

The building is subject to mortgage loan of P 1,600,000, which is to be assumed by the C 1. Compute for the net (debit) credit adjustment for Jinky and Ira.
partnership. Agreement provides Ness and Francis share profits and losses 30% and a. 5,740 ; 5,640 c. (1,740) ; 360
70% respectively. b. (5,740) ; (5,640) d. (1,740) ; (360)

D 1. On March 1, 2012, what is the balance of Francis’s capital account? C 2. Compute the total liabilities after formation
a. 7,400,000 c. 6,100,000 a. 123,900 c. 131,100
b. 6,280,000 d. 5,800,000 b. 127,500 d. 127,900
====================================================================== ======================================================================

On March 1, 2011, Jinky and Ira decided to combine their businesses and form a The partnership agreement of Richard and Maricar provides that interest at 10% per
partnership. Their balance sheets on March 1, before adjustments, showed the year is to be credited to each partner on the basis of weighted average capital
following: balances. A summary of Maricar’s capital account for the year ended December 31,
2011, is as follows:
Cash 18,000 7,500 Balance, January 1 840,000
Accounts Receivable 37,000 27,000 Additional Investment, July 1 240,000
Inventories 60,000 39,000 Withdrawal, August 1 (90,000)
Furniture and Fixtures (net) 60,000 18,000 Balance, December 31 990,000
Office Equipment (net) 23,000 5,500
Prepaid Expenses 12,750 6,000 C 1. What amount of interest should be credited to Maricar’s capital account for
TOTAL 210,750 103,000 2011?
a. 91,500 c. 92,250
Accounts Payable 91,500 36,000 b. 99,000 d. 103,500
Capital 119,250 67,000
TOTAL 210,750 103,000 SOLUTION:
1/1 840,000 x 12/12 = P 840,000
They agreed to have the following items recorded in their books: 7/1 240,000 x 6/12 = 120,000
8/1 90,000 x 5/12 = (37,500)
1. Provided 2% allowance for doubtful accounts. Balance P 922,500
2. Jinky’s furniture and fixtures should be P 62,000, while Ira’s office equipment is x 10%
under depreciated by P500. Interest P 92,250
3. Rent expense incurred previously by Jinky was not yet recorded amounting to =====================================================================
P2,000 while salary expense incurred by Ira was not also recorded amounting to
4. The fair market value of inventory amounted to:
On January 2, 2011, Betty and Peachie formed a partnership. Betty contributed capital PROBLEM 7
of P350,000 and Peachie, P50,000. They agreed to share profits and losses 80% and Capital balances and profit and loss sharing ratios of the partners in the BIG ELM
20% respectively. Peachie is the general manager and works in the partnership full Gallery are as follows:
time and is given a salary of P10,000 a month, an interest of 5% of the beginning
capital (of both partner) and a bonus of 15% of net income before the salary, interest Berns, Capital (50%) P 280,000
and the bonus. The profit and loss statement of the partnership for the year ended Irvin, Capital (30%) 320,000
December 31, 2011 is: Gerald, Capital (20%) 200,000
TOTAL P 800,000
Net Sales P 1,750,000
Cost of goods sold 1,400,000 Berns need money and agrees to assign half of his interest in the partnership to Yeoh
Gross Profit 350,000 for P 180,000 cash. Yeoh pays directly to Berns. Yeoh does not become a partner.
Expenses (inclusive of salary, interest, bonus) 286,000
Net Income P 64,000 D 1. What is the total capital of the Big Partnership immediately after the
assignment of the interest to Yeoh?
C 1. The amount of bonus to Peachie in 2011 amounted to: a. 620,000 c. 980,000 e. None of the above
a. 26,603 c. 36,000 b. 400,000 d. 800,000
b. 32,912 d. 41,400 =====================================================================
PROBLEM 6 The partners’ capital (income-sharing ratio in parenthesis) of Nancy, Orange, Pearl and
Joeben and Ken are in partnership sharing profits equally and preparing their accounts Queenie on May 31, 2011, was as follows:
to Dec. 31 each year. On July 1, 2011, Franz joined in the partnership, and from that
date, profits are shared Joeben 40% and Franz 20%. In the year ended, Dec. 31, 2011, Nancy (20%) 120,000
profits were: Orange (20%) 160,000
6 months to June 31, 2011 400,000 Pearl (20%) 140,000
6 months to Dec. 31, 2011 600,000 Queenie (40%) 80,000
Total Partner’s Capital 500,000
It was agreed that Joeben and Ken only should bear equally the expense for a bad
debt of P80,000, written off in the six months to Dec. 31, 2011 in arriving at the On May 31, 2011, with the consent of Nancy, Orange, Pearl and Queenie:
P600,000 profit. a. Pearl retired from the partnership and was paid P100,000 cash in full settlement of
her interest in the partnership.
A 1. Which of the following correctly states Joeben’s profit share for the year? b. Ruben was admitted to the partnership with a P40,000 cash investment for a 10%
a. 432,000 c. 440,000 interest in the net assets of Nancy, Orange, Pearl, Queenie and Ruben.
b. 400,000 d. 448,000
====================================================================== A 1. The capital account to be credited to Ruben:
a. 44,000 c. 40,000
b. 54,000 d. 50,000
Warren, Xenon and York are partners sharing profits and losses in the ratio of 4:3:3, Arbell, Ariel and Alby formed a partnership on January 1, 2011. Each contributed P
respectively. The condensed balance sheet of Howard Partnership as of Dec. 31, 2011 240,000. Salaries were to be allocated as follows:
is: Arbell 60,000
Ariel 60,000
WAXY Partnership Alby 90,000
Balance Sheet
December 31, 2011 Drawings were equal to salaries and be taken out evenly throughout the year. With
Cash P 100,000 sufficient partnership net income, Arbell and Ariel could split a bonus equal to 25% of
Other Assets 260,000 partnership net income after salaries and bonus (in no event could the bonus go
Total Assets P 360,000 below zero). Remaining profits were to be split as follows: 30% for Arbell; 30% for
Ariel; and 40% for Alby. For the year, partnership net income was P240,000.
Liabilities P 80,000 C 1. Compute the ending capital for each partner.
Warren, Capital 120,000 a. Arbell, P310,200; Ariel, P310,200; Alby, P339,600
Xenon, Capital 80,000 b. Arbell, P252,000; Ariel, P252,000; Alby, P249,000
York, Capital 80,000 c. Arbell, P250,200; Ariel, P250,200; Alby, P249,600
Total Liabilities and Capital P 360,000 d, Arbell, P251,000; Ariel, P251,000; Alby, P248,000
Assume instead that Howard Partnership is dissolved and liquidated by installments PROBLEM 11
and the first realization of P80,000 cash is on the sale of other assets with book value Sach, Kah, Nah are partners in SKN Partnership and share profits and losses 50%, 30%
of P160,000. and 20% respectively. The partners have agreed to liquidate the partnership and some
D 1. After the payment of liabilities, how should the available cash shall be liquidation expenses to be incurred. Prior to liquidation, the partnership financial
distributed to Warren, Xenon and York? position reflects the following book value:
a. 72,000; 54,000; 54,000 c. 32,000; 24,000; 24,000
b. 88,000; 56,000; 56,000 d. 48,000; 26,000; 26,000 Cash 50,400
Noncash assets 595,200
SOLUTION: 40% 30% 30% Notes payable to Nah 76,800
Cash OA W X Y Other liabilities 369,600
Capital bal. 100k 260k 120k 80k 80k Sach, Capital 144,000
Realization 80k (160k) (32k) (24k) (24k) Kah, Capital (24,000)
Payment of liab (80k) ____ Nah, Capital 79,200
Bal. 100k 100k 88k 56k 56k
Possible loss: B 1. Assuming that the actual liquidation expenses are P33,600 and that the
Bal of NCA 100k noncash assets with a book value of P480,000 are sold for P432,000, how
-Unpaid liab (0) much cash should Nah receive?
Cash withheld 0_ a. 92,914 c. 149,142
Total (100k) (40k) (30k) (30k) b. 79,200 d. 0
Cash Distribution 48k 26k 26k
SOLUTION: Cash receipts 158,200 130,490
Cash NCA Sach Kah Nah Cash Disbursements 124,550 141,390
(50%) (30%) (20%)
Bal 50,400 595,200 144k (24k) 79200 On Oct. 31, 2011, all remaining noncash assets in the two stores were sold for cash of
Realization 432k (480k) (24k) (14,400) (9,600) P120,000. The partnership was dissolved, and cash settlement was effected.
- Liq.exp (33,600) (16,800) (10,080) (6,720)
-Liab (369,600) D 1. In the distribution of the P120,000 cash, how much should Polly receive?
Bal- distr 79,200 115,200 103,200(48,480) 62880 a. 48,000 c. 68,000
+Payable 76800 b. 52,000 d. 72,000
to partner
-Rec from -- -- -- SOLUTION:
partner Polly – 120,000 x 60% = 72,000
Bal. 103,200 (48,480) 139,680
-Posibble ======================================================================
loss: PROBLEM 13 (FINAL PB MARCH 2012)
Bal- NCA 115,200 When Mark and Monik, a partner who share profits equally, were badly hurt in a car
+Cash 0 accident, a liquidator was appointed to wind-up the firm’s businesses. The accounts
withheld showed: Cash, P35,000; Noncash assets, P110,000; Liabilities, P20,000; Mark, Capital,
-Unpaid 0 P71,000; Monik, Capital, P45,000; The liquidator expects some time to dispose of the
liab. partnership’s non-cash asset and estimates liquidation expenses at P10,000.
Tot. (115200) (57,600) (34,560) (23,040) Required: 1. How much cash can be safely distributed to each partner at this point to
possible Mark and Monik respectively?
loss a. P3,000/P0 c. P5,000/P500
BAL 45,600 (83,040) 116,640 b. P5,000/P0 d. P5,000/1,000
Cap.absorp (59,314) 83,040 (23,726)
BAL (13,714) 0 92,914
Aidan, Bertram and Cassidy decided to dissolve their partnership on May 31, 2011. On
Cap.absorp 13,714 (13,714)
this date, their capital balances and profit-sharing percent were as follows:
BAL 0 0 79,200
Aidan 50,000 40%
Bertram 60,000 30%
Cassidy 20,000 30%
Polly and Rolly formed a partnership on July 1, 2011 to operate two stores to be
The net income from January 1 to May 31, 2011 was P44,000. Also on May 31,2011,
managed by each of them. They invested P60,000 and P40,000 and agreed to share
the partnership’s cash and liabilities respectively, were P40,000 and P90,000. For
earnings 60% and 40% respectively. All their transactions were for cash and their
Aidan to receive P52,500 in full settlement of his interest in the partnership.
subsequent transactions were handled through their respective bank accounts as
Required: 48. How much must be realized from the sale of the partnership’s noncash
summarized below:
a. 63,000 c. 81,000
b. 211,000 d. 193,000
====================================================================== During 2011, the partnership had an income of P370,000. Assume there were no
PROBLEM 15 (FINAL PB MARCH 2012) drawings during 2011.
Rafael and Joy partnership operates in January 2, 2011 which reflects the following
data: On January 2, 2012, Jericho and Kerwin decided to admit new partner, Liezl, for a 1/6
Revenue 108,000 interest in the firm for P350,000. The bonus method is used to record the admission of
Cost of sales 80,000 the new partner. After admitting the new partner, the partnership agreement is
Depreciation 5,000 amended as follows:
Interest on partners 5% on average capital
Additional information: a. Each partner receives 10% interest on her beginning capital balance.
Rafael withdraw on March 1, P5,000 b. Each partner receives an annual salary of P40,000.
Joy withdraw on April 1, P8,000 representing his yearly salary as agreed by the c. The residual profit or loss is divided in a ratio of 30% to Jericho, 50% to Kerwin, and
partners. 20% to Liezl.
Rafael and Joy have P25,000 and P18,000 beginning capital balances
respectively. On December 31, 2013, the partnership is dissolved. On this date, after closing the
Profit sharing for Rafael is 2/3 and 1/3 for Joy. books, the following information is available:

Required: 1. Ending capital balance of each partner after closing the net income to Cash P 320,000
their capital balances Loan to Kerwin 100,000
a. Rafael, 35,330 and Joy, 31,404 Other Assets 1,400,000
b. Rafael, 34,747 and Joy, 23,253 Liabilities 220,000
c. Rafael, 35,330 and Joy, 31,404 Jericho, Capital 400,000
d. Rafael, 35,330 and Joy, 31,404 Kerwin, Capital 800,000
====================================================================== Liezl, Capital 400,000
On January 2, 2011, Jericho and Kerwin formed a partnership. The following assets During the month of January 2014, assets with a book value of P 360,000 were sold for
were contributed by each of the partners: P 420,000.


Cash 80,000 120,000 1. Original capital balance of the partners on January 1, 2011?
Inventory 20,000 Answer: Jericho : P 200,000
Equipment 120,000 360,000 Kerwin : P 400,000

The equipment of Kerwin is subject to a mortgage of P 100,000 which the partnership 2. Capital balances on December 31, 2011?
has assumed. The partnership agreement specifies that each partner receives 10% Answer: Jericho : P 346,000
interest on his beginning capital balance. Jericho receives an annual salary of P 30,000; Kerwin : P624,000
Kerwin receives an annual salary of P40,000. The remaining profit or loss is divided Liezl : P 350,000
using 2:3 ratio with 2 parts assigned to Jericho and 3 parts assigned to Kerwin.
3. Agreed capital of the partners on January 2, 2012?
4. Cash distribution of P 420,000 cash on January 2, 2014?
P 200,000 P 400,000
20,000 40,000
30,000 40,000 PROBLEM 1
**96,000 **144,000 Paul Corporation paid P 400,000 cash for the net assets of Rafael Company, which
P 346,000 P 624,000 consisted of the following:
** Net Income P 370,000 Current Assets 80,000 112,000
Interest ( 60,000) Property and Equipment 320,000 440,000
( 70,000) Liabilities assumed 80,000 72,000
Net Amount P 240,000
A 1. The property equipment acquired in this business combination should be
Jericho : P 240,000 x 2/5 = P 96,000** recorded at
Kerwin : P 240,000 x 3/5 = P 144,000** a. 440,000 c. 366,664
b. 400,000 d. 360,000
====================================================================== ======================================================================
On January 1, 2011, Prescott Company pays P 1,080,000 cash and also issue 72,000
shares of P10 par ordinary shares with a market value of P 1,320,000 for the net
assets of Sinclair Company. In addition, Prescott pays P 120,000 for registering and
issuing the 72,000 shares and P 280,000 for professional fees to effect the
combination. Summary balances immediately before the combination is as follows (in
Cash 1,400 160 160
Inventories 480 320 400
Other Current Assets 120 80 80
Plant Assets – net 1,040 720 720
TOTAL ASSETS 3,040 1,280 1,360

Current Liabilities 640 120 120

Other liabilities 320 200 160
Ordinary Shares, P10 par 1,680 800
Retained Earnings 400 160
TOTAL L & SHE 3,040 1,280
Liabilities (400,000)
D 1. What is the total asset of Prescott Company after the acquisition? Ordinary shares, par P4 (80,000)
a. 4,360,000 c. 5,040,000 Share premium (320,000)
b. 4,320,000 d. 4,240,000 Retained earnings (400,000)

SOLUTION: Liezl’s current assets and property and equipments, respectively, are appraised at
P400,000 and P1,600,000; its liabilities are fairly valued. Accordingly, Jake issued
Consideration Transferred: shares of its ordinary shares with total market value equal to that of Laya’s net assets.
Cash P1,080,000 Required: 43. To recognize goodwill of P200,000, how many shares were issued?
OS 1,320,000 P 2,400,000 a. 40,000 c. 50,000
Less: FVNA ( 1,080,000) b. 45,000 d. 55,000
Goodwill P 1,320,000
Prescott BV- assets P 3,040,000 Problem 5 (QUIZ 3)
Sinclair FV – assets 1,360,000 On September 18, 2011, Online Co. acquired all the Globe Inc.’s P4,000,000
Goodwill 1,320,000 identifiable assets and P1,000,000 liabilities. Book values of the Globe’s assets and
Less: Payments liabilities equal to their fair values except for the overvalued plant & equipment. As a
Cash paid P 1,080,000 consideration, Online issued its own shares of stock with a market value of
Registration 120,000 P3,200,000. The merger resulted into P1,400,000 goodwill. Assuming Online had
Professional fees 280,000 (1,480,000) P10,000,000 total assets prior the combination.
TOTAL ASSETS P 4,240,000 Required: 11. How much is the combined total assets?
PROBLEM3 (FINAL PB MARCH 2012) A. 12,800,000 C. 14,200,000
Sherman Corporation exchanged its ordinary shares, worth P500,000 for al of the net B. 13,200,000 D. 14,000,000
assets of Dicky Company in a business combination treated as a purchase. At the date ======================================================================
of combination, Sherman’s net assets had a book value of P650,000 and a fair value Problem 6 (QUIZ 3)
of P900,000. Dicky’s Company’s net assets had a book value of P450,000 and a fair A condensed balance sheet at July 1, 2011 and the related current fair value data for
value of P460,000 ASDF Company are presented below:
Required: 1. Immediately following the combination, the net assets of the combined Carrying Value Fair Value
company should have been reported at what amount? Current assets 368,000 404,500
a. 1,000,000 c. 1,050,000 Property and equipment 592,500 690,00
b. 1,150,000 d. 1,100,000 Patent 58,500 48,000
Total Assets 1,019,000 1,142,500
Current liabilities 107,500 107,500
Jake Co. will issue share of P10 par ordinary shares for the net assets of Liezl Co. Jake
Non-current liabilities 280,000 297,500
Co.’s ordinary shares has a current market value of P40 per share. Liezl’s financial
Share Capital, P20 par value 210,000 405,000
position accounts follow:
Retained earnings 421,500
Current assets 320,000
Total liabilities and stockholder’s equity 1,019,000
Property and equipment 880,000
Total liabilities and stockholder’s equity 1,570,000 400,000 230,000
On August 1, 2011 JKL Corporation issued 8,900 shares of its P29 par value share
capital (fair value, P45 per share) and P251,000 cash for the net assets of ASDF On that date, the fair market value of Layas inventories and building and equipment
Company. Of the P232,500 acquisition related costs paid by JKL Corporation on August were P156,000 and P248,000 respectively, while bonds payable has a fair value of
1, 2010, P40,000 were stock issued cost. P34,000. The fair market values of all other assets and liabilities of Layas (except for
goodwill) were equal to their book values. Hiyas Corp. acquired the net assets of Layas
Required: 1. How much is the goodwill (gain on acquisition) to be recorded by JKL Co. by issuing 5,000 shares of its P30 par value common stock (current fair value P36
Corp.? per share) and purchase price in cash amounting to P24,000. Contingent consideration
that is determinable (probable and reasonably estimated) amount to P4,000.
A. 25,000 C. (86,000) Additional cash payments made by Hiyas Corp. in completing the acquisition were:
B. (25,000) D. 86,000 Legal fees for contract of business combination, P16,000; Accounting and legal fees
for SEC registration, P22,000; Printing cost of stock certificates, P12,000; Finder’s fee,
2. What is the net increase in the stockholder’s equity in the books of JKL P14,000; Indirect cost, P10,000.
Corp. as a result of the business combination?
Required: 1. As a result of the business combination, the amount of total assets and
A. 279,000 C. 254,000 total liabilities,
B. 639,000 D. 400,500 Respective in the books of the surviving company.

====================================================================== A. 2,032,000 ; 874,000 C. 1,926,000 ; 878,000

Problem 7 (QUIZ 3) B. 1,926,000 ; 874,000 D. 2,032,000 ; 878,000
The following statement of financial position were prepared for Hiyas Corp. and Layas
Co. January 1, 2011, just before they entered into a business combination. 2. As a result of the business combination, the amount of share capital, share
premium and retained earnings, respectively, in the books of the surviving
Hiyas Corp. Layas Co. FMV company.
Cash 420,000 10,000 10,000
Accounts receivable 150,000 40,000 40,000 A. 570k ; 96k; 390k C. 570k; 100k; 378k
Merchandise inventory 400,000 100,000 156,000 B. 570k; 100k; 386k D. 520k; 120k; 480k
Building and equipment 800,000 200,000 248,000
Accumulated depreciation (200,000) (50,000) ======================================================================
Goodwill - 100,000
Total assets 1,570,000 400,000 454,000

Accounts payable 250,000 140,000 140,000

Bonds payable 400,000 60,000 84,000
Share Capital
P30 par value 420,000
P20 par value 100,000
Share premium 100,000 20,000
Retained earnings 400,000 80,000 -
Problem 8 (QUIZ 3)
On January 2, 2011, the Face Company purchased the net assets of Phone Company CONSOLIDATION
by issuing shares of stocks at P3,000,000 fair market value. Book value and fair value
financial position data on January 1, 2010, are as follows: P2- 1ST PREBOARD FEB. 2012
Face Company Phone Company
Book Value Fair Value Book Value Fair Value PROBLEM 1
Cash 4,600,000 4,600,000 300,000 300,000 On December 31, 2011, Pattern Company paid P3,960,000 for 99% of the outstanding
Accounts receivable 1,000,000 1,000,000 980,000 980,000 ordinary shares of Sequence Company. The remaining 1% was held by a stockholder
Inventory 1,500,000 1,300,000 710,000 600,000 who was unwilling to sell the stock. Sequence’s net assets had a book value of
Building & 1,800,000 1,460,000 1,520,000 1,064,000 P3,400,000 and a fair market value of P3,600,000 when it was acquired by Pattern. If
equipment, net Sequence used push down accounting,
Goodwill - - 90,000 80,000
Total Assets 8,900,000 8,360,000 3,600,000 3,024,000 B 1. The non-controlling interest should be reported at
a. 34,000 c. 39,600
Liabilities 1,000,000 1,000,000 570,000 570,000 b. 36,000 d. 40,000
Capital stock 1,600,000 600,000
SOLUTION: P3,600,000 x 1% = P36,000
Additional paid-in 900,000 960,000
Retained earnings 5,400,000 1,470,000
Total liabilities & 8,900,000 3,600,000
PACMAN Corp. acquired an 80% interest in SIC Corp. on January 1, 2011 for P700,000.
On this date, share capital and retained earnings of Pacman Corp. were P1,800,000
and P800,000 respectively; and SIC’s P500,000 and P100,000 respectively. The assets
Face incurred and paid legal and brokerage fees of P90,000 for business combination;
and liabilities of SIC Corp. were stated at their fair value when Pacman acquired its
and P30,000 indirect acquisition costs. Contingency fee of P40,000 for additional legal
80% interest. Pacman uses the cost method to account for its investment in SIC. The
services would be paid within the year immediately after the business combination.
non controlling interest is computed based on the estimated fair values.
The net income and dividends for 2011 for the affiliated companies were as follows:
Required: 1. The combined total assets is:
Pacman’s net income – P300,000; Dividend declared – P180,000; Dividends payable
December 31, 2011 – P90,000. SIC’s net income – P90,000; Dividends declared –
A. 9,500,000 C. 12,390,000
P50,000 and dividends payable December 31, 2011 – P25,000.
B. 12,480,000 D. 12,600,000
End of year evaluation indicates P5,500 impairment in goodwill.

Required: 1. The non-controlling interest at December 31, 2011 is:

a. 128,000 c. 184,000
b. 123,000 d. 181,900
Mira Co. acquired inventories on June 1, 2011 from its 75% owned subsidiary, Pierre Sales 9,300,000 5,100,000
Co. The inventories were sold for P86,000, including the 20% mark-up on cost. Out of Cost of Sales 4,350,000 2,670,000
these inventories, 60% were sold to outsiders. During the year, Mira reported net Ending Inventory 920,000 840,000
income of P185,000 and Pierre reported net income of P125,000. Net Income 3,375,000 2,025,000
Required: 1. How much is the realized profit to be allocated to non controlling interest Dividends paid 1,350,000 675,000
in 2011?
a. 5,733 c. 2,150 A 1. Assuming downstream sale, what is the consolidated net income
b. 2,867 d. 1,433 attributable to parent shareholders?
====================================================================== a. 4,556,250 c. 4,500,3000
PROBLEM 4 (FINAL PB MARCH 2012) b. 4,561,312 d. 4,651,200
Apple Corp. owns 85% of Mac Corp. ordinary shares. On May 1, 2011, Mac sold a
machine to Apple for P150,000. The carrying amount of the machine is P110,000 and B 2. Assuming upstream sale, what is the consolidated net income attributable
has a remaining useful life of 5 years. to parent shareholders?
Required: 1. How much is the net effect in the computation of consolidated net a. 4,556,250 c. 4,500,3000
income attributable to controlling interest? b. 4,561,312 d. 4,654,212
a. 34,666 decrease c. 32,000 decrease
b. 29,466 decrease d. 27,200 decrease B 3. What is the consolidated sales?
====================================================================== a. 14,400,000 c. 13,400,000
PROBLEM 5 (FINAL PB MARCH 2012) b. 13,050,000 d. 14,050,000
On January 1, 2011, Bumibili Company purchased a 90% equity in Forsale Company.
On January 2, 2011, Forsale sold equipment to Bumibili Co. for P540,000 (original cost
was P750,000 but the carrying value was P375,000). Remaining useful life of the
equipment is 3 years and the two entities employ straight line depreciation. D 4. What is the consolidated cost of sales?
Required: 1. In the consolidated income statement at the end of 2011, how much a. 5,578,750 c. 7,020,000
depreciation would be charged? b. 5,670,000 d. 5,771,250
a. 62,500 c. 100,000
b. 90,000 d. 125,000 A 5. What is the consolidated ending inventory?
====================================================================== a. 1,550,750 c. 7,020,000
PROBLEM 6 (QUIZ 4) b. 1,700,500 d. 5,781,250
Process Company acquired 95% interest from Style Company on January 2, 2011. The
inventories acquired from affiliate in 2012 are:

Beginning Inventory 337,500

Ending Inventory 675,000

Intercompany sale of merchandise during the year amounts to P1,350,000 at a gross

profit rate of 30%. In 2012, the data relating to the operations of Process Company
and Style Company are:
SOLUTION: ======================================================================
PARENT SUBSIDIARY CONSO On January 2011, Paris Company purchased 70% of the stocks of Seine Company at
Net Income 3,375,000 2,025,000 book value. On May 1, 2011, Paris Company acquired a used machinery for P225,000
+ BI (337,500x30%) 101,250 from Seine Company that was carried in the latter’s books at P180,000. The machinery
-EI (675,000x30%) (202,500) has a remaining useful life of 6 years.
-Dividends (641,250) On October 1, 2012, Seine Company purchased an equipment that was already 30%
(675,000x95%) depreciated from Paris Company for P380,000. The original cost of this equipment
TOTAL 2,733,750 1,923,750 4,657,500 was P600,000 and had a remaining life of 5 years. Results of operation for the year
-NI-sub (101,250) 2012 are:
(2,025,000x5%) PARIS SEINE
CONSO NI 4,556,250 Net Income 630,000 110,000
2. UPSTREAM Dividend paid 230,000
Net Income 3,375,000 2,025,000 A 1. On the consolidated income statement in 2012, what is the consolidated
+ BI (337,500x30%) 101,250 net income attributable to parent shareholders?
-EI (675,000x30%) (202,500) a. 750,250 c. 785,500
-Dividends (641,250) b. 754,250 d. 752,250
(675,000x95%) ======================================================================
TOTAL 2,733,750 1,923,750 4,657,500 PROBLEM 8 (QUIZ 4)
On January 1, 2012, Paulie Corporation sold equipment to Saulie Corporation, its
-NI-sub X5% (96,187.5)
wholly owned subsidiary for P680,000. Paulie paid P1,000,000 for this equipment, for
which the depreciation to the date of intercompany sale totaled P360,000. Both
CONSO NI 4,561,312
companies use the straight-line method of depreciation. The equipment had a 10-year
3. Sales- Parent 9,300,000
life when purchased by Paulie and expected salvage value of P100,000.
Sales- Subsidiary 5,100,000
Dividends – Parent (1,350,000)
B 1. What amount should be presented in the consolidated statement of
Conso. Sales 13,050,000
financial position at Dec. 31, 2012 for the equipment cost and accumulated
4. COS- Parent 4,350,000
a. 1M; 360k c. 680k; 360k
COS- Sub 2,670,000
b. 1M; 450k d. 680k, 450k
BI (337,500x30%) ( 101,250)
EI (675,000x30%) 202,500
Dividends- Parent (1,350,000)
On January 1, 2009, Pax Co., purchased 90% of Starbox Co. for P2.2M. On that day, the
Conso COS 5,771,250
equity of Starbox consisted of share capital of P800,000 and retained earnings of
P1.2M. All assets and liabilities of Starbox are fairly valued.
5. Ending inventory- Parent 920,000
By January 1, 2010, the retained earnings of Starbox had increased to P2M. For 2010,
Ending inventory- Sub 840,000
Starbox reported net income of P400,000 and paid dividends of P80,000. For 2011,
EI (675,000x30%) (202,500)
Starbox reported net income of P480,000 and paid dividends of P120,000.
Conso EI 1,557,500
On October 1, 2010, Starbox sold to Pax land and building on it. The land had cost On December 31, 2011. Peige Company sold equipment to Sixers Company for P300k,
Starbox P80,000; the building had a book value of P160,000. Pax paid P100,000 for the that had a cost of P180k. The equipment is expected to have a useful life of 10 years
land and P80,000 for the building. It estimates that the building has a remaining useful from this date. Peige uses the cost method to account for its investment in Sixers.
life of 2 years.
For the year 2011, Peige Company reported income from its own operations in the
A 1. The balance in Pax’s equity method investment in Starbox account on amount ofP800k which included the gain of P120k on equipment sold to Sixers.
December 31, 2011? C 1. Consolidated net income attributable to parent on December 31, 2011
a. 3,541,000 c. 3,470,000 a. 1.28M c. 1,256,000
b. 3,271,000 d. 3,268,000 b. 800k d. 680k

Net income-sub 400k 480k Net Income 800k 720k
Unrealized loss- (80k-160k) 80k Unrealized gain (120k)
Realized loss (80k/2) (40k) (300k-180k)
Realized profit (100k-80k) (20k) Adjusted 680k 720k 1.4M
Depreciation (100k-80k)/2 (10k) NI to sub x 20% (144k)
Adjusted NI to sub 450k 440k NI to Parent 1,256,000
x90% X90% ======================================================================
NI To Parent 405k 396k PROBLEM 11 (QUIZ 4)

Investment in Subsidiary Steak Company is a wholly owned subsidiary of Pork Company. During 2011, Steak
Company sold all of its production to Pork Company for P1.2M, a price that includes a
Acquisition 2.2M Dividends (80k+120k)x90% 20% gross profit. 2011 is the first year that such intercompany sales were made. By
Sh. Cap (800kx90%) 720k =180k year-end, Pork Company sold 80% of the goods it had purchased for P1,248,000. The
NI-parent-2010 405k balance of the intercompany goods remained in the ending inventory and was
NI-parent-2011 396k adjusted to a lower value of P210k. The adjustment was a change to the cost of goods

====================================================================== C 1. What is the gross profit on sales recorded by both companies?

On January 1, 2011, Peige Company purchased 80% of the outstanding shares of a. 150k 228k
Sixers Company at a cost of P2.88M. On that date, Sixers Company had P1.6M of b. 210k 288k
ordinary shares and P2M of retained earnings. c. 240k 258k
For 2011, Sixers Company reported net income of P720k and paid dividends of P240k. d. 270k 240k
All of the assets and liabilities of Sixers Company are at fair market value.
PORK – 1.2Mx20%= 240k
STEAK - Sales 1,248,000 SOLUTION: Downstream
EI (210kx20%) 42,000 2010 2011 CONSO
Adjusted 1,290,000 x 20% = 258k Net income
(30kx75%) 22,500
A 2. What is the gross profit to be shown on the consolidated income (35kx75%) 26,250
statement? Unrealized gain- land (7,500)
a. 480k c. 510k (17,500-10k)
b. 500k d. 540k Unrealized loss-building 5k
SOLUTION: Realized loss- building (1k)
Sales- parent 1,248,000 (5k/5)
Sales- sub 768,000** Realized loss-building (750)
GP 480,000 (5k/5)x9/12
Adjusted NI 19,250** 25,250** 44,500**
**Sales with 20% GP 1.2M
Less: GP (1.2Mx20) (240k)
Sales without 20% GP 960k x 20% = 768k** Investment in Sheet
PROBLEM 12 (QUIZ 4) Acquisition 250k Dividends (5k+10k)x75%
Increase in RE = 11250
On January 1, 2007, Paper Inc. purchased 75% of Sheet Co. for P250k. On that date, (250k-100k)x75% 112,500
the equity of Sheet consisted of ordinary share of P150k and retained earnings of Adj NI 44,500
P100k. All assets and liabilities of Sheet were fairly valued. Goodwill, if any, is not
amortized. 395,750

By January 2, 2010, the retained earnings of Sheet had increased to P250k. For 2010, ======================================================================
Sheet reported net income of P30k and paid dividends of P5k. For 2011, Sheet PROBLEM 13 (QUIZ 4)
reported net income of P35k and paid dividends of P10k.
On January 1, 2005, Pluto Co. purchased 90% of Saturn Co. for P275k. On that day, the
On April 1, 2010, Paper sold a land and an old office building on it. Paper’s original equity of Saturn consisted of ordinary share of P100k and retained earnings of P150k.
cost for the land was P10k. The office building had a book value of P25k. Sheet paid All assets and liabilities of Saturn were fairly valued.
P17,500 for the land and P20k for the building. It estimates that the building has a
remaining life of 5 years. By January 1, 2010, the retained earnings of Saturn had increased to P250k. For 2010,
Saturn reported net income of P50k and paid dividends of P10k. For 2011, Saturn
D 1. For 2011, what is the balance of Paper’s equity method investment in Sheet reported net income of P60k and paid dividends of P15k.
a. 380,125 c. 387,500 On October 1, 2010, Saturn sold to Pluto land and warehouse on it. The land had cost
b. 414,500 d. 395,750 Saturn P10k; the warehouse had a book value of P20k. Pluto paid P12,500 for the land
and P10k for the warehouse. It estimates that the warehouse has a remaining life of 2
A 1. What is the balance in Pluto’s equity method investment in Saturn account P2- 1ST PREBOARD FEB. 2012
on December 31, 2011?
a. 442,625 c. 433,875 PROBLEM 1
b. 408,875 d. 408,500 Leonilo Inc. sells computers on the installment basis. For the year ended, Dec. 31,
2011, the following were reported:
SOLUTION: Upstream Cost of Installment Sales 1,050,000
2010 2011 CONSO Loss on repossession 27,000
Net income 50k 60k Fair Value of Repossessed Merch 225,000
Unrealized gain- land (2,500) Account Defaulted 360,000
(12,500-10k) Deferred Gross Profit, Dec. 31 216,000
Unrealized loss- 10k A 1. How much was collected during the year?
warehouse (10k-20k) a. 420,000 c. 780,000
Realized loss- building (5k) b. 528,000 d. 831,430
Realized loss-building (1,250) SOLUTION:
(10k/2)x3/12 FMV of repossession 225,000
Adjusted NI 56,250 55k 111,250 Less: Unpaid bal.
NI to parent x 90% Account defaulted
NI attributable to parent 100,125 (360,000x70%**) (252,000) squeeze
Loss on repossession (27,000)

Investment in Saturn **252,000/360,000 = 70% - Percentage of cost

Acquisition 275k Dividends (10k+15k)x90% Sales 100% (1.05M/70%) 1,500,000

Increase in RE = 22,500 Cost of Inst Sales (70%) 1,050,000
(250k-150k)x90% 90k DGP beg 30% 450,000
Adj NI to Parent 100,125
IR end= DGP, end / GPR
442,625 IR end = 216,000/30%
IR end = 720,000

IR beg. -- IR, end 720k

Sales 1.5M Uncollected 360k
PROBLEM 2 A 2. Total realized gross profit under the installment method to be adjusted on
On July 10, 2011, Ford Motors sold an new car to Mr. Morales for P1,700,000. The car Dec. 31, 2011.
costs Ford Motors P1,301,250. Mr. Morales paid 25% cash down payment and traded a. 46,480 c. 36,992
his old car. Ford granted an allowance of P160,000 on the old car traded, the balance b. 38,080 d. 45,152
payable in equal monthly installment payments. The monthly installment amounts to ======================================================================
P60,000 inclusive of 12% interest on the unpaid balance of the principal amount of PROBLEM 4
obligation. The old car traded in has a selling price of P240,000 after reconditioning On July 10, 2011, Ford Motors sold an new car to Mr. Morales for P1,700,000. The car
cost of P45,000. costs Ford Motors P1,301,250. Mr. Morales paid 25% cash down payment and traded
his old car. Ford granted an allowance of P160,000 on the old car traded, the balance
After paying three installments, Mr. Morales suffered major financial setback payable in equal monthly installment payments. The monthly installment amounts to
incapacitating him to continue paying. The car was subsequently repossessed. When P60,000 inclusive of 12% interest on the unpaid balance of the principal amount of
reacquired, the car was appraised to have a fair value of P600,000. obligation. The old car traded in has a selling price of P240,000 after reconditioning
cost of P45,000.
A 1. Gain (loss) on repossession
a. (125,235) c. (125,433) After paying three installments, Mr. Morales suffered major financial setback
b. 125,235 d. 125,433 incapacitating him to continue paying. The car was subsequently repossessed. When
reacquired, the car was appraised to have a fair value of P600,000.
A 2. Under the installment method, how much is the realized gross profit to be
recognized at the end of the year? A 1. Gain (loss) on repossession
a. 192,006 c. 200,000 a. (125,235) c. (125,433)
b. 151,250 d. 180,146 b. 125,235 d. 125,433
PROBLEM 3 A 2. Under the installment method, how much is the realized gross profit to be
Kerwin Company is a dealer of air conditioners. For the period May 1, 2011 to May 31, recognized at the end of the year?
2011, Kerwin gives a trade discount of 10% to all its buyers. On May 1, 2011, 5 units of a. 192,006 c. 200,000
air conditioners with a total list price of P200,000 and total cost of P119,600 were sold b. 151,250 d. 180,146
to Mr. Caab. Kerwin granted an allowance of P20,000 for Mr. Caab’s used air ======================================================================
conditioners as trade in although the current market price is P24,000. The balance was PROBLEM 5
payable as follows: 20% of the balance paid at the time of purchase; the rest is Arirang Electronics makes all of its sales on credit and accounts for them using the
payable in 10 months starting June 1. 2011. A 15% gross profit rate is usual from the installment sales method. For simplicity, assume that all sales occur on the first day of
sale of second hand air conditioners. the year and that all cash collections are made on the last day of the year. Arirang
Electronics charges 18% interest on the unpaid installment balance. Data for 2010 and
After 6 months of paying, Mr. Caab defaulted in payment of Dec. 1, 2011. The 5 units 2011 as follows:
were repossessed and it would require P4,000 reconditioning cost for each unit before 2010 2011
it could be resold for P12,000 each. Sales 200k 240k
Cost of Goods Sold 120k 160k
B 1. Gain (loss) on repossession to be recognized on Dec. 1, 2011? Cash collections (principal and interest):
a. 6,720 c. 3,520 2010 Sales 80k 100k
b. (6,720) d. (3,520) 2011 Sales 180k
C 1. The interest income recognized in 2011 amounted to: D 1. The installment accounts receivable at Fec. 31, 2008 is
a. 28,080 c. 71,280 a. 2,000,000 c. 2,800,000
b. 43,200 d. 99,400 b. 2,200,000 d, 3,000,000
C 2. The realized gross profit in 2011 PROBLEM 8
a. 28,768 c. 74,368 On April 1, 2011, Gooey Corporation sold for P14,000 a refrigerator which had a cost
b. 45,600 d. 79,200 of P9,100. A down payment of P1,500 was made with the provision that additional
====================================================================== payments of P1,250 be made monthly thereafter. Interest was to be charged at a
PROBLEM 6 monthly rate of 2% on the unpaid balance of the principal; the monthly installment
The various documents and records which were recovered immediately after a fire was to apply first to the interest then to the balance of the principal. After completing
gutted its premises, LDG Marketing Co. garnered the following information (the four months installment, the customer defaulted and the refrigerator was
company uses the installment method of accounting): repossessed. At this time, the market value of the refrigerator (used) was estimated to
be P3,750.
2006 2007 2008
Inst Sales 1M 1.6M ? B 1. The gain or loss on repossession and the realized gross profit to be
Cost of IS ? 1.2M ? recognized in 2011.
GP on IS ? ? 564k Gain (Loss) on Repossession RGP
Collection on: a. (1,695.96) 2,275
2006 sales 100k 500k 200k b. (1,695.96) 1,967.56
2007 sales -- 400k 1M c. (1,125) 875
2008 sales -- -- 800k d. 1,125 1,967.56
RGP on IS 22k ? 462k ======================================================================
B 1. Based on the information above, the cost of installment sales for the year Jaguar Company began operations on June 1, 2011. The following information
2008 was extracted from its records at year-end:
a. 1,800,000 c. 1,864,000 Cost of Installment Sales 2,187,500
b. 1,836,000 d. 1,880,000 Cost of regular sales 2,100,000
====================================================================== Mark-up on Installment Sales 140% of cost
Nark-up on regular sales 33 1/3 on sales
PROBLEM 7 Balances at Dec. 31, 2011:
KJE Corporation, which began business on Jan. 1, 2007, appropriately uses the Installment Accounts Receivable 3,150,000
installment sales method of accounting. The following data are available: Accounts Receivable 1,470,000
Operating expenses 70% of RGP
Dec. 31, 2007 Dec. 31, 2008
Bal. of DGP on sales account: A 1. Net income for the year ended Dec. 31, 2011
2007 600k 240k a. 682,500 c. 180,314
2008 880k b. 535,500 d. 348,000
GPR on sales 30% 40% ======================================================================
The following selected accounts are taken from the trial balance on Dec. 31, 2011 of JDG Co. accounts for installment sales on the installment basis. On January 1, 2011,
Drew Co. ledger accounts included the following balances:
Accounts receivable – charge 150,000 Installment - 2009 77,000
sales Receivable
Installment receivables - 2009 30,000 Installment - 2010 310,000
Installment receivables - 2010 90,000 Receivable
Installment receivables - 2011 540,000 Deferred Gross Profit - 2009 23,100
Merchandise Inventory 105,000 Deferred Gross Profit - 2010 124,000
Purchases 730,000
Freight-in 6,000 On December 31, 2011 account balances before adjustments for realized gross profit
Repossessed Merchandise 30,000 on installment sales were:
Repossession loss 48,000
Cash Sales 180,000 Installment - 2009 None
Charge Sales 360,000 Receivable
Installment Sales 892,800 Installment - 2010 84,000
Deferred Gross Profit - 2009 44,400 Receivable
Deferred Gross Profit - 2010 78,720 Installment - 2011 201,000
Additional Information: Deferred Gross - 2009 23,100
a. Gross profit rate on 2009 installment sales was 30% and for 2010, the rate was 32%. Profit
b. Installment Sales price exceed cash sales price vy 24% while charge sales prices Deferred Gross - 2010 124,000
exceed cash sales prices by 20%. Profit
c. The entry for repossessed goods was: Deferred Gross - 2011 151,620
Repossessed Merchandise 30,000 Profit
Repossession Loss 48,000
Installment Receivables - 2009 36,000 Installment sales in 2011 were made at 42% above cost of merchandise.
Installment Receivables - 2010 42,000 Required: 1. Total realized gross profit on installment sales in 2011
a. 265,020 c. 195,020
d. Merchandise on hand at the end of 2011 (new and repossessed) was P141,000. b. 197,820 d. 205,668
B 1. If all sales were on cash basis, the total sales for 2011, and the cost of goods
sold on installment sales for 2011:
a. 1,200,000; 544,320 c. 1,032,656; 780,000
b. 1,200,000; 468,200 d. 1,600,000; 535,248

The following selected accounts appeared in the trial balance of Winter Sales as of Debit Credit
December 31, 2011: Installment Receivable – 2010 sales 30,000
Installment Receivable – 2011 sales 400,000
Required: 1. The total realized gross profit on installment sales in 2011, and Inventory, December 31, 2010 140,000
Gain/(Loss) on repossession on repossession in 2011 Purchases 1,110,000
a. 258,525; (2,525) c. 258,525; 2,525 Repossession 6,000
b. 171,000; (2,525) d. 171,000; 2,525 Installment Sales 850,000
====================================================================== Sales (Regular) 770,000
PROBLEM 13 (FINAL PB MARCH 2012) Unrealized Gross Profit 2010 108,000
The following table are available for JHJ Company Additional information:
2009 2010 2011 Installment Receivable – 2010 sales, as of 240,000
Installment sales 100,000 160,000 (?) Dec. 31, 2010
Cost of installment sales (?) (?) 183,600 Inventory of new and repossessed 190,000
Gross profit (?) (?) 56,400 merchandise as of Dec. 31, 2011
Gross profit percentage (?) 25% (?) Gross Profit percentage of regular sales 30% on sales
Cash collections during the year
2009 sales (?) 50,000 20,000 Repossession was made during the year. It was a 2010 sale and the
2010 sales (?) 40,000 100,000 corresponding uncollected account at the time of repossession was P15,500.
2011 sales (?) (?) 90,000 Realized gross profit on (?) (?) 32,100
Realized gross profit on Installment 2,200 21,000 Installment sales
Required: 1. Installment sales in 2011
Required: 1. Using the installment method, compute the realized gross profit in 2011 a. 184,275 c. 225,225
a. 21,250 c. 4,400 b. 210,000 d. 390,000
b. 25,000 d. 50,550
====================================================================== ======================================================================
BYJ Enterprises uses the cost recovery method for all installment sales. Hondai, a dealer of vehicle, sells exclusively on installment basis. One of its customer,
Complete the following table: Mr. Yee purchased a car for P1,361,250. The cost to Hondai was P762,300. After
2009 2010 2011 making an initial payment of P181,500, Mr. Yee defaulted on subsequent payments.
Installment sales 160,000 190,000 (?) Hondai lost no time in repossessing the car which, by this time, was appraised at a
Cost of installment sales (?) 112,100 136,500 value of P379,500. Hondai had to incur additional cost of repairs of P49,500 before
Gross profit percentage 38% (?) 35% the car was subsequently resold for P825,000 to Mr. Zippi who made the initial
Cash collections payment of P206,250.
2009 sales 51,200 92,800 11,200 Required: 1. How much is the loss on repossession on the sale?
2010 sales 45,600 (?) a. 99,000 c. 115,500
2011 sales 65,100 b. 281,160 d. 231,250
PROBLEM 16 (FINAL PB MARCH 2012) There was one repossession recorded during 2011, it is related to a 2010 sale. The
Fiel Company sells heavy duty batteries, which cost P7,000 at a total installment price repossessed appliance was sold at its fair value of P400, which equaled the
of P12,000. A regular customer buys a unit and trades in his old unit for an allowance uncollected balance in the customer’s installment accounts receivable.
of P2,500. Fiel spends P250 to recondition each unit traded in and then sells them at
P3,250 each. A profit of 20% results from the sale of used batteries. Required: 1. Total realized gross profit on prior year sales on December 31, 2011 and
Required: 1. Trade in over (under) allowance granted to the customer the gain(loss) from
a. 150 overallowance c. 500 overallowance the sale of the repossessed appliance are:
b. 150 underallowance d. 500 underallowance
A. P152,460 and P(156) C. P139,932 and P156
====================================================================== B. P152,460 and P156 D. P150,460 and P156
PROBLEM 17 (FINAL PB MARCH 2012) ======================================================================
On September 1, 2011, Ace-Shot Enterprise, a franchisor, entered into a franchising Problem 19 (QUIZ 3)
agreement with Bran Company charging Bran a franchise fee of P1,000,00. Upon Mr. Matthew Marquez is a dealer in appliance who sells on an installment
signing the contract, a non-refundable downpayment of P250,000 is paid with the basis. A refrigerator which originally cost P1,848 was sold by him for P3,300 to Jake
balance payable in three equal annual installment starting 2012. Ace-Shot had already Samson who made the down payment of P440 but defaulted in subsequent payments.
performed 95% of the services as of February 1, 2012 at a total cost of P300,000. Ace- Mr. Marquez repossessed the refrigerator at an appraised value of P920. To
Shot was able to collect the first installment in 2012 but the collectability of the improve its salability, he expended P120 for reconditioning. He was able to sell the
remaining balance is still doubtful. refrigerator to Phil Roxas for P2,000 at a down payment of the first installment of
Required: 1. In its 2012 financial statement, Ace-Shot should recognize profit of P500.
a. 350,000 c. 175,000 Required: 1. The realized gross profit from the first installment sale (to Jake Samson)
b. 1,000,000 d. 250,000 and from the
====================================================================== second installment sale (to Phil Roxas) are:
The data below are taken from the records of Josh Appliance Co., which sells A. P193.60 and P200 C. P193.60 and P240
appliances exclusively on the installment basis. B. P52.80 and P240 D. P52.80 and P200

2009 2010 2011 ======================================================================

Installment Sales 731,000 835,000 1,221,500 Problem 20 (QUIZ 3)
Gross Profit Rate 36% 39% 40% The Boris Trading appropriately used the installment sales method in accounting for
the following installment sale. During 2011, Boris sold furniture to an individual for
The balance in the Installment Accounts Receivable controlling accounts at the P6,000 at a gross profit of P2,400. On June 1, 2011, this installment account receivable
beginning and end of 2011: had a balance of P4,400 and it was determined that no further collections would be
2011 made. Boris therefore repossessed the merchandise. When reacquired, the
Jan. 1 Dec. 31 merchandise was appraised as being worth only P2,000. In order to improve its
From Sales Made In salability, Boris incurred cost of P100 for reconditioning.
2009 P 34,800 P-
2010 410,800 51,600 Required: 1. Loss on repossession
2011 - 611,040 A. P440 C. P1,760
B. P640 D. P2,200
2010 installment contracts 95,000 160,000
====================================================================== 2011 installment contracts 125,000
Problem 21 (QUIZ 3)
Sharapova Corporation accounts for sales on the installment basis. The balances of Defaults:
the control accounts for Installment Contracts Receivable at the beginning and end of Unpaid balance of 2009 installment 25,000 30,000
2011 were: contracts
Value assigned to repossessed 13,000 12,000
Jan. 1, 2011 Dec. 31, 2011 merchandise
Installment contract receivable – 2009 48,040 Unpaid balance of 2010 installment 32,000
Installment contract receivable – 2010 688,920 134,880 contracts
Installment contract receivable – 2011 820,180 Value assigned to repossessed 18,000
During 2011, the company repossessed a refrigerator which had been sold in Required: 1. The total realized gross profit after loss on repossession for 2011
2010 for P10,800 and P6,400 had been collected prior to default. The company sales
and cost of sales figures are: A. P99,550 C. P97,950
2009 2010 2011 B. P115,250 D. P113,250
Net Sales 760,000 864,000 1,204,000 ======================================================================
Cost of Sales 494,000 570,240 758,520 PROBLEM 23 (PREWEEK MARCH 2014)
The following selected accounts are taken from the trial balance on Dec. 31, 2014 of
The resale price of the repossessed merchandise is P4,000 after Kifer Company:
reconditioning cost of P600 and a normal gross profit of 35%.

Accounts Receivable – charge sales P 170,000

Required: 1. The total realized gross profit on December 31, 2011 and the gain(loss) Installment Receivable – 2012 110,000
on repossession Installment Receivable – 2013 450,000
Installment Receivable – 2014 960,000
A. P345,785 and P(762) C. P142,500 and P(452) Merchandise Inventory 240,000
B. P345,785 and P(904) D. P142,500 and P452 Purchases 1,190,000
====================================================================== Freight-in 60,000
Problem 22 (QUIZ 3)
Repossessed Merchandise 70,000
The 888 Appliance Company reports gross profit on the installment basis. The ff. data
Repossession loss – 2014 80,000
are summarized:
Repossession loss – 2012 40,000
2009 2010 2011
Bad debts – Charge Sales 5,000
Installment sales 480,000 500,000 600,000
Selling Expenses 460,000
Cost of goods – installment sales 360,000 362,500 432,000
Cash Sales 300,000
Gross Profit 120,000 137,500 168,000
Charge Sales 600,000
Installment Sales 1,500,000
Deferred Gross Profit-2012 160,000
2009 installment contracts 90,000 150,000 145,000
Deferred Gross Profit-2013 280,000
Additional Information: Cash sales P 756,000
Installment Sales 1,589,940
a. Gross profit rate on 2012 installment sales was 40% and for 2013, the rate was 35%. Merchandise Inventory, Jan. 1 348,360
b. Installment sales price exceed cash sales prices by 25% while charge sales prices Purchases 1,255,782
exceed cash sales prices by 20%. Merchandise Inventory, Dec. 31 217,260
c. The deferred gross profit balances shown above were the amounts as of January 1, Cash collections on inst contracts:
2014 and were not adjusted during the year. Downpayment 397,500
d. Merchandise on hand at the end of 2014 (new and repossessed) was P260,000. Inst payments (include interest of P 55,517.04). Average 476,046
e. The following is the summary of the repossession account on Dec. 31, 2014: of 6 monthly installments on all contracts except on
defaulted contracts.
YEAR OF SALE FMV OF MDSE LOSS INSTALLMENT A contract amounting to P 6,600 was defaulted after paying three monthly
(DEBIT) (DEBIT) RECEIVABLE installments.
2012 10,000 40,000 50,000 REQUIRED:
2014 60,000 80,000 140,000 1. GPR based on sales at cash equivalent? 37%
2. Total interest earned for 4 months? P 123.09
REQUIRED: 3. Cash price equivalent? P 2,201,400

A. Cost of Goods Sold : P 1,300,000

B. Allocation of Cost of Goods Sold :
C. Correction of Repossession : P 87,200
D. Realized Gross Profit : P 192,000
Alanah Company sells household furniture both in cash and in installment basis. For
each installment sales, a sales contract is made whereby the following items are

A. A downpayment of 25% of the installment price is required and the balance

payable in 15 equal monthly installment.
B. Interest of 1% per month is the charged on the unpaid cash sales price equivalent at
each installment.
C. The price of installment sales is 110% of the cash sales price.

For accounting purposes, installment sales are recorded at contract price. Any unpaid
balances on defaulted contracts are being charged to uncollectible accounts expense.
Sales of defaulted merchandise were credited to uncollectible accounts expense.
Interest are recognized in the period earned. For its first year of operations ending
Dec. 31, 2014, the books of the company show the following:
The Taguig Branch purchases all of its merchandise from the home office. Its Dec. 31
P2- 1ST PREBOARD FEB. 2012 inventory was P50,400. The home office bills the branch at 40% above its cost.

PROBLEM 1 B 1. Balance of Shipment to Branch account on the home office books before
Timotei Company owns a branch in Bacolod. As of the end of the current year, the closing
home office has an Investment in Bacolod Branch account with a P154,000 debit a. 256,500 c. 199,800
balance. At the same time, the branch is reporting a Home Office account with b. 216,000 d. 1,181,440
P122,000 credit balance. An investigation uncovers the following:
SOLUTION: 302400/140% = 216,000
1. During the year, the home office shipped merchandise costing P32,000 to the ======================================================================
branch at a billed price of P56,000. The branch accidentally recorded the shipment as PROBLEM 3 (FINAL PB MARCH 2012)
P76,000. The following information are extracted from the books and records of IRIS Corp. and
2. At year’s end, the home office assigned P28,000 in expenses to the branch, the its branch. The balances are at December 31, 2011, third year of the corporation’s
branch recorded this allocations as P38,000. existence.
3. Also at year’s end, the branch transferred P62,000 in cash to the home office. The Home Office Branch Books
office has not yet recorded this money. Book
A 1. Reconciled balance of the reciprocal accounts? Sales 1,400,000
a. 92,000 c. 93,000 Expenses 500,000
b. 106,000 d. 154,000 Shipments from home office 767,500
Allowance for overvaluation of branch 187,500
SOLUTION: inventory
HO (Investment in Branch) BRANCH (Home Office
Account) The branch acquires all of its merchandise from the home office. The inventories of
Balance 154,000 122,000 the branch at billed price are as follows:
1 (20,000) January 1, 2011 170,000
2 (10,000) December 31, 2011 168,000
3 (62,000) Required: 1. The percentage of profit on cost that the home office uses to bill its
BAL,END 92,000 92,000 merchandise shipped to branch is
====================================================================== a. 120% c. 20%
PROBLEM 2 b. 125% d. 25%
The following balances are from the books of Bam Co. and its Taguig Branch location
as of Dec. 31, 2011: 2. The balance of shipments to Branch account before the books are closed
a. P750,000 c. P767,500
DEBIT CREDIT b. P725,000 d. P614,000
Sales 540,000
Shipments from HO 302,400 3. The adjusted profit of the branch
Inventory, 1/1 56,700 a. P130,500 c. P321,600
Expenses 180,000 b. P284,400 d. P134,500
====================================================================== a. P600,000 c. P825,000
PROBLEM 4 (FINAL PB MARCH 2012) b. P687,500 d. P832,500
The following information are extracted from the books and records of Major ======================================================================
Company and its branch. The balances are at December 31, the fourth year of the PROBLEM 6 (FINAL PB MARCH 2012)
company’s operations: Quontis Company opened a branch in Lucena City to which it bills shipments of
Home Office Branch merchandise at 140% of cost. In May 2011, branch records show the following:
Sales 600,000 Inventory, beginning -
Shipments to branch 200,000 Sales 325,000
Shipments from home office 240,000 Shipments from Home Office 175,000
Purchases 60,000 Purchases from other sources 140,000
Expenses 120,000 Inventory, End (P10,000 from purchases) 45,000
Inventory, Jan. 1 112,000
Allowance for overvaluation Required: 1. How much was the branch ending inventory at cost
of branch inventory 56,000 a. 25,000 c. 35,000
b. 32,143 d. 45,000
There are no shipments in transit between the home office and the branch. Both =====================================================================
shipments accounts are properly recorded. The ending inventory at billed price PROBLEM 7 (FINAL PB MARCH 2012)
includes merchandise acquired from the home office in the amount of P120,000 and The Vanity Company is maintaining a branch in Makati. During the year, the home
P14,000 acquired from vendors for total of P134,000. office shipped goods to the branch at a cost of P120,000. The branch submitted to the
Required: 1. How much of the beginning inventory was acquired from outsiders? home office the following report summarizing its operations for the period ended
a. P12,000 c. P16,000 December 31, 2011.
b. P14,000 d. P32,000
Sales (30% on account) 196,000
9. The branch net income in accordance with GAAP: Expenses (50% of which is unpaid) 50,000
a. P178,000 c. P218,000 Purchases 25,000
b. P198,000 d. P238,000 Shipments from home office 150,000
Inventory, 1/1/2011 (30% from outsiders) 30,000
====================================================================== Inventory, 12/31/2011 (40% from outsiders) 90,000
PROBLEM 5 (FINAL PB MARCH 2012) Remittance to Home Office 60,000
FOOD CRAVINGS Co. established a branch in Baguio early last year to which it shipped
merchandise before the branch opening with a billing price of P600,000. During the Required: 1. Branch cost of sales and Net income (loss) as far as the home office is
year, the home office billed the branch the total of P240,000 for additional shipments concerned
of merchandise. Some defective merchandise were shipped back by the branch and a. 88,000 ; 58,000 c. 88,000 ; 54,000
was given a credit for P15,000 on the return. The branch also made purchases of b. 92,000 ; 54,000 d. 83,000 ; 58,000
merchandise totaling P145,000 from outside suppliers. At the end of the year, a ======================================================================
physical count disclosed a branch ending inventory of P370,000 which included
P40,000 of merchandise acquired from outside suppliers, Merchandise shipments Problem 8 (QUIZ 3)
from home office were billed at 20% above cost. A home office transfers inventory to its branch at 25% mark-up above cost during
Required: 1. Total cost of merchandise available for sale of the branch during the year 2010, which was lower by 15% compared to the mark-up above cost last year. In 2010,
the reciprocal account in the income statement of the branch amounts to P60,000. At Required: 1. The amount of the Unrealized profit in the separate books of the home
year-ended, the home office adjusted its Unrealized Profit account downward to office on January 1, 2011; the branch beginning inventory 2010 that came from
P3,200. The cost of goods sold of the branch in its books is overstated by P14,000. outside purchases; cost of goods available for sale of the branch.
Required: 1. How much is the ending inventory per branch books at the end of 2009?
A. 18,200 C. 16,000 A. 3,000; 6,925; 102,200 C. 2,250; 4,750; 111,625
B. 13,000 D. 12,800 B. 3,000; 4,750; 111,625 D. 2,250; 6,925; 102,200

====================================================================== 2. The total ending inventory to be shown on the combined financial

Problem 9 (QUIZ 3) statements; the combined net income for the year.
A home office ships inventory to its branch at 125% of cost. The required balance of
the Unrealized inter-company profit account is P17,550. During the year, the home A. 39,675; 136,850 C. 46,925; 134,675
office sent merchandise to the branch costing P156,800. At the start of the year, the B. 39,675; 134,675 D. 46,925; 136,850
branch’s financial position shows P63,000 of inventory on hand that was acquired by
the home office. ======================================================================
Required: 1. By what amount is the cost of goods overstated? Problem 11 (QUIZ 3)
A. 36,050 C. 15,750 The home office bills GABBY Branch at 140% of cost in 2010. During the year 2010
B. 34,250 D. 12,600 goods billed at P86,625 were shipped to the branch. The account Allowance for
Overvaluation has a balance of P30,600 before adjustment. The beginning inventory
====================================================================== of the branch from the home office at cost is P23,400; the beginning inventory of the
Problem 10 (QUIZ 3) branch from outsiders is P3,800; purchases from outsiders is P32,625.
Home office bills its branch for merchandise shipments at 30% above cost. The
following are some of the account balances on the books of home office and its Required: 1. Cost of goods available for sale of the branch.
branch as of December 31, 2010:
A. 121,700 C. 152,300
B. 155,810 D. 115,875
H.O. Books Branch Books ======================================================================
Inventory, January 1 P 5,000 P 14,500
Shipments from Home Office 37,700 PROBLEM 12 (PREWEEK MARCH 2014)
Purchases 225,000 50,000 Vida Company has several branches located in key cities in the south. It authorizes
Shipments to Branch 36,250 transfers of cash and inventories among branches. The head office ships goods (P
Branch Inventory Allowance 13,125 50,000 cost) to Cebu branch paying freight for P 3,000. The home office authorizes the
Sales 300,000 180,000 transfer of goods from Cebu branch to Zamboanga branch where the latter is charged
Operating Expenses 72,000 27,500 for the cost of the goods and freight charge of P 1,000 for the transfer. If the shipment
had been made by the home office directly to Zamboanga branch, the freight charge
Per physical count, the ending inventory of the branch is P10,500 including goods would have been P 4500.
from outside purchases of P6,925; the ending inventory of the home office is P30,000.
REQUIRED: What would happen to the freight difference?
ANSWER: Savings of P500.
(125%) (100%) (25%)
HO – Cebu (3,000+1,000) P 4,000
HO – Zamboanga 4,500 Beginning Inventory P 600,000
Savings P 500 Net Purchases 870,000
====================================================================== (900,000-30,000)
PROBLEM 13 (PREWEEK MARCH 2014) TGAS P 1,470,000
The following information pertains to shipments of merchandise from Home Office to Ending Inventory (840,000)
Branch during 2014: COGS P 630,000 P 504,000 P 126,000

Home Office’s cost of merchandise P 320,000

Intercompany Billings 400,000
Sales by branch 500,000
Unsold Merchandise at branch, 12/31/14 40,000

REQUIRED: Sales in the consolidated financial statements?

ANSWER: P 500,000

Tosca Company bills its branch for merchandise shipments at 125% of cost. As of cut
off date, Dec. 31, 2014, the following data were available:


Merchandise, Dec. 1 600,000 240,000
Addition to stock, Dec. 900,000 720,000
Merchandise, Dec. 31 840,000 300,000

The branch returned P 30,000 merchandise to the home office acquired at billed price.

REQUIRED: Amount of allowance for overvaluation that was realized as a result of

sales in December?
ANSWER: P 126,000

b. 250,000 d. 1,000,000
Joy Restaurant Inc., sold a fast food restaurant franchise to Carlos. The sale agreement
P2- 1ST PREBOARD FEB. 2012 signed on Jan. 2, 2011, called for a P60,000 down payment plus two P20,000 annual
payments, representing the value of initial franchise services rendered by Joy
PROBLEM 1 Restaurant. In addition, the agreement required the franchisee to pay 5% of its gross
On May 31, 2011, Charmaine received P400,000 from Maricar representing the down revenues to the franchisor, this was deemed sufficient to cover the cost and provide a
payment on the franchise agreement signed on that date. Maricar issued promissory reasonable profit margin on continuing franchise services to be performed by Joy
notes for the balance of P2,000,000, payable in four equal semi-annual installment Restaurant. The restaurant opened early in 2011, and its sales for the year amounted
due on Nov. 20, 2011 was appropriately paid by Maricar. Accordingly, Charmaine uses to P1,000,000.
the accrual method in recording franchise revenue.
D 1. Assuming a 10% interest rate is appropriate, what will be Joy Restaurant’s
A 1. How much would Charmaine report as deferred franchise revenue in its 2011 total revenue ( the present value of an annuity of P1 at 10% for 2 periods
financial statement for the year ended December 31, 2011? 1.7355)
a. 0 c. 1,200,000 a. 60,000 c. 144,710
b. 600,000 d. 1,500,000 b. 94,710 d. 148,180
On Sept. 30, 2011, Karl Inc. received from Harvey P1,100,000 representing franchise
fee. Franchise services were immediately started by Karl and these were completed Dowpayment 60,000
on Oct. 31, 2011 at cost amounting to P660,000. Add: PV of annual payments
(20,000X1.7355) 34,710
D 1. How much would Karl report as franchise fee revenue in its financial Initial Franchise Fee
statement for the year ended Oct. 31, 2011? Add: CFF (1,000,000x5%) 50,000
a. 0 c. 440,000 Add: Interest income (34,710x10%) 3,471
b. 275,000 d. 1,100,000 TOTAL REVENUE 148,180

====================================================================== ======================================================================
On Dec. 29, 2011, Jolly Bee signed a franchising agreement for the operation of an Jerry Inc. charges an initial franchise fee of P230,000 with P50,000 paid when the
outlet in Dagupan City by Nikki Co. The franchising agreement required the franchisee, agreement was signed and the balance in five annual payments. The Present value of
Nikki Co. to make an initial payment of P400,000 upon signing of the contract and the future payments discounted at 10% is P136,468. The franchisee has no option to
three payments each of P200,000 beginning one year from the agreement date and purchase P30,000 of equipment for P24,000. Jerry has substantially provided all initial
yearly thereafter. The franchisor agrees to make market studies, find a suitable services required and collectability of the payments is reasonably assured.
location, train employees and perform some other related services by next year. The
initial payment is refundable until substantial performance is effected. C 1. What is the amount of revenue from franchise fee?
A 1. How much should Jolly Bee report as franchise fee revenue at the end of a. 50,000 c. 186,468
2011? b. 180,468 d. 230,000
a. 0 c. 400,000
Down payment 50,000
PV of payment 136,468 P2- 1ST PREBOARD FEB. 2012
Prism Company is a contractor for the construction of large office buildings. At the
beginning of 2011, one building is in progress. The following data described the status
of the building at the beginning of the year:
Contract Price 12.6M
Cost incurred to Jan. 1, 2011 (including 2.85M
P100,000 worth of materials stored at the
site to be used in 2012 to complete the
Estimated cost to complete 1/1/11 8.15M

During 2011, the following data were obtained with respect to the same building:
Cost incurred to date 6.08M
Cost to complete, 12/31/11 3.92M

D 1. Realized gross profit (loss) to be reported for the year 2011 using the
percentage of completion method
a. (600,000) c. 1,160,000
b. (1,000,000) d. 1,154,800
2010 2011
CP 12.6M 12.6M
CI2D 2.75M 5.98M
ECTOC 8.25M (11M) 4.02M (10M)
Est. GP 1.6M 2.6M
X POC 25% 59.8%
RGP-2D 400k 1,554,800
-RGP-PY -- (400k)
RGP-CY 400k 1,154,800

Received from customer 450,000 750,000
Luxor Construction Company has consistently used the percentage of completion C 1. Under the cost recovery method of construction accounting (zero profit
method fro recognizing income. During 2010, Luxor started work on a P6,000,000 approach), what amount should CJ Corp recognize as gross profit for 2010 and
construction contract which was completed in 2011. The accounting records provided 2011?
the following: a. 0 ; 0 c. 0 ; 240,000
2010 2011 b. 150,000 ; 240,000 d. 240,000 ; 240,000
Progress Billings 2,200,000 3,800,000
Costs incurred each year 1,800,000 3,600,000 SOLUTION:
Collections 1,400,000 4,600,000 2010 2011
Estimated cost to complete 3,600,000 -- CP 1.2M 1.2M
CI2D 450k 960k
D 1. How much income should Luxor have recognized in 2011? ECTOC 450k (900k) 0 960k
a. 200,000 c. 300,000 Est. GP 300k 240k
b. 220,000 d. 400,000 X POC 50% 100%
RGP-2D 150k 240k
RGP-CY 150k
2010 2011
CP 6M 6M
**Zero profit method: So during 2010, no profit was recorded since the construction
-TECTOC: is not yet completed (100%).
CI2D 1.8M 5.4M ======================================================================
ECTOC 3.6M (5.4M) 0 (5.4M)
Est. GP 600k 600k PROBLEM 4
X POC 1/3 100% The KRIS Construction Company started work on three job sites during the current
RGP-2D 200k 600k year. Any costs incurred are expected to be recoverable. Data relating to the three
-RGP-PY 0 (200k) jobs are as follows:
RGP-CY 200k 400k
====================================================================== BATANGAS LAGUNA SAN
During 2010, CJ Corp. started a construction job with a total contract price of Contract Price 1M 1.4M 500k
P1,200,000. Any costs incurred are expected to be recoverable. The job was Cost incurred 750k 200k 200k
completed on Dec. 31, 2011. Additional data are as follows: Estimated cost to -- 800k 200k
2010 2011 Billings on contract 1M 200k 300k
Actual costs incurred 450,000 510,000 Collections on contract 1M 200k 200k
Est. remaining costs 450,000 --
Billed to customer 480,000 720,000
D 1. 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 uses? JOINT VENTURE
POC Method Cost Recovery Method P2- 1ST PREBOARD FEB. 2012
a. 1,530,000 1,400,000
b. 1,530,000 1,530,000 PROBLEM 1
c. 530,000 530,000 On July 1 ,2011, Austin, Brian and Craig formed a joint venture for the sale of
d. 530,000 400,000 merchandise. Austin was designated as the managing participant. Profits or losses are
e. Answer not given to be divided as follows:
Austin 50%
Brian 25%
Craig 25%
On Oct. 1 ,2011, though the joint venture is still incomplete, the participants agreed to
recognize profits or loss on the venture to date. The cost of inventory on hand is
determined at P50,000. The joint venture account has a debit balance of P30,000
before distribution of profit and loss. No separate sets of book is maintained for the
joint venture and the participants record in their individual books all venture

A 1. Joint venture profit or loss on Oct. 1, 2011

a. 20,000 c. (30,000)
b. 50,000 d. 10,000

B 2. Using the same information, assume that the joint venture account has a
credit balance of P60,000, what is the joint venture profit of loss?
a. (110,000) c. (10,000)
b. 110,000 d. 10,000
Balsy is the manager of the joint venture BCD Sales, which they decided to liquidate.
Before dissolution and liquidation, the following accounts appear in the books of Balsy
Joint Venture 10,000
Chilly 24,000
Doggy 8,000

All the remaining merchandise and supplies of the joint venture were bought and paid
by Balst for P22,000. The resulting income were shared equally by the participants
D 1. Joint venture profit (loss) Selling price
a. (10,000) c. (24,000)
b. 22,000 d. 12,000 1. The balance of the joint venture account before profit or loss distribution is:
====================================================================== a. 9,800 c. 28,800
PROBLEM 3 b. 28,000 d. No answer given
On Oct.1, 2011, Chip Pat and Aric entered into a joint venture business. They were to
market a special cellphone. The venture profits and losses were to be shared in a 5:3:2 2. Using the same information, the profit (loss) of the joint venture is
ratio, respectively. On Dec. 31, 2011, while the joint venture is still incomplete, the a. (900) c. (1,500)
three participants decided to recognize the profits and losses for the three months b. 1,500 d. 900
period. The inventory is listed 25% above cost at P100,000. The joint venture account e. None of the above
has a debit balance of P48,000. No separate books are maintained for the joint
venture. 3. Using the information, how much would AMY receive in the final
settlement assuming she took the unsold merchandise at cost?
A 1. Joint venture profit (losses) for the three months period. a. 26,000 c. 16,950
a. 32,000 c. (48,000) b. 25,250 d. 17,030
b. 52,000 d. 27,000 e. None of the above
B 2. Share of Chip, Pat and Aric in the profits (losses) PROBLEM 5
a. (24,000); 14,400; (9,600) c. 26,000; 15,600; 10,400 The trustee for ALANA Company prepares a statement of affairs which shows that
b. 16,000; 9,600; 6,400 d. 13,500; 8,100; 5,400 unsecured creditors whose claims total of P120,000 may expect to receive
====================================================================== approximately P72,000 if assets are sold for the benefit of creditors:
PROBLEM 4 Mr. Mercado is an employee who is owed P1,500
AMY and BABY formed a joint venture. Their capital contributions, and profit and loss MOKI holds a note for P2,000 on which interest of P100 is accrued; nothing
ratio are presented below: has been pledge on the note.
Contribution: CINABON holds a note of P12,000 on which interest of P600 is accrued.
Cash 50% 10,000 Securities with a book value of P13,000 and a present market vale of P10,000 are
Merchandise 50% 16,000 6,000 pledged on the note.
SEPI holds a note for P5,000 on which interest of P300 is accrued, property
A summary of the joint venture activities is presented below: with a book value of P4,000 and a present market value of P6,000 is pledged on the
Purchases of merchandise by 8,000 note.
Baby Required: 1. How much will Mr. Mercado receive?
Expenses paid by Baby: a. P0 c. P700
Mayor’s permit 800 b. P180 d. P1,500
Freight on merchandise contributed by Amy 600 e. None of the above
Delivery expense of merchandise sold 400
Sales (all of the merchandise contributed and 2. How much will MOKI receive?
purchased a. P0 c. P2,100
by Baby and one-half of those contributed by Amy) 28,000 c. P2,000 d. P1,260
– e. None of the above
3. How much will CINABON receive?
b. P12,600 d. P11,560
e. None of the above P2- 1ST PREBOARD FEB. 2012
P, E and T formed a joint venture in 2011 and agreed to divide profits and losses BOOK VALUE REALIZABLE VALUE
equally. The venture is terminated on December 31, 2011 even though there are still Assets:
unsold merchandise. On this date, P’s trial balance contains the following account Cash 80k 80k
balances before profit and loss distribution. Joint venture cash debit balance of Accounts Receivable – net 400k 300k
P120,000; Joint venture account debit balance of P24,000; E, Capital debit balance of Inventories 600k 280k
P56,000 and T capital debit balance of P64,000. P receives P18,000 for his share in the Plant Assets – net 1M 1.12M
venture profit. Furthermore, he agrees to be charged for the unsold merchandise as of Total Assets 2.08M 1.78M
December 31, 2011.
Required: 1. Cost of unsold merchandise Liabilities:
a. 12,000 c. 78,000 Liabilities with priority claims 320k
b. 60,000 d. 54,000 Accounts payable - unsecured 600k
Notes payable – secured by 400k
accounts receivable
Mortgage payable – secured by 880k
all plant assets
Total Liabilities 2.2M

C 1. Amount available for unsecured claims without priority

a. 600,000 c. 280,000
b. 1,160,000 d. 620,000

D 2. Expected rate of recovery of unsecured creditors

a. 21.5% c. 41.5%
b. 22.3% d. 40%

D 3. Estimated payment to creditors

a. 1,460,000 c. 1,540,000
b. 90,000 d. 1,780,000
Fully Secured Asset 1.12M Freight 14,000
Less: Fully secured (880k) 240k Cost of consigned goods 100,000
liability Total 124,000
Partially Secured 300k
Asset ======================================================================
Less: Partially (400k) 100k PROBLEM 3 (FINAL PB MARCH 2012)
secured liability The following data are provided by the TSUGI Company:
Add: Free Assets 360k Assets at book value 300,000
(80k+280k) Assets at net realizable 210,000
Total 600k 100k value
Less: Liability with (320k) Liabilities at book value:
priority Fully secured mortgage 120,000
Add: Liability 600k Unsecured accounts and notes payable 140,000
without priority Unrecorded liabilities:
(unsecured) Interest on bank notes 1,000
Net Free Assets or 280k **1 700k Estimated cost of administering estate 12,000
Amount available
for unsecured The court has appointed a trustee to liquidate the company.
Required: 1. The journal entry made by the trustee to record the assets and liabilities
2. Rate of recovery = NFA/Unsecured (280k/700k)=40% should include an estate deficit of:
3. (880k x 100%) + (300kx100%) + (100kx40%) + (320kx100%) + (600kx40%) = 1.78M a. P63,000 c. P51,000
b. P62,000 d. P50,000
====================================================================== e. None of the above
On May 1, 2011, Zen Co. paid P10,000 for the insurance of consigned goods, while in 2. Assuming the same information, the statement of affairs prepared by the
transit, shipped to a consignee, and P14,000 for the freight. In addition, Zen advanced trustee at this time should include an estimated deficiency to unsecured
P10,000 as part of the commission that will be due when the consignee sells the creditors of
goods. The consigned goods costs Zen P100,000 and will be sold for a total amount of a. P90,000 c. P63,000
P160,000. b. P78,000 d. P50,000
e. None of the above
B 1. What is the total amount of inventory that Zen should report for the ======================================================================
consigned goods on May 1, 2011? PROBLEM 4 (FINAL PB MARCH 2012)
a. 100,000 c. 134,000 The following date were taken from the statement of realization and liquidation of
b. 124,000 d. 194,000 XYZ Company for the quarter ended September 30, 2011:
Assets to be realized P41,250
Assets acquired 45,000
Assets realized 52,500 PROBLEM 6 (PREWEEK MARCH 2014)
Assets not realized 18,750 On January 1, 2014, the records of Tras Ty, trustee in bankruptcy for Biglang bagsak
Liabilities to be liquidated 67,500 Company showed the following:
Liabilities assumed 22,500
Liabilities liquidated 45,000 Cash P 16,400
Liabilities not liquidated 56,250 Assets not realized:
Supplementary credits 63,750 Land 20,000
Supplementary charges 58,500 Buildings 86,000
Equipment 56,000
Required: 1. The ending balances of share capital and retained earnings are P37,500 Patents 8,800
and P15,000, respectively. What is the net income (loss) for the period? Liabilities not liquidated:
a. P21,000 c. P(21,000) Accounts Payable 160,000
b. P(26,250) d. P5,250 Loans Payable 80,000
====================================================================== Estate Deficit 52,800
DIKY Company filed a voluntary bankruptcy petition on September 30, 2011 and the During January, Tras Ty sold equipment having a book value of P 30,000 for P 17,600
statement of affairs reflect the following amounts: and sold patents for P 24,000. Tras Ty was paid P 2,600 as trustee fee and P 21,000
Book Value Current was distributed proportionately to the creditors.
Assets: Assets pledged with Fully secured 910,000 1,080,625 REQUIRED: Estate Deficit, January 31, 2014 : (P 52,600)
Assets pledged with Partially secured 511,875 341,250 TENTATIVE SOLUTION:
Free assets 1,137,500 796,250 Assets P 187,200
Liabilities: Liabilities with priority 113,750 Liabilities ( 240,000)
Fully secured creditors 739,375 Net (P 52,800)
Partially secured creditors 568,750 Trustee Fee ( 2,600)
Unsecured creditors 1,478,750 Equipment (17,600-30,000) ( 12,400)
Patent (24,000-8,800) 15,200
Assume that the assets are converted into cash at the estimated current values and Estate Deficit, 01/31/14 (P 52,600)
the business is liquidated.
Required: 1. Total amount of cash the partially secured creditors will receive ======================================================================
a. 341,250 c. 477,750
b. 511,875 d. 568,750
b. Credit Cash – NT, MDS, P29.7M
c. Debit Accounts payable, P75M
NGAS d. Credit Due to BIR, P300,000
P2- FINAL PREBOARD MARCH 2012 ======================================================================

Agency JAG prepares the payroll fund for the month of August 2011: The following data were taken for the accounting records of Agency QUE on
Salaries and wages 600,000 December 31, 2011 (in million):
ADCOM 180,000 Notice of cash allocation received 1,200
PERA 120,000 Office supplies expense 32
Gross payroll 900,000 Electricity 160
Less: Withholding tax 24,000 Refund of excess cash advance 40
GSIS contribution 18,000 Unused NCA 240
Pag-ibig contribution 12,000 Rent expense 64
Philhealth contribution 6,000 60,000 Salaries and wages – regular pay 440
Net payroll 840,000 Travelling expenses 8
The net payroll is advanced to a Distributing Officer. PERA 80
Required: 1. Which of the following is true to record the advances to the distributing
officer? Required: 1. Which of the following is true to close the net income over expenses?
a. Debit Cash – Disbursing Officer, P900,000 a. Debit Retained operating surplus, P120
b. Credit Cash – NT, MDS, P840,000 b. Debit Subsidiary income from national government, P120
c. Debit Cash in Bank – LCCA, P840,000 c. Credit Income and expense summary, P120
d. Credit Cash – NT, MDS, P900,000 d. Credit Retained operating surplus, P120
On May 1, 2011 Agency GHIE signed a contract for the construction of a building. The Agency LV collected cash of P100,000 for services rendered. The collection was
contract price is P150M. The agency made a downpayment of 30% of the contract deposited to the Land Bank.
price. On September 1, 2011, Agency GHIE received the first billing of 50% of the Required: 1. Entry to record the deposit
contract price. The agency paid the first billing less P300,000 withholding tax. a. Debit Cash in Bank – LCCA and Credit Cash – Disbursing Officer for
Required: 1. Which of the following is true to record the receipt of the filling billing? P100,000
a. Debit Contract Billing, P75M b. Debit Cash – NT, MDS and Credit Cash – Collecting Officer for P100,000
b. Debit Construction in progress, P150M c. Debit Cash in Bank – LCCA and Credit Cash – Collecting Officer for
c. Credit Advances to contractor, P45M P100,000
d. Credit Accounts payable, P45M d. Debit Cash – NT, MDS and Credit Cash – Disbursing Officer for P100,000
2. Which of the following is false to record the payment of the first billing?
a. Debit Accounts payable, P30M
PROBLEM 5 ======================================================================
During 2011, Agency LINK transferred cash of P200,000 to Agency East for a PROBLEM 8
land beautification project. Subsequently, Agency LINK received a report from Agency Wild life park a private not-for-profit zoological society, received contributions
East about the project. restricted for research totaling P700,000 in 2010. None of the contributions were
Required: 1. Which of the following is incorrect spent on research in 2010. In 2011, P490,000 of the contributions were used to
a. The obligation of P200,000 is entered in the RAOCO support the research activities of the society.
b. Source Agency debits Due from NGA upon transfer of cash
c. Receiving Agency credits Cash – NT, MDS upon receipt of cash Required: 1. The net effect on the statement of activities for the year ended
d. Source Agency debits, Land Development upon receipt of the completion December 31, 2011 for Wild Life Park would be a
report from the implementing agency a. P210,000 increase in temporarily restricted net assets
====================================================================== b. P490,000 decrease in temporarily restricted net assets
PROBLEM 6 c. P490,000 increase in temporarily restricted net assets
Makati Museum, received a contribution restricted for research totaling P100,000 in d. P490,000 increase in unrestricted net assets
2011. Assume the P100,000 was not expensed in 2011. These contributions were used ======================================================================
to purchase P70,000 of research equipment in 2011. As a result of these transactions, PROBLEM 9
for the year ended December 31, 2011. On April 15, 2011 Bureau of Internal Revenue (BIR) collected taxes from individual
Required: 27. Makati Museum will report on its statement of activities a taxpayers in the amount of P3,500,000. The BIR has no authority to use these
a. P30,000 increase in temporarily restricted net assets collections in their operation and therefore deposited it to the Bureau of Treasury.
b. P100,000 increase in temporarily restricted net assets Required: 1. What is the journal entry to record the collection in the National
c. P70,000 increase in unrestricted net assets Government Books?
d. P30,000 increase in unrestricted net assets a. Cash-in-Bank-LCCA 3,500,000
====================================================================== Income taxes – Individuals 3,500,000
PROBLEM 7 b. Cash-Collecting Officer 3,500,000
Agency SS issued a purchased order for the acquisition of office equipment costing Income taxes – Individuals 3,500,000
P225,000. The equipment was received with the charge invoice and was paid by check c. Cash-Disbursing Officer 3,500,000
after withholding tax of 10%. Agency SS remitted the tax withheld to BIR thru a Income taxes – Individuals 3,500,000
government depository bank. d. Cash-National Treasury – 3,500,000
Required: 30. What is the entry Agency SS to record the payment? MDS
a. Accounts Payable 225,000 Income taxes – Individuals 3,500,000
Due to BIR 22,500 ======================================================================
Cash-National Treasury, MDS 202,500 PROBLEM 10 (QUIZ 4)
b. Office Equipment 225,000 The following data were taken from the accounting record of Agency CJ on Dec. 31,
Cash-National Treasury, MDS 225,000 2011 (in million).
c. Accounts Payable 225,000 Notice of cash allocation received 600
Due to BIR 22,500 Office supplies expense 16
Cash – Disbursing Officer 202,500 Electricity 80
d. Office Equipment 202,500 Refund of excess cash advance 20
Cash-National Treasury, MDS 202,500 Unused NCA 120
Rent expense 32
Salaries and wages – regular pay 220 price. On Sept. 1, 2012, Agency LT received the first billing of 50% of the contract
Travelling expense 4 price. The agency paid the first billing less P150,000 withholding tax.
PERA 40 C 1. Which of the following is true to record the receipt of the first billing?
a. Debit Contract Billings, P37.5M.
D 1. Which of the following is true to close the net income over expense? b. Debit Construction in Progress, P75M.
a. Debit Retained Operating Surplus, P80 c. Credit Advances to Contractor, P22.5M
b. Debit Subsidy Income from National Government, P60 d. Credit Accounts Payable, P22.5M
c. Credit Income and Expense Summary, P80
d. Credit Retained Operating Surplus, P60 C 2. Which of the following is false to record the payment of the first billing?
a. Debit Accounts Payable, P15M
SOLUTION: b. Credit Cash- NT, MDS, P14.85M
Notice of cash allocation received 600 c. Debit Accounts Payable, P37.5M
Office supplies expense (16) d. Credit Due to BIR, P150k.
Electricity (80)
Refund of excess cash advance (20) SOLUTION:
Unused NCA (120) 1. P75Mx30% = P22.5M
Rent expense (32) ======================================================================
Salaries and wages – regular pay (220)
SEA Hospital had the following cash receipts for the year ended December 31, 2012:
Travelling expense (4)
Collection of receivables 500,000
PERA (40)
Contribution of for an establishment of term endowment 100,000
Tuition from nursing school 200,000
Interest received from investment in permanent 35,000
On June 30, 2011, Agency ER collected P35,000 from tenants for the rent of office
Dividend received from investment in term endowments 40,000
space in its building and deposited the collections to UnionBank (AODB). On July 10,
Payment of supporting expenses 150,000
the agency used P17,000 of this collection for the repair of the office space.
Payment of program expenses 215,000
D 1. Which of the following is true to record the payment of the repair of the
offices space? The interest received from permanent endowment is restricted by the donor for
a. Debit Repairs and Maintenance, P35,000. acquisition of equipment.
b. Credit Cash- Disbursing Officer, P35,000.
c. Debit Cash- Collecting Officer, P17,000. B 1. How much is the net cash provided by operating activities?
d. Credit Cash in Bank – LCCA, P17,000. a. 335,000 c. 410,000
====================================================================== b. 375,000 d. 435,000
On May 1, 2012, Agency LT signed a contract for the construction of a building. The
contract price is P75M. The agency made a down payment of 30% of the contract
Collection of receivables 500,000
Tuition from nursing school 200,000
Dividend received from investment in term endowments 40,000 P2- FINAL PREBOARD MARCH 2012
Payment of supporting expenses (150,000)
Payment of program expenses (215,000)
Net cash provided by operating activities 375,000 PROBLEM 1
====================================================================== Required: 1. Which of the following is true?
PROBLEM 14 (QUIZ 4) a. The forex loss to be presented in the income statement on December 31,
Ms. G. Araneta works full time for a nonprofit organization for 5 months now. She fills 2011 amounted to P132,500, if the time value element is included in the
the position of finance director, a position that normally pays P750,000 per year. Ms. assessment of the hedge effectiveness.
Araneta accepts no salaries for her work. b. The forex gain to be presented in the shareholders’ equity on June 30,
2011 is P70,000, if the time value element is excluded from the
assessment of the hedge effectiveness.
A 1. How should these donated services be recorded? c. The forex gain or loss on option contract on June 30, 2011 should be
a. Debit to Salary Expense, P312,500 P162,500 if the time value element is included in assessing the hedge
b. Debit Contributions Revenue, P312,500 effectiveness.
c. Credit Contributions Revenue, P750,000. d. The intrinsic and time value of option on January 1, 2011 were 0 and
d. No required entry 16,000 respectively.
(750,000/12) x 5 months = P312,500 Oki Company entered into a forward contract to hedge a sale of inventory in
====================================================================== November 25, 2010 to be collected on January 24, 2011. 36,000 FC (foreign currency)
PROBLEM 15 (QUIZ 4) in 60 days. The relevant exchange rate are as follows:
On January 2, 2010, a graduate of Asean University established a permanent trust Spot rate Forward rate – 1/24/11
fund and appointed Urban Bank as the trustee. The income from the trust fund is to 25-Nov-10 P52.73 P52.77
be paid to Asean University and used only by the school of education to support 31-Dec-10 P52.82 P52.89
student scholarships. 24-Jan-11 P52.94

A 1. What entry is required on Asean Univeristy’s books to record the receipt of Required: 1. What is the forex gain (loss) from this transaction and hedge that will be
cash from the interest on the trust fund? reported on Oki’s 2010 income statement?
a. Debit cash and credit restricted current funds deferred revenue a. P1,080 c. P(1,080)
b. Debit cash and credit restricted endowment revenue b. P3,240 d. P(4,320)
c. Debit cash and credit endowment fund balance
d. Debit cash and credit unrestricted endowment revenue ======================================================================
PROBLEM 3 Required: 1. Forex gain (loss) be reported on the December 31, 2011 income
On Sept. 30, the company purchased 5,000 units of inventory at cost of 103,000 FC. statement
The option was settled/sold on Sept. 30, 2011 at its fair value of P1,000. a. 12,040 c. (10,320)
Required: 1. What is the intrinsic value and time value of option on June 30? b. 14,280 d. (14,280)
Intrinsic Time Intrinsic Time
Value Value Value Value THEORIES: (PREWEEK MARCH 2014)
a. 200 1,100 c. 1,300 0 C 1. Its main function is the availability and appropriation of funds for public
b. 1,100 200 d. 0 1,300 services.
a. Department of Finance c. National Budget System
Required: 1. What is the foreign exchange gain or loss on option contract (hedging b. Department of Treasury d. Commission on Audit
instrument) on Sept. 30?
Equity Earnings Equity Earnings C 2. Which government agency is responsible for the design and preparation of
a. 1,000 (1,100) c. 1,100 (1,000) NGAS?
b. 800 (1,100) d. 1,100 800 a. Department of Budget and Management
====================================================================== b. Department of Treasury
PROBLEM 4 c. Commission on Audit
Imogene Company sold handicraft goods to a US firm for $100,000 in 2011. Pertinent d. Government Agencies
information on exchange rate follows:
Buying Selling D 3. The following are the systems followed in the NGAS, except
Sept. 4 Receipt of order 45.80 46.00 a. Commercial Accounting c. Responsibility Accounting
b. Double entry bookkeeping d. Fund Accounting
Oct. 15 Date of shipment 47.00 48.00
Dec. 13 Balance sheet date 47.20 48.50
A 4. This is the basis of accounting under NGAS
Jan. 6, 2012 Settlement date 46.00 47.00
a. Modified Accrual c. Accrual basis
b. Cash basis d. Strict accrual
Required: 1. Amount recorded as sales
a. 4,700,000 c. 4,600,000
A 5. To provide the responsibility accounting, the NGAS uses a standard chart of
b. 4,580,000 d. 4,800,000
accounts with
a. Three digits c. Five digits
b. Four digits d, Six digits
On December 1, 2011, Albert Corporation received an order for equipment FOB
shipping point from Steven Company. The order is billed for $86,000 payable on
B 6. The financial statements under NGAS includes all, except
January 31, 2012. The equipment was shipped and invoiced to Steven Company on
a. Statement of income and expenses c. Statement of fin.position
December 12, 2011.
b. Statement of operation d. Cash flow statement
Buying Selling
C 7. Under NGAS, which is false regarding purchase of property and supplies?
Dec. 1 51.45 51.60 a. Asset method is followed where purchase is recognized as asset.
Dec. 12 51.58 51.84 b. Depreciation accounting is followed.
Dec. 31 51.72 51.96 c. Purchases are taken up as expense.
Jan. 31, 2012 51.68 51.89 d. Corollary is not allowed.
A 8. Upon approval and issuance of the Agency Budget Matrix (ABM), the B 13. An arrangement for creditors to accept an amount less than the amount
pertinent data on release for each government agency shall be entered in the owed to them is referred to as
Registry of Appropriation and Allotment by a. Charge and discharge agreement c. Bankruptcy agreement
a. Department of Budget and Management b. Composition agreement d. Chandler Agreement
b. Bureau of Treasury
c. Commission on Audit
d. Government Agencies

A 9. Although the agency will not journalize its appropriation and allotments, it
shall maintain four registries for the allotment it receives and for the
obligation it incurs. Which of the following is the registry in the books of the
a. Registry of Allotment and Obligation
b. Registry of Appropriations and Allotment
c. Registry on notice of cash allocation and replenishment
d. Registry of allotment and notice of cash allocation

D 10. As provided in the constitution, no money shall be paid out of the National
Treasury except in the pursuance of
a. Budget c. Fund
b. President’s executive order d. Appropriation

B 11. Cash collection is a critical event for income recognition in the

Cost Recovery Method Installment Method

a. No No
b. Yes Yes
c. No Yes
d. Yes No

C 12. Lith Company uses the installment sales method to recognize revenue.
Customers pay the installment notes in 24 equal monthly amounts, which
include 12% interest. What is the balance of an installment note receivable 6
months after the sale?
a. 75% of the original sales price
b. Less than 75% of the original sales price
c. The present value of the remaining monthly payments discounted at 12%.
d. Less than the present value of the remaining monthly payments discounted
at 12%.