BADAREV – ADVANCED FINANCIAL ACCOUNTING AND REPORTING (MIDTERM)

1. What is the valuation if a partner contributes a noncash property to the partnership?

a. Book value of the property ​ ​ c​ . Actual amount of the property

b. Acquisition cost of the property ​ d​ . Fair value of the property

2. Temporary withdrawals made by the partner is posted in ledger as

a. Partner’s drawing, debit ​ ​ c​ . Partner’s capital, debit

b. Partner’s drawing, credit ​ ​ d​ . Partner’s capital, credit

3. Partnership drawings are

a. Always maintained in a separate account from the partner’s capital account
b. Equal to partners’ salaries
c. Usually maintained in a separate drawing account with any excess draws being deducted directly to the
capital account

d. Not discussed in the specific contract provisions of the partnership

4. Under the entity theory, a partnership is
a. Viewed through the eyes of the partners
b. Viewed as having its own existence apart from the partners
c. A separate legal and tax entity
d. Unable to enter into contracts in its own name

5. The Red and black partnership agreement provides for Red to receive a 20% bonus on profits before the bonus.
Remaining profits and losses are divided between Red and black in the ratio of 2:3, respectively. Which partner has a
greater advantage when the partnership has a profit or when it has a loss?

Profit ​ ​Loss ​ ​ ​ ​Profit ​ ​Loss

a. Red ​ ​Black ​ ​ ​ ​c. Black ​ ​Red
b. Red ​Red ​ ​ ​ ​d. Black ​ ​Black
6. WW and MM drafted a partnership agreement that lists the following assets contributed at the partnership’s formation:
Contributions by: ​ ​ ​ W
W ​ ​ M
M

Cash ​ ​ ​ ​ ​ 20,000
P ​ ​ 30,000
P

Inventory ​ ​ ​ ​ ​ ​ 15,000
P

Building ​ ​ ​ ​ ​ ​ ​ 40,000
P

Furniture & equipment ​ ​ 1​ 5,000

The building is subject to a mortgage of P10,000, which the partnership has assumed. The partnership agreement also
specifies that profits and losses are to be distributed evenly. What amounts should be recorded as capital for WW and
MM at the formation of the partnership

WW ​ ​MM ​ ​ ​ ​WW ​ ​MM

a. P35,000 ​P85,000 ​ ​ ​ ​c. P55,000 ​P55,000
b. P35,000 ​P75,000 ​ ​ ​d. P60,000 ​ 60,000
P

7. Anne, Iris and Alfred formed a partnership on April 30, with the following assets, measured at their fair market value,
contributed by each partner:

Particulars ​ ​ ​Anne ​ ​Iris ​ ​Alfred

Cash ​ ​ ​ ​P200,000 ​P240,000 ​P600,000

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 Automobile ​ ​ ​170,000
Delivery Trucks ​ ​ ​ ​ ​560,000
Computer and printer ​ ​ ​ ​102,000
Office furniture ​ ​ ​ ​ ​70,000 ​ ​50,000
Land and Building ​ ​3,000,000 ​
Totals ​ P972,000 ​
P650,000 ​ ​P3,370,000 ​ ​
Although Alfred has contributed the most cash to the partnership, he did not have the full amount of P600,000 available
and was forced to borrow P400,000. The land and building contributed by Anne has a mortgage of P1,800,000 and the
partnership is to assume responsibility of the loan. If the profit and loss sharing agreement is 40 percent, 40 percent, and
20 percent respectively, for Anne, Iris and Alfred, what is the total capital investment of all the partners at the opening of
the business on April 30?

a. P4,992,000 ​ ​b. P3,192,000 ​ ​c. P2,792,000 ​ ​d. P3,328,000

8. Mahal admits Mora as a partner in the business. Balance sheet accounts of Mahal on September 30, just before admission
of Mora show:

Cash ​ ​ ​ ​P31,200 ​ ​Accounts payable ​P74,400

Accounts receivable ​ ​144,000 ​ ​Mahal, capital ​ ​316,800
Merchandise inventory ​ ​216,000
It is agreed that for purpose of establishing Mahal’s interest, the following adjustments shall be made:
• An allowance for doubtful accounts of 2% is to be established
• Merchandise inventory is to be valued at P242,400
• Prepaid expense of P4,200 and accrued expenses of P4,800 are to be recognized
Mora is to invest sufficient cash to obtain a 1/3 interest in the partnership. How much is Mora’s investment to the
partnership?

a. P169,860 ​ ​b. P211,200 ​ ​c. P171,660 ​ ​d. P95,040

On March 1, 20x4, CC and FF formed a partnership with each contributing the following assets:

Accounts ​ ​ ​ ​ ​CC ​ ​FF

Cash ​ ​ ​ ​ ​ ​P30,000 ​P70,000
Machinery ​ ​ ​ ​ ​25,000 ​ ​75,000
Building ​ ​ ​ ​ ​ ​-- ​ ​225,000
Furniture and Fixtures 10,000 ​ ​ ​ ​ ​ ​--
The building is subject to a mortgage loan of P90,000, which is to be assumed by the partnership. The agreement provides that CC
and FF share profits and losses 30% and 70%, respectively

9. On March 1, 20x4 the capital account of FF would show a balance of

a. P280,000 ​ b​ . P305,000 ​ c​ . P314,000 ​ ​d. P370,000
10. Assuming that the partners agreed to bring their respective capital in proportion to their respective profit and loss ratio,
and using FF’s capital as the base, how much cash is to be invested by CC?

a.P19,000 b. P30,000 ​
c. P40,000 d. P55,000 ​ ​ ​ ​ ​
CC admits DD as a partner in business. Accounts in the ledger for CC on November 30, 20x4, just before the admission of DD,
show the following balances:

Cash ​ ​ ​ ​ ​ ​P6,800
Accounts receivable ​ ​ ​ ​14,200
Merchandise inventory ​ ​ ​ ​20,000
Accounts payable ​ ​ ​ ​8,000
CC, capital ​ ​ ​ ​ ​33,000
It is agreed that for purpose of establishing CC’s interest the following adjustments shall be made:

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 An allowance for doubtful accounts of 3% of accounts receivable is to be established
The merchandise inventory is to be valued at P23,000
Prepaid salary expense of P600 and accrued rent expense of P800 are to be recognized

11. DD is to invest sufficient cash to obtain a 1/3 interest in the partnership. CC’s adjusted capital before the admission of
CC

a. P28,174 ​ ​b. P35,347 ​ ​c. P35,374 ​ ​d. P36,374

12. The amount of cash investment by DD
a. P11,971 ​ b​ . P14,087 ​ ​c. P17,687 ​ ​d. P18,487
13. In 2011, Jessie and Anne agreed to contribute equal amounts into a new partnership for a 50% interest in profit (loss)
and in capital to each of them. Their respective contributions will come from old proprietorships they owned and will
both be dissolved. Jessie contributed the following items and amounts:

Cash ​ P585,000 ​ ​ ​ ​
Machineries (at book value per her proprietorship records) P400,000
Anne contributed the following items at their carrying amounts in the proprietorship records:

Accounts receivable ​ ​ ​ ​P75,000

Inventory ​ ​ ​ ​ ​210,000
Furniture and fixtures ​ ​ ​ ​402,000
Intangibles ​ ​ ​ ​ ​172,500
All non cash contributions are not property valued. The two partners have agreed that (a) P6,000 of the accounts
receivable are uncollectible; (b) the inventories are overstated by P15,000; (c) the furniture and fixtures are understated
by P9,000; and the intangibles includes a patent with a carrying value of P10,500, which must now be derecognized due
to the result of unsuccessful litigation promulgated by the court just before the partnership formation.
What is the fair value of the machineries invested by Jessie into the partnership?

a. P336,000 ​ ​b. P252,000 ​ ​c. P390,000 ​ ​d. P350,000

14. I and Q formed a partnership on January 2, 2016, and agreed to share income 90%, 10%, respectively. I contributed a
capital of P12,500. Q contributed no capital but has a specialized expertise and manages the firm full-time. There were
no withdrawals during the year. The partnership agreement provides for the following:

a. Capital accounts are to be credited annually with interest at 5% of beginning capital

b. Q is to be paid a salary of P500 a month
c. Q is to receive a bonus of 20% of income calculated before deducting his bonus, his salary and interest on both
capital accounts

d. Bonus, interest, and Q’s salary are to be considered partnership expenses

The partnership’s 2016 income statement follows:

Revenues ​ ​ ​P48,225
Expenses ​ ​ ​24,850
Net income ​ ​ ​P23,375
How much is the total share of Q on the 2016 partnership net income?

a. P15,837.50 ​ ​b. P14,325 ​ ​c. P16,194 ​ ​d. P14,169

15. R and J, partners, divide profits and losses on the basis of average capitals. Capital accounts for the year ended
December 31, 2016, are shown below. The net profit for 2016 is P135,000. (Changes in capitals during the first half of
the month are the regarded as effective as the beginning of the month; changes during the second half of a month are
regarded as effective as of the beginning of the following month.)

Particulars ​ ​R, Capital ​ ​ ​J, Capital

​ ​ ​Dr ​ ​Cr ​ ​Dr ​ ​Cr
January 1 ​ ​ ​ ​P300,000 ​ ​ ​P330,000
March 9 ​ ​P50,000
April 14 ​ ​ ​ ​ ​ ​ ​ ​ ​150,000
July 1 ​ ​ ​ ​ ​100,000

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 Sept 4 ​ ​ ​ ​ ​ ​ ​P40,000
Sept 22 ​ ​ ​ ​ ​100,000
October 26 75,000 ​ ​
The share of R on the 2016 profit is:

a. P57,250 ​ ​b. P77,250 ​ ​c. P57,750 ​ ​d. P62,630

16. Efren and Frenz operate The Gourmet Restaurant as a partnership. Their partnership agreement has the following
provisions for sharing profits and losses:

A. Income is distributed only as far as it is available

B. Available income is to be distributed in the following sequence:
1. Efren, who is the chef, gets a salary of P25,000 a year; Frenz, who is still learning, gets a salary of P10,000
2. Interest is imputed on the average capital balances at 15 percent
3. Any remaining profits and losses are to be shared equally
The average capital balances during the year were P270,000 for Efren and P50,000 for Frenz. If the partnership income
for the year is P17,500, it should be distributed to the partners as follows:

a. Efren P8,000; Frenz P9,500 ​ ​ ​c. Efren P12,500; Frenz P5,000

b. Efren P8,750; Frenz P8,750 ​ ​ ​d. Efren P14,000; Frenz P3,500
17. Partner Alta had a capital balance on January 1, 20x4 of P45,000 and made additional capital contributions during
20x4 totaling P50,000. During the year 20x4, Alta withdrew P8,000 per month. Alta’s post-closing trial balance on
December 31, 20x4 is P30,000. Alta’s share of 20x4 partnership income is:

a. P96,000 ​ ​b. P50,000 ​ ​c. P31,000 ​ ​d. P8,000

18. Partners A and B have a profit and loss agreement with the following provisions: salaries of P20,000 and P25,000 for
A and B respectively; a bonus to A of 10% of net income after bonus; and interest of 20% on average capital balances of
P40,000 and P50,000 for A and B, respectively. Any remainder is to be split equally. If the partnership had net income of
P88,000, how much should be allocated to Partner A

a. P36,000 b. P44,500 ​ c. P50,000 ​ ​ ​ ​ ​d. P43,500

X, Y and Z, a partnership formed on January 1, 20x4 had the following initial investment:

X ​ ​ ​P100,000
Y ​ ​ ​P150,000
Z ​ ​
P225,000 ​
The partnership agreement states that the profits and losses are to be shared equally by the partners after consideration is made for
the following:
• Salaries allowed to partners: P60,000 for X, P48,000 for Y, and P36,000 for Z
• Average partners’ capital balances during the year shall be allowed10%
• Additional information:
• On June 30, 20x4, X invested an additional P60,000
• Z withdrew P70,000 from the partnership on September 30, 20x4
• Share the remaining partnership profit was P5,000 for each partner
19. Partnership net profit of December 31, 20x4 before salaries, interests and partner’s share on the remainder was
a. P199,750 ​ b​ . P207,750 ​ c​ . P211,625 ​ d​ . P222,750
A partnership begins its first year with the following capital balances:

A, capital ​ ​ ​P60,000
B, capital ​ ​ ​P80,000
C, capital ​ ​
P100,000 ​
The articles of partnership stipulate that profits and losses be assigned in the following manner
• Each partner is allocated interest equal to 10 percent of the beginning capital balance

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 • B is allocated compensation of P20,000 per year
• Amy remaining profits and losses are allocated on a 3:3:4 basis, respectively
• Each partner is allowed to withdraw up to P5,000 cash per year
20. Assuming that the net income is P50,000 and that each partner withdraws the maximum amount allowed. What is the
balance in C’s capital account at the end of that year?

a. P105,800 ​ ​b. P106,200 ​ ​c. P106,900 ​ ​d. P107,400

21. The following balance sheet for the partnership of LuzVisMin was taken from the books on October 1, 2010
Cash ​ ​ ​ 200,000
P ​ ​ ccounts payable
A ​ ​ 400,000
P

Other assets ​ 8​ 00,000 ​ ​ ​ uz, capital

L ​ ​ 2​ 40,000

​ ​ ​ ​ ​ ​ is, capital
V ​ ​ 1​ 90,000

​ ​ ​ ​ ​ ​ in, capital
M ​ ​ 1​ 70,000

Total ​ ​ ​ 1,000,000
P ​ ​ otal
T ​ ​ ​ ​ 1,000,000
P
The profit and loss agreement among the partners follows:
• Annual salaries to Luz and Vis of P10,000 each
• Annual interest of 5% on beginning capital
• Bonus of 15% to Luz based on income after salaries, interest and bonus. Remaining profit 25% to Luz, 35% to Vis, and
40% to Min.
The partnership began its operations on October 1, 2010. Net income for the year ended December 31, 2010 is P139,000.
Which of the following is true?

a. ​The bonus to Luz is P11,608

b. ​Net income after salaries, interest and bonus is P77,392
c. ​Vis total share in net income is P43,375
d. ​Min’s share on the profit after salaries, interest and bonus is P27,086
22. The dissolution of a partnership occurs
a. Only when the partnership sells its assets and permanently closes its books
b. Only when a partner leaves the partnership
c. Only when a new partner is admitted to the partnership
d. When there is any change in the individuals who make up the partnership
23. The process of terminating the business, selling the assets, paying the liabilities and disbursing the remaining cash to
the partners is called

a. Dissolution ​ ​ ​ ​ ​c. Liquidation

b. Formation of a partnership ​ ​ ​d. Withdrawal
24. The selling of noncash assets for cash in partnership liquidation, any difference between book value and the cash
proceeds is called

a. Net profit or loss on sale ​ ​ ​c. Capital gain or loss

b. Gain or loss on realization ​ ​ ​d. Sales differential value
25. The main characteristic of a lump sum liquidation done in one transaction is that all the
a. Assets are sold in one transaction
b. Liabilities are paid on one transaction

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 c. Cash available to partners is distributed to them in one transaction
d. Assets are sold in one transaction and all the available cash is distributed to creditors and partners in one
transaction.

26. The cash available for distribution to partners in an installment liquidation is equal to the
a. Cash available after a sale of noncash assets is made
b. Cash available after payment to creditors are made
c. Cash available after payment to creditors are made and after reserve for future liquidation is set aside
d. All of the above
27. When advance cash distribution plan is prepared, a partner’s loan payable to partnership is
a. Added to other liabilities
b. Added to the credit balance in the partner’s capital account
c. Subtracted from the credit balance in the partner’s capital account
d. Omitted from the calculation
28. Capital balance and profit and loss sharing ratios of the partners in the ABC partnership are as follows:
A, capital (40%) ​ ​ ​ 168,000
P

B, capital (40%) ​ ​ 1​ 92,000

C, capital (20%) ​ ​ 1​ 20,000

Total ​ ​ ​ ​ ​ 480,000
P
A needs money and agrees to assign one-fourth of his interest in the partnership to D for P45,000 cash. D pays P45,000
directly to A. Compute the (1) capital balance of D, and (2) the total capital of the ABC Partnership immediately after the
assignment of the interest to D?

a. (1) P42,000; (2) P547,200 ​ ​ ​c. (1) P42,000; (2) P480,000

b. (1) P67,200; (2) P480,000 ​ ​ ​d. (1) P67,200; (2) P547,200
29. A partnership has the following capital balances:
Elgin (40% of gains and losses) ​ ​ ​P100,000
Jethro (30%) ​ ​ ​ ​ ​200,000
Foy (30%) ​ ​ ​ ​ 300,000 ​
Oscar is going to pay a total of P200,000 to these three partners to acquire a 25 percent ownership interest from each.
Goodwill (or revaluation of asset) is to be recorded. What is Jethro’s capital balance after the transaction?

a. P150,000 ​ ​b. P175,000 ​ ​c. P195,000 ​ ​d. P200,000

30. Partners Allen, Baker and Coe share profits and losses 5:3:2, respectively. The balance sheet as of April 30, 2014
follows:

Assets ​ ​ ​ ​ ​ ​Liabilities and Capital

Cash ​ ​ ​ ​P40,000 ​Accounts payable ​ ​P100,000
Other assets ​ ​ ​360,000 ​Allen, Capital ​ ​ ​74,000
​ ​ ​ ​ ​ ​Baker, Capital ​ ​ ​130,000
​ ​ ​ ​
Coe, Capital​ ​ ​
96,000 ​ ​
The assets and liabilities are recorded and presented at their respective fair values. Jones is to be admitted as a new

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 partner with a 20% capital interest and a 20% share in the profits and losses in exchange for a cash contribution. No
goodwill or bonus is to be recorded. How much cash should Jones contribute?

a. P60,000 ​
b. P72,000 ​c. P75,000 ​ ​ ​ ​d. P80,000
The partners in the Kim, Gerald and Maja partnership have capital balances as follows:

Kim, capital ​ ​P17,500

Gerald, capital ​ ​P17,500
Maja, capital ​ ​P20,000
Profits and losses are shared 30%, 30% and 40% respectively. On this date, Maja withdraws and the partners agree to pay him
P22,500 out of partnership cash (Tangible assets are already stated at values approximating their fair market values).

31. Using bonus method, how much must be the ending capital of Kim immediately after Maja’s withdrawal?
a. P17,500 ​ ​b. P16,250 ​ ​c. P16,750 ​ ​d. P19,375
32. Using partial goodwill method, how much must be the ending capital of Kim immediately after Maja’s withdrawal?
a. P17,500 ​ b​ . P16,250 ​ c​ . P16,750 ​ d​ . P19,375

33. Using full goodwill method, how much must be the ending capital of Kim immediately after Maja’s withdrawal?
a. P17,500 ​ b​ . P16,250 ​ c​ . P16,750 ​ d​ . P19,375

34. Elton and Don are partners who share profits and losses in the ratio of 7:3, respectively. On November 5, 20x4, their
respective capital accounts were as follows:

Elton ​ ​ ​P70,000
Don ​ 60,000 ​ ​
On that date they agreed to admit Kravitz as a partner with a one-third interest in the capital and profits and losses upon
his investment of P50,000. The new partnership will began with a total capital of P180,000. Immediately after Kravitz’s
admission, what are the capital balances of Elton, Don and Kravitz, respectively?

a. P60,000; P60,000; P60,000 ​ ​ ​c. P63,333; P56,667; P60,000

b. P63,000; P57,000; P60,000 ​ ​ ​d. P70,000; P60,000; P50,000
35. Kris and Mark are partners who share profits and losses 70:30. They have capital account balances of P170,000 and
P260,000, respectively at the date they admit Frank into the partnership. Frank invests P120,000 in the partnership for a
25 percent equity interest and the bonus method is applied. What is the peso amount of bonus recognized in Frank’s
capital account at the date of admission?

a. P70,000 ​ ​b. P52,500 ​ ​c. P23,333 ​ ​d. P17,500

36. On December 31, 20x4, AN and DE are partners with capital balances of P80,000 and P40,000 and they share profits
and losses in the ratio of 2:1, respectively. On this date, ST invests P36,000 cash for a one-fifth interest in the capital and
profit of the new partnership. The partners agree that the implied partnership goodwill (total revaluation of assets) is to
be recorded simultaneously with the admission of ST. The total implied goodwill of the firm is

a. P4,800 ​ ​b. P6,000 ​ ​c. P24,000 ​ ​d. P30,000

37. Bishop has a capital balance of P120,000 in a local partnership, and Cotton has a P90,000 balance. These two partners
share profits and losses by a ratio of 60 percent to Bishop and 40 percent to Cotton. Lovett invests P60,000 in cash in the
partnership for a 20 percent ownership. The goodwill (or revaluation of asset) method will be used. What is Cotton’s
capital balance after this new investment?

a. P99,600 ​ ​b. P102,000 ​ ​c. P112,000 ​ ​d. P126,000

38. On June 30, 20x4, the balance sheet for the partnership of William, Brown and Lowe, together with their respective
profit and loss ratios, is summarized as follows:

Assets, at cost ​ ​ ​P300,000 ​Williams, loan ​ ​ ​P15,000

​ ​ ​ ​ ​ ​ illiams, capital
W ​ ​70,000
​ ​ ​ ​ ​ ​ rown, capital
B ​ ​ ​65,000
​ ​ ​ ​ ​ ​ owe, capital
L ​ ​ ​150,000
Williams has decided to retire from the partnership, and by mutual agreement the assets are to be adjusted to their fair
value of P360,000 at June 30, 20x4. It is agreed that the partnership will pay Williams P102,000 cash for his partnership
interest exclusive of his loan, which is to be repaid in full. Goodwill is to be recognized in this transaction, as implied
(total) by the excess payment to Williams. After Williams’ retirement, what are the capital balances of Brown and Lowe,

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 respectively?

a. P65,000 and P150,000 ​ ​ ​c. P73,000 and P174,000

b. P97,000 and P246,000 ​ ​ ​d. P77,000 and P186,000
39. Prior to liquidation, the liabilities and partners’ capital account are reported with the following balances:
Partner’s ​ ​ ​ apitals
C ​ ​ rofit ratio
P

Alaska ​ ​ ​ ​ 160,000
P ​ 1​ /3

Beermen ​ ​ ​ 290,000
P ​ 2​ /3

Totals ​ ​ ​ ​ 450,000
P
The total liabilities of the partnership amount to P150,000, and all assets available are non-cash assets which were
realized at P540,000. The cash distribution to partners upon liquidation would be

Alaska ​ ​ ​Beermen ​ ​Alaska ​ ​ ​Beermen

a. P135,000 ​ ​P270,000 ​ ​c. P140,000 ​ ​P250,000
b. P130,000 ​ ​P260,000 ​ ​d. P190,000 ​ ​P350,000
40. X, Y, and Z have capital balances of P40,000, P50,000 and P18,000, respectively and a profit sharing ratio of 4:2:1,
respectively. If X received P8,000 upon liquidation, the total amount received by all partners was

a. P108,000 ​ ​b. P56,000 ​ ​c. P24,000 ​ ​d. P52,000

41. Based on #38 above, except the X received P26,000 as a result of liquidation, Z received as part of the liquidation
a. P26,000 ​ b​ . P18,000 ​ c​ . P14,500 ​ d​ . P14,000

42. The statement of financial position of the firm A, B, C and D, just prior to liquidation shows the following: A, loan,
P1,000, A, capital, P5,500, B, capital, P5,150, C, capital, P6,850, D, capital, P4,500.
A, B, C and D share profits 4:3:2:1 respectively. Certain assets are sold for P6,000 and this is distributed to partners.
How much cash should C receive?

a. P3,283 ​ ​b. P 0 ​ ​ ​c. P2,717 ​ ​d. P6,000

43. On January 1, year 1, the partners of Cobb, Davis, and Eddy, who share profits and losses in the ratio of 5:3:2,
respectively, decided to liquidate their partnership. On this date the partnership condensed balance sheet was as follows:

Assets ​ ​ ​ ​ ​Liabilities and Capital

Cash ​ ​ ​P 50,000 ​Liabilities ​ ​ ​P 60,000
Other assets ​ ​250,000 ​Cobb, capital ​ ​ ​80,000
​ ​ ​ ​ ​Davis, capital ​ ​ ​90,000
​ ​ ​ ​ ​Eddy, capital ​ ​ ​70,000
Total assets ​ ​P300,000 P300,000 ​Total Liabilities and Capital ​
On January 15, year 1, the first cash sale of other assets with a carrying amount of P150,000 realized P120,000. Safe
installment payments to the partners were made the same date. How much cash should be distributed to each partner?

Cobb ​ ​Davis ​ ​Eddy ​ ​Cobb ​ ​Davis

​ ​Eddy
a. P15,000 ​P51,000 ​P44,000 ​c. P55,000 ​P33,000 ​P22,000
b. P40,000 ​P45,000
P35,000 ​ ​ d​ . P60,000 ​P36,000 ​P24,000
The balance sheet of Kate, Tim and Mar partnership shows the following information as of December 31, 2015:

Cash ​ ​ ​P4,000 ​ ​ ​Liabilities ​ ​P10,000

Other assets ​ ​56,000 ​ ​ ​Kate, loan ​ ​5,000
​ ​ ​ ​ ​ ​Kate, capital ​ ​25,000
​ ​ ​ ​ ​ ​Tim, capital ​ ​14,000
​ ​ ​ ​ ​ ​Mar, capital ​ ​6,000

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 Total ​ ​
60,000 ​ Total ​60,000 ​ ​ ​ ​ ​
Profit and loss ratio is 3:2:1 for Tim, Kate and Mar respectively. Other assets were realized as follows:

Date ​ ​ ​Cash received ​ ​Book value

January 2016 ​ ​P12,000 ​ ​P18,000
February 2016 ​ ​7,000 ​ ​ ​15,400
March 2016 ​ 25,000 ​ ​ ​ ​22,600
Cash is distributed as assets are realized

44. The total loss to Kate is

a. P6,000 ​ ​b. P2,000 ​ ​c. P2,000 ​ ​d. None
45. The total cash received by Tim is
a. P4,000 ​ b​ . Zero ​ ​ ​c. P10,000 ​ ​d. P3,000
46. Cash received by Mar in January 2016 is:
a. P400 ​ b​ . P2,000 ​ ​c. P1,000 ​ ​d. Zero
Rosa, Susan, and Tina are partners sharing profits on a 5:3:2. On January 1 , 20x1. Vida was admitted into the partnership with a
20% in profits. The old partners continue to participate in profits in their original ratios. For the year the partnership book showed
a net income of P25,000. It was disclosed however, that the following errors were committed:

Particulars ​ ​ ​ ​ ​ ​20x0 ​ ​20x1

Accrued expenses not recorded at year-end ​ ​P1,200 ​
Inventory overstated ​ ​ ​ ​ ​ ​ ​P3,100
Purchases not recorded for which goods have been received

And inventoried ​ ​ ​ ​ ​ ​ ​ ​P2,000

Income received in advance not adjusted ​ ​P1,500
Unused supplies not taken up at year-end ​ ​ ​ ​P900

47. The new profit and loss ratio of Rosa, Susan, Tina, and Vida, respectively for 20x1 is
a. 40%, 25%, 15%; and 20% ​ ​ c​ . 45%, 30%, 15% and 20%

b. 50%, 20%, 10% and 20% ​ ​ d​ . 40%, 24%, 16% and 20%

48. The share of partner Rosa in the 20x1 corrected net income is
a. P 9,400 ​ b​ . P10,000 ​ c​ . P11,750 ​ d​ . P12,500

49. PFRS 11 Joint Arrangements provide that joint control exists where:
a. One party alone has power to control the strategic operating decisions of the joint arrangement
b. No single party is in a position to control the activity unilaterally
c. The decisions in areas essential to the goals of the joint arrangement do not require the consent of the parties
d. No one party may be appointed as the manager of the joint arrangement

50. Which if the following is correct?

a. Where the joint operators have designed the joint arrangement so that its activities primarily aim to provide parties
with an output it will be classified as a joint control
b. All joint arrangements are not structured through a separate vehicle are classified as joint ventures
c. For a joint venture, the rights pertain to the rights and obligations associated with individual assets and liabilities,
whereas with a joint operation, the rights and obligations pertain to the net assets
d. In considering the legal form of the separate vehicle if the legal form establishes rights to individual assets and
obligations, the arrangement is a joint operation. If the legal form establishes rights to the net assets of the arrangement,
then the arrangement is a joint venture

51. Which of the following statements is not true in relation to joint control?
a. Joint control exist only where there is contractually agreed sharing of control

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 b. Entities over which a party has joint control are accounted for in accordance with PFRS 11 Joint Arrangements
c. Joint control requires the unanimous consent of the parties sharing control
d. Each party must have an equal interest for joint control to exist

52. In relation to supply of service to a joint operation by one of the joint operators, which of the following statements is
correct?
a. A joint operator cannot earn a profit on supplying services to itself
b. A joint operator is not able to recognize the service revenue or service cost for the services supplied to the joint
operation
c. A joint operator can recognize 100% of the earned through the supply of services to the joint operation
d. A joint operator is entitled to recognize a profit from the supply of services to itself

53. ON December 31, 2015, Intel, Inc. authorized Chiquito to operate as a franchisee for an initial franchise fee of
P15,000. Of this amount, P6,000 was received upon signing the agreement and the balance represented by an note due in
three annual instalments of P3,000 each beginning December 31, 2017. The present value on December 31, 2015, for
three annual payment appropriately discounted is P7,200. According to the agreement, the non-refundable downpayment
represents a fair measure of the services already performed by Intel and substantial future services are still to be
rendered. However, the collectability of the note is not reasonably assured. Intel’s December 31, 2015, balance sheet
unearned franchisee fee from Chiquito’s franchise should report as:

a. P13,200 ​ ​b. P10,000 ​ ​c. P 0 ​ ​d. P7,200

54. On December 31, 2015, McKing Inc. signed an agreement authorizing Burge Company to operate as a franchise for an
initial franchise fee of P500,000. Of this amount, P200,000 was received upon signing of the agreement and the balance
is due in three annual payment of P100,000 each, beginning December 31, 2011. No future services are required to be
performed. Burge Company’s credit rating is such that collection of the note is reasonably assured. The present value at
December 31, 8 of the three annual payments discounted at 14% (the implicit rate for a loan of this type) is P232,200. On
December 31, 2016, McKing should record earned franchise fees of

a. P232,200 ​ ​b. P432,200 ​ ​c. P300,000 ​ ​d. P 0

55. On December 31, 2015 Bulaklak Company signed an agreement to operate as franchisee of Bluewich for a franchise
fee of P800,000. Of this amount, P300,000 was paid upon signing of the agreement and the balance is payable in five
annual payments of P100,000 each beginning December 31, 2016. The present value of the five payment, at an
appropriate rate of interest, is P560,000 at December 31, 2015. The agreement provides that the downpayment is not
refundable and no future services are required of the franchisor. The collection of note receivable is reasonably certain.
Bluewich’s Company should report unearned revenue from franchise fee in its December 31, 2012 balance sheet at:

a. P800,000 ​ ​b. P300,000 ​ ​c. P660,000 ​ ​d. P 0

56. The franchise agreement between Minute Burger and Ms. Paganda which was signed at the beginning of the year
required a P5,000,000 franchise fee payable P1,000,000 upon signing of the franchise and the balance in four annual
instalments starting the end of the current year. At the time of granting of the franchise, the present value using 12% as
discount rate of the four instalments would approximate P1,996,500. The fees once paid are not refundable. The
franchise may be cancelled subject to the provisions of the agreement. Should there be unpaid franchise fee attributed to
the balance of main fee (P5,000,000), same would become due and demandable upon cancellation. Further, the franchisor
is entitled to a 5% fee on gross sale payable monthly within the first ten days of the following month. The Credit
Investigation Bureau rated Ms. Paganda as AA credit rating. Further the balance of the franchise fee was guaranteed by a
commercial bank. The first year of operations yielded gross sales of P90 million. As of the signing of the franchise
agreement, Minute Burger’s unearned franchise fee amounted to

a. P6,496,500 ​ ​b. P4,000,000 ​ ​c. zero ​ ​ ​d. P1,996,500

57. Mike and Noel formed a joint venture to purchase and sell a special type of merchandise. The venturers agreed to
contribute cash of P270,000 each to be used in purchasing the merchandise, and to share profits and lossess equally. They
also agreed that each shall record his purchases, sales, and expenses in their own books.
Upon termination of the joint venture, the following data are made available:

Particulars ​ ​ ​ ​ ​Mike ​ ​ ​Noel

Joint venture ​ ​ ​ ​ ​P234,000 credit ​ ​P170,600 debit
Inventory taken ​ ​ ​ ​ 1​ 0,800 ​ ​ ​33,750
Expenses paid from joint venture cash ​ 5​ ,400 ​ ​ 9​ ,900
How much cash is to be received by Noel in the final settlement?

a. P267,950 ​ ​b. P290,225 ​ ​c. P323,975 ​ ​d. P280,325

58. ABS and CBN formed a joint venture on January 1, 2013 to operate two stores to be managed by each
ventures/participants. They agree to contribute cash as follows:

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 ABS ​ ​ ​P 30,000
CBN ​ ​ ​P 20,000
Profits and losses are to be divided in the capital ratio. All venture transactions are for cash. Cash receipts and
disbursements of the business during the 4-month period handled through the participant’s/venturer’s bank accounts are
as follows:

Particulars ​ ​ ​ABS ​ ​CBN

Recepits ​ ​ ​P78,920 ​P65,425
Disbursements ​ 70,695 ​ ​62,275 ​ ​
On April 30, the remaining non-cash venture assets in the hands of the particiapants/venturers were sold for P60,000. The
venture is terminated and settlement is made between ABS and CBN
The P60,000 is divided between the particiapants/venturers as follows:

a. ABS, P16,180; CBN, P43,820 ​ ​ ​c. ABS, P26,180; CBN, P33,820

b. ABS, P21,905; CBN, P38,095 ​ ​ ​d. ABS, P48,095; CBN, P11,905

59. In the reporting of a corporate liquidation, assets are shown at

a. Present value calculated using an appropriate discount rate
b. Net realizable value
c. Historical rate
d. Book value

60. In a statement of affairs, assets are classified

a. According to whether they are pledged with particular creditors
b. As current or non-current
c. As monetary or non-monetary
d. As operating or non-operating

61. What are free assets?

a. Assets for which net realizable value is greater than historical cost
b. Assets for which no market exists
c. Assets for which replacement cost is greater than historical cost
d. Assets available to be distributed for liabilities with priority and other unsecured obligations

62. What is an inherent limitation of statement of financial affairs?

a. Many of the amounts reported are only estimations that might prove to be inaccurate
b. The statement is applicable only to bankruptcy
c. The statement covers only a short time, whereas a bankruptcy may last much longer
d. The figures on the statement vary as to voluntary and an involuntary bankruptcy

63. In the accounting statement of affairs, the gains and losses upon liquidation would equal
a. Net book value of assets minus book value of liabilities
b. The book value of assets minus the realizable value
c. Total estimated realizable value of assets minus the amount assigned to secured creditors
d. Total estimated realizable value of assets minus the amount remaining for unsecured creditors

64. Lakeside Bank holds a P100,000 note secured by a building owned by Fly-by-Night Manufacturing, which has filed by
bankruptcy. If the property has a book value of P120,000 and a fair market value of P90,000, what is the best way to
describe the note held by the bank? It has a/an
a. Secured claim of P100,000
b. Unsecured claim of P100,000
c. Secured claim of P90,000 and an unsecured claim of P10,000
d. Secured claim of P100,000 and an unsecured claim of P20,000

The following was taken from the Statement of Affairs of Paradigm Company at August 30, 2018:

Assets pledged with fully secured creditors ​ ​P71,000

Assets pledged with partially secured creditors ​ ​12,500
Free assets ​ ​ ​ ​ ​ ​11,000
Liabilities with priority ​ ​ ​ ​ ​3,000
Fully secured liabilities ​ ​ ​ ​ ​69,000

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 Partially secured liabilities ​ ​ ​ ​20,000
Liabilities without priority ​ ​ ​ ​18,000
65. The estimated deficiency to unsecured creditors without priority amounts is
a. P15,500 ​ b​ . P15,150 ​ c​ . P10,550 ​ ​d. P10,050
66. The estimated amount payable to partially-secured liabilities is
a. P14,450 ​ b​ . P14,045 ​ c​ . P15,441 ​ ​d. P14,540
67. The estimated amount payable to liabilities without priority is
a. P7,059 ​ b​ . P5,790 ​ c​ . P9,750 ​ ​d. P9,570
68. Zero na Corp has been undergoing liquidation since January 1. As of March 31, its condensed statement of realization
and liquidation is presented below:
Assets:

Assets to be realized ​ ​ ​P95,000

Assets acquired ​ ​ ​ ​5,000
Assets realized ​ ​ ​ ​30,000
Assets not realized ​ ​ ​42,000
Liabilities:

Liabilities liquidated ​ ​ ​35,000

Liabilities not liquidated ​ ​ ​31,850
Liabilities to be liquidated ​ ​65,000
Liabilities assumed ​ ​ ​1,500
Revenues and expenses:

Sales on account (credit) ​ ​5,000

Purchases (debit) ​ ​ ​1,500
Payment of expenses of trustee ​ ​7,500
Sales for cash ​ ​ ​ ​25,000
Interest on marketable securities 1​ 50
The net gain (loss) for the three-month period ending March 31 is

a. P7,200 ​ ​b. (P7,200) ​ ​c. P49,500 ​ ​d. (P17,500)

69. Rap Company is insolvent and its statement of affairs shows the following information:
Estimated gains on realization of assets ​ ​ 1,440,000
P

Estimated losses on realization of assets ​ 2​ ,000,000

Additional assets ​ ​ ​ 1​ ,280,000

Additional liabilities ​ ​ ​ 9​ 60,000

Capital stock ​ ​ ​ ​ 2​ ,000,000

Deficit ​ ​ ​ ​ ​ 1​ ,200,000
The pro-rate payment on the peso to stockholders (estimated amount to be recovered by stockholders) is:

a. P0.30 ​ ​b. P0.43 ​ ​c. P0.57 ​ ​ ​d. P0.70

70. S and L owes the Merian Corpozation P6,000 on account, which is secured by accounts receivable with a book value
of P5,000. Its statement of affairs lists the accounts receivable securing the Merian account with an estimated realizable
value of P4,500. If the dividend to general unsecured creditors is 80%, how much can, Merian expect to receive?

a. P6,000 ​ ​b. P5,800 ​ ​c. P5,700 ​ ​d. P4,800

12

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