Afar

AFAR
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 1. When the bankruptcy court grants the order for relief:
a. The court discharges the debtor except for claims provided for in the reorganization plan.
b. The bankruptcy court confirms that the reorganization plan is fair an equitable.
c. The reorganization plan has been accepted by at least two-thirds in amount and over half
in number of claims.
d. Creditors may not seek payment of their claims directly from the debtor corporation.
____ 2. Ana’s Inc. granted a franchise to Mocca for the Makati area. The franchisee was to pay a franchisee of
P500,000, payable in five equal annual installments starting with the payment upon signing of the agreement.
The franchise was to pay monthly 3% of gross sales of the preceding month. Should the operations of the
outlet prove to be unprofitable, the franchise may be canceled with whatever obligations owing Ana’s, Inc. in
connection with the P500,000 franchise fee waived. The prevailing interest rate is 14%. The first year
generated a gross sales of P2,500,000.
What is the amount of unearned franchisee fee after the first year of operations?
a. 575,000
b. 391,400
c. 291,400
d. 500,000
____ 3. SMDC Construction Corporation contracted with the province of Pampanga to construct a bridge at a contract
price of P16 million. SMDC Corporation expects to earn P1,520,000 on the contract. The percentage of
completion method is to be used and the completion stage is to be determined by estimates made by the
engineer. The following schedule summarizes the activities of the contract for years 2014-2016.
Estimated Engineer’s
cost to estimate of Billings on Collection on
Year Cost incurred complete completion contract billings
2014 4,600,000 9,640,000 31% 5,000,000 4,500,000
2015 4,500,000 5,100,000 58% 6,000,000 5,400,000
2016 5,250,000 - 100% 5,000,000 6,100,000
A 10% retainer accounts for the difference between billings and collections.
Under the percentage of completion method, using the engineer’s estimate as the measure of completion to
be applied to revenues and costs, how much is the gross profit earned each year?
a. 2014 (1,760,000); 2015 (1,800,000); 2016 (1,650,000)
b. 2014 (545,600); 2015 (498,400); 2016 (606,000)
c. 2014 (545,600); 2015 (1,044,000); 2016 (1,044,000)
d. 2014 (1,760,000); 2015 (6,400,000); 2016 (1,650,000)
____ 4. Which statement is false regarding the acceptance and confirmation of a reorganization plan?
a. Even if creditors and stockholders approve of the plan, the court can reject the plan
b. Acceptance of the plan requires the approval of two-thirds in number of claims and one-
half in dollar amount of creditors that cast votes
c. Any class of creditors that is not damaged by a reorganization is assumed to have accepted
the plan without voting
d. A separate vote is required of each class of stockholders
e. The plan must be voted on by the creditors and the stockholders of the company
____ 5. The following information pertain to the building contract of Carrie Construction Company, wherein the fixed
contract price is P40 million.
2015 2016 2017

Estimated costs 10,050,000 15,075,000 8,375,000
Progress billings 5,000,000 12,500,000 22,500,000
Cash collection 4,000,000 11,500,000 24,500,000
Assume that all costs are incurred, all billings to customers are made, and all collections from costumers are
received within 30 days of billing, as planned. Under the percentage-of-completion method of revenue
recognition is used, how much is the income from construction for the year 2017?
a. 1,950,000
b. 2,925,000
c. 4,875,000
d. 1,625,000
____ 6. The preclosing general ledger trial balances at December 31, 2015 for the Ropali Company and its Naga City
branch office are shown below:
Trial Balance
Home Office Branch
Dr (Cr) Dr (Cr)
Cash 3,600,000 800,000
Accounts receivable 3,500,000 1,200,000
Inventory 7,000,000 1,500,000
Plant assets - net 9,000,000
Branch office 2,000,000
Accounts payable (3,600,000) (1,350,000)
Accrued expenses (1,400,000) (250,000)
Home office (900,000)
Capital stock (5,000,000)
Retained earnings (4,500,000)
Sales (44,000,000) (9,500,000)
Purchases 29,000,000 2,400,000
Purchases from Home office 4,500,000
Expenses 4,400,000 1,600,000
Your audit disclosed the following data:
1. On December 23, the branch office manager purchased P400,000 of furniture and fixtures but failed to
notify the home office. The bookkeeper, knowing that all fixed assets are carried
on the home office recorded the proper entry on the branch office records. It is the Company’s policy not to
take any depreciation on assets acquired in the last half of a year.
2. On December 27, a branch office customer erroneously paid his account of P200,000 to the home office.
The bookkeeper made the correct entry on the home office books but did not notify the branch office.
3. On December 30, the branch office remitted cash of P500,000, which was received by the home office in
January, 2016
4. On December 3, the branch office erroneously recorded the December allocated expenses from the home
office as P50,000 instead of P150,000.
5. On December 31, the home office shipped merchandise billed at P300,000 to the branch office, which was
received in January, 2015.
6. The entire opening inventory of the branch office had been purchased from the home office, Home office
2015 shipments to the branch officer were purchased by the home office in 2015. The physical inventories at
December 31, 2015, excluding the shipment in transit, are:
Home office 5,500,000 (at cost)

Branch office 2,000,000 (comprised of P1,800,000 from home office and P200,000
from outside vendors)
7. The home office consistently bills shipments to the branch office at 20% above cost. The sales account is
credited for the invoice price.
How much is the correct net income of the branch?

a. 2,340,000
b. 2,240,000
c. 2,100,000
d. 2,200,000
____ 7. Below is the unadjusted trial balance of Elmer Corporation at December 31, 2015
Debit Credit
Cash 2,500
Installment accounts receivable, 2014 20,000
Inventory, December 31, 2015 100,000
Other assets 248,500
Accounts payable - trade 25,000
Unrealized gross profit, 2013 10,000
Capital stock 300,000
Retained earnings 40,000
Gain on repossession 3,000
Operating expenses 25,000
Total 466,000 466,000
Cost of goods sold had been uniform over the years at 60% of sales.
Elmer Corporation adopts perpetual inventory procedures. On installment sales, the corporation charges
installment accounts receivable and credits inventory gross profit accounts.
Repossessions of merchandise have been made during the 2015 due to some customers’ failure to pay
maturing installments. Analysis of these transactions were summarized as follows:
Inventory 3,750
Unrealized gross profit, 2013 400
Gain on repossession 1,350
The repossessed merchandise was unsold at December 31, 2015. It was ascertained that they were booked
upon repossession at original costs. A fair valuation of these items would be a sale price of the repossessed
merchandise at P5,000 after incurring costs of reconditioning of P2,500 and cost to dispose them in the
market at P250.
The realized gross profit on 2015 sales was:

a. 68,000
b. 28,000
c. 22,000
d. 62,000
____ 8. On March 31, 2011, C received from X P550,000 representing franchise fee. Franchise services were
immediately started by C and these were completed on Oct. 31, 2011 at a cost of P330,000. Further the
franchisor is entitled to a 5% fee on gross sales payable within the first ten days of the following month.
The following year, the franchisee yielded gross sales of P9,000.000. C’s earned franchise fee for year 2012:
a. 550,000
b. 1,000,000
c. 670,000
d. 450,000
____ 9. Which of the following statement is wrong regarding the installment sales?
a. Trade-in merchandise and repossessed merchandise are considered as part of collections
and both are included in the total goods available for sale.
b. Gain in repossession may be recognized on the year the merchandise was repossessed.
c. Upon repossession the defaulted account is credited while the debit includes the true worth
of the repossessed merchandise.
d. Under the installment method, the deferred gross profit account must be set-up on the year
of sale and adjusted by the portion which is realized of the end of the year.
____ 10. If a partnership has only non-cash assets, all liabilities have been properly disbursed, and no additional
liquidation expenses are expected, the maximum potential loss to the partnership in the liquidation process
is:
a. the estimated proceeds from the sale of the assets less the book value of the non-cash
assets
b. the book value of the non-cash assets
c. the fair market value of the non-cash assets
d. none of the above
____ 11. What information is conveyed by the Statement of Realization and Liquidation?
a. Write up of assets
b. Recognition of recorded liabilities
c. Account balances reported by the company at the date of the filing of the bankruptcy
petition
d. Assets and liabilities but not stockholders’ equity
e. Cash receipts generated by the sale of the debtor's property
____ 12. When the outcome of the construction contract can be estimated reliably, which of the following accounting
treatment is proper?
a. The balance construction in progress account will be equal to cumulative construction
revenue recognized even if it is probable that total contract costs will exceed total contract
revenue.
b. The construction revenue shall be recognized only to the extent of contract costs incurred
that it is probable will be recoverable.
c. When it is probable that total contract costs will exceed total contract revenue, the
expected loss shall be recognized as an expense immediately without reference to the
stage of completion of the contract activity at the end of the reporting period.
d. The construction costs shall be deferred without reference to the stage of completion of the
contract activity at the end of the reporting period.
____ 13. Jim Builders reports under PAS 11, and constructed a new subdivision during 2013 and 2014 under contract
with Cactus Development Co. Relevant data are summarized below:
Contract amount P3,000,000
Costs 2013 1,200,000
2014 600,000
Gross profit 2013 800,000
2014 400,000
Contract billings 2013 1,500,000
2014 1,500,000
The Company uses the cost recovery method under PAS 11 to recognize revenue.
What would be the journal entry SDH would use to record revenue in 2014?
a. (DR) Construction-in-progress 1,200,000
(DR) Costs of construction 600,000
(CR) Revenue for long-term contracts 1,800,000
b. (DR) Construction-in-progress 400,000
c. (DR) Costs of construction 2,000,000
(DR) Gross profit 1,000,000
d. (DR) Accounts receivable 1,500,000
____ 14. On a statement of financial affairs, a specific liability may be classified as

a. secured or unsecured
b. current or long-term
c. direct or indirect
d. monetary or nonmonetary
e. past due or not yet due
____ 15. On December 1, 2013, the Raffy Company established an agency in Las Pinas, sending its merchandise
samples costing P15,750 and a working fund of P9,000 to be maintained on the imprest basis. During the
month of December, the agency transmitted to the home office sales orders which were billed at P64,380 of
which P20,400 was collected. A home office disbursement chargeable to the sales agency is the acquisition of
furniture and fixtures for Las Pinas, P25,000 to be depreciated at 24% per annum. The agency paid expenses
of P3,815 and received replenishment thereof from the home office. On December 31, 2013, the agency
samples were valued at P10,075. It was estimated that the gross profit on goods shipped to bill agency
sales orders average 25% of cost.
How much is the net income of the agency for the month ended December 31, 2013?
a. (2,614)
b. 3,386
c. 2,886
d. 12,876
____ 16. Josh and Nino form a partnership. Josh contributes into the partnership a personal computer that he has
used at home in nonbusiness related activities. Josh had paid P10,000 for the computer 2 years ago. The
current market value of the computer is P9,000. The partners, after reviewing BIR rules, assigned the
computer a useful life of 5 years. For financial reporting purposes, at what amount should the computer be
recorded in the partnership ledger?
a. 10,000
b. 9,000
c. 7,500
d. 6,000
____ 17. Dickie Corporation contracted to build a building for Dickson Company. The contract price was P500,000 and
Dickie estimated that construction costs would total P420,000. The construction period lasted until September
1, 2015. Costs during the each period, estimated total cost of the product at the end of the year, billings and
cash collected during the year were as follows:
2015 2016 2017

Cost during the period 105,000 195,000 125,000
Estimated or actual total costs 420,000 425,000 425,000
Billings during the period 100,000 150,000 250,000
Cash collected during the period 80,000 140,000 260,000
The amount of gross profit recognized in 2016 using the percentage of completion method must be:
a. 32,942.50
b. 36,500
c. 20,000
d. 80,000
____ 18. Onyok Bank holds a P50,000 note secured by a building owned by Jojo Trading, which has filed for
bankruptcy under the Insolvency Law. If the property has a book value of P60,000 and a fair market value of
P45,000, what is the best way to describe the note held by Onyok Bank? The bank has:
a. A secured claim of P5,000 and an unsecured claim of P45,000.
b. A secured claim of P50,000.
c. A secured claim of P45,000 and an unsecured claim of P5,000
d. An unsecured claim of P50,000.
____ 19. Which of the following transactions will increase the normal balance of home office account in the separate
statement of financial position of the branch?
a. Payment by the branch of home office’s loans payable
b. Collection by the home office of branch’s receivable
c. Credit memo issued by the home office
d. Debit memo received from the home office
____ 20. The following transactions were incurred for the year by the Company:
1. Transfer of P13,000 merchandise to an agency to establish a working fund.

2. Receipt of sales orders from the agency, P130,000.
3. Collection of agency accounts by the home office, P91,000.
4. Home office disbursements representing agency expenses, P11,700.
5. Replenishment of the agency working fund upon receipt of expense vouchers for P5,850.
6. Cost of goods sold identified with the agency sales, P93,600.
How much is the net income traceable to the agency?

a. 18,850
b. (72,150)
c. 5,850
d. 36,400
____ 21. A franchise agreement grants the franchisor an option to purchase the franchisee’s business.It is probable
that the option will be exercised. When recording the initial fee, the franchisor should
a. record the entire initial franchise fee as unearned revenue which will reduce the amount of
cash paid when the option is exercised
b. record the portion of the initial franchise fee which is attributable to the bargain purchase
option as a reduction of the future amounts receivable from the franchisee.
c. record the entire initial franchise fee as a deferred credit which will reduce the franchisor’s
investment in the purchased outlet when the option is exercised.
d. none of the answers are correct
____ 22. Partnership drawings are

a. always maintained in a separate account from the partner's capital account.
b. not discussed in the specific contract provisions of the
partnership.
c. usually maintained in a separate draw account with any excess
draws being debited directly to the capital account.
d. equal to partners' salaries.
____ 23. On July 1, 2012, XYZ Construction Corp. contracted to build an office building for ABC. Inc. for a total
contract price of P975,000.
2012 2013 2014

Contract cost incurred to date 75,000 600,000 1,050,000
Estimated costs to complete the contract 675,000 400,000 -
Billings to ABC, Inc. 150,000 550,000 275,000
How much is the Construction in Progress account balance at December 31, 2013, using the percentage
of completion method?
a. 350,000
b. 825,000
c. 900,000
d. 575,000
____ 24. The doctrine of marshaling of assets

a. is applicable if either the partnership is insolvent or individual partners are insolvent
b. allows partners to first contribute personal assets to unsatisfied partnership creditors
c. is applicable only if the partnership is insolvent
d. provides that when the Uniform Partnership Act is adopted, amounts owed to personal
creditors and to the partnership for debit capital balances are shared proportionately from
the personal assets of the partners
____ 25. On January 2, 2017, Diversified Enterprises signed a franchise agreement with DTSI Company for an initial
franchise fee of P92,500. Of this amount DTSI paid P17,500 upon the signing of the franchise contract and
the balance is payable in four annual payments of P18,750 starting December 31, 2017. DTSI issued 12%
interest-bearing notes for the balance. Collection of the notes are not reasonably assured.
The down-payment is not refundable; it represents the actual cost of initial services provided by Diversified
before formal signing. However, additional substantial services have yet to be performed by Diversified.
During 2017 additional direct franchise cost of P45,750 and indirect cost of P15,000 were incurred by
Diversified.
It is also agreed that DTSI will pay continuing franchise fee at 3% of its gross sales revenue. The franchise
outlet commenced business operations on October 1, 2017 and its gross sales totaled P600,000 by year-end.
The net income recognized by Diversified from the DTSI franchise in 2017 is
a. 16,590
b. 19,312.50
c. 36,812.50
d. 37,150
____ 26. S and L owes the Cris Corporation 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 Cris account with an
estimated realizable value of P4,500. If the dividend to general unsecured creditors is 80%, how much can
Cris expect to receive?
a. 5,700
b. 4,800
c. 5,800
d. 6,000
____ 27. A franchisor signed a contract with a franchisee on September 1, 2016. The franchisor receives a partial
payment of the initial franchise fee to its franchisee and the balance of the franchise fee is due in the next
several years. The franchisor does not recognize revenue from franchise fee in 2016 when
a. The period of refund has elapsed, collection of the note is certain, the franchisor has a fair
measure of services already period performed, but substantial services remain to be
performed.
b. The downpayment is refundable and substantial future services remain to be performed by
the franchisor.
c. The downpayment is nonrefundable, collection of the note is reasonable assured, and the
franchisor has performed substantially all of the services required by the initial fee.
d. The refundability period has expired and no future services are required by the franchisor
but collection of the note is highly uncertain.
____ 28. Andok’s lechon manok, franchiser, entered into franchise agreement with Simon, franchisee, on March 31,
2013. The total franchise fee is P500,000 of which P100,000 is payable upon signing and the balance in
four equal annual installments. The down payment is refundable in the event the franchiser fails to render
services and none thus far had been rendered. When Simon prepares its financial statements on March
31, 2013, the unearned franchise fee revenue to be reported is:
a. 100,000
b. 500,000
c. 400,000
d. 0
____ 29. On its balance sheet, a company undergoing reorganization should

a. report its assets as pledged or free
b. continue to report its assets at book value
c. report its assets at net realizable value because there is reason to doubt that the
organization is a going concern
d. report its assets at current replacement cost
e. report its assets at fair market value, so that financial statement users can estimate whether
creditors' claims will be met
____ 30. Partner T is personally insolvent, owing P400,000. Personal assets will only bring P150,000 when liquidated.
At the same time, T has a credit capital balance in the partnership of P85,000. The capital amounts of the
other partners total a (credit) balance of P200,000. Under the doctrine of marshaling of assets, the personal
creditors of T can collect up to __________.
a. 400,000
b. 435,000
c. 235,000
d. 150,000
____ 31. Jodee Construction’ Enterprises, a franchisor, charges franchisees a “franchise fee” of P500,000. Of this
amount, a non-refundable P200,000 is paid upon the signing of the contract with the balance payable in three
equal installments after each year thereafter. Jodee Construction’ will assist in locating a suitable business site,
conduct a market study, oversee the construction of facilities, and provides initial training for employees.
On December 1, 2013, Jodee Construction’ signed a franchising agreement for the U-belt area. By the end of
2013, it was determined that the substantial performance of the initial services had cost Jodee Construction’ a
total P150,000 and that collection of the balance of the franchise fee has been reasonably assured. In its 2013
income statement,
Jodee Construction’ should report franchise revenue and net income:

a. 0
b. 500,000
c. 300,000
d. 350,000
____ 32. How should the fresh start reorganization value normally be determined?
a. as the sum of the historical cost of net assets
b. as the sum of current replacement cost of the company's assets
c. by adjusting current cash flows for the entity as it emerges from reorganization
d. as the sum of the net realizable value of identifiable assets
e. by discounting future cash flows for the entity that will emerge
____ 33. On January 2, 2015, Mycor’s Inc. signed an agreement to operate as franchisee of Mang Inasal for an initial
franchise fee of P2,343,750 for 10 years. Of this amount, P468,750 was paid when the agreement was signed
and the balance payable in three annual payments beginning on December 31, 2015. Mycor’s signed a non-
interest bearing note for the balance. The implicit interest rate is 18%. Assume that substantial services
amounting to P730,000 had already been rendered by the franshisor and indirect costs of P53,750 have also
been incurred.
If collection of the note is not reasonably assured, calculate the net income. For the year ended December
31, 2015. Use PV factor 2.17.
a. 700,150
b. 456,026
c. 753,900
d. 509,776
____ 34. On July 1, the Joshua Company, organized a sales outlet in Cebu City. Following are the home office-branch
transactions for the month of July:
July 1 The home office transferred P250,000 to its Cebu branch.

2 Merchandise costing the home P30 per unit was shipped to the branch at an
invoice price of P40 per unit. Ten thousand units were shipped on July 2; a
second order was to be filled by local suppliers.
2 Shipping costs on the above were paid as follows:
By the office: P15,000
By the branch: P5,000
5 Additional merchandise was acquired by the branch from regional
distributors, 5,000 units at P31
6 Display equipment was purchased by the home office, cost P360,000, and
was delivered to the branch. Plant assets accounts were kept by the home
office.
10 Branch sales for the period July 3-10; on account, 8,000 units at P50.
18 Branch collections on account, P320,000
25 Branch sales for the period July 11-24; on account, 5,000 units at P50
29 Cash remittance by branch to home office, P100,000
30 Monthly summary of branch cash expenses: Advertising (P4,000); Sales
commission (65,000); Miscellaneous (P1,000)
31 Depreciation recorded by the home office for July included P15,000 that
related to the display equipment used by the branch. Insurance on this
equipment was amortized by the home office in the amount of P2,500.
31 Inventories of merchandise at the branch on July 31 included the following:
From the home office (1,500 units x P40)
From local suppliers (500 units x P31)
Determine the correct balance of reciprocal account after recording branch net income or loss.
a. 648,500
b. 665,500
c. 599,500
d. 582,500
____ 35. Michael, Gabriel, and Raphael are partners sharing profits on a 5:3:2 ratio. On January 1, 2014, Joshua was
admitted into the partnership with a 20% share in profits. The old partners continue to participate in profits in
their original ratios.
For the year 2014, the partnership book showed a net income of P25,000. It was disclosed, however, that the
following errors were committed:
2013 2014
Accrued expenses not recorded at year-end 1,200
Inventory overstated 3,100
Purchases not recorded, for which goods have been received inventories 2,000
Income received in advance not adjusted 1,500
Unused supplies not taken up at year-end 900
The share of partners Michael in the 2014 corrected net income is:
a. 11,750
b. 9,400
c. 10,000
d. 12, 500
____ 36. Which of the following best describes the use of interest on invested capital as a means of allocating profits?
a. Interest is allocated only if there is partnership net profit.
b. Use of beginning or ending measures of invested capital may be subject to manipulation
that distorts the measure of invested capital.
c. Invested capital balances are never affected by drawings of the partnerships.
d. If interest on invested capital is used, it must be used for all partners.
____ 37. Michael, Gabriel, and Raphael are partners sharing profits on a 5:3:2 ratio. On January 1, 2014, Joshua was
admitted into the partnership with a 20% share in profits. The old partners continue to participate in profits in
their original ratios.
For the year 2014, the partnership book showed a net income of P25,000. It was disclosed, however, that the
following errors were committed:
2013 2014
Accrued expenses not recorded at year-end 1,200
Inventory overstated 3,100
Purchases not recorded, for which goods have been received inventories 2,000
Income received in advance not adjusted 1,500
Unused supplies not taken up at year-end 900
The new profit and loss ratio of Michael, Gabriel, Raphael and Joshua, respectively for 2014 is
a. 40%; 25%; 15%; and 20%
b. 50%; 20%; 10%; and 20%
c. 45%; 30%; 15%; and 20%
d. 40%; 24%; 16%; and 20%
____ 38. Kenneth Company, Inc. franchisor, entered into a franchise agreement with Orville Trading, franchisee on
March 31,2013. The total franchise fee is P500,000, of which P100,000 is payable upon signing and the
balance in four equal annual installments. The downpayment is refundable in the event the franchisor fails to
render services and none thus far had been rendered. When Kenneth Company prepares its financial
statements on March 31, 2013, the franchise fee revenue to be reported is:
a. 500,000
b. 400,000
c. 100,000
d. 0
____ 39. James Company is a dealer of mobile system. The company gives trade discounts of 15%. On May 1, 2018,
Jerry purchased a mobile system with an invoice price of P780,000. The mobile system costs P52,000. James
granted an allowance of P120,000 to Jerry’s old mobile system as trade-in the current market value of which
is P140,000. The balance is payable as follows: 30% at the time of purchase while the rest is payable in five
installments at the end of each month commencing the month of sale. Jerry defaulted on his payments starting
August 31, 2018 and the mobile system sold to him was repossessed. The fair value of the repossessed
merchandise is P120,000 before reconditioning costs of P20,000.
What is the resulting net income from the transactions?

a. 199,000
b. 195,200
c. 215,320
d. 215,200
____ 40. A, B, and C decide to dissolve their partnership on May 31, 2013. On this date their capital balances
and profit percent were as follows:
A P150,000 40%
B P180,000 30%
C P60,000 30%
The net income from Jan. 1 to May 31, 2013 was P132,000. Also on May 31, 2013, the partnership cash and
liabilities, respectively, were P120,000 and P270,000. For A to receive P165,600 in full settlement of his
interest in the partnership., how much must be realized from the sale of the partnership’s non cash assets?
a. 189,000
b. 243,000
c. 579,000
d. 633,000
____ 41. A local partnership is liquidating and is currently reporting the following capital balances:
Angela, capital (50% share of all profits and losses) 19,000

Woodrow, capital 18,000
Cassidy, capital (12,000)
Cassidy has indicated that a forthcoming contribution will cover the P12,000 deficit. However, the two
remaining partners have asked to receive the P25,000 in cash that is presently available. How much of this
money should each of the partners be given?
a. Angela (12,000); Woodrow (13,000)
b. Angela (13,000); Woodrow (12,000)
c. Angela (12,500); Woodrow (12,500)
d. Angela (11,500); Woodrow (13,500)
____ 42. Which one of the following is a requirement that must be met before an involuntary bankruptcy petition can
be filed?
a. The petition must be signed by creditor(s) with unsecured debts of at least P5,000
b. The petition must be signed by a majority of the creditor(s)
c. The petition must be signed by creditor(s) with unsecured debts of at least P13,475
d. The petition must be signed by creditor(s) to whom the debtor owes more than half of its
debts
e. The petition must be filed by all creditor(s) to whom the debtor owes at least P13,475
____ 43. On January 2, 2017, Magnolia Ice Cream signed an agreement authorizing Trisha to operate as franchisee for
an initial franchise fee P500,000 received upon signing of the agreement. Trisha commenced operations on
August 1, 2017, at which date all of the initial services required of Magnolia Ice Cream had been performed
at a cost of P120,000. The franchise agreement further provides that Trisha must pay a 10% monthly
continuing franchising fee. Sales reported from August 1 to December 31, 2017 amounts to P400,000.
What is the net income related with franchise fee to be reported by Magnolia Ice Cream in 2017?
a. 420,000
b. 500,000
c. 380,000
d. 540,000
____ 44. The following data are provided by Bingo Corp. , which is undergoing liquidation process:
1 Total liabilities amounts to P692,000. 35% is secured by assets amounting to P270,000

with a FMV of P250,000; 40% is secured by assets amounting to P300,000 with FMV of
P225,000.
2 Total assets amounts to P890,000 and has a total FMV of P695,000
3 Unpaid income taxes amounts to P35,000. Additional salaries payable and administrative
expenses totalled P28,000.
Which of the following statements is correct?

a. The estate deficit amount to P60,000.
b. The assets available to all unsecured creditors with and without priority is P227,800.
c. The amount paid to partially secured creditors is P225,000.
d. The amount paid to all secured creditors is P695,000.
____ 45. A balance sheet for the partnership of KK, LL, and MM, who share profits 2:1:1 respectively, shows the
following balances just before liquidation:
Cash 48,000
Other assets 238,000
Liabilities 80,000
KK, Capital 88,000
LL, Capital 62,000
MM, Capital 56,000
In the first month of liquidation, P128,000 was received on the sale of certain assets. Liquidation expenses of
P4,000 were paid, and additional liquidation expenses of P3,200 are anticipated before liquidation is
completed. Creditors were paid P22,400. Available cash is distributed to the partners. The cash to be
received by each partner based on the above data:
a. KK, 29,400; LL, 32,700; MM, 26,700
b. KK, 56,600; LL, 28,300; MM, 28,300
c. KK, 88,000; LL, 62,000; MM, 56,000
d. KK, 86,000; LL, 61,000; MM, 55,000
____ 46. A partnership agreement calls for allocation of profits and losses by salary allocations, a bonus allocation,
interest on capital, with any remainder to be allocated by preset ratios. If a partnership has a loss to allocate,
generally which of the following procedures would be applied?
a. Any loss would be allocated equally to all partners
b. Any salary allocation criteria would not be used
c. The loss would be allocated using the profit and loss ratios, only
d. The bonus criteria would not be used
____ 47. The Allan Company is attempting to determine the total revenue on a contract to build a factory for The
Marcelo Company. All calculations are in accordance with PAS 11:
Construction contracts, and Allan has identified the following:
Initially agreed fixed contract price 800,000

Variation in the contract (see Note 1) 100,000
Penalty (Note 2) 30,000
1. During the contract Marcelo changed the specification of the air conditioning systems. The changes
specification has been agreed but a new contract with the new price has not yet been signed, although an
increase in the contract price of around P100,000 is highly probable.
2. A strike at Allan caused a delay for which the penalty in the original contract was P30,000. This was agreed
by both parties.
At what amount should the total contract revenue be stated?

a. 770,000
b. 800,000
c. 870,000
d. 900,000
____ 48. When a secured claim is not fully settled by the selling of the underlying collateral
a. The unsettled portion of the claim cannot be collected by the creditor
b. The unsettled portion remains as a secured claim
c. The unsettled portion is classified as an unsecured priority claim
d. The unsettled portion remains as an unsecured priority claim.
____ 49. Jim Builders constructed a new subdivision during 2013 and 2014 under contract with Cactus Development
Co. Relevant data are summarized below:
Contract amount P3,000,000

Costs 2013 1,200,000
2014 600,000
Gross profit 2013 800,000
2014 400,000
Contract billings 2013 1,500,000
2014 1,500,000
The Company uses the percentage-of-completion method to recognize revenue.
What would be the journal entry to record revenue in 2014?

a. (DR) Accounts receivable 1,500,000
b. (DR) Construction-in-progress 400,000
c. (DR) Costs of construction 2,000,000
(DR) Gross profit 1,000,0000
d. (DR) Accounts receivable 1,500,000
(CR) Costs of construction 600,000
(CR) Gross profit 600,000
(CR) Deferred revenue 300,000
____ 50. Which of the following statements is wrong regarding long-term construction contracts?
a. General administrative costs may be part of contract costs but would usually be expensed.
b. The amount of expected warranty cost is part of the estimated cost at completion.
c. The latest estimated of anticipated cost of materials, labor and subcontracting costs and
indirect cost required to complete a project should be used to determine the progress
toward completion.
d. If upon completion of the project the balance of Progress Billings is greater than the
balance of Construction in Progress, the excess is due to customer which is a liability.
____ 51. The home office in Mandaluyong shipped merchandise costing P21,690 to Caloocan branch and paid for the
freight charges of P3,980. Caloocan branch was subsequently instructed to transfer the merchandise to Manila
Branch wherein Manila branch paid for P1,250 freight. If the shipment was made directly from Mandaluyong
to Manila, the freight cost would have been P5,500.
As a result of the interbranch transfer of merchandise, which of the following statements is wrong?
a. The Home Office will debit excess freight of P270
b. The Caloocan branch will debit the amount of P25,670 to Home Office Current account
c. The Manila branch will credit the amount of P25,940 to Home Office Current account
d. The Manila branch will debit freight-in amounting toP5,500
____ 52. Which of the following is not one of the more common reorganization plan elements?
a. plans proposing changes in the company's operations
b. plans for changes in the management of the company
c. plans for generating additional monetary resources
d. plans for plant expansion
e. plans to settle the debts of the company that existed when the order for relief was entered
____ 53. A partnership has the following balance sheet just before the final liquidation is to begin:
Cash 26,000 Liabilities 50,000

Inventory 31,000 Art Capital (40%) 18,000
Other assets 62,000 Raymond Capital (30%) 25,000
Darby Capital (30%) 26,000
Total 119,000 Total 119,000
Liquidation expenses are estimated to be P12,000. The other assets are sold for P40,000. What distribution
can be made to the partners?
a. Art (1,333); Raymond (1,333); Darby (1,334)
b. Art (0); Raymond (1,500); Darby (2,500)
c. Art (600); Raymond (1,200); Darby (2,200)
d. Art (0); Raymond (1,200); Darby (2,800)
____ 54. TD decided to withdraw from his partnership with SM and MR. Before his withdrawal, TD's capital balance
was P 58,000, while SM's was P64,000 and MR's was P77,000. Also, the partnership's total assets amounted
to P 450,000, but the partners agreed that a fixed asset was under depreciated by P15,000. TD, SM and MR
share profits and losses in the ratio of 2:4:4, respectively. If TD was paid P53,200 upon his retirement, how
much is the remaining partnership net assets after TD's withdrawal?
a. 130,800
b. 182,800
c. 160,800
d. 197,800
____ 55. The following condensed balance sheet is presented for the partnership of Maria, Mary and Marriane, who
share profits and losses in the ratio 4:3:3, respectively:
Cash 4,500
Other assets 41,500
Maria, loan 1,000
47,000
Accounts payable 10,500

Marriane, loan 1,500
Maria, Capital 15,500
Mary, Capital 10,000
Marriane, Capital 9,500
47,000
Assume that instead of admitting a new partner, the partners decide to liquidate the partnership. If the other
assets are sold for P35,000, how much cash should be distributed to Maria?
a. 11,900
b. 12,900
c. 15,500
d. 11,500
____ 56. In 2015, Jerico Construction Company was contracted to do private road network of Philip Corporation for
P50 million. The project was estimated to be complete in two years.
The construction contract provided amount other things the following:

1. 5% mobilization fee (to be deducted from the last billing) payable within 15 days after the signing of the
contract.
2. Retention provision of 10% on all billings.
3. Progress billings on construction are payable within seven days from date of acceptance.
Winton estimated its gross margin on the project at 25% and used the percentage of completion method of
accounting. By the end of the year, Jerico presented progress billings corresponding to 50% completion.
Philip Corporation accepted all the bills presented except the last one for 10% which was accepted on January
10. With the exception of the last billing of 8% accepted in 2015 which was due on January 3, 2017 all
accepted billings were settled in 2015.
The gross profit recognized by Jerico Construction Company for 2015 is:
a. 12,500,000
b. not determinable
c. 25,000,000
d. 6,250,000
____ 57. Al Corporation has been using the cash method to account for income since its first yeat of operations in
2015. All sales are made on credit with notes receivable given by the customers. The income statements for
2015 and 2016 included the following amounts:
2015 2016
Revenues - collection on principal 64,000 100,000
Revenues - interest 7,200 11,000
Cost of goods purchased which includes increase in iventory
of goods on hand of P4,000 in 2015 and P16,000 in 2016 90,400 104,040
The balances due on the notes at the end of each year were as follows:
2015 2016
Notes receivable - 2015 124,000 72,000
Notes receivable - 2016 120,000
Unearned interest revenue - 2015 14,334 11,158
Unearhed interest revenue - 2016 16,086
Under the installment method, how much is the realized gross profit in 2016?
a. 43,230
b. 24,534
c. 22,124
d. 46,658
____ 58. A partnership begins its first year with the following capital balances:
Diane, capital 60,000

Dada, capital 80,000
Debbie, capital 100,000
The articles of partnership stipulate that profits and losses be assigned in the following manner:
1 Each partner is allocated interest equal to 10% of the beginning capital balance.
2 Dada is allocated compensation of P20,000 per year.
3 Any remaining profits and losses are allocated on a 3:3:4 basis, respectively.
4 Each partner is allowed to withdraw up to P5,000 cash per year.
Assuming that the net income is P50,000 and that each partner withdraws the maximum amount allowed,
what is the balance in Debbie’s capital account at the end of that year?
a. 105,800
b. 106,900
c. 107,400
d. 106,200
____ 59. The fair market value of a partnership can be implied by

a. adding the incoming partner's market value of consideration to the book value of the
existing partnership
b. The incoming partner's market value of consideration divided by the incoming partner's
percentage share in profit and loss.
c. the incoming partner's percentage ownership share in the new partnership.
d. the tax basis of the old partner's assets added to the incoming partner's consideration
____ 60. The Rommel Company was organized in 2015. Shortly after opening its doors to the public at the main store,
Rommel Company established a branch in another city. At the end of the second year of operations, the home
office received the following condensed income statement from the branch:
Revenues 280,000
Cost of goods sold 220,000
Gross margin 60,000
Selling and administrative expenses 50,000
Net income 10,000
The management at the home office questioned the accuracy of these figures and assigned you the task of
verifying the branch data. Your review of the records uncovered the following facts:
1. The beginning of year balance in unrealized profit to branch was P12,000.
2. During the period, the home office shipped goods to the branch that had cost the main store P150,000.
However, your review of the branch receiving reports revealed that a number of shipments from the home
office had been recorded twice by the branch accountant.
3. The branch is billed a uniform 25% above cost and receives inventory only from the home office.
4. The branch ending inventory was correctly reported at a billed price of P43,500.
5. When reconciling reciprocal accounts, you found that the branch had not recorded P4,000 of services
performed by the Home Office and billed to the branch. All other selling and administrative expenses were
correctly reported by the branch.
Compute the correct net income of the branch.

a. 62,800
b. 50,800
c. 22,000
d. 66,800
____ 61. On July 1, 2015, DMCI Construction Company contracted to build an office building for RH Corporation for
a total contract price of P9.75 million. On July 1, Mean estimated that it would take between 2 to 3 years to
complete the building. On December 31, 2017, the building was deemed substantially completed. Following
are accumulated contract costs incurred, total estimated costs, and accumulated billings to RH for 2015, 2016,
and 2017.
12/31/2015 12/31/2016 12/31/2017

Contract costs incurred to date 750,000 6,000,000 10,500,000
Total estimated costs 7,500,000 10,000,000 -
Billings to RH 1,500,000 5,500,000 9,250,000
Using the percentage of completion method, determine the correct income (loss) from construction to be
presented in the income statement of the company for the years 2015, 2016 and 2017, respectively.
a. P225,000; (P225,000); (P750,000)
b. P225,000; (P475,000); (P500,000)
c. P225,000; P250,000; (P750,000)
d. P225,000; (P250,000); (P500,000)
____ 62. The Home Office in Makati shipped merchandise costing P80,000 to Manila branch and paid for the freight
charges of P600. The home office bills the branch at 125% of cost. Manila branch was subsequently
instructed to transfer one-half of the merchandise to Quezon City branch wherein Quezon City branch
paid for P200 freight. If the shipment was made directly from Makati to Quezon City, the freight cost would
have been P400. By how much will Manila Branch charge the Home Office account?
a. 50,500
b. 51,300
c. 50,300
d. 50,600
____ 63. Lawyer's fees incurred during a reorganization are accounted for with a debit to
a. a liability
b. additional paid-in capital
c. an intangible asset, Reorganization Cost, which would normally be amortized over a five-
year period
d. retained earnings
e. an expense
____ 64. Manalo Construction Company began operations in 2015. Construction activity for the first year is shown
below. All contracts are with different customers, and any work remaining at December 31, 2015, is expected
to be completed in 2016.
Cash Contract Estimated

Billings collections costs incurred additional
Total contract through through through costs to
Project price 12/31/2015 12/31/2015 12/31/2015 complete
1 280,000 180,000 340,000 450,000 140,000
2 335,000 110,000 210,000 126,000 504,000
3 250,000 250,000 440,000 330,000 -
865,000 540,000 495,000 453,000 322,000
Determine the income from construction to be reported in the income statement for the year 2015.
a. 74,000
b. 45,000
c. 43,000
d. 30,000
____ 65. C, D and E were partners with capital balances on January 2, 2013of P660,000, P440,000 and P220,000,
respectively. On July 1, 2013 C retires from the partnership. On the date of retirement the partnership net loss
is P132,000 and the partners agreed that certain asset is to be revalued at P176,000 from its original cost of
P110,000. The partners agreed further to pay C P495,000 in settlement of his interest. The remaining partners
continue to operate under a new partnership, DE partnership.
What is the total capital of DE partnership?

a. 627,000
b. 748,000
c. 616,000
d. 759,000
____ 66. DMCI contractors had a 3-year construction contract in 2012 for P900,000. The company uses the percentage
of completion method for financial statement purposes. Income to be recognized each year is based on the
ratio of cost incurred to total estimated cost to complete the contract. Data on this contract follows:
Accounts receivable - construction contract billings 30,000

Construction in progress 93,750
Less: Amount billed 84,375
10% retention 9,375
Net income recognized in 2012 before tax 15,000
DMCI contractors maintains a separate bank account for each construction contract. Bank deposits to this
contract amounted to P50,000.
What was the estimated total income before tax on this contract?
a. 45,000
b. 135,000
c. 94,000
d. 144,000
____ 67. During a reorganization, cash reserves tend to grow. How should interest earned on these reserves be
reported on the financial statements?
a. on the balance sheet as a long-term liability
b. on the income statement as a reorganization item
c. as a credit directly to retained earnings
d. on the income statement, but not classified as a reorganization item
e. as an unearned revenue until the reorganization is complete
____ 68. Romeo Construction has consistently used the percentage of completion method. On January 10, 2015,
Romeo began work on P1,500,000 construction contract. At the inception date, the estimated cost of
construction was P1,125,000. The following data relate to the progress of the contract:
Income recognized at December 31, 2015 150,000
Costs incurred January 10, 2015 through December 31, 2016 900,000
Estimated cost to complete, December 31, 2016 300,000
What percent was completed in 2016?

a. 35%
b. 75%
c. cannot be determined
d. 40%
____ 69. The Bem Company has just completed a 4 year contract to which the following relate:
Labor and materials costs 1,800

Machinery cost 600
Initial design costs 100
Disposal proceeds of machinery 50
What are the total contract costs, according to PAS 11 Construction contracts?
a. 1,900
b. 2,500
c. 2,350
d. 2,450
____ 70. Jinkee 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 1,375,000
Assets acquired 750,000
Assets realized 1,200,000
Assets not realized 1,375,000
Liabilities:
Liabilities liquidated 1,875,000
Liabilities not liquidated 1,700,000
Liabilities to be liquidated 2,250,000
Liabilities assumed 1,625,000
Revenues and Expenses:
Supplementary charges/debits 3,125,000
Supplementary credits 2,800,000
The net gain (loss) for the three-month period ending March 31 is:
a. 750,000
b. (325,000)
c. 250,000
d. 425,000
AFAR
Answer Section
MULTIPLE CHOICE
1. ANS: D TOP: Corporate Liquidation
2. ANS: C
SOL:
Unearned franchise fee: p100,000 x 2.914 = P291,400
Since the franchise maybe canceled with any outstanding balance to be waived, then that amount still to be
collected is considered unearned.
TOP: Franchise Accounting
3. ANS: D TOP: Construction Accounting
4. ANS: B TOP: Corporate liquidation
5. ANS: D
SOL:
Total contract price 40,000,000
Total estimated costs
2015 10,050,000
2016 15,075,000
2017 8,375,000 33,500,000
Estimated gross profit 6,500,000
2017 gross profit (8,375,000/33.500,000 x 6,500,000) 1,625,000
TOP: Construction Accounting
6. ANS: C
SOL:
Reciprocal accounts
Branch Home office
Unadjusted balance 2,000,000 900,000
1. Furniture purchased by the branch (400,000)
2. Collection of branch accounts (200,000)
3. Remittance in transit (500,000)
4. Error on allocated expenses 100,000
5. Shipment in transit 300,000
Adjusted balance 1,100,000 1,100,000
Net income of the branch

Sales 9,500,000
Correct cost of sales
Beginning inventory (1,500,000 x 5/6) 1,250,000
Add: Purchases from outsiders 2,400,000
Add: Shipments from home office at cost
(4,500,000 +300,000 x 5/6) 4,00,000
Less: Ending inventory (1,950,000) (5,700,000)
Gross profit 3,800,000
Less: Correct expenses (1,600,000 +100,000) (1,700,000)
Correct net income of the branch 2,100,000
TOP: Home Office & Branch Accounting
7. ANS: C
SOL:
50,000/.40 = 125,000 - 70,000 = 55,000 x 40% = 22,000
TOP: Installment Sales
8. ANS: D TOP: Franchise accounting
9. ANS: A TOP: Installment Sales
10. ANS: B TOP: Partnership
11. ANS: E TOP: Corporate liquidation
12. ANS: C TOP: Construction Accounting
13. ANS: A TOP: Construction accounting
14. ANS: A TOP: Corporate liquidation
15. ANS: C TOP: Home office & branch accounting
17. ANS: A
SOL:
Contract price 500,000
Total estimated costs 425,000
Estimated gross profit 75,000
Percentage of completion ((105,000 + 195,0000)/425,000) 70.59%
Gross profit realized to date 52,942.50
Less: Gross profit realized prior year
Total estimated cost (420,000)
Estimated gross profit prior year 80,000
Percent of completion (105,000/420,000) 25% (20,000)
Gross profit realized 2015 32,942.50
18. ANS: C TOP: Corporate liquidation
19. ANS: D TOP: Home Office & Branch Accounting
20. ANS: A
SOL:
Agency sales receipts 130,000
Cost of sales (93,600)
Gross profit 36,400
Expenses (11,700 + 5,850) (17,550)
Net income of the agency 18,850
21. ANS: C TOP: Franchise Accounting
22. ANS: C TOP: Partnership
23. ANS: D TOP: Construction accounting
24. ANS: A TOP: Partnership
25. ANS: B
SOL:
Journal entry upon signing of franchise contract
Cash 17,500
Notes receivable 75,000
Franchise revenue 17,500
Unearned franchise revenue 75,000
Installment sales 75,000

Installment cost 45,750
Gross profit 29,250
Gross profit % 39%
Initial franchise fee 17,500,000

Realized gross profit (18,750 x 39%) 7,312.50
Continuing franchise fees (600,000 x 3%) 18,000
Interest revenue (75,000 x 12%) 9,000
Direct cost (17,500)
Indirect cost (15,000)
Net income 19,312.50
26. ANS: A TOP: Corporate liquidation
27. ANS: B TOP: Franchise Accounting
28. ANS: B TOP: Franchise accounting
31. ANS: B TOP: Franchise accounting
33. ANS: A
SOL:
Downpayment 468,750
Present value (312,500 x 2.17) 1,356,250
IFF 1,825,000
Less: Franchise cost 730,000
Franchise profit 1,095,000
Gross profit rate (1,095,000/1,825,000) 60%
Realized gross profit (468,750 + ((625,000 - 244,125) x 60%) 509,775

Interest income 244,125
Expenses (53,750)
Net income 700,150
34. ANS: A
SOL:
Sales
(8,000 x 50) 400,000
(5,000 x 50) 250,000 650,000
Cost of sales:
Shipments from home office (10,000 x 40) 400,000
Add: Shipping costs (15,000 + 5,000) 20,000
Total 420,000
Less: Cost of ending inventory (1,500/10,000 x 63,000 (357,000)
420,000)
Purchases from outside suppliers (5,000 x 31) 155,000
Less: Ending inventory (500 x 31) 15,500 (139,500)
Gross profit 153,500
Less: Operating profit
Advertising 4,000
Sales commissions 65,000
Miscellaneous 1,000
Depreciation 15,000
Insurance 2,500 (87,500)
Net income reported by the branch 66,000
Cash to Cebu branch 250,000

Merchandise shipped to Cebu branch (40 x 10,000) 400,000
Shipping cost paid by the home office 15,000
Cash remittance by Cebu branch to home office (100,000)
Depreciation charged to Cebu branch by the home office 15,000
Insurance charged to Cebu branch by the home office 2,500
Branch reported net income 66,000
Balance of reciprocal accounts 648,500
35. ANS: B
SOL:
Net income per books 25,000
Accrued expenses not recorded at the end of 2013 1,200
Inventory overstatement at the end of 2014 (3,100)
Purchases not recorded in 2014 (2,000)
Income received in advance no adjusted at the end of 2013 1,500
Unused supplies not taken up at the end of 2014 900
Adjusted net income 23,500
40%
Profit share of Michael 9,400
TOP: Partnership
37. ANS: D
SOL:
Michael (50% x 80%) 40%
Gabriel (20% x 80%) 24%
Raphael (20% x 80%) 16%
100%
TOP: Partnership
38. ANS: D TOP: Franchise accounting
39. ANS: D TOP: Installment Sales
41. ANS: C
SOL:
Craig receives an additional P10,000. Since Craig is assigned 20% of all profits and losses, this allocation
indicates total goodwill of P50,000.
20% of goodwill = P10,000

Goodwill = P50,000
Montana is assigned 30% of all profits and losses and would, therefore, record P15,000 of this goodwill, an
entry that raises this partner’s capital balance from P130,000 to P145,000.
Amount paid 90,000

Less: Book value of interest of Craig (20%) 80,000
Excess 10,000
Divided by 20%
Goodwill - total implied 50,000
Montana, capital: 130,000 + (50,000 x 30%) 145,000
TOP: Partnership
42. ANS: C TOP: Corporate liquidation
43. ANS: A
SOL:
Cash received / Initial Franchise Fee 500,000
Direct cost (120,000)
Gross profit on initial franchise fee 380,000
Continuing franchise fee (400,000 x 10%) 40,000
Net income 420,000
Since the franchise reported gross sales starting August, therefore as of December 31, there is substantial
performance already and the initial franchise fee is recognized as revenue.
46. ANS: D TOP: Partnership
47. ANS: C TOP: Construction accounting
48. ANS: C TOP: Corporate Liquidation
49. ANS: B TOP: Construction accounting
50. ANS: D TOP: Installment Sales
51. ANS: A TOP: Home office & branch accounting
52. ANS: D TOP: Corporate liquidation
53. ANS: B
SOL:
Art Raymond Darby Total
Reported balances 18,000 25,000 26,000 69,000
Possible loss (26,000) (19,500) (19,500) (65,000)
(8,000) 5,500 6,500 4,000
Possible insolvency (3:3) 8,000 (4,000) (4,000) 0
Payment to partners - 1,500 2,500 4,000
TOP: Partnership
54. ANS: A
SOL:
Net assets before TD’s withdrawal (450,000 - 251,000) 199,000
Adjustment for depreciation (15,000)
Net assets, adjusted 184,000
Payment to TD (53,200)
Share in profit 130,800
TOP: Partnership
56. ANS: D
SOL:
Gross profit realized (P50,000,000 x 25% x 50%) = P6,250,000
57. ANS: D
SOL:
Gross profit in 2015
Sales in 2015:
Collected selling price equal to principal 64,000
collected
Selling price nor yet collected
Notes receivable, beginning 124,000
Less: Unearned interest revenue (14,334) 109,666 173,666
Cost of sales in 2015

Purchases 90,400
Less: Increase in inventory (4,000) 86,400
Gross profit 87,266
Gross profit rate (87,266/173,666) 50.25%
Realized gross profit in 2015

64,000 x 50.25% = 32,160
Gross profit in 2016

Sales in 2016:
Collected selling price for 2015 and 2016 100,000
Less: Sales of 2015 collected in 2016:
Notes receivable, beginning 124,000
Notes receivable, ending 72,000
Collected notes 52,000
Less: Interest collected (14,334 - 11,158) (3,176) 48,824
Collected selling price for 2012 sales 51,176
Selling price no yet collected for 2012 sales
Notes receivable, ending 120,000
Less: Unearned interest revenue (16,086) 103,914 155,090
Cost of sales in 2016:

Purchases 104,040
Less: Increase in inventory (16,000) 88,040
Gross profit 67,050
Gross profit rate (67,050/155,090) 43.23%
Realized gross profit in 2016

2015 sales (48,824 x 50.25% 24,534
2016 sales (51,176 x 43.23%) 22,124
46,658
TOP: Installment Sales
58. ANS: C
SOL:
Diane Dada Debbie TOTAL
Interest, 10% of beginning capital 6,000 8,000 10,000 24,000
Salary 20,000
Balance/Remainder (3:3:4) 1,800 1,800 2,400 6,000
Totals 7,800 29,800 12,400 50,000
Statement of Capital
Diane Dada Debbie TOTAL
Beginning capital 60,000 80,000 100,000 240,000
Net income (above) 7,800 29,800 12,400 50,000
Drawings (Given) (5,000) (5,000) (5,000) (5,000)
Ending capital 62,800 104,800 107,400 275,000
TOP: Partnership
60. ANS: A
SOL:
Correct net income: 280,000
Revenues
Cost of goods sold
Beginning inventory at cost (12,000/25%) 48,000
Add: Shipments at cost 150,000
Less: Ending inventory at cost (21,750/125%) (34,800) (163,200)
Gross margin 116,800
Selling and administrative expenses (25,000 + 2,000) (54,000)
Net income 62,800
61. ANS: B
SOL:
2015 2016 2017
Contract price 9,750,000 9,750,000 9,750,000
Total estimated costs 7,500,000 10,000,000 10,500,000
Estimated (actual) profit (loss) 2,250,000 (250,000) (750,000)
Percentage of completion
750,000/7,500,000 10%
Recognized in full 100% 100%
Gross profit to date 225,000 (250,000) (750,000)
Less: Gross profit (loss) prior year - 225,000 (250,000)
Gross profit (loss) during the year 225,000 (475,000) (500,000)
62. ANS: C TOP: Home office & branch accounting
64. ANS: A
SOL:
Project 1
Costs incurred during 2015 225,000
Estimated additional costs to complete 70,000 295,000
Gross loss during the year totally recognized (15,000)
Project 2
Costs incurred in 2015 63,000
Estimated additional costs to complete 252,000 315,000
Percentage of completion (63/315) 20%
Gross profit realized during the year 4,000
Project 3
Total actual costs incurred 165,000
Actual gross profit realized during the year 85,000
Total income from construction 74,000
65. ANS: D TOP: Partnership
66. ANS: D
SOL:
Gross profit rate (15,000/93,750) 16%
68. ANS: A
SOL:
Cost incorrect January 10, 2015 through December 31, 2016 900,000
Estimated cost to complete, December 31, 2016 300,000
Total estimated cost 1,200,000
Total percentage of completion as of December 31, 2016 (900,000/1,200,000) 75%
Income recognized December 31, 2015 150,000

Total estimated profit prior year (1,500,000 - 1,125,000) 375,000
Percentage of completion prior year (150,000/375,000) 40%
Percent completed in 2016 (75% - 40%) 35%

69. ANS: A TOP: Construction accounting
70. ANS: D TOP: Corporate liquidation

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2015 2016 2017

Your audit disclosed the following data:

Home office 5,500,000 (at cost)

How much is the correct net income of the branch?

The realized gross profit on 2015 sales was:

____ 14. On a statement of financial affairs, a specific liability may be classified as

2015 2016 2017

1. Transfer of P13,000 merchandise to an agency to establish a working fund.

How much is the net income traceable to the agency?

____ 22. Partnership drawings are

2012 2013 2014

____ 24. The doctrine of marshaling of assets

____ 29. On its balance sheet, a company undergoing reorganization should

Jodee Construction’ should report franchise revenue and net income:

July 1 The home office transferred P250,000 to its Cebu branch.

What is the resulting net income from the transactions?

Angela, capital (50% share of all profits and losses) 19,000

1 Total liabilities amounts to P692,000. 35% is secured by assets amounting to P270,000

Which of the following statements is correct?

Construction contracts, and Allan has identified the following:

Initially agreed fixed contract price 800,000

At what amount should the total contract revenue be stated?

Contract amount P3,000,000

The Company uses the percentage-of-completion method to recognize revenue.

What would be the journal entry to record revenue in 2014?

Cash 26,000 Liabilities 50,000

Accounts payable 10,500

The construction contract provided amount other things the following:

2. Retention provision of 10% on all billings.

Diane, capital 60,000

____ 59. The fair market value of a partnership can be implied by

1. The beginning of year balance in unrealized profit to branch was P12,000.

Compute the correct net income of the branch.

12/31/2015 12/31/2016 12/31/2017

Cash Contract Estimated

What is the total capital of DE partnership?

Accounts receivable - construction contract billings 30,000

What percent was completed in 2016?

Labor and materials costs 1,800

Net income of the branch

Installment sales 75,000

Initial franchise fee 17,500,000

Gross profit rate (1,095,000/1,825,000) 60%

Realized gross profit (468,750 + ((625,000 - 244,125) x 60%) 509,775

Cash to Cebu branch 250,000

20% of goodwill = P10,000

Amount paid 90,000

Cost of sales in 2015

Realized gross profit in 2015

Gross profit in 2016

Cost of sales in 2016:

Realized gross profit in 2016

Income recognized December 31, 2015 150,000

Percent completed in 2016 (75% - 40%) 35%

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