The 5th Panfilo O. Domingo Cup Jr.

A Mythical Tale: Uncovering the Accounting Lineage of the Fabled Beasts

FINAL ROUND

1. The relevant measure of value of the assets of a company that is going out of business is their:
a. Current market value
b. Book value
c. Historical cost
d. Higher of historical cost or current market value

2. Statement 1: A corporation, as an artificial being, can become a partner.

Statement 2: A corporation, having the right of succession, is affected by the insolvency of its
stockholders.
Which of the following statements is/are true?
a. Statement 1 only
b. Statement 2 only
c. Both are true
d. None of the above

3. During the month of May, Ford Company has the following transactions:
Revenue of P150,000 were earned of which P130,000 was received in cash.
Bank loan of P100,000 was released and P25,000 was paid.
Equipment worth P50,000 was purchased and 50% was paid in cash and the remaining on account.
Expenses of P75,000 were paid out of P85,000 that were incurred.
Additional cash investment by the owner was P50,000.
Owner’s drawing, P10,000
Cash balance at the beginning of the month was P95,000, owner’s equity was P45,000 and
liabilities was P50,000.
Cash balance at the end of May is _____________

ANSWER: P240,000

SOLUTION:
Cash, beginning P 95,000
Revenue 130,000
Bank Loan (100,000-25,000) 75,000
Equipment (50,000 x 50%) (25,000)
Expenses (75,000)
Additional Cash Investment 50,000
Owner’s drawing (10,000)
Cash, end P P240,000

4. Those that have been issued and fully paid for, but subsequently reacquired by the issuing corporation

Answer: Treasury shares

5. The partnership agreement of Jade, Seth, and Kim provides for the following allocation of profit in the
following order:
A. Jade is to receive 10% of profit up to P100,000 and 20% over P100,000.
 B. Seth and Kim are to receive 5% of each of the remaining profit over P150,000.
C. The balance of the profit is to be allocated equally among the partners.
The partnership’s net profit for the year ended December 31, 2018 was P250,000.

What amount should be allocated to Jade?

Answer: P108,000

SOLUTION:

Jade [100,000 * .10] P10,000

[150,000 * .20] 30,000
Share in the remaining profit [204,000 / 3] 68,000
Amount allocated to Jade P108,000
6. It refers to the total par value of all issued par value shares, or the total consideration received for all
issued no-par value shares.

Answer: Legal capital

7. The capital accounts for the partnership of Lynx, and Marie at October 31, 2018, are as follows:
Lynx, Capital P80,000
Marie, Capital 40,000
120,000
The partners share profits and losses in the ratio of 3:2 respectively.

The partnership is in desperate need of cash, and the partners agree to admit Nora as a partner
with one-third in the capital and profits and losses upon his investment of P30,000. Immediately
after Nora’s admission, what should be the capital balances of Lynx, Marie, and Nora, respectively,
assuming bonus is to be recognized?
a. P50,000 P50,000 P50,000
b. P66,667 P33,333 P50,000
c. P68,000 P32,000 P50,000
d. P60,000 P60,000 P60,000

Solution:
Agreed capital Contributed capital Bonus
Old P100,000 P120,000 (P20,000)
New 50,000 30,000 20,000
150,000 150,000

Lynx Marie Nora

Contributed capital P80,000 P40,000 30,000
Bonus (12,000) (8,000) 20,000
Agreed capital P68,000 P32,000 P50,000

8. The following are the beginning balances of Mr, Josh Shoes Sports Shop:
Cash P7,000 Accounts Payable P114,000
Accounts Receivable 58,000 Notes Payable 112,000
Inventories 124,000 Josh Shoes, Capital 103,000
Notes Receivable 140,000
 Additional information:
a. Mr. Josh shoes invested additional cash capital of P250,000
b. Mr. Josh shoes applied for a bank loan in the amount of P2,500,000
c. Mr. Josh shoes purchased inventories worth P136,000, with a down payment of P36,000 and
balance payable in 60 days
d. Mr. Josh shoes returned some defective inventoried amounting to P18,000.
e. The bank loan was approved and released to Mr. Josh Shoes and the loan proceeds was
booked
f. Mr. Josh Shoes received payment for the Accounts receivable

Accounts receivable balance as of the month end amount to ______________

ANSWER: P0

9. The BRC Company owns an office building and leases the office under a variety of rental agreement
involving rent paid in advance monthly or annually. Not all tenants make timely payments of their rent.
The company’s balance sheets contained the following data:

2010 2011
Rental receivable P 192,000 P 248,000
Unearned Rentals 640,000 480,000

During the year, the company received P1,600,000 from tenants. What amount of rental revenue
should the company record for the year 2011? __________

ANSWER: P1,816,000

SOLUTION:
Cash Received P 1,600,000
Unearned Rentals, beg. 640,000
Rental Receivable, end 248,000
Unearned Rentals, end (480,000)
Rental Receivable, beg. (192,000)
Rent Revenue P1,816,000

10. Alyssa, and Claude are partners with capital balances of P125,000 and P90,000, respectively on
January 1, 2018. Additional investments were made by Alyssa on March 1, 2018 for P200,000 and in
September 30, 2018 for P75,000; investments were made by Claude on July 1, 2018 for P50,000 and
on October 31, 2018 for P75,000. Withdrawals were made by Claude on February 1, 2018 for
P40,000 and on August 1, 2018 for P60,000; withdrawals made by Alyssa on June 30,2018 amounts
to P80,000. What is Alyssa’s 2018 average capital? (round up to the nearest decimal)

Answer: P270,416.67

Beginning Capital P125,000.00

Investments:
[200,000 * 10/12] 166,666.67
[75,000 * 3/12] 18,750.00
 Withdrawals:
[80,000 * 6/12] (40,000)
P270,416.67

11. Those mentioned in the articles of incorporation as originally forming and composing the corporation
and are signatories of such document are known as:

Answer: Incorporators

12. Hudson, Inc. is a calendar-year corporation. Its financial statements for the years 2017 and 2016
contained errors as follows:
2017 2016
Ending inventory P4,500 overstated P12,000 overstated
Depreciation expense P3,000 understated P9,000 overstated

Assume that the proper correcting entries were made at December 31, 2016. By how much will
2017 income before taxes be overstated or understated?

a. P1,500 understated
b. P1,500 overstated
c. P3,000 overstated
d. P7,500 overstated

Answer: D
P4,500 + P3,000 = P7,500.

13. Alyssa, and Claude are partners with capital balances of P125,000 and P90,000, respectively on
January 1, 2018. Additional investments were made by Alyssa on March 1, 2018 for P200,000 and in
September 30, 2018 for P75,000; investments were made by Claude on July 1, 2018 for P50,000 and
on October 31, 2018 for P75,000. Withdrawals were made by Claude on February 1, 2018 for
P40,000 and on August 1, 2018 for P60,000; withdrawals made by Alyssa on June 30,2018 amounts
to P80,000. What is Alyssa’s 2018 average capital? (round up to the nearest decimal)

Answer: P270,416.67

SOLUTION:

Beginning Capital P125,000.00

Investments:
[200,000 * 10/12] 166,666.67
[75,000 * 3/12] 18,750.00
Withdrawals:
[80,000 * 6/12] (40,000)
P270,416.67

14. Hani and Heechul are partners in buying and selling young adult fiction novels. They agreed that total
partnership capital upon formation should be P60,000. If Hani invested his second hand books which
cost her P40,000 but which can be currently sold for P25,000, how much bonus will Heechul receive if
he is to receive a capital credit of 70%?

ANSWER: P7,000
SOLUTION:
 P60000*70% = P42000
Hani’s capital contribution = P25000
Heechul’s capital contribution = P60000 - P250000 = P35000
Bonus = P42000 – P35000 = P7000

15. On March 1, 2018, Cate and Doge decided to combine their business and form a partnership. Their
statement of financial position as of March 1, 2018 before adjustments, showed the following:

Cate Doge
Cash P9000 P3750
Accounts Receivable P18500 13500
Inventories 30000 19500
Furniture and Fixtures (net) 30000 9000
Office Equipment 11500 2750
Prepaid Expenses 6375 3000
Total Assets P105375 P51500

Accounts Payable P45750 P18000

Capital 59625 33500
Total Liabilities and Capital P105375 P51500

The parties agreed that the following adjustments should be considered prior to formation.

1. Provide 2% allowance for doubtful accounts on each Accounts Receivable.

2. Cate’s furniture and fixtures should be P31,000, while Doge’s office equipment is under
depreciated by P250.
3. Rent expense incurred previously by Cate was not yet recorded amounting to P1,000, while
salaries expense incurred by Doge was not recorded amounting to P800.
4. The fair market value of the inventory amounted to P29,500 for Cate and P21,000 for Doge.

What is the total assets of the newly formed partnership?

ANSWER: 157,985

SOLUTION

Cate, Accounts Payable: 45750 + 1000 = P46750

Cate, Capital: 59675- 870 = 58755
Doge, Accounts Payable: 18000 + 800 = 18800
Doge, Capital: 33500 + 180 = 33680
P157985

16. The partnership of Ed and Sheeran, who share profits and losses in the ratio of 3:2, shows the
following information in their balance sheet:
Other assets P450,000 Accounts payable P120,000
Ed, loan 20,000 Ed, capital 195,000
Sheeran, capital 155,000
Total assets P470,000 Total liabilities & equity P470,000

The partners decided to liquidate the partnership. If other assets are sold for P385,000, what
amount of the available cash should be distributed to Ed?
Answer: P136,000
Solution:
Cash Other assets Accounts payable Ed, capital Sheeran, capital
Account balances P450,000 120,000 175,000 155,000
Sale of other assets 385,000 (450,000) (39,000) (26,000)
Payment of liabilities (120,000) (120,000)
Balances P265,000 - - P136,000 P129,000

17. The articles of incorporation of Bataan Corporation provide for an authorized capital stock of
P40,000.00 divided into 2,000 shares at P20 par value. At the time of incorporation, how much is the
minimum subscription and paid-in capital requirements?

Answer: P10,000 and P5,000 respectively.

18. On December 31, 2018, the GAR Partnership of Garry, Aubrey and Rolly have the following accounts
and balances: Garry, Capital (50%), P297,000; Aubrey, Capital (30%), P220,000; Rolly, Capital (20%),
P195,000; Loans Payable-Aubrey, P72,000; Accounts Receivable-Garry, P36,000; Rolly, Drawing
P36,000. Because of unsuccessful operation for the last 2 years, the partners decided to liquidate after
closing the books on December 31, 2018. On this date, the total assets amounted to P1,056,000
including cash of P321,000. During the liquidation process, all the non-cash assets were taken by its
competitor. Liabilities were settled, liquidation expenses of P15,000 were paid and the balance was
distributed to the partners. Ultimately, Rolly received P125,000 in the final settlement.

Determine the amount realized from the sale of non-cash assets.

Answer: P544,000

Solution:

Average Capital
Garry P261 000
Aubrey P294 000
Rolly P159 000

Garry Aubrey Rolly Total

P261 000 P284 000 P159 000 P714 000

(85 000) (51 000) (34 000) (170 000)

P 163 000 P243 000 P125 000 P544 000

19. I. A general partner may contribute money, property, and/or services.

II. A limited partner may contribute money, property, and/or services.
III. A limited partner may be an industrial partner.
Which of the following statements is/are false?

Answer: II and III

20. This is a corporation whose shares are limited to a few, restricted as to their transfer, and not listed in
any stock exchange.
Answer: Close Corporation