Pretest

REPUBLIC OF THE PHILIPPINES PALAWAN STATE UNIVERSITY Puerto Princesa City, Palawan Advanced Accounting 1 PRETEST - PARTNERSHIP Name: ________________________________________________________ Block:___________________ Instructions: Encircle the letter of your choice. Strictly No ERASURES of any form. Show your solution to support your answer on yellow paper. The business assets of Iver and Arickson appear below: Iver Arickson Iver Arickson Cash P11,000 P22,354 Accts. Payable P178,940 P243,650 Accts. Rec. 234,536 567,890 Notes Payable 200,000 345,000 Inventories 120,035 260,102 Iver, capital 641,976 Land 603,000 Arickson, 728,352 capital Buikding 428,267 P1,020,916 P1,317,002 F and F 50,345 34,789 Other Assets 2,000 3,600 P1,020,916 P1,317,002 Iver and Arickson agreed to form a partnership by contributing their respective assets and equities subject to the ff. adjustments: a. Accounts receivable of P20,000 in Iver’s books and P35,000 in Arickson’s are uncollectible. b. Inventories of P5,500 and P6,700 are worthless in Iver and Aricksons respective books. c. Other assets of P2,000 and P3,600 in Iver and Arickson’s respective books to be written-off. 1. The capital account of the partners after the adjustments will be: Iver Arickson Iver Arickson a. P615,942 P717,894 c. P640,876 P683,050 b. 640,876 712,345 d. 614,476 683,052 2. The same information above, how much total assets does the partnership have after formation? a. P2,337,918 b. P22,37,918 c. P2,265,118 d. P2,365,218 3. The partnership has the ff. accounting amounts: Sales P70,000 Salary to partners P13,000 COGS 40,000 Interest paid to banks 2,000 Operating Expenses 10,000 Withdrawal of 8,000 partners The partnership net income (loss) is a. P20,000 b. P18,000 c. P5,000 d. (P3,000) 4. Gillee, Kristel and Queenie are partners with average capital balances during 2011 of P472,500; P238,650; and P162,350, respectively. The partners receive 10% interest on their average capital balances; after deducting salaries of P122,325 to Gillee and P82,625 to Queenie, the residual profits or loss is divided equally. In 2011, the partnership had a net loss of P125,624 before the interest and salaries to partners. By what amount should Gillee and Queenie’s capital account change?

Gillee Queenie Gillee Queenie a. P30,267 (P40,448) c. (P40,844) P31,235 b. 29,476 17,536 d. 28,358 32,458 5. Using the same information, except the partnership had a loss of P125,624 after the interest and salaries to partners, by what amount should Kristel’s capital account change? a. (P115,443) b. P23,865 c. (P41,875) d. (P18,010) 6. In the MarNars partnership, Marcial’s capital is P14,000 and Narciso’s capital is P40,000 and they share income in a3:1 ratio, respectively. They decide to admit Doming to the partnership. Each of the following questions is independent of the others.

Marcial and Narciso agree that some of the inventory is obsolete. The inventory account is decreased before Doming is admitted. Doming invests P40,000 for a one–fifth interest. What is the amount of inventory written down? a. P4,000 b. P10,000 c. P15,000 d. P20,000 7. Using the same info., Doming directly purchases a one –fifth interest by paying Marcial P34,000 and Narciso P10,000. The land account is increased before Doming is admitted. By what amount is the land account increased? a. P40,000 b. P36,000 c. P20,000 d. P10,000 8. Using the same info., Doming invests P40,000 for a one-fifth interest in the total capital of P220,000. The journal to record Domings admission into the partnership will include: a. Credit to cash for P40,000 c. Credit to Narciso, capital P40,000 b. Debit to Marcial, capital P3,000 d. Credit to Doming, capital P1,000 9. Partner’s capital of Naruto, Kakashi, Sasuke and Sakura on May 31, 2011, were as follows: Naruto (20%)……………..P60,000 Sasuke (20%)…………….. P70,000 Kakashi (20%)……………..P80,000 Sakura (40%)…………….. P40,000 On May 31, with the consent of the partners:  Sasuke retired from the partnership and was paid P50,000 cash in full settlement of his interest in the partnership.  Sai was admitted to the partnership with a P20,000 cash investment for 10% interest in the net assets of the remaining partners. The capital account to be credited to Sai is a. P22,000 b. P27,000 c. P20,000 d. P25,000 10. Partnership of Jiggy, Zuriel, Bellyjon and Macky has agreed to combine with the partnership of Ramon and Renel. The individual capital accounts and profit and loss sharing percentage of each partner follow: P and L Sharing % Capital Accounts Now Proposed Jiggy P50,000 40 28 Zuriel 35,000 30 21 Bellyjon 40,000 20 14 Macky 25,000 10 7 150,000 100 70 Ramon 60,000 50 15 Renel 40,000 50 15 P100,000 100 30 Jiggy, Zuriel, Bellyjon and Macky Partnership has undervalued tangible assets of P20,000 and Ramon and Renel partnership has undervalued tangibl assets of P8,000. All the partners agree that:  Jiggy, Zuriel, Bellyjon and Macky Partnership has P30,000 goodwill, and  Ramon and Renel partnership has P10,000 goodwill. The combined businesses will continue to use the general ledger of Jiggy, Zuriel, Bellyjon and Macky Partnership. Assume the tangible assets are to be revalued and goodwill is to be recorded. Compute the amount of goodwill recognized in the partnership books: a. P0 b. P30,000 c. P40,000 d. P68,000 11. Using the same info., compute the capital balances of Jiggy and Ramon, respectively: a. Jiggy, P70,000; Ramon, P69,000 c. Jiggy, P58,000; Ramon, P64,000 b. Jiggy, P62,000; Ramon, P65,000 d. Jiggy, P50,000; Ramon, P60,000 12. Using the same info. Except that bonus method is to be used with respect to undervalued assets and goodwill. Compute the amount of goodwill recognized in the books: a. P0 b. P30,000 c. P40,000 d. P68,000 13. Using the same info. Except the bonus method is to be used with respect to undervalued assets and goodwill. Compute the capital balances of Jiggy and Ramon, respectively: a. Jiggy, P70,000; Ramon, P69,000 c. Jiggy, P58,000; Ramon, P64,000 b. Jiggy, P62,000; Ramon, P65,000 d. Jiggy, P50,000; Ramon, P60,000 14. The assets and equities of Ellen, Eunice and Monalie partnership at the end of its fiscal year on October 31, 2011 are as follows:

Assets Liabilities and Equity Cash P15,000 Liabilities P50,000 Receivables-net 20,000 Loan from Monalie 10,000 Inventory 40,000 Ellen, capital-30% 45,000 Plant assets-net 70,000 Eunice, capital-50% 30,000 Loan to Eunice 5,000 Monalie, capital-20% 15,000 Total Assets P150,000 Total Liab. and Equity P150,000 The poartners decide to liquidate the partnership. They estimate that the noncash assets, other than the loan to Eunice, can be converted into P100,000 cash over the two-month period ending December 31, 2011. Cash is to be distributed to the appropriate parties as it becomes available during the liquidation process. The partner most vulnerable to partnership lossess on liquidation is: a. Ellen, c. Ellen and Eunice equally b. Eunice d. Monalie 15. Using the same info., and P65,000 is available for first distribution, it should be paid to: Priority Creditors Ellen Eunice Monalie A P60,000 P5,000 P0 P0 B 60,000 1,500 2,500 1,000 C 50,000 5,000 0 10,000 D 50,000 12,000 0 3,000 16. Arlando, Arickson, Emelben and John Alfred, partners in crime, shares profits at the ratio of 5:3:1:1. On June 30, relevant partners’ accounts follow: Advances Loans Capital Dr. Cr. Cr. Arlando P20,000 P160,000 Arickson 40,000 120,000 Emelben P18,000 60,000 John Alfred 10,000 100,000 On this day, cash of P72,000 is declared as available for distribution to partners profits. Who among the partners will benefit from the P72,000 cash distribution? a. Emelben and John Alfred c. All equally b. Arickson and John Alfred d. Arlando and Arickson 17. After all non-cash assets have been converted into cash in the liquidation of the Kristel and Dodoy partnership, the ledger contains the following account balances: Debit Credit Cash P34,000 Accounts payable P25,000 Loans payable to Kristel 9,000 Kristel, capital 8,000 Dodoy, capital 8,000 Available cash should be distributed: P25,000 to accounts payable and: a. P9,000 loan payable to Kristel c. P1,000 to Kristel and P8,000 to Dodoy b. P4,500 each partner d. P8,000 to Kristel and P1,000 to Dodoy 18. The XYZ Partnership is being dissolved. All liabilities have been paid and the remaining assets are being realized gradually. The equity of the partners is as follows: Partners accounts Loans to (from) P and L ratio partnership X P24,000 P6,000 3 Y 36,000 3 Z 60,000 (10,000) 4 The second cash payment to any partner(s) under a program of priorities shall be made thus: a. To Z, P2,000 c. To Z, P8,000 b. To Y, P6,000 d. To Y, P6,000 and Z, P8,000 19. A cash distribution plan (payment priority program) for the Victorio, Ramon and Cristobal partnership appears below:

Priority Creditors 100%

Victorio

Ramon

Cristobal

First P300,000 Next P80,000 70% 30% Next P70,000 3/7 4/7 Remainder 22% 34% 44% If P550,000 of cash is to be distributed, how much will be received by the priority creditors and the partners? Priority Creditors Victorio Ramon Cristobal A P0 P0 P0 P0 B 0 121,000 187,000 242,000 C 300,000 55,000 85,000 110,000 D 300,000 108,000 58,000 84,000 20. May, Lorreine, Pam, partners to a firm, have capital balances of P11,200, P13,000, and P5,800, respectively, and share profits in the ratio of 4:2:1. Prepare a schedule showing how available cash will be given to the partners as it becomes available. Who among the partners shall be paid first with an available cash of P1,400? a. Lorreine b. None c. Pam d. May 21. Ok Ka lang?, Inc. signed a note payable to its bank for P10,000. Accrued interest on the note on February 28, 2004 amounts to P250. The note is secured by inventory with a book value of P12,000. The inventory is sold for P8,000 and unsecured creditors receive 30 percent of their claims. The bank should receive the ff. amount in settlement of the note and interest a. P10,250 b. P10,000 c. P8,675 d. P8,000 22. On December 18, 2011, the statement of affairs of the Luging lugi Co. which is in bankruptcy liquidation, included the ff: Assets pledged for fully secured liabilities P100,000 Assets pledged for partially secured liabilities 40,000 Free assets 120,000 Fully secured liabilities 80,000 Partially secured liabilities 50,000 Unsecured liabilities with priority 60,000 Unsecured liabilities without priority 90,000 Compute the estimated amount to be paid to: Unsecured liab. w/ Partially secured Unsecured liab. priority liab. w/o priority A P80,000 P60,000 P50,000 P70,000 B 64,000 60,000 48,000 88,000 C 80,000 48,000 60,000 72,000 D 80,000 60,000 48,000 72,000 23. Babagsak ka Co. is insolvent and its statement of affairs shows the ff. information: Estimated gains on realization of assets P1,440,000 Estimated losses on realization of assets 2,000,000 Additional assets 1,280,000 Additional liabilities 960,000 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. P.30 b. P.43 c. P.57 d. P.70 24. Bagsak na Bagsak na ba? Corp. has been undergoing liquidation since Janaury 1. As of March 31, its condensed statement of realization and liquidation is presented below: Assets: Assets to be realized P1,375,000 Assets acquired 750,000 Fully secured liab.

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 3,125,000 Supplementary credits 2,800,000 The net gain (loss) for the three month period ending March 31 is: a. P250,000 b. (P325,000) c. P425,000 d. P750,000 25. Using the same info., compute the ending cash balance of cash account assuming that common stock and deficits are P1,500,000 and P500,000, respectively. a. P425,000 b. P575,000 c. P1,325,000 d. P1,375,000 26. JPIA Co. was forced into bankruptcy and is in the process of liquidating assets and paying claims. Unsecured claims will be paid at the rate of forty cents on the peso. Deanna holds a P30,000 noninterest bearing note receivable from JPIA collateralized by an asset with a book value of P35,000 and a liquidation value of P5,000. The amount to be realized by Deanna on this note is a. P5,000 b. P12,000 c. P15,000 d. P17,000 27. Abalos and ZTE formed a joint venture. Their capital contributions, and profit and loss ratio are presented below: Contributions Profit and Loss Ratio Cash Merchandise Abalos P5,000 P8,000 50% ZTE 6,000 50% Summary of Joint venture activities: Purchases of merchandise by ZTE……………………………….P4,000 Expenses paid by ZTE: Mayor’s permit………………………………………………………… 400 Freight on merchandise contributed by Abalos……….. 300 Delivery expense of merchandise sold……………………… 200 Sales (all contributed and purchased by ZTE and ½ contributed by Abalos) Selling Price…… 14,000 The balance of the joint venture account before profit or loss distribution is: a. P4,900 b. P14,000 c. P14,400 d. None 28. Using the same info., the profit (loss) of the JV is: a. (P450) b. P750 c. (P750) d. P450 29. Using the same info., how much would Abalos receive in the final settlement assuming he took the unsold merchandise at cost? a. P13,000 b. P12,625 c. P8475 d. P8,515 30. Santa and Claus formed a joint venture to acquire and sell a special type of merchandise Santa is to manage the venture and o furnish the capital. The participants are to share equally any gain or loss on the joint venture. On April 1, 2011, Claus sent Santo P10,000 cash, which was all used to purchase merchandise. Santa paid freight of P240 on the merchandise purchased. On April 27, ½ of the merchandise was sold for P7,200 cash. Santa paid the cost of delivering merchandise to customers which amounted to P260.No further transactions occurred until the end of the month. The profit (loss) of the venture for the month of April 2011 is: a. P1,820 b. P1,950 c. (P1,700) d. None 31. Using the same info., the account of Claus in the books of Santa shows a debit balance (credit) Balance on April 30, 2011 after recognizing the profit (loss) on the uncompleted joint venture: a. (P10,910) b. P10,975 c. P10,850 d. P0 32. Joint venture of A, B, and C having proved to be unprofitable, the parties agreed to dissolve the venture. Accounts with the venture and venturers on the books of A, the managing partner, are as follows just before dissolution and liquidation: Debit Credit

Joint venture cash P12,000 Joint venture 6,500 B, capital P14,500 C, capital 6,500 The balance of joint venture assets on hand is sold by A for P3,500. A is allowed special compensation of P300 for ending p the venture; remaining profits or loss is distributed equally. The JV profit (loss) is: a. P3,000 b. P10,000 c. (P3,000) d. P0 33. Using the same info., B and C received in final settlement: a. B, P13,400; C, P5,400 c. B, P15,850; C, P7,850 b. B, P10,500; C, P3,500 d. None 34. Wag Mangopya Co. has consistently used the percentage of completion method. On January 10, 2011, the company began to work on a P6,000,000 construction contract. At the inception date, the estimated cost of construction was P4,500,000. The ff. data relate to the progress of the contract: Income recognized at 12/21/2011…………………………………..P600,000 Cost incurred 1/10/2011 thru 12/31/2012………………………3,600,000 Estimated Cost to Complete at 12/31/2012……………………..1,200,000 How much income should the company recognize for the year ended December 31, 2012? a. P300,000 b. P525,000 c. P600,000 d. P900,000 35. During 2011, Ablaza Corporation started a construction job with a total contract price of P600,000. Any costs incurred are expected to be recoverable. The job was completed on December 15, 2012. Additional data are as follows: 2011 2012 Actual costs incurred P225,000 P255,000 Estimated remaining costs 225,000 Billed to customer 240,000 360,000 Received from customer 225,000 375,000 Under the cost recovery method of construction accounting what amount should Ablaza recobnize as gross profit for 2011 and 2012? 2011 2012 2011 2012 A P0 P0 C P0 P120,000 B 75,000 120,000 D 120,000 120,000 36. The ff. data relate to a construction job started by Hijos Company during 2011: Total contract price…………………………………………….P100,000 Actual costs during 2011……………………………………. 20,000 Estimated remaining costs…………………………………. 40,000 Billed to customer…………………………………………….. 30,000 Received from customer during 2011………………… 20,000 Any costs incurred are expected to be recoverable. Under the cost recovery method construction accounting, what amount should Hijos recognize as gross profit for 2011? a. P0 b. P4,000 c. P10,000 d. P12,000 37. Burikat Co. recognizes construction revenue and expenses using percentage of completion method. During 2011, a single long-term project was begun, which continued thru 2012. Information on the project follows: 2011 2012 Accounts receivable from construction P100,000 P300,000 contract Construction expenses 105,000 192,000 Construction in progress 122,000 364,000 Partial billings on contract 100,000 420,000 Profit recognized from long term construction contract in 2012 should be a. P50,000 b. P108,000 c. P128,000 d. P228,000 38. During 2011, Sir Nars started work on a P3,000,000 fixed price construction contract. Any costs incurred are expected to be recoverable. The accounting records disclosed the ff. data for the year ended December 31, 2011: Costs incurred………………………………………………….P930,000

Estimated cost to complete…………………………….2,170,000 Progress billings………………………………………………1,100,000 How much loss should Sir Nars have recognized in 2011? Percentage of Percentage of Cost Recovery Cost Recovery Completion Completion A P100,000 P0 C P100,000 P100,000 B P0 P0 D P30,000 P0 39. No Power Co. was tapped to build private electric plants in Araceli and Busuanga. The ff. info. Relate to these projects during 2011. Any costs incurred are expected to be recoverable. Araceli Busuanga Contract price P10,500,000 P7,500,000 Costs incurred to date 6,000,000 7,000,000 Est’d costs to complete 3,000,000 1,000,000 Billings during the year 7,000,000 1,000,000 Collections during the year 6,000,000 1,000,000 What amount of gross profit (loss) should the company report in its 2011 income statement? Percentage of Completion Cost recovery method A P562,500 (P500,000) B 500,000 (500,000) C 500,000 D (500,000) 500,000 40. Bagsak na ba? Entered into a construction agreement in 2011 that called for a contract rpice of P9,600,000. At the beginning of 2012, a change order increased the initial contract price by P480,000. The company uses the percentage of completion basis of revenue recognition. In relation to the project, the ff. data are obtained: 2011 2012 Cost incurred to date P4,920,000 P8,640,000 Est’d cost to complete 4,920,000 2,160,000 Billings made 5,280,000 8,520,000 Collection made 4,380,000 7,500,000 What gross profit (loss) should the company recognize in 2012? a. P120,000 b. (P240,000) c. (P480,000) d. (P720,000) 41. Andok’s Malampaya Branch submitted the ff. data for 2011, its first year of operation: Sales……………………………………………..P203,500 Cr. Shipments from H.O……………………… 186,120 Dr. Operating Expenses………………………. 18,755 Dr. H.O.-current…………………………………. 48,125 Cr. Shipments to the Branch are billed at cost. The December 31 inventory of the branch was P25,245. What is the correct balance on December 31, 2011 of the Branch Account-current as per Home Office Books? a. P46,750 b. P48,125 c. P65,505 d. P71,995 42. Leila Co.’s shipments to and from it Brazil branch are billed at 120% of cost. On December 31, Brazil branch reported the ff. data, at billed prices: inventory, January 1, of P33,600; shipments received from H.O. of P840,000; shipments returned of P48,000; and inventory, December 31, of P36,000. What is the balance of the Allowance for Overvaluation of Branch inventory on December 31 before adjustment? a. P5,600 b. P137,600 c. P6,000 d. P145,600 43. Ewan ko ba? Co. opened its Tsugi Tugi branch on January 1. Merchandise shipments from home office during the month billed at 120% of cost is P125, 000. Branch returned damaged merchandise worth P15,620. On January 31, the branch reported a net loss of P2,270 and an inventory of P84,000. What is the net income (loss) of the branch to be taken up in the books of Home Office? a. (P1,690) b. P6,500 c. (P2,270) d. P1,960 44. Ok Ka lang? Co. established its Puerto branch in January 2011. During its year of operations, home office shipped to its Puerto branch merchandise worth P130,000 which included markup of 15% of cost. Sales on account totaled P250,000 while cash sales amounted to P80,000. Puerto reported operating

expenses of P38,000 and ending inventory of P15,000, at billed price. In so far as the Home Office is concerned, the real net income of Puerto branch is: a. P177,000 b. P82,000 c. P147,000 d. P192,000 45. Pagbibigyan ba kita? Inc. established its branch on May 1, 2011. During the first month of operation, the home office shipped merchandise to the branch worth P138,000 which included a markup of 15% on cost. Sales for cash were P80,000 while sales on account were P250,000. At month’s end, the branch reported operating expenses of P38,000 and a closing inventory of P23,000 at billed price. As far as the home office is concerned, the true branch net income for May 2011 is: a. P82,000 b. P147,000 c. P177,000 d. P192,000 46. Tamporurot, Icn. Charges an initial franchise fee of P115,000, with P25,000 paid when agreement was signed and the balance in five annual installments. The PV of the future payments, discounted at 10% is P68,234. The franchisee has the option to purchase P15,000 of equipment for P12,000. Tamporurot has substantially provided all initial services required and the collectability of the payments is reasonably assured. The amount of revenue from franchise fees is: a. P25,000 b. P90,234 c. P93,234 d. P115,000 47. On January 2, 2011, Sexy Sexy Inc. authorized Burikatan Co. to operate as a franchisee over a twenty year period for an initial franchise fee of P60,000 received on signing the agreement. Burikatan started operations on June 30, 2011, by which date Sexy Sexy had performed all of the required initial services. In its income statement for the six months ended June 30, 2011, what amount should Sexy Sexy report as revenue from franchise fees in connection with Burikatan franchise? a. P0 b. P1,500 c. P30,000 d. P60,000 48. On January 3, 2011, Dogstyle Services, Inc. signed an agreement authorizing Tira Company to operate as a franchisee over a 20 year period for initial franchise fee of P50,000 received when the agreement was signed. Tira commenced operations on July 1, at which date all initial services required had been performed. The agreement also provides that Tira must pay annually to Dogstyle a continuing franchise fee equal to 5% of the revenue from the franchise. Tira’s franchise revenue for 2011 was P400,000. For the year ended December 31, 2011, how much should Dogstyle record as revenue from franchise fees in respect of the Tira franchise? a. P70,000 b. P50,000 c. P45,000 d. P22,500 49. On December 31, 2011, James Iha, Inc. authorized Flea to operate as a franchisee for an initial franchise fee of P75,000. Of this amount, P30,000 was received upon signing the agreement, and the balance, represented by a note, is due in three annual payments of P15,000 each, beginning December 31, 2012. The present value on December 31, 2011appropriately discounted is P36,000. According to the agreement, the nonrefundable down payment represent the fair measure of the services already performed by James Iha, however, substantial future services are required of James Iha. Collectability of the note is reasonably certain. On December 31, 2011, James Iha should record unearned franchise fee of? a. P0 b. P36,000 c. P45,000 d. P75,000 50. Lechon Butiki, Inc., franchisor, entered into a franchise agreement with Mamang Mantikang Tulog, franchisee, on March 31, 2011. 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 Mamang Mantikang Tulog prepares its financial statements on March 31, 2011, the franchise fee revenue to be reported is: a. P0 b. P100,000 c. P500,000 d. P400,000