Profit Loss Profit Loss

BAFINAR – ADVANCED FINANCIAL ACCOUNTING AND REPORTING (MIDTERM) 1. What is the valuation if a partner contributes a noncash property to the partnership? a. Book value of the property c. Actual amount of the property b. Acquisition cost of the property d. Fair value of the property 2. Temporary withdrawals made by the partner is posted in ledger as a. Partner’s drawing, debit c. Partner’s capital, debit b. Partner’s drawing, credit d. Partner’s capital, credit 3. A partnership is formed by two individuals who were previously sole proprietors. Property other than cash that is part of the initial investment in the partnership would be recorded for financial reporting purposes at the a. Proprietor’s book values or the fair value of the property at the date of investment, whichever is higher b. Proprietor’s book values or the fair value of the property at the date of investment, whichever is lower c. Proprietor’s book values of the property at the date of investment d. Fair value of the property at the date of investment 4. How does partnership accounting differ from corporation accounting? a. The matching principle is not considered appropriate for partnership accounting b. Revenues are recognized at a different time by a partnership that is appropriate for a corporation c. Individual capital accounts replace the contributed capital and retained earnings balances found in corporate accounting d. Partnerships report all assets at fair value as of the latest balance sheet date 5. Which of the following best describes the articles of partnership agreement? a. The purpose of the partnership and partners’ rights and responsibilities are required elements of the articles of the partnership b. The articles of the partnership are a legal covenant and must be expressed in writing to be valid c. The articles of the partnership are an agreement that limits partners’ liability to partnership assets d. None of the above 6. Partnership drawings are a. Always maintained in a separate account from the partner’s capital account b. Equal to partners’ salaries c. Usually maintained in a separate drawing account with any excess draws being deducted directly to the capital account d. Not discussed in the specific contract provisions of the partnership 7. Under the entity theory, a partnership is a. Viewed through the eyes of the partners b. Viewed as having its own existence apart from the partners c. A separate legal and tax entity d. Unable to enter into contracts in its own name 8. 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 present 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 bonus criteria would not be used d. The loss would be allocated using the profit and loss ratios only 9. The Red and black partnership agreement provides for Red to receive a 20% bonus on profits before the bonus. Remaining profits and losses are divided between Red and black in the ratio of 2:3, respectively. Which partner has a greater advantage when the partnership has a profit or when it has a loss? Profit Loss Profit Loss a. Red Black c. Black Red b. Red Red d. Black Black

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10. WW and MM drafted a partnership agreement that lists the following assets contributed at the partnership’s formation: Contributions by: WW MM Cash P20,000 P30,000 Inventory P15,000 Building P40,000 Furniture & equipment 15,000 The building is subject to a mortgage of P10,000, which the partnership has assumed. The partnership agreement also specifies that profits and losses are to be distributed evenly. What amounts should be recorded as capital for WW and MM at the formation of the partnership WW MM WW MM a. P35,000 P85,000 c. P55,000 P55,000 b. P35,000 P75,000 d. P60,000 P60,000 11. Anne, Iris and Alfred formed a partnership on April 30, with the following assets, measured at their fair market value, contributed by each partner: Particulars Anne Iris Alfred Cash P200,000 P240,000 P600,000 Automobile 170,000 Delivery Trucks 560,000 Computer and printer 102,000 Office furniture 70,000 50,000 Land and Building 3,000,000 Totals P3,370,000 P972,000 P650,000 Although Alfred has contributed the most cash to the partnership, he did not have the full amount of P600,000 available and was forced to borrow P400,000. The land and building contributed by Anne has a mortgage of P1,800,000 and the partnership is to assume responsibility of the loan. If the profit and loss sharing agreement is 40 percent, 40 percent, and 20 percent respectively, for Anne, Iris and Alfred, what is the total capital investment of all the partners at the opening of the business on April 30? a. P4,992,000 b. P3,192,000 c. P2,792,000 d. P3,328,000 12. Paul admits Timothy as a partner in business. Accounts in the ledger for Paul on November 30, 2016, just before the admission of Timothy, shows the following balances: Cash P52,000 Accounts payable P124,000 Accounts receivable 140,000 Paul, capital 528,000 Merchandise inventory 360,000 It is agreed that for the purposes of establishing Paul’s interest the following adjustments should be made: a. An allowance for doubtful accounts of 2% of accounts receivable is to be established. b. The merchandise inventory is to be valued at P404,000 c. Prepaid expenses of P13,000 and accrued liabilities of P8,000 are to be established. Timothy is to invest sufficient funds in order to to receive a 1/3 interest in the partnership. How much must Timothy contribute? a. P264,000 b. P286,100 c. P190,720 d. P176,000 13. Mahal admits Mora as a partner in the business. Balance sheet accounts of Mahal on September 30, just before admission of Mora show: Cash P31,200 Accounts payable P74,400 Accounts receivable 144,000 Mahal, capital 316,800 Merchandise inventory 216,000 It is agreed that for purpose of establishing Mahal’s interest, the following adjustments shall be made: • An allowance for doubtful accounts of 2% is to be established • Merchandise inventory is to be valued at P242,400 • Prepaid expense of P4,200 and accrued expenses of P4,800 are to be recognized 2

Mora is to invest sufficient cash to obtain a 1/3 interest in the partnership. How much is Mora’s investment to the partnership? a. P169,860 b. P211,200 c. P171,660 d. P95,040 On March 1, 20x4, CC and FF formed a partnership with each contributing the following assets: Accounts CC FF Cash P30,000 P70,000 Machinery 25,000 75,000 Building -225,000 Furniture and Fixtures 10,000 -The building is subject to a mortgage loan of P90,000, which is to be assumed by the partnership. The agreement provides that CC and FF share profits and losses 30% and 70%, respectively 14. On March 1, 20x4 the capital account of FF would show a balance of a. P280,000 b. P305,000 c. P314,000 d. P370,000 15. Assuming that the partners agreed to bring their respective capital in proportion to their respective profit and loss ratio, and using FF’s capital as the base, how much cash is to be invested by CC? a. P19,000 b. P30,000 c. P40,000 d. P55,000 CC admits DD as a partner in business. Accounts in the ledger for CC on November 30, 20x4, just before the admission of DD, show the following balances: Cash P6,800 Accounts receivable 14,200 Merchandise inventory 20,000 Accounts payable 8,000 CC, capital 33,000 It is agreed that for purpose of establishing CC’s interest the following adjustments shall be made: An allowance for doubtful accounts of 3% of accounts receivable is to be established The merchandise inventory is to be valued at P23,000 Prepaid salary expense of P600 and accrued rent expense of P800 are to be recognized 16. DD is to invest sufficient cash to obtain a 1/3 interest in the partnership. CC’s adjusted capital before the admission of CC a. P28,174 b. P35,347 c. P35,374 d. P36,374 17. The amount of cash investment by DD a. P11,971 b. P14,087 c. P17,687 d. P18,487 18. In 2011, Jessie and Anne agreed to contribute equal amounts into a new partnership for a 50% interest in profit (loss) and in capital to each of them. Their respective contributions will come from old proprietorships they owned and will both be dissolved. Jessie contributed the following items and amounts: Cash P585,000 Machineries (at book value per her proprietorship records) P400,000 Anne contributed the following items at their carrying amounts in the proprietorship records: Accounts receivable P75,000 Inventory 210,000 Furniture and fixtures 402,000 Intangibles 172,500 All non cash contributions are not property valued. The two partners have agreed that (a) P6,000 of the accounts receivable are uncollectible; (b) the inventories are overstated by P15,000; (c) the furniture and fixtures are understated by P9,000; and the intangibles includes a patent with a carrying value of P10,500, which must now be derecognized due to the result of unsuccessful litigation promulgated by the court just before the partnership formation. What is the fair value of the machineries invested by Jessie into the partnership? a. P336,000 b. P252,000 c. P390,000 d. P350,000

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19. I and Q formed a partnership on January 2, 2016, and agreed to share income 90%, 10%, respectively. I contributed a capital of P12,500. Q contributed no capital but has a specialized expertise and manages the firm full-time. There were no withdrawals during the year. The partnership agreement provides for the following: a. Capital accounts are to be credited annually with interest at 5% of beginning capital b. Q is to be paid a salary of P500 a month c. Q is to receive a bonus of 20% of income calculated before deducting his bonus, his salary and interest on both capital accounts d. Bonus, interest, and Q’s salary are to be considered partnership expenses The partnership’s 2016 income statement follows: Revenues P48,225 Expenses 24,850 Net income P23,375 How much is the total share of Q on the 2016 partnership net income? a. P15,837.50 b. P14,325 c. P16,194 d. P14,169 20. R and J, partners, divide profits and losses on the basis of average capitals. Capital accounts for the year ended December 31, 2016, are shown below. The net profit for 2016 is P135,000. (Changes in capitals during the first half of the month are the regarded as effective as the beginning of the month; changes during the second half of a month are regarded as effective as of the beginning of the following month.) Particulars R, Capital J, Capital Dr Cr Dr Cr January 1 P300,000 P330,000 March 9 P50,000 April 14 150,000 July 1 100,000 Sept 4 P40,000 Sept 22 100,000 October 26 75,000 The share of R on the 2016 profit is: a. P57,250 b. P77,250 c. P57,750 d. P62,630 21. Efren and Frenz operate The Gourmet Restaurant as a partnership. Their partnership agreement has the following provisions for sharing profits and losses: A. Income is distributed only as far as it is available B. Available income is to be distributed in the following sequence: 1. Efren, who is the chef, gets a salary of P25,000 a year; Frenz, who is still learning, gets a salary of P10,000 2. Interest is imputed on the average capital balances at 15 percent 3. Any remaining profits and losses are to be shared equally The average capital balances during the year were P270,000 for Efren and P50,000 for Frenz. If the partnership income for the year is P17,500, it should be distributed to the partners as follows: a. Efren P8,000; Frenz P9,500 c. Efren P12,500; Frenz P5,000 b. Efren P8,750; Frenz P8,750 d. Efren P14,000; Frenz P3,500 22. Partner Alta had a capital balance on January 1, 20x4 of P45,000 and made additional capital contributions during 20x4 totaling P50,000. During the year 20x4, Alta withdrew P8,000 per month. Alta’s post-closing trial balance on December 31, 20x4 is P30,000. Alta’s share of 20x4 partnership income is: a. P96,000 b. P50,000 c. P31,000 d. P8,000 23. Partners A and B have a profit and loss agreement with the following provisions: salaries of P20,000 and P25,000 for A and B respectively; a bonus to A of 10% of net income after bonus; and interest of 20% on average capital balances of P40,000 and P50,000 for A and B, respectively. Any remainder is to be split equally. If the partnership had net income of P88,000, how much should be allocated to Partner A a. P36,000 b. P44,500 c. P50,000 d. P43,500 4

X, Y and Z, a partnership formed on January 1, 20x4 had the following initial investment: X P100,000 Y P150,000 Z P225,000 The partnership agreement states that the profits and losses are to be shared equally by the partners after consideration is made for the following: • Salaries allowed to partners: P60,000 for X, P48,000 for Y, and P36,000 for Z • Average partners’ capital balances during the year shall be allowed10% • Additional information: • On June 30, 20x4, X invested an additional P60,000 • Z withdrew P70,000 from the partnership on September 30, 20x4 • Share the remaining partnership profit was P5,000 for each partner 24. Partnership net profit of December 31, 20x4 before salaries, interests and partner’s share on the remainder was a. P199,750 b. P207,750 c. P211,625 d. P222,750 25. The dissolution of a partnership occurs a. Only when the partnership sells its assets and permanently closes its books b. Only when a partner leaves the partnership c. Only when a new partner is admitted to the partnership d. When there is any change in the individuals who make up the partnership 26. The process of terminating the business, selling the assets, paying the liabilities and disbursing the remaining cash to the partners is called a. Dissolution c. Liquidation b. Formation of a partnership d. Withdrawal 27. The selling of noncash assets for cash in partnership liquidation, any difference between book value and the cash proceeds is called a. Net profit or loss on sale c. Capital gain or loss b. Gain or loss on realization d. Sales differential value 28. The main characteristic of a lump sum liquidation done in one transaction is that all the a. Assets are sold in one transaction b. Liabilities are paid on one transaction c. Cash available to partners is distributed to them in one transaction d. Assets are sold in one transaction and all the available cash is distributed to creditors and partners in one transaction. 29. The cash available for distribution to partners in an installment liquidation is equal to the a. Cash available after a sale of noncash assets is made b. Cash available after payment to creditors are made c. Cash available after payment to creditors are made and after reserve for future liquidation is set aside d. All of the above 30. When advance cash distribution plan is prepared, a partner’s loan payable to partnership is a. Added to other liabilities b. Added to the credit balance in the partner’s capital account c. Subtracted from the credit balance in the partner’s capital account d. Omitted from the calculation 31. Capital balance and profit and loss sharing ratios of the partners in the ABC partnership are as follows: A, capital (40%) P168,000 B, capital (40%) 192,000 C, capital (20%) 120,000 Total P480,000

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A needs money and agrees to assign one-fourth of his interest in the partnership to D for P45,000 cash. D pays P45,000 directly to A. Compute the (1) capital balance of D, and (2) the total capital of the ABC Partnership immediately after the assignment of the interest to D? a. (1) P42,000; (2) P547,200 c. (1) P42,000; (2) P480,000 b. (1) P67,200; (2) P480,000 d. (1) P67,200; (2) P547,200 32. A partnership has the following capital balances: Elgin (40% of gains and losses) P100,000 Jethro (30%) 200,000 Foy (30%) 300,000 Oscar is going to pay a total of P200,000 to these three partners to acquire a 25 percent ownership interest from each. Goodwill (or revaluation of asset) is to be recorded. What is Jethro’s capital balance after the transaction? a. P150,000 b. P175,000 c. P195,000 d. P200,000 33. Partners Allen, Baker and Coe share profits and losses 5:3:2, respectively. The balance sheet as of April 30, 2014 follows: Assets Liabilities and Capital Cash P40,000 Accounts payable P100,000 Other assets 360,000 Allen, Capital 74,000 Baker, Capital 130,000 Coe, Capital 96,000 The assets and liabilities are recorded and presented at their respective fair values. Jones is to be admitted as a new partner with a 20% capital interest and a 20% share in the profits and losses in exchange for a cash contribution. No goodwill or bonus is to be recorded. How much cash should Jones contribute? a. P60,000 b. P72,000 c. P75,000 d. P80,000 The partners in the Kim, Gerald and Maja partnership have capital balances as follows: Kim, capital P17,500 Gerald, capital P17,500 Maja, capital P20,000 Profits and losses are shared 30%, 30% and 40% respectively. On this date, Maja withdraws and the partners agree to pay him P22,500 out of partnership cash (Tangible assets are already stated at values approximating their fair market values). 34. Using bonus method, how much must be the ending capital of Kim immediately after Maja’s withdrawal? a. P17,500 b. P16,250 c. P16,750 d. P19,375 35. Using partial goodwill method, how much must be the ending capital of Kim immediately after Maja’s withdrawal? a. P17,500 b. P16,250 c. P16,750 d. P19,375 36. Using full goodwill method, how much must be the ending capital of Kim immediately after Maja’s withdrawal? a. P17,500 b. P16,250 c. P16,750 d. P19,375 37. Elton and Don are partners who share profits and losses in the ratio of 7:3, respectively. On November 5, 20x4, their respective capital accounts were as follows: Elton P70,000 Don 60,000 On that date they agreed to admit Kravitz as a partner with a one-third interest in the capital and profits and losses upon his investment of P50,000. The new partnership will began with a total capital of P180,000. Immediately after Kravitz’s admission, what are the capital balances of Elton, Don and Kravitz, respectively? a. P60,000; P60,000; P60,000 c. P63,333; P56,667; P60,000 b. P63,000; P57,000; P60,000 d. P70,000; P60,000; P50,000 38. Kris and Mark are partners who share profits and losses 70:30. They have capital account balances of P170,000 and P260,000, respectively at the date they admit Frank into the partnership. Frank invests

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39.

40.

41.

42.

43.

44.

45.

46.

P120,000 in the partnership for a 25 percent equity interest and the bonus method is applied. What is the peso amount of bonus recognized in Frank’s capital account at the date of admission? a. P70,000 b. P52,500 c. P23,333 d. P17,500 On December 31, 20x4, AN and DE are partners with capital balances of P80,000 and P40,000 and they share profits and losses in the ratio of 2:1, respectively. On this date, ST invests P36,000 cash for a one-fifth interest in the capital and profit of the new partnership. The partners agree that the implied partnership goodwill (total revaluation of assets) is to be recorded simultaneously with the admission of ST. The total implied goodwill of the firm is a. P4,800 b. P6,000 c. P24,000 d. P30,000 Bishop has a capital balance of P120,000 in a local partnership, and Cotton has a P90,000 balance. These two partners share profits and losses by a ratio of 60 percent to Bishop and 40 percent to Cotton. Lovett invests P60,000 in cash in the partnership for a 20 percent ownership. The goodwill (or revaluation of asset) method will be used. What is Cotton’s capital balance after this new investment? a. P99,600 b. P102,000 c. P112,000 d. P126,000 On June 30, 20x4, the balance sheet for the partnership of William, Brown and Lowe, together with their respective profit and loss ratios, is summarized as follows: Assets, at cost P300,000 Williams, loan P15,000 Williams, capital 70,000 Brown, capital 65,000 Lowe, capital 150,000 Williams has decided to retire from the partnership, and by mutual agreement the assets are to be adjusted to their fair value of P360,000 at June 30, 20x4. It is agreed that the partnership will pay Williams P102,000 cash for his partnership interest exclusive of his loan, which is to be repaid in full. Goodwill is to be recognized in this transaction, as implied (total) by the excess payment to Williams. After Williams’ retirement, what are the capital balances of Brown and Lowe, respectively? a. P65,000 and P150,000 c. P73,000 and P174,000 b. P97,000 and P246,000 d. P77,000 and P186,000 Prior to liquidation, the liabilities and partners’ capital account are reported with the following balances: Partner’s Capitals Profit ratio Alaska P160,000 1/3 Beermen P290,000 2/3 Totals P450,000 The total liabilities of the partnership amount to P150,000, and all assets available are non-cash assets which were realized at P540,000. The cash distribution to partners upon liquidation would be Alaska Beermen Alaska Beermen a. P135,000 P270,000 c. P140,000 P250,000 b. P130,000 P260,000 d. P190,000 P350,000 X, Y, and Z have capital balances of P40,000, P50,000 and P18,000, respectively and a profit sharing ratio of 4:2:1, respectively. If X received P8,000 upon liquidation, the total amount received by all partners was a. P108,000 b. P56,000 c. P24,000 d. P52,000 Based on #43 above, except the X received P26,000 as a result of liquidation, Z received as part of the liquidation a. P26,000 b. P18,000 c. P14,500 d. P14,000 The statement of financial position of the firm A, B, C and D, just prior to liquidation shows the following: A, loan, P1,000, A, capital, P5,500, B, capital, P5,150, C, capital, P6,850, D, capital, P4,500. A, B, C and D share profits 4:3:2:1 respectively. Certain assets are sold for P6,000 and this is distributed to partners. How much cash should C receive? a. P3,283 b. P 0 c. P2,717 d. P6,000 On January 1, year 1, the partners of Cobb, Davis, and Eddy, who share profits and losses in the ratio of 5:3:2, respectively, decided to liquidate their partnership. On this date the partnership condensed balance sheet was as follows: 7

Assets Cash Other assets

Liabilities and Capital P 50,000 Liabilities P 60,000 250,000 Cobb, capital 80,000 Davis, capital 90,000 Eddy, capital 70,000 Total assets P300,000 Total Liabilities and Capital P300,000 On January 15, year 1, the first cash sale of other assets with a carrying amount of P150,000 realized P120,000. Safe installment payments to the partners were made the same date. How much cash should be distributed to each partner? Cobb Davis Eddy Cobb Davis Eddy a. P15,000 P51,000 P44,000 c. P55,000 P33,000 P22,000 b. P40,000 P45,000 P35,000 d. P60,000 P36,000 P24,000 The balance sheet of Kate, Tim and Mar partnership shows the following information as of December 31, 2015: Cash P4,000 Liabilities P10,000 Other assets 56,000 Kate, loan 5,000 Kate, capital 25,000 Tim, capital 14,000 Mar, capital 6,000 Total 60,000 Total 60,000 Profit and loss ratio is 3:2:1 for Tim, Kate and Mar respectively. Other assets were realized as follows: Date Cash received Book value January 2016 P12,000 P18,000 February 2016 7,000 15,400 March 2016 25,000 22,600 Cash is distributed as assets are realized 47. The total loss to Kate is a. P6,000 b. P2,000 c. P2,000 d. None 48. The total cash received by Tim is a. P4,000 b. Zero c. P10,000 d. P3,000 49. Cash received by Mar in January 2016 is: a. P400 b. P2,000 c. P1,000 d. Zero 50. For financial statement purposes, the installment method of accounting may be used if the a. Collection period extends over more than twelve months b. Installments are due in different years c. Ultimate amount collectible is indeterminate d. Percentage-of-completion method is inappropriate 51. According to the installment method of accounting, gross profit on an installment sale is recognized in income a. On the date of sale b. On the date the final cash collection is received c. In proportion to the cash collection d. After cash collections equal to the cost of sales have been received 52. Income recognized using the installment method of accounting generally equals cash collected multiplied by the a. Net operating profit percentage b. Net operating profit percentage adjusted for expected uncollectible accounts c. Gross profit percentage d. Gross profit percentage adjusted for expected uncollectible accounts 53. At time of repossession, repossessed merchandise is debited at its a. Original cost c. Fair value after reconditioning cost b. Unrecovered cost d. Fair value before reconditioning cost 8

54. The realization of income on installment sales transactions involves a. recognition of the difference between the cash collected on installment sales and the cash expenses incurred b. deferring the net income related to installment sales and recognizing the income as cash is collected c. deferring gross profit while recognizing operating or financial expenses in the period incurred d. deferring gross profit and all additional expenses related to installment sales until cash is ultimately collected 55. Since there is no reasonable basis for estimating the degree of collectibility, Astor Co. uses the installment method of revenue recognition for the following sales: Year 2 Year 1 Sales P900,000 P600,000 Collections from: Year 1 sales 100,000 200,000 Year 2 sales 300,000 -Accounts written off: Year 1 sales 150,000 50,000 Year 2 sales 50,000 -Gross profit percentage 40% 30% What amount should Astor report as deferred gross profit in its December 31, year 2 balance sheet for the year 1 and year 2 sales? a. P150,000 b. P160,000 c. P225,000 d. P250,000 56. Luge Co., which began operations on January 2, year 1, appropriately uses the installment sales method of accounting. The following information is available for year 2: Installment accounts receivable, December31, year 2 P800,000 Deferred gross profit, December 31, year2 (before recognition of realized gross profit for year 2) 560,000 Gross profit on sales 40% For the year ended December 31, year 2, cash collections and realized gross profit on sales should be Cash collections Realized gross profit Cash collections Realized gross profit a. P400,000 P320,000 c. P600,000 P320,000 b. P400,000 P240,000 d. P600,000 P240,000 57. Dolce Co., which began operations on January 1, year 1, appropriately uses the installment method of accounting to record revenues. The following information is available for the years ended December 31, year 1 and year 2: Particulars Year 1 Year 2 Sales P1,000,000 P2,000,000 Gross profit realized on sales made in: Year 1 150,000 90,000 Year 2 -200,000 Gross profit percentages 30% 40% What amount of installment accounts receivable should Dolce report in its December 31, year 2 balance sheet? a. P1,225,000 b. P1,300,000 c. P1,700,000 d. P1,775,000 58. In 2013, a merchandise was sold on installment basis by MB Company for P80,000 at a gross profit of 25% on cost. During the year, a total of P42,500, including interest of P12,500 was collected on this contract. In 2013, no collection was made on this sale, and the merchandise was repossessed. The fair value of the merchandise is P34,000 after reconditioning cost of P4,000. What is the gain (loss) on repossession? a. (P10,000) b. (P14,000) c. P10,000 d. (P20,000) 59. ACE started operations on January 1, 2015 selling home appliances and furniture on instalment basis. For 2015 and 2016, the following represented operational details: Particulars (Note: in thousands of pesos) 2015 2016 Installment sales 2,400 3,000 Cost of instalment sales 1,440 2,100 9

Collections 2015 installment sales 1,260 900 2016 installment sales 1,800 On January 7, 2017 an instalment sale account in 2015 defaulted and the merchandise with a market value of P30,000 was repossessed. The related instalment balance as of date of default and repossession was P48,000. The balance of unrealized gross profit as of end of 2015: a. P456,000 b. P720,000 c. P384,000 d. P550,000 60. In the reporting of a corporate liquidation, assets are shown at a. Present value calculated using an appropriate discount rate b. Net realizable value c. Historical rate d. Book value 61. In a statement of affairs, assets are classified a. According to whether they are pledged with particular creditors b. As current or non-current c. As monetary or non-monetary d. As operating or non-operating 62. What are free assets? a. Assets for which net realizable value is greater than historical cost b. Assets for which no market exists c. Assets for which replacement cost is greater than historical cost d. Assets available to be distributed for liabilities with priority and other unsecured obligations The following was taken from the Statement of Affairs of Paradigm Company at August 30, 2018: Assets pledged with fully secured creditors P71,000 Assets pledged with partially secured creditors 12,500 Free assets 11,000 Liabilities with priority 3,000 Fully secured liabilities 69,000 Partially secured liabilities 20,000 Liabilities without priority 18,000 63. The estimated deficiency to unsecured creditors without priority amounts is a. P15,500 b. P15,150 c. P10,550 d. P10,050 64. The estimated amount payable to partially-secured liabilities is a. P14,450 b. P14,045 c. P15,441 d. P14,540 65. The estimated amount payable to liabilities without priority is a. P7,059 b. P5,790 c. P9,750 d. P9,570 The following are taken from the statement of affairs of MM Corporation (#66 to #69) Assets pledged for fully secured liabilities (current fair value, P75,000) P90,000 Assets pledged for partially secured liabilities (current fair value, P52,000) 74,000 Free assets (current fair value, P40,000) 70,000 Unsecured liabilities with priority 7,000 Fully secured liabilities 30,000 Partially secured liabilities 60,000 Unsecured liabilities without priority 112,000 66. The amount that will be paid to creditors with priority is a. P6,000 b. P6,200 c. P7,000 d. P7,500 67. The amount to be paid to fully secured creditors is a. P20,000 b. P30,000 c. P32,000 d. P35,000 68. The amount to be paid to partially secured creditors is 10

a. P52,700 b. P56,200 c. P57,000 69. The amount to be paid to unsecured creditors is a. P70,800 b. P72,000 c. P72,800

d. P57,200 d. P78,200

70. Cebuano Company has had severe financial difficulties and considering the possibility of liquidation. At this time, the company has the following assets (stated at net realizable value) and liabilities Assets (pledged against debts of P70,000) P116,000 Assets (pledged against debts of P130,000) 50,000 Other assets 80,000 Liabilities with priority 42,000 Unsecured creditors 200,000 In liquidation, how much would be paid to the partially secured creditors? a. P130,000 b. P50,000 c. P74,000 d. P200,000

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