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Cinco, a partner of Antonio and Danna decided to withdraw from the ACD partnership Cincos
shares in the profit and losses was 25% while that of Antonio and Danna are 50% and 25%
respectively. In the final settlement of his interest, he was paid 9,500, although the capital
balance before his retirement was only 85,000 the 10,000 difference implied that an equipment
of the partnership was undervalued prior to recording Cincos withdrawal and adjustment was
made by the partnership to bring the equipment to its fair value.

The total of partner capital before any adjustment and before Cinco withdrawal was 340,000,
what would be the partnership net asset after the withdrawal of Cinco?

a. 285,000
b. 245,000
c. 295,000
d. 325,000
2. When government official disburses government funds beyond the approval budget, the official
may be charged with
a. Technical malversation
b. Graft and corruption
c. An administrative case
d. Estafa
3. Peace Inc. uses the percentage of completion method in recognizing income. In 2010, the
company was engaged by World on a fixed price contract to build a 10 story building. On Jan. 1,
2011, a fire damaged the accounting records of Peace. The following data were taken form the
salvage files:

12/13/2010 12/13/2010

Architects estimated cost of completion 1,875,000 2,000,000

Cost incurred 750,000

Percentage of completion 60%

Income recognized to date 125,000 300,000

What is the percentage of completion?

a. 40%
b. 25%
c. 30%
d. 20%
4. Partners A, B and C share profits and losses in the ratio of 5:3:2 at the end of a very unprofitable
year, they decided to liquidate the firm. The partner capital account balances at this time are as
follows: A, 616,000; B, 697,200; C, 420,000. The liabilities accumulate to 840,000, including a
loan of 280,000 from A. The cash balance is 168,000 all the partners are personally solvent. The
partners to sell the asset in installment.
If B received 100,800 from the first distribution of cash, how much did C receive at that time?
a. 56,000
b. 22,400
c. 33,600
d. 61,600

5. A company issued 120,000 shares of its 25 par common stock for all the outstanding stocks of B
Corporation in a business combination completed on Aug. 1, 2016. A companys stock has a FMV of 32
per share. B Corporations net assets are worth 3.04 million at book value. Out of pocket costs of the
combination were as follows:

Legal fees 20,800

Contingent consideration

(reasonable & measurable) 14,400

Printing cost of stock certificates 6,400

Finders fee 21,600

Professional fee paid to a CPA 16,800

Fees paid to company lawyers 8,000

Fees paid to company accountants 12,000

If the combination is treated as a purchase transaction, the cost of combination will be:

a. 3,840,000
b. 3,940,000
c. 3,920,000
d. 3,899,200

6. A construction company signed a contract to build a theater over a period of two years and with this,
another contract for five years. Both the contracts are negotiable as a single package and are closely
interrelated to each other. The two contracts should be:

a. Combined and treated as a single contract

b. Segmented and considered two separate contracts
c. Recognized under the completed contracted method
d. Treated differentlythe building contract under the completed contract method and
maintenance contract under the percentage of completion method

7. The act assets of a non-profit organization are classified as

a. Unrestricted and temporary restricted

b. Temporarily restricted and permanently restricted
c. Unrestricted and temporarily used
d. Unrestricted, temporarily restricted and permanently restricted
8. In government accounting, supplies and materials purchased for inventory purposes shall be
recorded using:
b. Weighted average
c. Moving average
9. Consolidated FS are typically prepared when one entity has a controlling financial interest in another
a. A subsidiary is a finance company
b. The fiscal year ends of the two entities are more than three months apart
c. Such control is likely to be temporary
d. The two entities are in unrelated industries, such as manufacturing and real estate
10. As of Dec. 31, 2012, the books of ton Partnership showed capital balances of T 40,000; O 25,000; N
5,000. The partners profit and loss ratio was 3:2:1, respectively. The partners decided to liquidate
and they sold all noncash assets for 37,000. After settlement of all liabilities amounting 12,000, they
still have cash of 28,000 left for contribution. Assuming that any capital debit balance is
uncollectible, the share of T in the distribution of the 28,000 cash would be:
a. 17,800
b. 18,800
c. 19,800
d. 16,800
11. Contract revenue in construction contract comprises
a. The initial amount of revenue agreed in the contract
b. The initial amount of revenue agreed in the contract, variation in the contract, claim and
incentive payment
c. Variation in the contract, claim and incentive payment
d. The initial amount of revenue agreed in the contract and progress billings
12. Condoro MFG. Company consigned 20 air conditioners to Coolrite Inc. The cost of each air
conditioner is 10,000 and the freight on the shipment was paid by Condoro in the amount of 4,000.
Coolright subsequently submitted account sales stating that it had sold twelve air conditioners, and
remitted the balance of 196,400 due to Condoro. The remittance was net of the following
deductions from the selling price of the air conditioners sold; commission 15% of the selling price;
advertising, 15% of commission; delivery and installation of air conditioners sold, 1,600; and cartage
cost incurred upon receipt of the consignment shipment, 600. How much of the net income/loss of
Condoro on the consignment?
a. 72,400
b. 74,000
c. 74,240
d. 72,420
13. General company acquired the net assets of Major company during 2011. The purchase price was
800,000. On the date of transaction, Major had no long term investments in marketable equity
securities and 400,000 in liabilities. The fair value of citizen assets on the acquisition date was as
i. Current asset 800,000
ii. Noncurrent asset 600,000
How should General company account for the 200,000 difference between the fair
value of the net assets acquired, 1,000,000 and the cost 800,000?

a. Retained earnings should be reduced by 200,000

b. Current assets should be recorded at 685,000 and noncurrent assets recorded at 515,000
c. 200,000 gain on acquisition of business should be recognized
d. A deferred credit of 200,000 should be set up and subsequently amortized to future net
income over a period not to exceed 40 years.

14. On Jan. 1, 2016, K enterprises, an SME, acquired a 35% equity of L Corporation, a joint venture. K
will share with other venturers control and profits in their respective participation ratios. K paid
116,000 for its interest and also paid 5,800 transaction costs. Ks only investment in equity is this
joint arrangement. During the year, L Corporation reported the following transactions:
i. Declared and paid cash dividend of 30,000
ii. Reported a loss of 84,000 during the year
The fair value of Ks investment is determined by appropriate valuation techniques at 130,000.
Costs to sell are estimated at 11,700.
What is the amount of Investment in L Corporation will SME K report in its 2016 balance sheet if
it uses the equity model?

a. 130,000
b. 116,000
c. 81,900
d. 118,300
15. Enteng Company acquired all of Agimat corporations assets and liabilities on October 2, 2009 in a
business combination at that date. Agimat reported asset with a book value of P2,496,000 and
liabilities of P1,424,000. Enteng noted that Agimat had 160,000 of research and development costs
at the acquisition date that did not appear of any value. Enteng also determined that patents
developed by Agimat had a fair value of P480,000 but had not been recorded by Agimat. Except for
building and equipment , Enteng determined the fair value of all other asset and liabilities reported
by Agimat approximately the recorded amount. In recording the transfer of asset and liabilities in its
books, Enteng recorded goodwill of P372,000. Enteng paid P2,068,000 to acquire Agimats asset and
liabilities if the book value of Agimats building and equipment was P1,364,000. What was their fair
a. 1,508,000
b. 144,000
c. 304,000
d. 1,668,000
16. On Dec. 31, 2009, Joan a franchisor entered into a franchising agreement with Iris charging Irish a
franchise of 1,000,000. Upon signing of the contract, a non-refundable down payment of 250,000 is
paid with the balance payable in three equal annual instalment starting 2010. Joan had already
performed 99.9% of the services as of Feb. 1, 2010 at a cost of 300,000. Joan was able to collect the
first instalment payment in 2010 but the collectability of the remaining balance is still doubtful.

In its 2010 income statements, Joan should recognized profit of:

a. 1,000,000
b. 175,000
c. 250,000
d. 350,000
17. On Jan. 2, 2010, Pokemon signed an agreement to operate as a franchise of Digimon for an initial
franchise fee of 10,000,000 for 10 years. Of this amount, 2,000,000 was paid when the agreement
was signed and the balance payable in four equal amount payments beginning on Dec. 30, 2010.
Pokemon signed a non-interest bearing note for the balance. Pokemon rating indicates that it can
borrow money at 24% for a loan of this type. PV of an annuity of 1 for 4 periods at 24$ is 2.4.
Assume that the substantial services amounting to 1,020,000 had already been rendered by
Digimon and that additional indirect franchise cost of 272,000 was also incurred if the collection of
the note is not reasonably assured, the realized gross profit for the year ended Dec. 31, 2010 is:
a. 5,780,000
b. 2,420,800
c. 2,148,800
d. 5,508,000
18. Joy is trying to decide whether to accept a bonus of 25% of net income after salaries and bonus or a
salary of 243,750 plus a bonus of 10% of net income after salaries and bonus as a means of
allocating profit among the partners. Salaries traceable to the other partners are estimated to be
450,000. What amount of income would be necessary so that Joy would consider the choices to be
a. 2,750,000
b. 3,156,250
c. 2,275,000
d. 2,993,750
19. Anna and Janna are partner sharing profits and losses in the ratio of 6:4 respectively. On Jan. 2, the
partnership decided to admit Hannah as a new partner upon her investment of P96,000. On this
date, the interest in the partnership of Anna and Janna are as follows: Anna P138,000; Janna
P111,600 assuming that the new partner is given interests in the firm. The agreed capital of the
partnership is P360,000. The admission of a new partner will result to which of the following:
a. Goodwill of P20,400
b. Bonus from Janna is P2,400
c. Bonus to Hannah is P6,000
d. Capital balance of Anna after admission is P150,240
20. The Yvonne Inc. opened an agency in Sampaloc, Manila in 2008. The following is a summary of the
transaction of the agency:

Sales orders sent to Home office 55,000

Sales orders filled by Home office in 2008 46,500
Freight to shipment to agency 1,100
Collection net of 2% discount 39,690
Selling expenses paid from the agency working fund 2,820
Administrative expenses charged to agency 5% of sales
Samples shipped to agency
Cost 2,000
Inventory, Dec. 31, 2008 1,100

The company maintains its gross margin on agency sales at 30% excluding cost on shipment to agency.
The agency net income must be:

a. 4,995
b. 5,390
c. 5,995
d. 6390
21. On June 1, 2011, the following payments were made by Company A to the former owners and
officers of Company B
i. Cash paid for settlement of pre-existing relationship 300,000
ii. PN issued for remuneration for future employee services 1,200,000
iii. Cash paid for reimbursement for paying the acquirers acquisition cost 800,000
Also, Company A issued 300,000 shares with par value of P10 per share and market price of P45 per
share in exchange for 60% ownership of the outstanding shares of Company B. The net assets of
Company B on this date is P24,375,000. Company opted to use the partial goodwill method in this
transaction. In addition, Company A incurred the following expenditures cost to issue equity
amounting to P900,000. Professional fees paid to independent values, P280,000. Professional fees
paid to lawyers taking part in the negotiation process, P350,000. Fees to accountant for processing
SEC registration of shares, P60,000. Fees to advisors and bankers, P230,000. Since the parties cannot
agree on true value of the acquire on the date of acquisition, they contractually agreed that
additional consideration of P8,000,000 will be paid in the event the net earnings of Company B
reaches an average of P27,000,000 monthly for the next 6 months. On June 1, an estimated of the
fair value of the liability is 2,750,000 of its assets as a possible obligation the payment did not
materialize due to under performance against the target during this period.

What should be the amount of goodwill (gain) in the Dec. 31, 2011 consolidated statements of
financial position as a result of this acquisition?
a. 2,450,000
b. 75,000
c. (1,125,000)
d. 1,625,000
22. Ghost Fighter Corp. operates a branch in Baguio City. At close of the business on Dec. 31, 2010,
Baguio branch account in the home office books showed a debit balance of P485,600 the interoffice
accounts were in agreement at the beginning of the year. For purposes of reconciling the interoffice
accounts, the following facts were ascertained
a. A branch customer remitted P10,000 to the home office. The home office recorded this cash
collection on Dec. 21, 2010. Upon receiving a credit memo the branch recorded the transaction
twice on Dec. 23, 2010
b. A home office customer remitted P12,000 to the branch. The branch inadvertently recorded this
transaction on Dec. 26, 2010 as a transfer of cash from the home office. The home office made
no entry during the year
c. Branch collections of P75,000 were deposited for the account of the home office on Dec. 29,
2010; sixty percent was credited on the home office bank account as of Jan. 9, 2011 and the
balance was returned to the depositor marked NSF
d. Merchandise shipments of P200,000 made by the home office on Dec. 28, 2010 were received
by the branch on Jan. 24, 2011. However, only ninety percent of this shipment was charged by
the home office to Baguio branch; the balance was debited to other branch.
Compute the unadjusted balance of the home office current account as of Dec. 31, 2010
a. 442,600
b. 232,600
c. 242,600
d. 212,600
23. Examination of the reciprocal accounts between Manila Home office and Cebu branch shows the
i. P10,000 advertising expense of another branch was erroneously charged by the home
office to Cebu branch
ii. Cebu recorded shipment of merchandise from Home office amounting to P75,000 twice
iii. Home office recorded cash transfer of P65,700 from Cebu branch as coming from Davao
iv. Transfer of equipment from Home office amounting to P53,000 was not recorded by the
v. Cebu recorded a debit memo from Home office of P5,540 as P5,450

How much is the net adjustment to Cebu branch current account and to the Home office current
account respectively?

a. 75,700DR; 20,910DR
b. 75,700CR; 21,910DR
c. 75,700DR; 21,910CR
d. 65,700CR; 22,000CR
24. On April 1, 2011, the R and R company paid P30,000,000 to the number of stockholders of S&S to
acquire 75% ownership interest (representing 135,000 shares outstanding of S&S) in a transaction
properly accounted for as acquisition on this date, the asset and liabilities of S&S company were as

Cash 1,200,000
Inventories 7,500,000
Plant asset 31,000,000
Liabilities 13,500,000

Furthermore, it was determined that the merchandise inventory of S&S company had a fair market
value of P8,250,000 and the plant assets of P25,650,000. What should be the amount reflected as
goodwill (gain) by R&R company in its separate financial statements as a result of the business

The NCI is initially measure at fair value. Quoted price on the date of acquisition of S&S shares is at
P175,000 per share
a. P0
b. P16,275,000
c. 13,800,000
d. 18,400,000
25. Jack and Jill agreed on a joint venture to purchase and sell custom made items. They agreed to
contribute P50,000 each to be used in purchasing the merchandise, share equally in any gain or loss
and record their venture transaction in their individual books. Upon the termination of the venture,
the following information were available:
Joint venture account credit balance: Jack P36,000; Jill P40,400
Cost of custom made items take by: Jack P3,000; Jill P5,800
Expenses paid: by Jack P3,700; Jill P4,600
Compute for the joint venture profit:
a. P76,400
b. P84,700
c. P67,600
d. P85,200
26. Ante, Bert, and Carl have decided to liquidate their partnership. At this time, the partnership has
cash of 105,000, non-cash assets of P700,000, and liabilities of P460,000. The partners capital
balances, loan balances, and profit and loss ratios are as follows:

Ante Bert Carl

Capital balances 120,000 80,000 110.000
Loan balances 15,000 20,000
Profit and loss ratio 60% 20% 20%

The results of liquidation are summarized below:

January February March

Proceeds from sale of assets 500,000 90,000 70,000
Payments of liabilities 280,000 100,000 Remaining
Liquidation expense paid 12,000 10,000 5,000
Payment to partners 120,000 90,000 Remaining cash

How much is the cash withheld in January for future liquidation expense?

a. 11,000
b. 13,000
c. 12,000
d. 15,000