PRACTICAL ACCOUNTING TWO REVIEWERS/ TESTBANKS

1. Jinky is trying to decide whether to accept a bonus of 25% of

net income after salaries and bonus or a salary of P97,500 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 P450,000. What amount of
income would be necessary so that Jinky would consider the
choices to be equal?
a. P1,100,000 b. P1,197,500 c. P650,000
d. P1,262,500

2. Jamby and Minam just formed a partnership. Jamby contributed

cash of P2,205,000 and office equipment that cost P945,000. The
equipment had been used in her sole proprietorship and had been
70% depreciated, the appraised value of the equipment is
P630,000. Jamby also contributed a note payable of P210,000 to
be assumed by the partnership. Jamby is to have 60% interest in
the partnership. Miriam contributed only P1,575,000 merchandise
inventory at fair market value. Assume the use of bonus method,
the partners’ capital must be in conformity with their profit and loss
ratio upon formation.

In the formation of a partnership, which of the following is true?

a. The agreed capital of Jamby upon formation is P2,625,000
b. The total agreed capital of the partnership is P4,375,000
c. The capital of Miriam will increase by P105,000 as a result of
the transfer of capital
d. There is either an investment or withdrawal of asset under the
bonus method

3. Batanes Construction Company recognized gross loss of

P42,000 on its long-term project which has accumulated costs of
P490,000. To finish the project, the company estimates that it has
to incur additional cost of P735,000. The contract price is:
a. P798,000 b. P1,330,000 c. P1,225,000
d. P1,183,000

4. Ester, Judith and Martha were partners with capital balances on

January 2, 2009 of P70,000, P84,000 and P62,000, respectively.
 Their loss sharing ratio is 3:5:2. On may 1, 2009, Ester retires form
the partnership. On the date of retirement the partnership net profit
form operations is P48,000. The partners agreed further to pay
Ester P76,560 in settlement of her interest.

Upon retirement of Ester, which of the following will result?

a. Goodwill of Ester is P7,840
b. Judith capital after retirement of Ester is P36,400 higher than
Martha.
c. Bonus from Ester is P9,440
d. Bonus to Judith is P5,600

5. The following selected accounts appeared in the trail balance of

Valentine’s Company as of December 31, 2009:

Installment receivable – 2008 sales P 12,000

Repossessions P 2,400
Installment receivable – 2009 sales 160,000 Installment
sales 340,000
Inventory, December 31, 2008 56,000 Regular sales
308,000
Purchases 440,000 Deferred gross
profit – 2008 43,000
Operating expenses
92,000
Additional information:
Installment receivable – 2008 sales, December as of December
31, 2008
Inventory of new and repossessed merchandise as of December
31, 2009
Gross profit percentage on installment sales in 2008 is 10% higher
than the gross profit percentage on regular sales in 2009.

Repossessions was made during the year and was recorded

correctly. It was a 2008 sale and the corresponding uncollected
account at the time of repossession was P6,200.

What is the net income for 2009

a. P108,360 b. P13,480 c. P105,880
d. P107,200
6. On November 30, 2009, Loveless Company authorized NBSB
Corp. to operate as a franchisee for an initial franchise fee of
P1,950,000. Of his amount, P750,000 was received upon signing
the agreement and the balance, represented by a note, is due in
four annual payments starting November 30, 2010. Present value
of P1 at 12% for 4 periods is 0.6355.

Present value of an ordinary annuity of P1 at 12% for 4 periods is

3.0374. The period of refund will elapsed on January 31, 2010.
The franchisor has performed substantially all of the initial services
but the operations of the store have yet to start. Collectibility of the
note is reasonably certain. How much is the unearned franchise
fee on the year ended December 31, 2009?

a. P1,661,220 b. P750,000 c. P991,220

d. P0

7. On April 30, 2009, the capital accounts of P, Q shows the

following balances: P – P150,000, Q – 75,000 and R – P45,000. At
this time, S is admitted to the firm when he purchases a one-sixth
interest in the firm for P27,5000. The old partners equalized their
capital investments. Afterwards, all the partners agree to divide
profits and losses equally. The new partnership closes its books on
June 30, 2009 reporting a profit of P4,200 for two months. The
partners made the following withdrawals: P and R, P450 per
month; Q and S per month. On June 30, 2009, S invests enough
cash to increase his capital to a one-third interest in the
partnership. How much cash is to be invested by S?

a. P108,025 b. P68,025 c. P67,425 d.

P107,425

8. Forever, Inc. granted a franchise to Hopeless Romantic for the

manila area. The franchise was to pay a franchise fee of
P250,000, 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 Forever, Inc. in
 interest bearing note is 14%. The first year generated a gross
sales of P1,250,000. What is the amount of unearned franchise
fee after the first year of operations?

a. P287,500 b. P145,700 c. P195,700

d. P250,000

9. Lovebirds Corporation sells goods on the installment basis. For

the year just ended, the following were reported:

Cost of installment sales P 525,000

Loss on repossession 13,500
Fair value of repossessed merchandise 112,500
Account defaulted 180,000
Deferred gross profit, end 108,000

How much was the collections for the year?

a. P210,000 b. P264,000 c. P390,000
d. P415,715

10. DEF Company, which began operations on January 1, 2009

appropriately, uses the instalment method of accounting. The
following data pertain to DEF’s operations for year 2009:

Instalment sales (Before adjustment) P450,000 Operating

expenses (before write-off
And repossessions)
P36,000
Regular sales 187,500 Cash collections on
instalment sales
Cost of regular sales 107,500 including interest
of P12,000 156,000
Cost of instalment sale 315,000 Instalments
receivables written-off
Due to defaults
22,000
FMV of repossessed
Merchandise 27,000 Repossessed
accounts 50,000
Actual value of trade-in
 Merchandise 40,000 trade-in allowance
70,000

How much is the deferred gross profit at December 31, 2009?

What is the net income for the year ended December 31, 2009?
a. P50,500 ; P65,000 c. P41,000 ; P63,000
b. P50,500 ; P91,500 d. P41,000 ; P75,000

11. The partnership agreement of X, Y and Z provides for the

division of net income as follows:

I. Y, who manages the partnership is to receive a salary of

P16,500 monthly.
II. Each partner is to be allowed interest at 15% on ending
capital.
III. Balance is to be divided 25:30:45.

During 2009, X invested an additional P96,000 in the partnership.

Y made an additional investment of P60,000 and withdrew
P90,000, and Z withdrew P70,000. No other investments or
withdrawals were made during 2009. On January 1, 2009, the
capital balances were X, P280,000; Y, P300,000; and Z, P170,000.
Total capital at year-end was P975,000.

Compute the capital balance of each partner at year-end:

X Y Z
a. P 36,750 P214,920 P(20,670)
b. 412,750 484,920 77,330
c. 316,750 514,920 149,330
d. 398,750 412,500 87,250

12. The balance sheet as of September 30, 2009, for the

partnership of D, E and F shows the following information: Assets,
P360,000; D, loan, P20,000; D, capital, P83,000; E, capital,
P77,000; F, capital, P180,000. It was agreed among the partners
that D retires from the partnership, and it was also further agreed
that the assets should be adjusted to their fair value of P345,000
as of September 30, 2009. Net loss prior to the retirement of D
amount to P70,000. The partnership is to pay D P62,000 cash for
D’s partnership interest, which would include the payment of his
 loan. No goodwill is to be recorded. D, E and F share profit 40%,
15% and 45% respectively.

After D’s retirement, how much would F’s capital balance be?
a. P66,000 c. P136,500
b. P147,000 d. P182,250

13. 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’s capital account balances at this
time are as follows: A, P616,000; B, P697,200; C, P420,000. The
liabilities accumulate to P840,000, including a loan of P280,000
from A. The cash balance is P168,000. All the partners are
personally solvent. The partners plan to sell the assets in
instalment.

If B received P100,800 from the first distribution of cash, how

much did C receive at that time?
a. P56,000 c. P33,600
b. P22,400 d. P61,600

14. On July 1, 2007, NR Construction Corp. contracted to build an

office building for FM, Inc. for a total contract price of P12,875.
2007 2008 2009
Contract cost incurred P 9,375 P 65,625
P 56,250
Estimated costs to complete the contract 84,375
50,000 -
Billings to FM, Inc. 12,750 74,750
34,375

How much is the Construction in Progress account balance at

December 31, 2008, using the percentage of completion method?
How much is the Construction in Progress, net of Progress Billings
at December 31, 2008, using the zero-profit method? How much is
the realized gross profit/(loss), using percentage of completion
method in 2009?
a. P71,875; P2,875; P(9,375) c. P71,875;
P15,625; P(9,375)
 b. P74,687.50; P2,875; P(6,250) d. P71,875;
P15,625; P(6,250)

15. On January 2, 2009, SD Company signed an agreement to

operate as a franchisee of TQ Products, inc. for an initial franchise
fee of P937,500 for 7 years. Of this amount, P175,000 was paid
when the agreement was signed and the balance payable in four
annual payments beginning on December 31, 2009. SD signed a
non-interest bearing note for the balance. SD’s rating indicates
that he can borrow money at 16% for the loan of this type. Assume
that substantial services amounting to P283,500 had already been
rendered by TQ Products and that additional indirect franchise
cost of P25,500 was also incurred. PV factor is 2.80.

If the collection of the note is not reasonably assured, the net

income for the year ended December 31, 2009 is
a. P313,435 c. P168,135
b. P228,035 d. P253,535

16. Omega Inc. started a 4-year contract to build a dam.

Activities commenced on February 1, 2007. The total contract
price amounted to P12 million, and it was estimated that the
work would be completed at a total cost of P9.5 million. In the
construction agreement the customer agreed to accept
increases in wage tariffs additional to the contract price.

The following information refers contract activities for the financial

year ending December 31, 2007:
a. Costs for the year:
P’000
Materials………………………………………..
P1,400
Labor……………………………………………..
800
Operating overheads……………………….
150
Subcontractors………………………………..
180

b. Current estimate of total contract costs indicates the following:

  Materials are to be P180,000 higher than expected.
 Total labor costs are to be P300,000 higher than
expected. Of this amount, only P240,000 would be
brought about by increased wage tariffs. The other
amount would be due to inefficiencies.
 A savings of P300,000 is expected on operating
overheads.

c. During the current financial year the customer requested a

variation to the original contract and it was agreed that the
contract price would be to increased by P900,000. The total
estimated cost of this extra work is P750,000.

d. By the end of 2007, certificates issued by quantity surveyors

indicated a 25% stage of completion.

17. Compute the amount of gross profit or loss to be recognized in

2007 using contract costs in proportion to estimated contract costs
(percentage of completion method):
a. P568,000 c. P610,000
b. P577,000 d. P755,000

18. Compute the amount of gross profit or loss to be recognized in

2007 using percentage of the work certified (percentage of
completion method – output method using actual cost approach):
a. P568,000 c. P610,000
b. P577,000 d. P755,000

19. Tam’s Pizza, Inc. charges an initial franchise fee of P50,000 for
the right to operate as a franchisee of Tam’s Pizza. Of this amount,
P10,000 is payable when the agreement was signed and the
balance is payable in five annual payments of P8,000 each. In
return for the initial franchise fee, the franchiser will help locate the
site, negotiate with the lease or purchase of the site, supervise the
construction activity, and provide the bookkeeping services. The
credit rating of the franchisee indicates that money can be
borrowed at 8%. The present value of an ordinary annuity of five
receipts of P8,000 each discounted at 8% is P31,941.68.
 If the initial downpayment is not refundable and no future services
are required by the franchiser, but collection of the note is so
uncertain that recognition of the note as an asset is unwarranted,
the entry should be:

a. Cash……………………………………………………………
…… 10,000.00
Notes Receivable……………………………………………….
40,000.00
Discounts on Notes Receivable………….
8,058.32
Unearned Franchise Fees………………….
41,941.68

b. Cash……………………………………………………………
….. 10,000.00
Notes Receivable………………………………………………
40,000.00
Discounts on Notes Receivable………….
8,058.32
Revenue from Franchise Fees…………..
41,941.68

c. Cash
………………………………………………………………
10,000.00
Revenue from Franchise Fees…………………….
10,000.00

d. Cash……………………………………………………………
… 10,000.00
Unearned Franchise Fees……………………….
10,000.00

20. On April 1, 2004, Motorola, Inc. entered into a franchise

agreement with a local businessman. The franchisee paid P45,000
and gave a P30,000, 8%, 3 years notes payable with interest due
annually on March 31. Motorola recorded the P75,000 initial
franchise fee as revenue on April 1, 2004. On December 30, 2004,
the franchisee decided not to open the outlet under Motorola’s
 name. Motorola cancelled the franchisee’s note and refunded
P24,000 less accrued interest on the note, of the P45,000 paid on
April 1. What entry should Motorola make on December 30, 2004?
a. Loss on Repossessed Franchise……………………..
24,000
Cash……………………………………………………
24,000

b. Loss on Repossessed Franchise……………………..

22,200
Cash ……………………………………………………
22,200

c. Loss on Repossessed Franchise……………………..

52,000
Cash…………………………………………………..
22,200
Notes Receivable…………………………………….
30,000

d. Revenue from Franchise Fees……………………….

75,000
Interest Income……………………………………
1,800
Cash……………………………………………………
22,200
Notes Receivable…………………………………..
30,000
Revenue from Repossessed Franchise……..
21,000

21. Maranan Motors Sales cars on the installment basis. Presented

below are data for the past three years:

2007 2006 2005

Installment sales P2,880,000 P2,304,000 P1,543,000
Cost of sales 1,728,000 1,440,000 1,002,950
Collection on:
2007 installment 1,008,000
sales
 2006 installment 391,000 921,000
sales
2005 installment 478,000 462,000 578,000
sales

Repossessions on defaulted accounts included one made on a

2005 sale for which the unpaid balance amounted to P20,000. The
depreciated value of the car repossessed was P10,000.

The unrecovered cost of the car in 2005 and repossessed in 2007

is :
a. P6,500 c. P10,000
b. 7,000 d. 13,000

22. Ondoy Company began operations on January 1, 2011 and

appropriately uses the installment method of accounting. The
following data are available for 2011 and 2012

2011 2012

Installment sales 1,200,000 1,500,000

Cash collections from:
2007 sales 400,000 500,000
2008 sales 600,000
Gross profit on sales 30% 40%

The realized gross profit for 2012 is

a. 600,000
b. 240,000
c. 390,000
d. 440,000

23. On January 1, AwAw and BeBe pooled their assets to form a

partnership, with the firm to take over their business assets and
assume the liabilities. Partners capitals are to be based on net assets
transferred after the following adjustments. (Profit and loss are
allocated equally.)

BeBe's inventory is to be increased by P4,000; an allowance for

doubtful of P 1,000 and Pl.500 are to be set up in books of AwAw and
BeBe, respectively; and accounts payable of P4,000 is to be
recognized in AwAw's books. The individual trial balances on August,
before adjustments, follow:

AwAw BeBe
Assets P75.000 P113,000
Liabilities 5,000 34,500

What is the capital of AwAw and BeBe after the above adjustments?

a. AwAw, P65,000; BeBe, P76.000

b. AwAw, P65,000; BeBe, P81.000
c. AwAw, P68,750: BeBe, P77,250
d. AwAw, P75.000; BeBe, P81.000

24. The Partnership has the following balances in their trial balance:

(1) Sales = P70,000

(2) Cost of Goods Sold = P40,000
(3) Operating Expenses = P10,000
(4) Salary allocations to partners = P13,000
(5) Interest paid to banks = P2,000
(6) Partners' withdrawals = P8,000

The partnership net income (loss) is:

a. (3,000)
b. 18,000
c. 20.000
d. 5,000
25. The following data are provided by the Troubled Company:

Assets at book value 150.000

Assets at net realizable value 105,000
Liabilities at book value:
Fully secured mortgage 60,000
Unsecured accounts and notes payable 70,000
Unrecorded liabilities:
Interest on bank notes 500
Estimated cost of administering estate 6,000

The court has appointed a Trustee to liquidate the company.

When the Trustee records the assets and liabilities, it should include
an estate deficit of:

a. 31,500
b. 25,000
c. 31,000
d. 25,500

26. Mimi, Jojo, and Kaka are forming a new partnership. Mimi is to
invest cash of P100,000 and stamping equipment originally costing
P120.000 but has a second-hand value in the market at P50,000.
Jojo is to invest cash of P160,000, while Kaka, whose family is
engaged in selling stamping equipment, is to contribute cash of
P50,000 and a brand new stamping equipment to be used by the
partnership with a regular price of P 120.000 but which cost their
family's business P100,000. Partners agree to share profits equally.

The capital balances upon formation are:

a. Mimi, P220,000; Jojo, P160,000; and Kaka, P150,000

b. Mimi, P176,666; Jojo, P176,666; and Kaka, P176,668
c. Mimi, P160,000; Jojo, P160,000; and Kaka, P160,000
d. Mimi, P150,000; Jojo, P160,000; and Kaka, P170,000
27. On June 30, 2012, Aida, Lorna and Fe formed a partnership by
combining their separate business proprietorship.

Aida contributed cash of P75.000. Lorna contributed property with a

P54,000 carrying amount, a P60.000 original cost, and P120.000 fair
value. The partnership accepted responsibility for the P52.500
mortgage attached to the property. Fe contributed equipment with a
P45,000 carrying amount, a P112,500 original cost, and P82.500 fair
value. The partnership agreement specifies that profits and losses
are to be shared equally but is silent regarding capital contributions.

Who among the partners has the largest capital balance?

a. Lorna
b Fe
c. All capital account balances are equal
d. Aida

28. Dimagiba Company began operation at the beginning of 2012.

During the year, it had cash sales of 6,875,000 and sales on
installment basis of 16,500,000. Dimagiba adds a markup on cost of
25% on cash sales and 50% on installment sales. Installments
receivable at the end of 2008 is 6,600,000.

The resulting realized gross profit for 2012 is:

a. 3,300,000
b. 1,375,000
c. 4,675,000
d. 3,575,000

29. On October 1, 2011, Mario Corporation, a real estate developer,

sold land to Diego Company for 5,000,000. Diego paid cash of
600,000 and signed a ten-year 4,400,000 note bearing interest at
12%. The carrying amount of the land was P4,000,000 on the date of
sale. The note was payable in forty quarterly principal installments of
110,000 beginning January 2, 2012. Mario appropriately accounts for
the sale under the cost recovery method. On January 2, 2012, Diego
paid the first principal installment of 110,000 and interest of 132,000.
For the year ended December 31, 2012, what total amount of income
should Mario recognize from the land sale and the financing?

a. 309,640
b. 508.200
c. 208,000
d. 0

30. Popoy has a dilemna. He is trying to decide whether to accept a

salary of 40,000 or a salary of 25,000 plus a bonus of 10% of net
income after salary and bonus as a means of allocating profit among
the partners. Salaries traceable to the other partners are estimated to
be 100,000.

What amount of income would be necessary so that Popoy would

consider the choices to be equal?

a. 165,000
b. 305,000
c. 265,000
d. 290,000

31. Nonoy and Mar are considering forming a partnership whereby

profits will be allocated through the use of salaries and bonuses.
Bonuses will be 10% of net income after total salaries and bonuses.
Nonoy will receive a salary of P30.000 and a bonus. Mar has the
option of receiving a salary of P40,000 and a 10% bonus or simply
receiving a salary of P52,000. Both partners will receive the same
amount of bonus.

Determine the level of net income that would be necessary so that Jo

would be indifferent to the profit sharing option selected.

a. 300,000
b. 240,000
c. 334,000
d 94,000
32. Batanes Construction Company recognized gross loss of
P42,000 on its long-term project which has accumulated costs of
P490,000. To finish the project, the company estimates that it has
to incur additional cost of P735,000. The contract price is:
a. P798,000 b. P1,330,000 c. P1,225,000
d. P1,183,000

33. The following selected accounts appeared in the trail balance of

Valentine’s Company as of December 31, 2009:

Installment receivable – 2008 sales P 12,000

Repossessions P 2,400
Installment receivable – 2009 sales 160,000 Installment
sales 340,000
Inventory, December 31, 2008 56,000 Regular sales
308,000
Purchases 440,000 Deferred gross
profit – 2008 43,000
Operating expenses
92,000
Additional information:
Installment receivable – 2008 sales, December as of December
31, 2008
Inventory of new and repossessed merchandise as of December
31, 2009
Gross profit percentage on installment sales in 2008 is 10% higher
than the gross profit percentage on regular sales in 2009.

Repossessions was made during the year and was recorded

correctly. It was a 2008 sale and the corresponding uncollected
account at the time of repossession was P6,200.

What is the net income for 2009

b. P108,360 b. P13,480 c. P105,880
d. P107,200

34. On November 30, 2009, Loveless Company authorized NBSB

Corp. to operate as a franchisee for an initial franchise fee of
P1,950,000. Of his amount, P750,000 was received upon signing
 the agreement and the balance, represented by a note, is due in
four annual payments starting November 30, 2010. Present value
of P1 at 12% for 4 periods is 0.6355.

Present value of an ordinary annuity of P1 at 12% for 4 periods is

3.0374. The period of refund will elapsed on January 31, 2010.
The franchisor has performed substantially all of the initial services
but the operations of the store have yet to start. Collectibility of the
note is reasonably certain. How much is the unearned franchise
fee on the year ended December 31, 2009?

a. P1,661,220 b. P750,000 c. P991,220

d. P0

35. Forever, Inc. granted a franchise to Hopeless Romantic for the

manila area. The franchise was to pay a franchise fee of
P250,000, 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 Forever, Inc. in
interest bearing note is 14%. The first year generated a gross
sales of P1,250,000. What is the amount of unearned franchise
fee after the first year of operations?

a. P287,500 b. P145,700 c. P195,700

d. P250,000

36. Lovebirds Corporation sells goods on the installment basis. For

the year just ended, the following were reported:

Cost of installment sales P 525,000

Loss on repossession 13,500
Fair value of repossessed merchandise 112,500
Account defaulted 180,000
Deferred gross profit, end 108,000

How much was the collections for the year?

a. P210,000 b. P264,000 c. P390,000
d. P415,715
37. DEF Company, which began operations on January 1, 2009
appropriately, uses the instalment method of accounting. The
following data pertain to DEF’s operations for year 2009:

Instalment sales (Before adjustment) P450,000 Operating

expenses (before write-off
And repossessions)
P36,000
Regular sales 187,500 Cash collections on
instalment sales
Cost of regular sales 107,500 including interest
of P12,000 156,000
Cost of instalment sale 315,000 Instalments
receivables written-off
Due to defaults
22,000
FMV of repossessed
Merchandise 27,000 Repossessed
accounts 50,000
Actual value of trade-in
Merchandise 40,000 trade-in allowance
70,000

How much is the deferred gross profit at December 31, 2009?

What is the net income for the year ended December 31, 2009?
c. P50,500 ; P65,000 c. P41,000 ; P63,000
d. P50,500 ; P91,500 d. P41,000 ; P75,000

38. On July 1, 2007, NR Construction Corp. contracted to build an

office building for FM, Inc. for a total contract price of P12,875.
2007 2008 2009
Contract cost incurred P 9,375 P 65,625
P 56,250
Estimated costs to complete the contract 84,375
50,000 -
Billings to FM, Inc. 12,750 74,750
34,375
 How much is the Construction in Progress account balance at
December 31, 2008, using the percentage of completion method?
How much is the Construction in Progress, net of Progress Billings
at December 31, 2008, using the zero-profit method? How much is
the realized gross profit/(loss), using percentage of completion
method in 2009?
c. P71,875; P2,875; P(9,375) c. P71,875;
P15,625; P(9,375)
d. P74,687.50; P2,875; P(6,250) d. P71,875;
P15,625; P(6,250)

39. On January 2, 2009, SD Company signed an agreement to

operate as a franchisee of TQ Products, inc. for an initial franchise
fee of P937,500 for 7 years. Of this amount, P175,000 was paid
when the agreement was signed and the balance payable in four
annual payments beginning on December 31, 2009. SD signed a
non-interest bearing note for the balance. SD’s rating indicates
that he can borrow money at 16% for the loan of this type. Assume
that substantial services amounting to P283,500 had already been
rendered by TQ Products and that additional indirect franchise
cost of P25,500 was also incurred. PV factor is 2.80.

If the collection of the note is not reasonably assured, the net

income for the year ended December 31, 2009 is
a. P313,435 c. P168,135
b. P228,035 d. P253,535

Omega Inc. started a 4-year contract to build a dam. Activities

commenced on February 1, 2007. The total contract price
amounted to P12 million, and it was estimated that the work would
be completed at a total cost of P9.5 million. In the construction
agreement the customer agreed to accept increases in wage tariffs
additional to the contract price.

The following information refers contract activities for the financial

year ending December 31, 2007:
e. Costs for the year:
P’000
Materials………………………………………..
P1,400
 Labor……………………………………………..
800
Operating overheads……………………….
150
Subcontractors………………………………..
180

f. Current estimate of total contract costs indicates the following:

 Materials are to be P180,000 higher than expected.
 Total labor costs are to be P300,000 higher than
expected. Of this amount, only P240,000 would be
brought about by increased wage tariffs. The other
amount would be due to inefficiencies.
 A savings of P300,000 is expected on operating
overheads.

g. During the current financial year the customer requested a

variation to the original contract and it was agreed that the
contract price would be to increased by P900,000. The total
estimated cost of this extra work is P750,000.

h. By the end of 2007, certificates issued by quantity surveyors

indicated a 25% stage of completion.

40. Compute the amount of gross profit or loss to be recognized in

2007 using contract costs in proportion to estimated contract costs
(percentage of completion method):
c. P568,000 c. P610,000
d. P577,000 d. P755,000

41. Compute the amount of gross profit or loss to be recognized in

2007 using percentage of the work certified (percentage of
completion method – output method using actual cost approach):
a. P568,000 c. P610,000
b. P577,000 d. P755,000

42. Tam’s Pizza, Inc. charges an initial franchise fee of P50,000 for
the right to operate as a franchisee of Tam’s Pizza. Of this amount,
P10,000 is payable when the agreement was signed and the
balance is payable in five annual payments of P8,000 each. In
return for the initial franchise fee, the franchiser will help locate the
site, negotiate with the lease or purchase of the site, supervise the
construction activity, and provide the bookkeeping services. The
credit rating of the franchisee indicates that money can be
borrowed at 8%. The present value of an ordinary annuity of five
receipts of P8,000 each discounted at 8% is P31,941.68.

If the initial downpayment is not refundable and no future services

are required by the franchiser, but collection of the note is so
uncertain that recognition of the note as an asset is unwarranted,
the entry should be:

a. Cash………………………………………………………………
… 10,000.00
Notes Receivable……………………………………………….
40,000.00
Discounts on Notes Receivable………….
8,058.32
Unearned Franchise Fees………………….
41,941.68

b. Cash………………………………………………………………..
10,000.00
Notes Receivable………………………………………………
40,000.00
Discounts on Notes Receivable………….
8,058.32
Revenue from Franchise Fees…………..
41,941.68

c. Cash ………………………………………………………………
10,000.00
Revenue from Franchise Fees…………………….
10,000.00

d. Cash………………………………………………………………
10,000.00
Unearned Franchise Fees……………………….
10,000.00
43. On April 1, 2004, Motorola, Inc. entered into a franchise
agreement with a local businessman. The franchisee paid P45,000
and gave a P30,000, 8%, 3 years notes payable with interest due
annually on March 31. Motorola recorded the P75,000 initial
franchise fee as revenue on April 1, 2004. On December 30, 2004,
the franchisee decided not to open the outlet under Motorola’s
name. Motorola cancelled the franchisee’s note and refunded
P24,000 less accrued interest on the note, of the P45,000 paid on
April 1. What entry should Motorola make on December 30, 2004?
a. Loss on Repossessed Franchise……………………..
24,000
Cash……………………………………………………
24,000

b. Loss on Repossessed Franchise……………………..

22,200
Cash ……………………………………………………
22,200

c. Loss on Repossessed Franchise……………………..

52,000
Cash…………………………………………………..
22,200
Notes Receivable…………………………………….
30,000

d. Revenue from Franchise Fees……………………….

75,000
Interest Income……………………………………
1,800
Cash……………………………………………………
22,200
Notes Receivable…………………………………..
30,000
Revenue from Repossessed Franchise……..
21,000

44. Maranan Motors Sales cars on the installment basis. Presented

below are data for the past three years:
 2007 2006 2005
Installment sales P2,880,000 P2,304,000 P1,543,000
Cost of sales 1,728,000 1,440,000 1,002,950
Collection on:
2007 installment 1,008,000
sales
2006 installment 391,000 921,000
sales
2005 installment 478,000 462,000 578,000
sales

Repossessions on defaulted accounts included one made on a

2005 sale for which the unpaid balance amounted to P20,000. The
depreciated value of the car repossessed was P10,000.

The unrecovered cost of the car in 2005 and repossessed in 2007

is :
a. P6,500 c. P10,000
b. 7,000 d. 13,000

Perez, Reyes and Suarez were partners with capital balances as

of January 1, 2009 of P100,000, P150,000 and P200,000
respectively. They share profits on a 5:3:2 ratio.

On July 1, 2009, Perez withdraw from the partnership. For the six
month period ending June 30, 2009, the partnership generated a
net income P140,000. Partners agreed that at the time of
withdrawal, certain inventory had to be revalued at P70,000 from
its cost of P50,000. Further, partners agreed to pay Perez
P195,000 for his interest.

45. What are the capital balances of Reyes and Suarez after
Perez’s retirement?
Reyes Suarez
a. P217,000 P238,000
b. P189,000 P226,000
c. P177,000 P218,000
d. P187,500 P226,000
46. Assuming goodwill to Perez is recorded, what is the capital
balance of Reyes after Perez’s retirement?
a. P232,000 b. P186,000 c. P189,000
d. P190,000

47. Assuming total goodwill of the partnership is to be recorded,

what is the capital balance of Suarez after Perez’s retirement?
a. P238,000 b. P226,000 c. P234,000
d. P232,000

48. Perez, Que and Ramos are partners sharing earnings in the
ratio of 5:3:2, respectively. As of December 31, 2008, their capital
balance showed P95,000 for Perez, P80,000 for Que, and
P60,000 for Ramos.

On January 1,2009 the partnership admitted Santos as a new

partner and according to the agreement, Santos will invest
P80,000 in cash to the partnership and will also purchase 15% of
Que’s interest for P10,000. SActos will share 20% in the earnings
while the ratio of the original partners will remain proportionately
the as before Santos’ admission. After Santos’ admission, the total
capital of the partnership will be P330,000 while Santos’ capital
account will be P70,000.

What is the balance of Que’s capital account after the admission of

Santos?
a. P81,100 b. P79,100 c. P74,600 d. P72,600

49. On March 1, 2008, Alma and Betty formed a partnership with

cash investments of Alma, P480,000 and Betty, P240,000.

The partners agree to allocate profits and losses as follows:

1. Alma and Betty will be allowed a monthly salary of P48,000 and
P24,000, respectively.
2. The partners will be allowed with interest of 10% of their capital
balances at the beginning of each year.
3. The remainder will be divided on the basis of their beginning
capital for the year of operation and equally for the subsequent
years.
 4. Each partner is allowed to withdraw up to P24,000 a year. Any
withdrawal in excess of the figure will be treated as a direct
reduction from their capital balances.

In 2008 the partnership suffered a net loss of P36,000. But in 2009

they earned a profit of P132,000. The partners withdraw the
maximum amount each year. On January 2, 2010 a new partner,
Cora was admitted in the partnership for an investment of
P400,000 for a 40% interest. No revaluation of assets is to be
recorded. After the admission of Cora, the partners agreed to
divide profits and losses, 4:2:4, to Alma, Betty and Cora,
respectively.

On January 2, 2010, what is the entry to record the admission of

Cora?
a. Cash P400,000
Alma, Capital 33,000
Betty, Capital 33,000
Cora, Capital P467,000

b. Cash P400,000
Cora, Capital P400,000

c. Cash P400,000
Alma, Capital 32,000
Betty, Capital 16,000
Cora, Capital P448,000

d. Cash P448,000
Cora, Capital P448,000

50. On January 1, 2009 Mr. X and Ms. Y formed a partnership

engaged in selling compact discs. Their capital accounts during
the year show the following investments and withdrawals:

Mr. X Mr.
Y
Investments Withdrawals
Investments Withdrawals
Beginning balance P36,000
P24,000
June 1 P14,400
P14,400
August 1 24,000
2,400
December 1 6,000

The partnership’s profit and loss agreement provides for an annual

salary of P36,000 for each partner. Interest of 10% on average capital
balances. Mr. X is also to receive a bonus of 5% on net income after
bonus.

Assuming a net income of P105,000 before any allocations, how

much net income is allocated to Mr. X?
a. P56,125 b. P58,408 c. P44, 710 d. P36,900

51. Mr. PP and Ms. KK are partners in a construction business

located in Cebu City. The profit and loss agreement contains the
following provisions:

1. Salaries of P35,000 and P40,000 for PP and KK, respectively.

2. A bonus to PP equal to 10% of net income after the bonus.
3. Interest on weighted average capital at the rate of 8%. Annual
drawings in excess of P20,000 are considered to be a reduction of
capital for purposes of this calculation.
4. Profit and loss percentage of 40% and 60% for PP and KK,
respectively.

Capital and drawing activity of the partners for the year 2009 are as
follows:

PP Capital PP Drawing KK
Capital KK Drawing
Beginning balance P120,000 P 0 P
60,000 P 0
April 1 20,000
June 1 15,000
20,000
September 1 30,000
November 1 15,000
40,000
Ending balance P170,000 P30,000
P100,000 P20,000

Assuming net income for 2009 of P132,00 before any allocations,

how much profit should be allocated to Mr. PP?
a. P69,660 b. P69,747 c. P72,774 d. P69,774

52. On January 2, 2009, Belo and Reyes formed a partnership.

Belo contributed capital of P350,000 and Reyes, P50,000. They
agreed to share profits and losses 80% and 20%, respectively.
Reyes is given a salary of P10,000 a month; and interest of 5% of
the beginning capital of both partners and a bonus of 15% of net
income before the salary, interest and bonus. The income
statement of the partnership for the year ended December 31,
2009 as follows:

Revenues P1,750,000
Cost of goods sold
1,400,000
Gross profit
350,000
Expenses (including partners salary, interest and bonus)
286,000
Net profit P 64,000

What is the amount of bonus to Reyes in 2009?

a. P41,400 b. P32,912 c. P36,000 d. P26,800

Numbers 22 to 25 are based on the following data:

Arman Company has the following debit balances as of the year
ended December 31, 2009:
Direct materials inventory P
90,000
Work in process inventory
207,000
Finished goods inventory
297,000
 Under-applied factory overhead
24,000
Cost of goods sold
447,000
Additional information for 2009
Cost of direct materials purchased
P246,000
Cost of direct materials requisitioned
282,000
Cost goods completed
612,000
Applied factory overhead (120% of direct labor cost)
288,000

53. What is the Direct Materials Inventory on January 1, 2009?

a. P180,000 b. P162,000 c. P126,000
d. P108,000

54. What the Work in Process Inventory on January 1, 2009?

a. P95,000 b. P90,000 c. P9,000 d. P8,000

55. What is the Finished Goods Inventory on January 1, 2009?

a. P150,000 b. P144,000 c. P132,000
d. P145,000

56. What is the actual factory overhead incurred during 2009?

a. P264,000 b. P280,000 c. P312,000
d. P321,000

Numbers 57 and 58 are based on the following data:

During August, Marlon Machine Company started production job
orders 16,17 , and 18. Job order 15 was in process at the beginning
of the month with direct material costs of P35,000, direct labor cost of
P21,000, and applied factory overhead of P25,300. During the month,
direct materials were requisitioned, and direct labor was identified
with the job orders as follows:

Job Order No. Direct Materials Direct

Labor
15 P - P26,000
 16 39,000 45,000
17 53,000 47,000
18 47,000 16,000

Factory overhead is applied to the orders at 120% of direct labor cost.

Job orders 18 was incomplete on August 31.

57. What is the cost of goods manufactured for August?

a. P432,900 b. P376,600 c. P342,800
d. P358,600

58. What is the cost of work in process on August 31?

a. P138,000 b. P82,200 c. P18,400 d.
P156,400

Questions 59 and 60 are based on the following data:

The data has been gathered from the records of Roque
Manufacturing Company for April 2009:

Units
Work in process, April 1 (40% complete as to conversion costs)
5,000 units
Started in May 90,400
units
Work in process, April 30 (70% complete as to conversion costs)
4,000 units

Cost
Work in process, April 1 P
24,875
Materials cost incurred in April
P433,920
Conversion costs incurred in April P115,250

The company uses the FIFO process costing method. Materials

added at the beginning of processing while conversion costs is evenly
during the process.
59. What are the equivalent units of production of?
Materials Conversion Costs
a. 90,400 92,200
b. 95,400 91,200
c. 86,400 89,400
d. 92,400 90,600

60. What is the cost of units transferred out in April?

a. P551,345 b. P547,595 c. P522,720
d. P526,470

61. What is the cost of ending work in process?

a. P22,700 b. P23,700 c. P19,200 d. P22,000

Questions 31 and 33 are based on the following data:

Jimmy Company manufactures a highly sensitive smoke alarm and
uses the FIFO method for process costing. The total manufacturing
costs for the month of June is P264,000 and 2,750 units are
completed during the month.

The inventories at the beginning of June are:

Units in process (80% complete) 1,250 units
P128,000
Units on hand (complete) 600 units
76,800
The inventories at the end of June are:
Units in process (50% complete) 500 units
Units on hand (complete) 700 units

62. What is the equivalent unit of production?

a. 2,000 c. 2,200
b. 3,000 d. 1,750

63. What is the total cost of the units completed?

a. P92,400 c. P231,000
b. P79,200 d. P363,000

64. What is the total cost of units in process at the end?

a. P33,000 c. P32,000
 b. P32,200 d. P66,000

EXERCISES / PRACTICE PROBLEMS:

65. Ron Sam and Tim decided to engage in a real estate

venture as a partnership. Roy invested P140,000 cash and
Sam provided an office and furnishing value at P220,000.
(There is a P60,000 note payable remaining on furnishings to
be assumed by the partnership). Although Tim has no tangible
assets to invest, both Roy and Sam believe that Tim’s
salesmanship provides an adequate investment. The partners
agree to receive an equal capital interest in the partnership.
Using the bonus method, what is the capital balance of Tim?
a. P50,000 b. Zero c. P140,000 d. P100,000

66. KA and LA are partners who share profits and losses

equally. The capital accounts of KA and LA have tripled in five
years and at present have the following balances.

Ka, P90,000 LA, P60,000

MO desires to join the firm and offered to invest P50,000 for one-
third interest. KA and LA declined his offer but they extended a
counter-offer to MO of P70,000 for a one-fourth interest in the
capital and profits and losses of the firm. If MO accepted their offer
and bonus is recorded, what should be the balances in the capital
accounts of KA and LA after MO’s admission?
KA LA KA LA
a. P100,000 P70,000 c. P97,500
P67,500
b. P120,000 P90,000 d. P90,000
P60,000

67. Hannah and Ricardo are partners with capital of

P100,000 and P140,000 respectively. They share profits
equally. Marlou invests P120,000 for a 25% interest in the
partnership. Hannah, Ricardo and Marlou agree that the
combined capital is P360,000. The agreement on the entry of
Marlou brings about
 a. Bonus of P60,000 c. Goodwill of
P40,000
b. Goodwill of P60,000 d. Bonus of P30,000

AJ, BJ, and CJ are partners in an accounting firm. Their capital

account balances at December 31, 2005 were: AJ, P90,000; BJ,
P110,000; CJ, P50,000. They share profits and losses in a 4:4;2
ratio, after the following special terms:

a. Partner CJ is to receive a bonus of 10% of the net income

after the bonus.
b. Interest of 10% shall be paid on that portion of partners’
capital in excess of
P100,000.
c. Salaries of P10,000 and P12,000 shall be paid to partners AJ
and CJ respectively.

The income summary account for the year 2005 shows a credit
balance of P44,000.

68. What is the profit share of partner CJ?

a. P19,400 b. P16,800 c. P17,800
d. P19,800

69. A Partnership is currently holding P400,000 in asset and

P234,000 in liabilities. The partnership is to be liquidated and
P20,000 is the best estimation of the expenses that will be
incurred during this process. The four partners share profit and
losses as shown, Capital balances at the start of the liquidation
are as follows;

Kevin, capital (40%) P 59,000

Michael, capital (30%) 39,000
Brendo, capital (20%) 34,000
John, capital (10%) 34,000

The partners realize that John will be the first partner to start
receiving cash. How much cash will John receive before the other
partner collect any cash?
a. P12,250 b. P14,750 c. P17,000 d. P19,500
70. Roxanne and Roxy begin a partnership on January 1,
2006. Roxanne invests P40,000 cash as well as inventory
costing P15,000 but with a current appraised value of only
P12,000. Roxy contributes a building with a P40,000 book
value and a P48,000 fair market value. The partnership also
accepts responsibility for a P10,000 note payable owed in
connection with this building. The partners agree to begin
operations with equal capital balances. The articles of
partnership also provide that at the end of each year profits and
losses are allocated as follows:

a. For managing the business, Roxanne is credited with a

bonus of 10 percent of partnership income after subtracting
the bonus. No bonus is accrued if the partnership records a
loss.
b. Both partners are entitled to interest equal to 10 percent of
the average monthly capital balance for the year without
regard for the income or drawings of that year.
c. Any remaining profit or loss is divided 60 percent to Roxanne
and 40 percent to Roxy.
d. Each partner is allowed to withdraw P800 per month in cash
from the business.

On October 1, 2006, Roxanne invests an additional P12,000 cash

in the business. For 2006, the partnership reports income of
P33,000. Rojanne, an employee, is allowed to join the partnership
on January 1, 2007. The new partner invests P66,000 directly into
the business for a one-third interest in the partnership property.
The revised partnership agreement still allows for both the bonus
to Roxanne as well as the 10 percent interest, but all remaining
profits and losses are now split 40 percent each to Roxanne and
Rojanne with the remaining 20 percent to Roxy. Rojanne is also
entitled to P800 per month in drawings. Roxy chooses to withdraw
from the partnership a few years later. After negotiations, all
parties agree that Roxy should be paid a P90,000 settlement. The
capital balances on that date were as follows:

Roxanne, capital 88,000 Rojanne, capital

72,000
 Roxy, capital 78,000

Assuming that the goodwill method is used exclusively by this

partnership, what is the capital balance of Roxanne after
Rojanne’s admission to the partnership?
a. 74,780 b. 75,360 c. 75,800 d. 70,860

71. Enrelen, Jeanette, Julie and Janice were partners who

decided to dissolve and liquidate the affairs of the partnership.
Prior to dissolution and liquidation, the condensed balance
sheet together with the profit and loss sharing ratio was derived
as follows:

Cash P 50,000 Liabilities

P375,000
Other asses 900,000 Jeanette, loan
30,000
Janice, loan
25,000
Enrelen, capital (30%)
210,000
Jeanette, capital (30%)
157,500
Julie, capital (20%)
102,500
_______ Janice, capital (20%)
50,000
P950,000
P950,000

The other assets were sold for P600,000. Payments were made
to creditors and final distribution of cash was made to partners.
The partner who got paid the most was:
a. Enrelen for capital at P210,000 c. Jeanette
loan of P30,000 and capital of P135,000
b. Jeanette loan of P30,000 and capital of P157,500 d. Enrelen
for capital at P120,000
 NTV Company began operation in January 1, 2009 appropriately
uses the installment method of accounting. The following data
pertain to NTV’s operations for the remainder of the year.

Installment sales P450,000 Operating expenses

P36,000
Regular sales 187,500 Collections on
Installment sales
Cost of regular sales 107,500 (including interest of
P12,000) 156,000
Cost of installment sales 315,000 Installment rec. written
off due to
FMV of repossessed mdse. 27,000 default
22,000
Reconditioning costs 2,000 repossessed account
50,000

72. Calculate the total deferred gross profit at December 31,

2009
a. P66,600 b. P122,850 c. P70,200 d.
P126,450

The following data were taken from the book of Five Jewel
Company:

2008 2009
Installment sales P800,000
P900,000
Cost of installment sales 480,000
600,000
Collections
2008 Installment receivables 250,000
300,000
2009 Installment receivable -
360,000
Defaults and repossessions
Unpaid balance of prior year’s installment
Receivable defaulted 12,000
15,000
 Value assigned to repossessed merchandise 7,000
8,000

73. The gain /(loss) on repossession on the defaulted 2008

contract was
a. P1,000 gain b. P1,000 loss c. P3,000
loss d. P3,000 gain

Action, Inc. sold a fitness equipment on installment basis on

October 1, 2009. The unit cost to the company was P60,000 but
the installment selling price was set at P85,000. Terms of payment
included the acceptance of a used equipment given a trade-in
value of P30,000. The cash of P5,000 was paid in addition to the
trade-in equipment with the balance to be paid in ten (10) monthly
installments due at the end of each month commencing at the
month of sale. It would require P1,250 to recondition the used
equipment so that it could be resold for P25,000. A 15% gross
profit rate was usual from the sale of used equipment.

74. The realized gross profit during 2009 as indicated from

the foregoing information is
a. P4,000 b. P34,000 c. P10,000
d. P8,000

75. Sheraton Trading Company opened a branch in Binondo

on January 1, 2009 to expand the market for its products.
Merchandise shipped to the branch during 2002, at 125% of
cost, were P104,000. Other transactions relating to the branch
were as follows: Sales on account, P117,000; Expenses, of
which P1,500 are still unpaid a year-end, P20,000; cash
received from the customers’ accounts, net of discounts of 2%,
P72,520; and, cash remittance to the home office, P65,000. As
of December 31, 2009, the branch inventory was P12,500 at
billed price. As far as the home office is concerned, the branch
net income for 2002 was:
a. P8,300 b. P22,320 c. P24,300 d.
P24,320

76. Novell Bookstore has branches in key cities nationwide.

Merchandise shipped to the branches is billed at 25% above
 cost and are inventoried by the branches at billed price. Fixed
assets of the branches are carried in the home office books. All
collections of the branches are deposited in a bank account
against which only the home office can draw. Each branch,
however, maintains an imprest fund of P4,000 which is
reimbursed periodically for expenses. Certain expenses,
though, are paid by the home office and subsequently charged
against the branches. Presented below is a T-account of the
2009 Tagum branch current account:

Tagum Branch
Jan. balance P62,820 : Remittance
P180,640
Shipments to branch 128,000 :
Advertising and Promotion 6,400 :
Depreciation 2,400 :
Reimbursement of expenses 36,600 :
Net Income 9,260 :

The beginning inventory of this branch was P31,500, and it

reported sales of P192,690 of which P1,280 proved to be
uncollectible. The ending inventory was P22,750. What is the net
income of Tagum branch in so far as the home office is
concerned?
a. P9,260 b. P36,610 c. P45,860 d.
P27,350

Blotik Company has two merchandise outlets, its main store and
its Gaisano Mall branch. All purchases are made by the main store
and shipped to the Gaisano Mall branch at cost plus 10%. On
January 1, 2008, the main store and Gaisano Mall inventories
were P17,000 and P4,950, respectively. During 2008, the main
store purchased merchandise costing P50,000 and shipped 40%
of it to Gaisano Mall. At December 31, 2008, Gaisano Mall made
the following closing entry:

Sales P40,000
Inventory, end 6,050
Inventory, beg. P 4,950
 Shipments from main store
22,000
Expenses 13,100
Main store 6,000

77. If the main store inventory at December 31, 2008 is

P14,000, the combined main store and branch inventory that
should appear in Blotik Company’s December 31, 2008 balance
sheet is:
a. P18,950 b. P18,500 c. P20,050
d. P21,500

A branch operation buys most of its inventory from outside parties.

However, this year the home office transferred merchandise
costing P50,000 to the branch for P80,000. At the end of the year,
20 percent of this merchandise was still held by the branch.
Although the inventory was correctly counted and reported, the
branch did not tell the home office that this portion of the remaining
goods came from transfers. Consequently, the home office
assumed that all of the transferred merchandise has been sold to
outside parties.

78. What is the resulting impact on the net income reported

for the company as a whole?
a. the net income figure would still be correctly calculated
b. the net income figure would be P6,000 overstated
c. the net income figure would be P30,000 overstated
d. the net income figure would be P30,000 understated

Konstruk Construction Company uses the percentage of

completion method of accounting. In 2006, Konstruk began
working under contract #1105A, which provided for a contract price
of P12,000,000. Other details were as follows:
2006 2007
Cost incurred during the year P1,800,000
P9,450,000
Estimated cost to complete 7,200,000
-
Billing during the year 2,760,000 9,240,000
Collections during the year 1,500,000
9,300,000

79. The portion of the total contract price to be recognized as

revenue is 2006 is:
a. P1,920,000 b. P2,160,000 c. P2,400,000
d. P1,200,000

Jakiro Co. uses the cost to cost percentage of completion in

reporting earning; Jakiro assumed leadership of the firm after the
retirement of his father and in reviewing the firm’s record, finds the
following information on a recently completed project with a
contract price of P 2,500,000.

2007 2008 2009

Cost incurred to date P450,000 P1,275,000 ?
Gross Profit (loss) P50,000 P175,000 (25,000)

Mr. Jakiro wants to know how effectively the company operated

during the past years on the project and since he found that the
information is incomplete, he has asked you to help by answering:

80. How much was the estimated cost to complete at

December 2009?
a. 1,100,000 b. 1,725,000 c.0 d.
1,075,000

In 2004, Builtrite Co. agreed to construct an apartment building at

a price of P9,000,000. Builtrite uses the percentage of completion
method. The information relating to the costs and billings for the
contract were as follows:
2004 2005 2006
Cost incurred to date P2,520,000P5,400,000
P7,065,000
Estimated cost yet to be incurred 4,680,000 1,800,000
-
Customer billing to date 1,350,000 3,600,000
9,000,000
Collection of billing to date 1,080,000 2,880,000
8,460,000
81. What is the balance of the construction in progress, net of
contract billing account at Builtrite’s December 31, 2004
Balance Sheet?
a. P3,150,000 b. P3,600,000 c. P1,800,000
d. P2,250,000

Dapecol manufacturing Company uses a raw and in process

(RIP) inventory account and expense all conversion cost to cost of
goods sold account. At the end of each month, all inventories are
counted, their conversion cost components are estimated, and
inventory account balances are adjusted accordingly. Raw
materials cost is backflushed from RIP to finished goods. The
following information is for the month of April:

RIP, beg. (Inclusive of P1,400 conversion cost)

P31,000
Raw materials received on credit
367,000
RIP, ending, including P1,800 conversion cost
33,000

82. Compute the amount to be backflushed from RIP to cost

of goods sold:
a. P365,000 b. P368,600 c. P367,000
d. P365,400

SAMS Manufacturing Company produces only for customer order

and most work are shipped within thirty-seven hours of the receipt
of an order. SAMS Company uses raw and in process (RIP)
inventory account and expenses all conversion costs to the cost of
sales account. Work is shipped immediately upon completion, so
there are no finished goods on hand. At the end of each month,
inventory is counted, its conversion cost is estimated, and RIP
account balance is adjusted accordingly. Raw materials cost is
backflushed from RIP to Cost of Sales. The Following information
is for the month of May:

Beginning balance of RIP P12,300

Raw materials purchased 246,000
 Ending balance of RIP 12,100

The beginning balance of RIP includes P1,300 conversion cost

and ending balance also includes P2,100 conversion cost
estimates.
83. Compute the amount of cost of goods sold after all
transactions and adjustments were made:
a. P246,000 b. P246,200 c. P247,000
d. P245,000

Xerox Company is preparing its annual profit plan. As part of its

analysis of the probability of individual products, the controller
estimates the amount of overheads that should be assigned to the
individual product lines from the information given as follows:

Ordinary copier Specialized

copier
Units produced 25 25
Materials moves per
Product line 5 15
Direct labor hours per unit 200 200
Budgeted materials handling costs P50,000

84. Under activity based costing (ABC), the materials

handling cost assigned to one unit of ordinary copier would be
a. P1,000 b. P 500 c. P1,500 d. P5,000

2GO Corporation uses activity based costing to determine

product costs for external financial reports. The Company has
provided the following data concerning its activity based costing
system:
Estimated
Activity cost pools (and activity measures)
Overhead Cost
Machine related (machine hours) P81,600
Batch setup (setup) P387,000
General Factory (direct labor hours) P274,800

Expected Activity
Activity cost pools Total Product A Product C
Machine related 8,000 3,000 5,000
Batch setup 10,000 2,000 8,000
General factory 12,000 7,000 5,000

85. Assuming the actual activity are the same as expected,

the total amount of overhead costs allocated to product A would
be closest to:
a. P371,700 b. P387,700 c. P268,300
d. P149,000

86. Graft Co. which produces joint products. A and B in

department from a process which also yield by – product W.
product A and By – Product W are sold after separation, but
product B must be further processed in Department Two before
it can be sold. The cost assigned to the by – product is its
market value less P.40 per pound for delivery expense (NRV
method). Information relating to a batch produced in July is
presented.

Product Production (in pound) Sales Price per pound

A 2,000 P4.50
B 4,000 9.00
W 500 1.50
Joint cost in department One P18,000
Product B additional process cost in Department Two was P10,000

For joint cost allocation purposes, what is the net realizable value
at the split-off point of Product B?
a. P9,000 c. P26,000
b. P35,000 d. P28,000

Kaloocan Manufacturing Company produces chemicals Kaw and

Law. The processing also yields a by-product Haw another
chemical. The joint costs of processing are reduced by the net
realizable value of Haw. The Joint costs were registered at
P3,840,000.

In Thousand
Product Production Market value
Kaw 2,000 3,000
 Law 3,000 2,000
Haw* 1,000 420
* An additional P180,000 were spent to complete the processing of
Haw.

Assuming that the company uses the net realizable value method
for allocating joint costs, the allocated costs to Kaw would amount
to:
a. P2,160,000 b. P1,800,000 c. P2,208,000
d. P2,700,000

JobiMac Co.’s materials purchased during 2001 are P25,590 and

materials put into production are indirect and direct materials,
respectively, worth P18,500 and P7,090. The total factory payroll is
P74,000 of which P50,000 represents direct labor. Other factory
overhead costs amount to P32,000. The company applies the
actual factory overhead cost to the job. Cost of goods sold, and
the cost of goods manufactured, are P135,000 and 128,000
respectively,.

87. By what amount did the company’s closing goods, in

process inventory exceed its opening goods in process
inventory?
a. P1,590 b. P3,590 c. P5,390 d. 10,590

Peters and Company currently has 30 full-time professionals on

staff. Each professional is allotted the following number of hours
per year:

Budgeted billable time for clients 2,000

hours
Budgeted vacation time 200 hours
Budgeted professional development 175 hours
Budgeted unbillable time due to lack of demand 0
hours
Budgeted sick leave 125 hours

Consumer demand for the company's services is at 100 percent of

time available. Each professional receives a salary of P35,000 per
year and fringe benefits of P10,000 per year.
 88. What is the total budgeted direct -cost rate if management
believes that clients should be charged for the employees'
benefits that Peters and Company has to pay?
a. P17.50 b. P18.00 c. P22.50 d. P 5.00

89. What is the budgeted direct-cost rate if the company does

not want to charge clients directly for employee vacation, sick
leave, and professional development?
a. P14.00 b. P 4.00 c. P22.50 d. P18.00

90. Materials are added at the start of the process in Cedar

Company’s blending department, the first stage of the
production cycle. The following information is available for July:

Units
Work in process, July 1 (60% complete as to conversion costs)
60,000
Started in July
150,000
Transferred to the next department
110,000
Lost in production
30,000
Work in process, July 31 (50% complete as to conversion costs)
70,000

Under Cedar’s cost accounting system, the costs incurred on the

lost units are absorbed by the remaining good units. Using the
weighted average method, what are the equivalent units for the
materials unit cost calculation?
a. 180,000 b. 145,000 c. 125,000 d. 210,000

A Company produces small pencil erasers. Two percent of normal

inputs are expected to be spoiled in the process. Inspection occurs
at the end of the process and rejected units are disposed of as
scrap with no cost recovery. In a recent period, the following data
were obtained:
 Units
Total units started
750,000
Defective units rejected (including normal and abnormal
spoilage) 20,000
Costs
Materials
P14,750
Conversion
7,750
Total
P22,500

91. The cost for the units transferred to finished good during
this 24hour period, assuming no ending work-in progress, is
a. P21,900 b. P22,350 c. P22,050 d. P22,500

GAOGAO Mfg. Corp., makes single Product in two departments.

The production data for mixing department for May, 2008 follows:

Quantities:
In process, May 1 (40%) 4,000 units
Received from department 678 30,000
units
Completed and transferred 25,000
units
In process, May 31 (60%) 6,000 units

Production Costs: May 1 May

31
Transferred in P16,300 P89,100
Materials added 3,800 67,500
Conversion cost 1,940 81,000

Materials are added at the start of the process and losses normally
occur during the early stages of the operation.

92. Assuming average costing was used to account for the

process, the closing work in process was:
a. P44,640 b. P46,800 c. P45,600 d. P51,680
 Markie Company’s direct labor costs for the month of January
2003 were as follows:

Actual direct labor hours 20,000

Standard direct labor hours 21,000
Direct labor rate variance – unfavorable P 3,000
Total payroll 126,000

93. What was direct labor efficiency variance?

a. 6,000 favorable c. 6,300 favorable
b. 6,150 favorable d. 6,450 unfavorable

Universal company uses a standard cost system and prepared the

following budget at normal capacity for the month of January:

Direct labor hours 24,000

Variable factory overhead 48,000
Fixed factory overhead 108,000
Total factory overhead per DLH 6.50

Actual data for January were as follows:

Direct labor hours worked 22,000
Total factory overhead 147,000
Standard DLH allowed for capacity attained 21,000

94. Using the two-way analysis of overhead variance, what is

the budget (controllable) variance for January?
a. 3,000 favorable c. 9,000 favorable
b. 13,500 unfavorable d. 10,500 unfavorable

The following information pertains to Maglulubi Company maker of

cooking oil as follows:

Actual direct labor hours used

……………………………………… 4,700
Units produced ……………………………………………………...
1,500
Standard labor hours per unit produced
……………………………. 3
 Budgeted variable overhead per standard direct labor hour
………P 2
Actual variable overhead incurred
…………………………………. P 9,500

95. Compute the variable overhead efficiency variance

a. P100 unfavorable c. P400 favorable
b. P100 favorable d. P400 unfavorable

Dwarf Company applies overhead on the basis of direct labor

hours. Two direct labor hours are required for each product unit.
Planned production for the period was set at 9,000 units.
Manufacturing overhead budgeted at P135,000 for the period, of
which 20% of this costs is fixed. The 17,200 hours worked during
the period resulted in production of 8,500 units. Variable
manufacturing overhead cost incurred was P108,500 and fixed
manufacturing overhead cost was P28,000. Dwarf Company uses
four way variance methods for analyzing manufacturing overhead.

96. The fixed efficiency variance for the period is

a. P300 unfavorable c. P300
favorable
b. P1,200 unfavorable d. P1,200 favorable

97. Nena’s Lechon, Inc. franchise, entered into franchise

agreement with Aling Nene, franchisee, on March 31, 2008. 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 Nena’s prepares its financial statements on March 31,
2008, the franchise fee revenue to be reported is:
a. P 0 b. P100,000 c. P500,000
d. P400,000

98. On December 31, 2009, Peter Company signed an

agreement to operate as franchise of Wendy’s for a franchise
fee of P80,000. Of this amount, P30,000 was paid upon signing
of the agreement and the balance is payable in five annual
payments of P10,000 each beginning December 31, 2010. The
 present value of the five payment, at an appropriate rate of
interest, is P56,000 at December 31, 2009. The agreement
provides that the down payment is not refundable and no future
services are required of the franchisor. The collection of the
note receivable is reasonably certain. Wendy’s Company
should report unearned revenue from franchise fee in its
December 31, 2009 balance sheet at:
a. 80,000 b. 30,000 c. 66,000 d. 0

99. Chick 2 Go, Inc. charges an initial franchise fee of

P115,000, with P25,000 paid when the agreement was signed
and the balance in five annual payments. The prevailing interest
rate upon signing the contract was 10%. The Franchisee has
the option to purchase P15,000 of equipment for P12,000.
Chick 2 Go has substantially provided all initial services
required and collectibility of the payment is reasonably assured.
The amount of revenue recognized from the franchise fee was:
a. P25,000 b. P90,234 c. P93,234 d.
P115,000