dD CPA REVIEW SCHOOL OF THE PHILIPPINES MANILA CTICAL ACCOUNTING PROBLEMS I SUNDAY, JULY 27, 2014 FIRST PRE-BOARD EXAMINATION 4:00 P.M. TO 6:00 P.M. Use the following information for questions 4 and 2 ‘Squelch, Suppress and Retort are pariners sharing profit and loss equally with ending capital balances of 400,000; P400,000 and P300,000, respectively. The partners agreed to transfer ownership of equipment with a sound value of P75,000 to Retort as well as issue a note for the balance of Retorts interest. The equipment has a carrying amount of P97,500 and a replacement cost of P117,000 1. How much is the increase (decrease) in the capital of Squelch as a result of the transfer of ‘ownership of the equipment? P7500). B.P11,250 C.P(9,000) 22, 6/3 =( 7, 0 D.P22,500 y rt 2. What is the face value of the note to be issued to Retort? A.P29,500 gee B.P217,500 709 = 707. = 27 C.P202,500 D. P325,000 Use the following information for question 3 Because of their differences, Wily, Sly and Devious decided to liquidate their partnership on November 30, 2044, Wily, Sly and Devious have a profit rato of 4:2:3, The balance sheet ofthe partnership on December 31, 2013 reported P25,000; P30,000 and P10,000 capital balances of the three partners respectively. Cash cn the most recent balance sheet date amounted to 30% of total labilties. Debt ratio as of December 31, 2013 amounted to 20%, During the eleven months ended, revenues reported amounted to P44,000; expenses incurred ‘otaled P22,000; net cash flows amounted to P15,125 and lablities increased by 28,750. 3. If Wily wants to receive P27,600, what should be the selling price of the non-cash assets of the company on November 30, 20147 4 : A, P91,875 B.P 127,500 s + C.P94,226< « D, P96,500 elt ere i Use the following information for questions 4 and 5 or eT YT The balance sheet of the partnership of Hypnopampic, Wakefulness and Semiconscious are shown below: HWS Partnership Balance Sheet December 31, 2013 Cash P 50,000 Liablities Non-cash Assets 250,000 Hypnopompic, Capital (50%) Wakefulness, Capital (25%) Semiconscious, Capital (25%) TOTAL 300,000 TOTAL On January 2014, certain non-cash assets were sold for a certain amount. Liquidation expenses and liabilities of P4,000 and P25,000 were paid. Future liquidation expenses of P5,000 are anticipated. Wakefulness received P42,750 from the first distribution of available cash. 4, How much is the cash received from realization? A, P120,000 B, P140,000 C. P130,000 - D.P 75,000 Page 1 of 105, Assuming that on February 2014, the remaining non-cash assets were sold for P75,000 and liquidation expenses of P5,000 are pald, how much Is the total cash recelved by Hypnopompic from the two distributions of cash? ‘A.P37,500 8. P73,000 C. P75,000 D.P74,000 Use the following question for question 6 Philogyny and Love formed a partnership on January 2, 2014. Philogyny and Love contributed capital of 360,000 and P50,000 respectively. They agreed to share profits and losses 80% and 20%, respectively, Love is given a monthly salary of P5,000 and a 15% bonus based on income before salaries, interest and bonus. Both partners are given an interest of 5% of the beginning capital. The income statement for the year ended prepared by the company’s bookkeeper is shown below: Net Sales car Fat at 1,750,000 Cost of Sales mea 7 (1,400,000) Gross Profit a0 P 350,000 Expenses (including salary, interest and bonus) ua 286,000) Net Income P 64,000 6. What is the amount of bonus to Love in 2014? AP 25,412 B.PO C.P 2,087 D.P 18,782.61 Use the following information for questions 7 and 8 On December 31, 2014, the statement of affairs of Tary Company, which is in bankruptoy liquidation, included the following: Assets pledged for fully secured liabilities 100,000 - Assets pledged for partially secured libilties =o 40,000 ~ Free assets ee 420,000 ~ Fully secured liabilities. - 7 Ss 80,000 Partially secured labiities sere 50,000 Unsecured labiities with priority 60,000 Unsecured labilties without priority 90,000 7. How much is the estimated amount to be paid to partially secured liabilities? ‘A.P50,000 Fuyy be? - ee = cet a we BRASS ee oe C.P 47,500 “i _ D. P-48,000 al oe : 8, How much is the estimated amount to be paid to all creditors? & * as P80, 7 ae B.P 140,000 7 C. P.250,000 a D. P-260,000- Use the following information for question 9 ~~ =<) 7 Ullage Co. is insolvent and its statement of affairs shows’te following information: Estimated gains on realization of assets P1,440,000_- Estimated losses on realizations of assets © 2,000,000 | Additional assets 4,280,000, Additional liabilities 960,000° | Capital stock 2,000,000 | Deficit : ~ 1,200,000 Page 2 of 10 19, What is the pro-rated payment on the peso to stockholders? APOT0 B.P.0.80 C.PO075 . D.P085 ke Use the following information for question 10 | On December 31, 2014, VEX CO. granted a franchise right to CONFUSE for an intial franchise fee of P250,000 with P100,00 down payment. As of December 31, 2014, VEX has performed all of the services Tequired under the franchise agreement. 10, How much should be the franchise revenue for 2014? ms AP 100,000 ! B.P 150,000 ; C. P 250,000 i: : oo | Use the following information for question 11 On January 1, 2014, DEMURE CO. granted franchise right to MODEST for a non-refundable initial franchise fee of P200,000, of which 20% was collected upon signing of the contract and the remaining 80% by a note receivable in 4equal annual installments starting December 31. Furthermore, the franchisee is required to pay 5% of gross sales every December 31. On March 1, 2014, MODEST commenced operations and reported P2,000,000 gross sales for the year ended December 31, 2014. The cost of initial franchise fee and continuing franchise fee amounted to P64,000 and P40,000 respectively. 14. Assuming that the prevailing rate of interest is 12%, how much is the total revenue from the franchise of DEMURE for the year ended 20147 AP172,071.04 pe. Hot B.P 272,071.04 Po ta1tae CMF y 2.0873) ©.P 276,071.04 —s D.P 261,492.00 WRF V6t,4% (am x0) CEE IT tyne Use the following information for question 12-———— KNELL charges an initial franchise fee of P500, 060 forte for the right to operate as a franchise. Of thig amount, 100,000 is payable when the agreement was signed and the balance is payable in a noninterest bearing note in five annual payments of P80,000 each. In retum for the initial franchise fee, the franchisor wil help locate the site, negotiate 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 12%. The amount of future services to be provided to the franchisee is minimal and the collectabiity of the note is reasonably assured, 12. How much Is the unearned franchise fee? A. P 388,384 B. P 288,384 C.PO D. P-500,000 Use the following information for question 13 | RASH was contracted to build a house for P10,000,000 during 2014. Total estimated costs would amount to P8,000,000 over the period of construction. RASH incurred P2,000,000 of construction costs during 2014 and billed the customer P1,500,000. 50% of the total amount billed was collected. 13. How much gross profit should RASH recognize in 2014? A P'500,000 B. P 8,000,000 amfom > 24 C. P 1,000,000 D.P 1,500,000 10%7 Cem) an Page 3 of 10 KE, of