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CPA REVIEW SCHOOL OF THE PHILIPPINES MANILA ADVANCED FINANCIAL ACCOUNTING AND REPORTING — Sunday, April 22, 2018 Final Preboard Examination 3:30 p.m to 6:30 p.m, Numbers 1, and 3 (On December 31, 2018, the Statement of Financial Position of ABC Partnership with profit or loss ratio of 5:3:2 of respective partners A, B and C. showed the following information: Cash 1,600,000 Total Liabilities 2,000,000 ‘Noncash assets 1,400,000 A, Capital 100,000 B, Capital 500,000 , Capital 400,000 ‘On January 1, 2019, the partners decided to liquidate the partnership in installment. All partners are legally declared to be personally insolvent. As of January 31, 2019, the following transactions occurred: ‘© Noncash assets with a carrying amount P1,000,000 were sold at a gain of P100,000. ‘© Liguidation expenses for the month of January amounting to P50,000 were paid. Itis estimated that liquidation expenses amounting to P150,000 will be incurred for the month of February, 2019. = 20% of the liabilities to third persons were settled, ‘Available cash was distributed to the partners. 1, Whatis the amount of cash received by partner C on January 31, 20192 : ‘A. 260,000 : B. 240,000 s . 300,000 D. 350,000 2, What isthe share of B in the maximum possible toss on January 31, 2019? A. 275,000 B. 110,000 C. 120,000 D. 165,000 3. What is the amount of total cash withheld cin Jenvary 31, 2019? ‘A. 550,000 B. 1,600,000 . 1,750,000 D. 1,700,000 At the date of partnership formation of ABC partnership, the amount credited to A’s capital is less than the fair market value of the property he contributed. Which of the following is the most valid reason?” ‘A. The property contributed by A is impaired. B. The property contributed by A has been subjected to positive asset revaluation. CC. Bonus has been given by partner A to the other partners. . Goodwill arising from partnership formation has been recognized. Page 3 Namber 9 Which of the following unsecured liabilities with priority of a liquidating corporation shall be settled first? ‘A. Liabilities for employee benefits B. Liabilities for corporate income tax C. Liabilities for corporate crime D. Liabilities for quasi-delict Numbers 10 and 11 On January 1, 2018, an entity sold a car to a customer at a price of P400,000 with a production cost of 300,000. It is the entity’s policy to employ installment method to recognize gross profit from {installment sales. ‘At the time of sale, the entity received cash amounting to 25% of the selling price and old car with trade- {in allowance of P50,000. The said old car has fair value of P1S0,000. The customer issued a 5-year ‘note for the belance to be payable in equal annual installments every December 31 starting 2018. The note payable is interest bearing with 10% rate due on the remaining balance ofthe note. ‘The customer was able to pay the first annual installment and corresponding interest due, However, after ‘the payment of the second interest due, the customer defaulted on the second annual instaliment which resulted to the repossession of the car sold with appraised value of P110,000. On December 31, 2019, the repossessed car was resold for P140,000 after reccnditioning cost of P10,000. 10, What is the entity's realized gross profit for the year endéd December 31, 2018? ‘A. 50,000 ; B. 120,000 : , 108,000 D. 128,000 11, Whats the loss on repossession forthe year ended December 31, 2019? ‘A. 30,000 B. 20,000 . 10,000 D. 40,000 ‘Number 12 If the sale transaction provides for periodic installments over an extended period of time and the collectability of the sales price cannot be reasonably estimated, what method of revenue recognition ‘the most appropriate? ‘A. Cost recovery method B. Accrual basis : C: Installment method D. Cash basis Page 5 ‘Numbers 16,17 and 18 On January 1, 2018, Hardrock Company started the construction ofa building ata fixed contrat price ‘of P1,000,000. On the same date, the customer paid a mobilization fee equal to 5% of contract price that will be deductible from the first billing, The outcome of construction contract cannot be estimated reliably During 2018, the entity billed the customer equivalent to 30% of the contract price. During 2019, the entity billed again the customer amounting to 20% of the contract price. During 2020, the entity billed ‘again the customer amounting to 40% of the contract price. The remaining billing was made at the year ‘of completion of the project, ‘The entity made collection from the customer at the end of 2018, 2019 and 2020, in the amount of 120,000, P450,000 and P180,000, respectively. The entity provided the following data concerning the direct costs related to the said project: 2018 2019 2020 (Cumulative costs incurred at year-end 360,000 800,000 870,000 Remaining estimated costs to complete at year-end 840,000 250,000 50,000 16, What is the realized gross profit for the year ended December 31, 2019? A. 50,000 ae B. 200,000 ©. 150,000 D. 0 17, What isthe excess of construction ia progress over progress billings or excess of progress billings over construction in progress on December 31, 20207 ‘A. 30,000 excess billings B. 80,000 excess billings C. 20,000 excess construction in progress ‘D. 50,000 excess construction in progress 18, What isthe balance of accounts receivable on December 31, 20207 A. 150,000 i B. 100,000 . 120,000 D. 50,000 Number 19 ‘When it is probable that total contract costs will exccet! total contract revenue, how shall the long-term. ‘contractor account for the difference? A. The expected loss shall be recognised as an expense immediately. B. The expected profit shall be recognized as a yrofit immediately C. The expected loss shall be recognised as an experse taking into account the percentage of completion. as of the end of the period. D. The expected loss shall be recognised as a profit zaking into account the percentage of completion as of the end of the period.