COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

ADVANCED FINANCIAL ACCOUNTING & REPORTING JULY 21, 2019

Problem 1

BELL, LIVINGSTON, and JEREBKO, a partnership formed on January 1,

2016 had the following initial investment:
BELL 500,000
LIVINGSTON 750,000
JEREBKO 1,125,000

The partnership agreement states that the profits and losses are
to be shared equally by the partners after consideration is made
for the following:
 Salaries allowed to partners: P 300,000 for BELL, P 240,000
for LIVINGSTON, and P 180,000 for JEREBKO
 Average partner’s capital balances during the year shall be
allowed 10%
 On June 30, 2016, BELL invested additional P 300,000
 JEREBKO withdrew P 350,000 from the partnership on September
30, 2016
 Share on the remaining partnership profit was P 25,000 for
each partner

1. What is the total interest on average capital balances of the

partners?
a. P 243,750 b. P 268,750 c. P 288,125 d. P 303,125

2. What is the partnership net profit at December 31, 2016 before

salaries, interests and partner’s share on the remainder?
a. P 998,750 b. P 1,038,750 c. P 1,058,125 d. P 1,113,750

BELL
500,000 x 12/12 500,000
300,000 x 6/12 150,000
650,000

LIVINGSTON
750,000 x 12/12 750,000

JEREBKO
1,125,000 x 12/12 1,125,000
350,000 x 3/12 (87,500)
1,037,500

Total Average Capital (P 650,000 + P 750,000 + P 1,037,500) P 2,437,500

Total Interest on Average Capital (P 2,437,500 x 10%) P 243,750

Salaries allowed to Partners (P 300,000 + P 240,000 + P 180,000) P 720,000

Interest on Average Capital Balances 243,750
Share of each partner in the remaining profit (P 25,000 x 3) 75,000
Total Net Income P 1,038,750

Problem 2

APL and NKN’s capital is P 600,000 and P 480,000 respectively.

Profit Share Ratio 7:3. PLI directly purchased a 1/3 interest by
paying APL P 195,000 and NKN P 225,000. The land account is
increased by P 180,000 before PLI is accepted

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3. What is the capital of APL after admitting PLI?

a. P 300,000 b. P 356,000 c. P 420,000 d. P 484,000

4. What is the capital of NKN after admitting PLI?

a. P 300,000 b. P 356,000 c. P 420,000 d. P 484,000

5. What is the capital of PLI after admitting PLI?

a. P 300,000 b. P 356,000 c. P 420,000 d. P 484,000

APL NKN PLI TOTAL

Beginning 600,000 480,000 - 1,080,000
Revaluation 126,000 54,000 180,000
Updated 726,000 534,000 1,260,000
Bonus to New (242,000) (178,000) 420,000 -
Updated 484,000 356,000 420,000 1,260,000

Problem 3

MAGIC, DOMINIQUE, and JULIUS are partners with capital balances of

P 448,000, P 1,560,000 and P 680,000 respectively, sharing profit
and losses of 6:4:2. JULIUS is admitted as a new partner bringing
with him expertise and is to invest cash for a 25% interest in the
partnership, which includes a credit of P 420,000 bonus upon his
admission.

6. How much cash should JULIUS contribute?

a. P 336,000 b. P 420,000 c. P 756,000 d. P 3,024,000

7. How much should be the credited to JULIUS capital?

a. P 336,000 b. P 420,000 c. P 756,000 d. P 3,024,000

MAGIC DOMINIQUE JULIUS JULIUS TOTAL

Cash Contribution 448,000 1,560,000 680,000 336,000 3,024,000
Bonus (210,000) (140,000) (70,000) 420,000
Agreed Capital 238,000 1,420,000 610,000 756,000 3,024,000

Problem 4

KLAY, KYRIE, and KEVIN are partners who share profits and losses
in the ratio of 40:30:30, respectively. On January 1, 2017, they
decided to liquidate the partnership and the statement of financial
position was prepared as follows:
ASSETS LIABILITIES & CAPITAL
Cash 20,000 Liabilities 40,000
Non-Cash Assets 65,000 KYRIE, Loan 5,000
KEVIN, Loan 7,500
KLAY, Capital 10,000
KYRIE, Capital 10,000
KEVIN, Capital 12,500
Total Assets 85,000 Total Liab. and Capital 85,000

In January, non-cash assets with book value of P 35,000 was sold

for P 30,000 to a Mr. Thompson; liquidation expense of P 5,000 was
paid and only 40% of the outstanding liabilities were paid in
January. The partnership withholds cash of P 2,500 for next month’s
liquidation expenses.

In February, non-cash assets with book value of P 15,000 was sold

to Mr. James but a loss on realization of P 3,000 was recognized.
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Liquidation expense of P 2,750 was paid and only P 10,000 recorded

liabilities were paid during the month. The partnership withholds
cash of P 2,000 for next month’s liquidation expenses and P 2,750
in anticipation for future unrecorded liability.

In March, the remaining non-cash assets were sold to Ms. Smith for
P 12,500. A liquidation expense of P 5,500 was paid. The remaining
recorded liabilities including P 2,000 unrecorded liabilities were
paid during the month to end the liquidation process.

8. How much is the amount of cash available for distribution in

the month of January?
a. P 2,500 b. P 7,000 c. P 9,750 d. P 26,500

9. How much is the amount of cash available for distribution in

the month of March?
a. P 7,500 b. P 9,750 c. P 11,750 d. P 13,750

CASH WITHHELD

JANUARY
Outstanding recorded liabilities 40,000
Payment of liability (16,000)
Unpaid Recorded Liability for the current month 24,000
Add: Cash withheld in anticipation of unrecorded liability -
Add: Cash withheld for future liquidation expenses 2,500
Cash withheld for the current month 26,500

FEBRUARY
Outstanding recorded liabilities 24,000
Payment of liability (10,000)
Unpaid Recorded Liability for the current month 14,000
Add: Cash withheld in anticipation of unrecorded liability 2,750
Add: Cash withheld for future liquidation expenses 2,000
Cash withheld for the current month 18,750

MARCH
Outstanding recorded liabilities 14,000
Payment of liability (14,000)
Unpaid Recorded Liability for the current month -

JANUARY FEBRUARY MARCH

Cash Beginning 20,000 26,500 18,750
Proceeds 30,000 12,000 12,500
Liabilities Paid (16,000) (10,000) (16,000)
Liquidation Expenses (5,000) (2,750) (5,500)
Cash Withheld (26,500) (18,750) -
Cash Available 2,500 7,000 9,750

10. How much should KYRIE and KEVIN receive in the month of
January?
a. P 0 and P 0 c. P 0 and P 2,500
b. P 2,600 and P 14,450 d. P 2,500 and P 2,600

JANUARY
KLAY (40%) KYRIE (30%) KEVIN (30%) TOTAL
Capital 10,000 10,000 12,500
Loans 0 5,000 7,500
Total Interest 10,000 15,000 20,000 45,000
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+/- ADJUSTMENT (17,000) (12,750) (12,750) (42,500)

Cash Available (7,000) 2,250 7,250
Absorption 7,000 (3,500) (3,500)
0 (1,250) 3,750
Absorption 0 1,250 (1,250)
0 1,250 2,500

ADJUSTMENT
KLAY 42,500 x 40% 17,000
KYRIE 42,500 x 30% 12,750
KEVIN 42,500 x 30% 12,750

11. How should KLAY and KYRIE receive on February?

a. P 0 and P 0 c. P 0 and P 4,750
b. P 2,250 and P 4,750 d. P 2,250 and P 4,750

FEBRUARY

KLAY KYRIE KEVIN TOTAL

January Interest 10,000 15,000 20,000 45,000
Payment January - - (2,500) (2,500)
Total Interest Beg. 10,000 15,000 17,500 42,500
+/- ADJUSTMENT (14,200) (10,650) (10,650) (35,500)
Cash Available (4,200) 4,350 6,850 7,000
Absorption 4,200 (2,100) (2,100)
Cash Distributed 0 2,250 4,750 7,000

ADJUSTMENT
KLAY 35,500 x 40% 14,200
KYRIE 35,500 x 30% 10,650
KEVIN 35,500 x 30% 10,650

12. How much should KLAY, KYRIE, and KEVIN receive in the month
of March?
a. P 3,800, P 2,925, and P 2,925
b. P 0, P 4,875, and P 4,875
c. P 2,925, P 3,900, and P 2,925
d. P 4,875, P 0, and P 4,875

MARCH
KLAY KYRIE KEVIN TOTAL
January Interest 10,000 15,000 17,500 42,500
Payment January 0 (2,250) (4,750) (7,000)
Total interest beg. 10,000 12,750 12,750 35,500
+/- ADJUSTMENT (10,300) (7,725) (7,725) (25,750)
Cash Available (300) 5,025 5,025 9,750
Absorption 300 (150) (150)
Cash Distributed 0 4,875 4,875 7,000

ADJUSTMENT
KLAY 25,750 x 40% 10,300
KYRIE 25,750 x 30% 7,725
KEVIN 25,750 x 30% 7,725

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COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

Problem 5

In January 1, 2016, THOMAS and FRIENDS corporation jointly

purchased a bullet train for P 20,000,000. The contractual
arrangement to operate such for public transport is for 20 years
which is the expected life of the said bullet train. There is no
residual value after such life expectancy. During 2016, the
operators incurred maintenance cost paid to FIX IT FELIX
corporation amounting to P 500,000. The revenue earned for the
year as reported by the management of the joint operation amounted
to P 2,000,000.

13. What is the entry in the book of THOMAS corporation on January

1,2016 to account its interest or investment?
a. Cash in Joint Operation 20,000,000
Cash 20,000,000
b. Cash in Joint Operation 10,000,000
Equipment in Joint Operation 10,000,000
Cash 20,000,000
c. Equipment in Joint Operation 10,000,000
Cash in Joint Operation 10,000,000
d. Equipment in Joint Operation 20,000,000
Cash 20,000,000

14. How much is the share of FRIENDS corporation in the net income
of the operation?
a. P 250,000 b. P 750,000 c. P 1,000,000 d. P 1,500,000

Revenue 2,500,000
Expenses
Maintenance (500,000)
Depreciation (1,000,000)
Net Profit 500,000
Share in Profit (P 500,000 x 50%) 250,000

Problem 6

LJ, AD, and KL formed a joint operation. They agreed to make

initial contributions of P 50,000 each. Profit or loss shall be
divided equally. The following data relate to the joint operation’s
transactions:

Joint Operation Expenses from JO Cash Inventory Taken

LJ 40,000 credit 25,000 25,000
AD 50,000 credit 10,000 30,000
KL 60,000 credit 15,000 20,000

15. How much is the balance of joint operations account before

distribution of profit or loss?
a. P 75,000 b. P 150,000 c. P 225,000 d. P 350,000

16. How much is the joint operation’s sales during the period?
a. P 75,000 b. P 150,000 c. P 225,000 d. P 350,000

17. How much is the joint operation’s profit or loss during the
period?
a. P 75,000 b. P 150,000 c. P 225,000 d. P 350,000

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COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

Joint Operation
Merchandise Contribution 150,000 350,000 Sales and other items of income
Expenses 50,000 _______
150,000
75,000 Unsold merchandise
225,000 Net Profit

18. How much is the cash settlement – receipt (payment) by LJ?

a. P 50,000 b. P 75,000 c. P 95,000 d. P 100,000

Initial contribution 50,000

Share in Net Income 75,000
Merchandise Taken (25,000)
Cash Settlement 100,000

19. How much is the cash settlement – receipt (payment) by AD?

a. P 50,000 b. P 75,000 c. P 95,000 d. P 100,000

Initial contribution 50,000

Share in Net Income 75,000
Merchandise Taken (30,000)
Cash Settlement 95,000

Problem 7

NOLA owns 20% in a joint venture and uses the equity method to
account for its interest in the joint venture. NOLA has joint
control over the joint venture. In 2016, the joint venture sold
inventory to NOLA for P 100,000 with a 50% gross profit on the
transaction. The inventory remains unsold during 2016 and was only
sold by NOLA to external parties only in 2017. NOLA’s income tax
rate is 30%. Assuming Joint Venture reports profit of P 1,200,000
and P 1,800,000 on December 31, 2016 and 2017, respectively:

20. What is the share in the profit of joint venture before

adjustment
for 2016 and 2017?
a. P 240,000 and P 360,000 c. P 240,000 and P 367,000
b. P 223,000 and P 367,000 d. P 223,000 and P 360,000

21. How much is the unrealized profit from upstream sale net of
tax for 2016 and 2017?
a. P 0 an P 7,000 c. P 7,000 and P 0
b. P 7,000 and P 35,000 d. P 35,000 and P 7,000

Ending Inventory 100,000

Gross Profit Rate 50%
Unrealized Profit 50,000
Net of Tax 70%
Unrealized Profit, Net Of Tax 35,000
Interest share 20%
7,000

22. How much is the adjusted share in profit of the joint venture
in
2016 and 2017?
a. P 240,000 and P 360,000 c. P 240,000 and P 367,000
b. P 223,000 and P 367,000 d. P 223,000 and P 360,000

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COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

Problem 8

CARMELO Appliance Company operates a branch in Quezon City. The

following are transactions between the home office and branch for
the current year:
 The home office sends P 200,000 cash to the branch
 Shipments to branch are billed at cost of P 78,750
 The Home Office pays branch expense of P 3,500
 Home Office expense of P 3,375 are paid by the branch
 The branch returned merchandise costing P 10,000 to the home
office
 Home office acquires branch furniture for P 20,500 cash. The
said fixed asset is carried on Branch Books
 The annual depreciation on the branch furniture is 5%
 The branch sends a P 15,000 cash remittance to home office

23. What is the adjusted balance of Branch Current account in the

Home Office Books?
a. P 0 b. P 185,375 c. P 187,125 d. P 274,375

24. What is the adjusted Home Office Current account in the Home
Office
Books?
a. P 0 b. P 185,375 c. P 187,125 d. P 274,375

HOME OFFICE BOOK BRANCH BOOK

Branch Current 200,000 Cash 200,000

Cash 200,000 Home Office Current 200,000

Branch Current 78,750 Shipment from Home Office 78,750

Shipment to BR 78,750 Home Office Current 78,750

Branch Current 3,500 Expense 3,500

Cash 3,500 Home Office Current 3,500

Expense 3,375 Home Office Current 3,375

Branch Current 3,375 Cash 3,375

Shipment to Branch 10,000 Home Office Current 10,000

Branch Current 10,000 Shipment from HO 10,000

Branch Current 20,500 Furniture 20,500

Cash 20,500 Home Office Current 20,500

No entry Depreciation Expense 1,050

Accum. Depreciation 1,050

Cash 15,000 Home Office Current 15,000

Branch Current 15,000 Cash 15,000

Problem 9

BOOGIE company maintains branches that market the products it

produces. Merchandise is billed to the branches at cost, with the
branches paying the freight charges from the Home Office to the
branch. On May 27, LA branch ships a portion of its merchandise to
NOLA branch upon authorization by Home Office. Originally, LA
branch had been billed for this merchandise at P 25,000 and paid
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freight charges of P 3,125 on the shipments from Home Office. NOLA

branch, upon receiving the merchandise, pays freight charges of P
1,875 on the shipment from LA branch. If the shipment had been
made from the Home Office directly to NOLA branch, the freight
cost to NOLA branch would have been P 4,000.

25. How much is the excess freight cost to be credited in the

books of Home Office?
a. P 0 b. P 1,000 c. P 2,000 d. P 2,750

26. How much is the NOLA branch current in the books of the Home
Office?
a. P 25,000 b. P 26,875 c. P 27,125 d. P 28,125

27. Upon receipt of shipment by NOLA branch, freight-in is debited

in the amount of?
a. P 1,000 b. P 1,875 c. P 2,125 d. P 4,000

28. Home Office current is debited by LA branch by how much?

a. P 25,000 b. P 26,875 c. P 27,125 d. P 28,125

LA NOLA
(25,000) 25,000
(3,125) 4,000
0 (1,875)
(28,125) 27,125

Problem 10

KYLE KORVER opens an agency in Cabantian, Davao City. The following

transactions for the month of May 1, 2017:
 Home office sends a check for P 55,000 to the agency as
working fund shipped to the agency: Samples – P 200,000 and
advertising materials – P 20,000
 The home office fills up sales orders sent by the agency for
P 1,500,000 worth of merchandise
 The cost of merchandise shipped is P 800,000. The agency
collected P 833,000, net of 2% discount.
 The working fund is replenished for the delivery expense,
maintenance and store supplies amounting to P 5,500; P 3,500;
and P 6,000, respectively.
 The agency exhausted 50% of the samples while 60% of the
advertising materials were still unused

29. How much is the net income (loss) of the agency for the month
ended May 31, 2017?
a. P 170,000 b. P 460,000 c. P 560,000 d. P 570,000

Sales 1,500,000
Cash Discount (17,000)
Net Sales 1,483,000
Cost of Goods Sold (800,000)
Gross Profit 683,000
Operating Expenses
Delivery 5,500
Maintenance 3,500
Store Supplies 6,000
Used Samples 100,000
Used Adv. Mats. 8,000 123,000
Net Income 560,000

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COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE

Problem 11

TARIK BLACK Inc. opened an agency in Matina. The following are

transactions for July 2017. Samples worth P 10,000, advertisng
materials of P 5,000 and checks for P 50,000 were sent to the
agency. Agency sales amounted to P 220,000 (cost P 150,000). The
collection for agency amounted to P 176,400 net of 2% discount.
The agency’s working fund was replenished for the following
expenses incurred; rent for 2 months P 10,000, delivery expenses
P 2,500 and miscellaneous expenses of P 2,000. Home office charges
the following to agency, after analysis of accounts recorded in
the books; salaries and wages P 15,000 and commission which is 5%
of sales. The agency sample inventory at the end of July is 25% of
the quantity shipped. The agency has used 20% of the advertising
materials sent by the home office.

30. What is the amount of agency net income for the month of July?
a. P 17,400 b. P 21,000 c. P 22,400 d. P 66,400

Sales 220,000
Cash Discount (3,600)
Net Sales 216,400
Cost of Goods Sold (150,000)
Gross Profit 66,400
Operating Expenses
Delivery 5,500
Miscellaneous 2,000
Rent Expense 5,000
Salaries and Wages 15,000
Sales Commissions 11,000
Used samples 7,500
Used Adv. Materials 1,000 (44,000)
22,400

MALI YUNG NA-ANSWER NATIN SA CLASS. DAPAT PALA I-DIVIDE PA ANG RENT
SA TWO MONTHS. SORRY 

END OF ASSESSMENT

NOTHING FOLLOWS

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