1. Liza, Marie and Nena formed a joint venture.

e. Liza is to act as manager and is designated to record the joint venture transactions in his
books. As manager, she is allowed a management fee of P336,000. Profits and losses are to be divided equally. The following balances
appear at the end of 2008 before adjustments for venture inventory and distribution of profits and losses:
Debit Credit
Joint venture cash P1,344,000
Marie, capital 84,000
Nena, capital P756,000

The venture is terminated on December 31, 2008 with unsold merchandise costing P291,200. (a) Assuming that the joint venture profit is
P140,000. What is the balance of the joint venture account before the distribution of profit? (b) Assuming that the joint venture incurs a
loss of P28,000, what is the balance of the joint venture account before the distribution of loss?
a. P431,200 Dr; P319,200 Cr c. P151,200 Cr; P263,200 Dr
b. P151,200 Dr; P319,200 Cr d. P151,200 Dr; P319,200 Dr

2. Ana, Bea and Carina formed a joint venture. The contractual arrangement provides that Ana is to manage the venture and is to receive a
fee of 20% of the profit after deduction of the fee as an expense of the venture. The net profit after the fee has been agreed to be divided
as follows: Ana, 30%; Bea, 50% and Carina, 20%. After three months, the joint venture is terminated. The trial balance prepared by Ana
show the following balances:
Dr Cr
Joint venture P324,000
Bea, capital P18,000
Carina, capital 72,000

The venture has still some unsold merchandise worth P90,000. Ana agreed to purchase such at cost. The fee of Ana has not yet been
taken up. What is the total income earned by Ana? Before the cash settlement is made, the balance of the investment in joint venture
account in the books of Bea and Carina are:
a. P172,500; (Bea) P154,500; (Carina) P141,000
b. P103,500; (Bea) P154,500; (Carina) P141,000
c. P97,500; (Bea) P172,500; (Carina) P69,000
d. P172,500; (Bea) P172,500; (Carina) P69,000

3. Xena Company filed a voluntary bankruptcy petition on April 30, 2009 and the statement of affairs reflects the following amounts:
Book value Current value
Assets pledged with fully secured creditors P 910,000 P1,080,625
Assets pledged with partially secured creditors 511,875 341,250
Free assets 1,137,500 796,250
Liabilities with priority 113,750
Fully secured creditors 739,375
Partially secured creditors 568,750
Unsecured creditors 1,478,750
Assume that the assets are converted into cash at the estimated current values and the business is liquidated. What total amount of cash
should partially secured creditors receive?
a. P477,750 b. P511,875 c. P341,250 d. P568,750

4. Alma and Becca have just formed a partnership. Alma contributed cash of P176,400 and office equipment that cost P75,600. The
equipment had been used in his sole proprietorship and had been 70% depreciated, the current value of the equipment is P50,400. Alma
also contributed a note payable of P16,800 to be assumed by the partnership. Alma is to have a 30% interest in the partnership. Becca
contributed P256,000 land at fair market value. Becca should make additional investment of:
a. P234,000 b. P490,000 c. P256,000 d. P210,000

5. On September 21, 2008, Tina, Donna and Gina formed a partnership investing cash of P189,000, P170,100 and P52,920, respectively.
The partners share profits 3:2:2 and on October 17, 2008, they have cash of P12,600, and other assets of P598,500; liabilities are
P322,560. On this date they decided to go out of business and sell all the assets for P378,000. Gina has personal assets of P18,900 that
may, if necessary, be used to meet partnership obligations. How much should be distributed to Donna upon liquidation of the partnership?
a. P25,704 b. P61,236 c. P0 d. P50,400

6. A balance sheet for the partnership of Susan, Myrna and May, who share profits in the ratio of 50:25:25, shows the following balance just
before liquidation:
Cash P162,000 Susan, capital P297,000
Other assets 803,250 Myrna, capital 209,250
Liabilities 270,000 May, capital 189,000

On the first month of liquidation, certain assets are sold for P432,000. Liquidation expenses of P13,500 are paid, and additional liquidation
expenses are anticipated. Liabilities are paid amounting to P72,900 and sufficient cash is retained to insure the payment to creditors
before making payments to partners. On the first payment to partners, Susan receives P84,375. The amount of cash withheld for
anticipated liquidation expenses is:
a. P0 b. P237,600 c. P197,100 d. P40,500

7. The partnership agreement of Paul, Simon and Peter provides for the division of net income as follows:
 Simon, who manages the partnership is to receive an annual salary of P120,000.
 Each partner is to be allowed interest at 10% on ending capital.
  Balance is to be divided 40:25:35.

During 2008, Paul invested an additional P90,000 in the partnership. Simon made an additional investment of P75,000 and withdrew
P110,000 and Peter withdrew P60,000. No other investments or withdrawals were made during 2008. On January 1, 2008, the capital
balances were Paul, P300,000; Simon, P410,000; and Peter, P220,000. Total capital at year-end was P600,000. Compute the capital
balance of each partner at year-end:
Paul Simon Peter
a. (P176,000) P948,125 (P172,125)
b. 214,000 410,250 24,250
c. 214,000 398,125 ( 12,125)
d. 390,000 375,000 ( 165,000)

8. The balance sheet as of September 30, 2008, for the partnership of Diana, Elma and Flora shows the following information:
Assets P180,000 Diana, loan P 10,000
Diana, capital 41,500
Elma, capital 38,500
Flora, capital 90,000
Total P180,000 Total P180,000

It was agreed among the partners that Diana retires from the partnership, and it was also further agreed that the assets should be adjusted
to their fair value of P172,500 as of September 30, 2008. Net loss prior to the retirement of Diana amounted to P35,000. The partnership
is to pay Diana P31,000 cash for Diana’s partnership interest, which would include the payment of her loan. No goodwill is to be recorded.
Diana, Elma and Flora share profit 40%, 15% and 45%, respectively. After Diana’s retirement, how much would Flora’s capital balance
be?
a. P33,000 b. P73,500 c. P68,250 d. P92,625

9. Lanie and Pam partners who share profits and losses in the ratio of 8:2, respectively. Their respective capital accounts are as follows:
Lanie P105,000 Pam P90,000

They agreed to admit Jane as a partner with a one-third interest in the capital and profits and losses, upon an investment of P75,000. The
new partnership will begin with a total capital of P300,000. Immediately after Jane’s admission, what are the capital balances of Lanie,
Pam and Jane, respectively?
a. P105,000; P90,000; P75,000 c. P109,000; P91,000; P100,000
b. P101,000; P89,000; P100,000 d. P109,000; P91,000; P75,000

10. Partners Sasha, Haly and Jane 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 partners’ capital account balances at this time are as follows:
Sasha P123,300 Jane P44,000
Haly 139,440

The liabilities accumulate to P168,000, including a loan of P56,000 from Sasha. The cash balance is P33,600. All the partners are
personally solvent. The partners plan to sell the assets in installment. If Haly received P20,160 from the first distribution of cash, how
much did Sasha receive at that time?
a. P11,200 b. P4,480 c. P6,720 d. P0

11. On March 1, 2009, Mr. Seco signed a franchise agreement with Lovely Face. Lovely Face, charged an initial franchise fee of P255,000
from Mr. Seco. When the agreement was signed, Mr. Seco paid P95,000 and signed a non-interest bearing note for the balance. The
note is to be paid in four equal annual installments each beginning March 1, 2010. Mr. Seco’s normal borrowing rate is 12%. The down
payment is nonrefundable, collection of the note is reasonably assured and the franchisor has performed substantially all of the services
required by the initial franchise fee. Present and future value factors are as follows:
Present value of P1 at 12% for 4 periods 0.6355
Future value of P1 of 12% for 4 periods 4.7793
Present value of an ordinary annuity of P1 at 12% for 4 periods 3.0374

How much revenue from franchise fee will be reported by Lovely Face on its December 31, 2009 income statement?
a. P255,000 b. P121,496 c. P216,496 d. P196,680

Sin Construction Co. has used the cost-to-cost percentage of completion method of recognizing revenue, Marc Sin assumed the presidency
of the company after the death of his father, Vincent. In reviewing the records, Marc finds the following information regarding a recently
completed building project for which the total contract was P2,000,000.
2006 2007 2008
Gross profit (loss) P40,000 P140,000 (P20,000)
Cost incurred each year 360,000 ? 820,000
Marc wants to know how effectively the company operated during the three years on this project and, since the information is not complete,
has asked for answers to the following questions:

12. How much cost was incurred in 2007?

a. P660,000 b. P600,000 c. P560,000 d. P500,000

13. What percentage of the project was completed by the end of 2007?
 a. 65% b. 60% c. 55% d. 79%

14. What was the total estimated gross profit on the project by the end of 2007?
a. P300,000 b. P180,000 c. P250,000 d. P350,000

15. What was the estimated cost to complete the project at the end of 2007?
a. P660,000 b. P500,000 c. P650,000 d. P680,000

16. Andrews and block are partners in an engineering consulting firm sharing profits and losses 40% and 60%, respectively, and their capital
balances are P110,000 and P150,000, respectively. The recorded net assets of the company are as follows:
Book value Fair value
Working capital P240,000 P220,000
Property and Equipment (net) 80,000 108,000
Noncurrent liabilities 60,000 60,000

In addition to the recorded assets, the partners feel that the company has goodwill valued at P40,000 because the company enjoys a
strong client base and has earnings that are consistently above industry averages.
Carver is interested in merging his environmental consulting company with Andrews and Block. Carver’s net assets to be conveyed to the
partnership include the following:
Book Value Fair Value
Working Capital P50,000 P40,000
Property and Equipment 60,000 50,000

In addition to the above recorded net assets, Carver feels that his business contacts and expertise will add value to the existing partnership.
Carver has valued these intangibles at P20,000.
If Carver were to acquire a 30% interest in the new partnership, how much additional cash would have to contribute to the partnership?
a. P20,000
b. P22,000
c. P42,000
d. None of the above

17. The balance sheet as of June 30, 2012 for the partnership of Dom, Joe, and Rey show the following information:
Total assets (at cost)……………………………………………………………………………P 360,000
Dom, loan………………………………………………………………………………………………………………P 20,000
Dom, Capital……………………………………………………………………………………………………… P 83,,000
Joe, Capital……………………………………………………………………………………………………… P 77,000
Rey, Capital……………………………………………………………………………………………………… P 180,000
Total……………………………………………………………………………………………………………………P 360,000
It was agreed among partners that Dom retires from the partnership and it was further agreed that the assets be adjusted to their fair
values of P408,000 as of June 30, 2012. The partnership would pay Dom P121,000 cash for Dom’s partnership interest and includes the
payment of loan to Dom. No goodwill is to be recorded.
Dom, Joe, and Rey share profits and losses: 25%, 25%, and 50% respectively. After Dom’s retirement, what is the balance of Rey’s capital
account?
a. P180,000
b. P204,000
c. P200,000
d. Zero

Pasig Garment operates a branch in Cabanatuan City. At the end of the year, the Branch account in the books of the home office at Manila
shows a balance of P150,000. The following information are ascertained:
a. The home office has billed the branch the amount of P37,500 for the merchandise, which was in transit on December 31.
b. A home office accounts receivable for P10,500 was collected by the branch. Said collection was not reported to the home office by
the branch.
c. Supplies of P4,500 was returned by the branch to the home office but the home office has not yet reflected in its records the receipt
of the supplies.
d. The branch made a profit of P10,100 for the month of December but the home office erroneously recorded it as P11,180.
e. The branch has not received the cash in the amount of P25,000 sent by home office on December 31. This was charged to General
Expense account.
All transactions are presumed to have been properly recorded.
18. What is the balance of the Home Office account on the books of the branch as of December 31, before adjustments?
a. P121,920
b. P123,000
c. P117,420
d. P106,920
19. Bonifacio contractors had a 3-year construction contract in 2012 for P900,000. The company uses the percentage-of-completion method
for financial statement purposes. Income to be recognized each year is based on the ratio of cost incurred to total estimated cost to
complete the contract. Data on this follows:

Accounts receivable-construction contract billings P30,000

Construction in progress………………………………………………………………………………………….. P93,750
 Less: Amounts billed………………………………………………………………………………………………… 84,375
10% retention……………………………………………………………………………………………………………9,375
Net income recognized in 2012 (before tax)…………………………………………………………. …………... 15,000

Bonifacio Contractors maintains a separate bank account for each construction contract. Bank deposits to this contract amounted to
P50,000.
What was the estimated total income before tax on this contract?
a. P45,000
b. P94,000
c. P135,000
d. P144,000

20. Pista Hut granted a franchise to Eat-N-Run for the Rainbowbelt area. Eat-N-Run was to pay a franchise fee of P100,000 payable in five
equal instalments starting with the payment upon signing of the agreement. The franchisee was to pay monthly 1% of gross sales of the
preceding month. Should the operation of the outlet prove to be unprofitable, the franchise may be cancelled with whatever obligation
owing to Pista Hut, in connection with the P100,000 franchise fee, waived.
The first year’s operation generated a gross sales of P500,000. For the first year, Pista Hut earned fee of:
a. P5,000
b. P20,000
c. P25,000
d. P105,000

21. X and Y Inc. owes the Xylo Corporation P60,000 on account, which is secured by account receivable with a book value of P50,000. The
unsecured portion is considered a claim under bankruptcy law, X and Y has filed for bankruptcy. Its statement of affairs lists the accounts
receivable securing the Xylo account with an estimated realizable value of P45,000. If the dividend to general unsecured creditors is 80%
how much can Xylo expect to receive?
a. P60,000
b. P58,000
c. P57,000
d. P48,000

22. In 2014, AJD Construction Company was contracted to build Village Company’s private road network for P100 million. The project was
estimated to be completed in two years and the contract provided for:
1) 5% mobilization fee (to be deducted from the last billing) payable within 15 days after the signing of the contract.
2) 10% retention provision on all billings, and
3) Payment of progress billings within 10 days from acceptance.
AJD, which uses the percentage-of-completion method of accounting, estimated a 25% gross margin on the project. By the end of 2014,
AJD has presented progress billings corresponding to 50% completion. All of the progress billings presented in 2014 were accepted,
except the last one for 10% which was accepted on January 5, 2015. With the exception of one bill for 8% which was due on January 7,
2015, all of the billings accepted in 2015 are settled. Payments made by Village Company in 2015 amounted to:
a. P33,800,000
b. P38,500,000
c. P40,000,000
d. P45,200,000
e. No answer

23. RAGE AGAINST THE MACHINE charges an initial franchise fee of P75,000 for the right to operate as a franchise of Speed Racer. Of this
amount, P25,000 is collected immediately. The remainder is collected in four equal annual installment payments of P12,500 each. These
installments have a present value of P39,623: There is reasonable expectation that the down payment may be refunded and substantial
future services are yet to be performed by RAGE AGAINST THE MACHINE. The journal entry to record the franchise fee would be
a. Cash 25,000
Notes Receivable 50,000
Unearned Interest Income 10,377
Franchise Revenue 64,623

b. Cash 25,000
Notes Receivable 50,000
Unearned interest income 10,377
Unearned Franchise Revenue 64,623

c. Cash 25,000
Notes Receivable 50,000
Unearned Interest Income 10,377
Unearned Franchise Revenue 39,623
Franchise Revenue 39,623

d. Cash 25,000
Notes Receivable 50,000
Unearned interest income 10,377
Unearned franchise revenue 39,623
 Franchise revenue 25,000

24. Psalms sold fast food restaurant franchise to Peter. The sale agreement, signed on January 1, 2013, called for a P30,000 down payment
plus non-interest bearing note for the balance which is P20,000 payable in two equal annual payments, representing the value of initial
franchise services rendered by Psalms. In addition, the agreement required the franchisee to pay five percent of its gross revenues to the
franchisor, this was deemed sufficient to cover the cost and provide a reasonable profit margin on continuing franchise services to be
performed by Psalms. Psalms incurred direct cost of P20,000 in providing the initial services. The restaurant opened on the first month of
the second quarter of 2013, and its sales amounted to P500,000 each year for the first two years.

Assuming a 10% interest rate is appropriate and the collectability of the note is not reasonably assured. (the PV of annuity of P1 at 10%
for 2 periods is 1.7355). Use two decimal places.
The total revenue in 2014 is:
a. P74,090
b. P31,161
c. P31,510
d. P35,000

25. TMOSSIY Inc. opened an agency in Marikina. The following are transactions for July 2013. Samples worth P10,000, advertising materials
of P5,000 and checks for P50,000 were sent to the agency. Agency sales amounted to P220,000 (cost P150,000). The collection for
agency amounted to P176,400 net of 2% discount. The agency’s working fund was replenished for the following expenses incurred; rent
for two months P10,000; delivery expenses, P2,500 and miscellaneous expenses of P2,000). Home office charges the following to the
agency, after analysis of accounts recorded on the books for the month of July; salaries and wages P15,000 and commission which is 5%
of sales. The agency sample inventory at the end of the month was 25% of the quantity shipped. The agency has used 20% of the
advertising materials sent by the home office.
The agency has net income for the month of July is:
a. P17,400
b. P22,400
c. P23,650
d. P28,650

26. Joules Company sold a piano that cost P100,000 for P160,000 on October 31, 2014. The down payment was P25,000, and the balance
was to be paid in 12 equal monthly instalments at the end of each succeeding month. Interest was charged on the unpaid balance of the
contract at ½ of 1% per month, payments being considered as applying first to accrued interest and the balance to the principal. After
paying three instalments that included the said interest, the customer defaulted. The piano was repossessed late in February of 2015. It
was estimated that the piano had a value of P50,000 on a depreciated cost basis. What is the loss on repossession?
a. 7,738
b. 11,415
c. 14,448
d. 13,281

27. From the start of its operations, Ferrer Construction Company has used the percentage of completion method in recognizing income.
During 2013, Ferrer was engaged by Antonio Company on a fixed-price contract to build the 4-storey Optical Complex.
On January 1, 2015, an employee left an office window open and fireworks damaged the office. The Antonio Company file on the
accountant’s desk was destroyed. Dr Arcy Ferrer, the proprietor, has contracted you to help reconstruct the contract information. The
following data were taken from the salvaged files:
12/31/13 12/31/14
Architect’s estimated cost at completion P9,375,000 P12,825,000
Costs incurred 5,820,000
Percentage of completion 60%
Income (loss) recognized to date 625,000 (325,000)

What was the construction cost recognized in 2014?

a. 4,050,000
b. 4,870,000
c. 5,950,000
d. 5,820,000

The following selected accounts appeared in the trial balance of Soraya Sales Company as of December 31, 2014:

Installment receivable-2013 sales P 22,500 Repossessions P 4,500

Installment receivable-2014 sales 300,000 Installment sales 637,500
Inventory 105,000 Regular sales 577,500
Purchases 832,500 Deferred gross profit-2013 58,800

Additional information:

Installment receivable-2013 sales, December 31, 2013 P 180,000

Inventory of new and repossessed merchandise as of December 31, 2014 142,500
Gross profit percentage on regular sales during the year 30% on sales
28. Repossessions were made during the year. It was a 2013 sale and the corresponding uncollected account at the time of repossession as
P 12,000 and was recorded correctly. What is the total realized gross profit in 2014?
a. 352,425
b. 301,500
c. 352,950
d. 349,030

On October 31, 2014, Ivy, Irma and Irene who share earnings 5:3:2, respectively, decided to liquidate their partnership at which time their
condensed balance sheet was as follows:

Cash P 50,000 Liabilities P 60,000

Other assets 250,000 Ivy, capital 80,000
Irma, capital 90,000
Irene, capital 70,000
Total P 300,000 Total P 300,000

29. The first cash sale of assets booked at P 150,000 resulted in net realization of P 120,000. At this time Irma received P 48,000. What is the
amount of the expected liquidation expenses?
a. 15,000
b. 10,000
c. 40,000
d. 20,000

30. Fairy Company charges new franchisees an initial fee of P 2,500,000. Of this amount, P 1,000,000 is payable in cash when the agreement
is signed, and the remainder is to be paid in three equal annual instalments which are evidenced by a 12% interest-bearing promissory
note. In consideration therefore, Fairy Company will assist in locating the business site, conduct a market study to estimate earnings
potential, supervise construction of a building, and provide initial training to employees. On December 1, 2014, Fairy entered into a
franchising agreement with Dairy Company. By the end of the year, Fairy had completed all of the initial services required at a cost of P
800,000 and it has ascertained that collection of the note is reasonably assured.
What is the amount of franchise revenue that fairy Company should recognize in its 2014 income statement?
a. 335,000
b. 1,715,000
c. 2,500,000
d. 1,700,000
31. On April 1, 2008, Ringo Corp. entered into franchise agreement with Quart Corp. to sell their products. The agreement provides for an
initial franchise fee of P4,218,750 payable as follows: P1,181,250 cash to be paid upon signing of the contract and the balance in five
equal annual payment every December 31, starting at the end of 2008. Ringo signs 12% interest learning note for the balance. The
agreement further provides that the franchise must pay a continuing franchise fee equal to 5% of its monthly gross sales. On August 30
the franchisor completed the initial services required n the contract at a cost of P1,350,000 and incurred indirect costs of P232,500. The
franchise commenced business operations on September 3, 2008. The gross sales reported to the franchisor are September sales,
P110,000; October sales, P125,000; November sales P138,000; and December sales, P159,000. The first installment payment was made
on due date.
Assume the collectibility of the note is reasonably assured. In its income statement for the year ended December 31, 2008 how much is
the realized gross profit?
a. P2,868,750 b. P2,936,225 c. P2,895,350 d. P3,168,725

32. The ELI Corporation is undergoing liquidation and its statement of financial position as of January 2, 2013 is as follows:
ELI Corporation
Statement of Financial Position
As of January 2, 2013
Assets Liabilities and Equity
Cash P 124,200 Accounts Payable P 118,500
Receivables, net 340,800 Salaries Payable 50,000
Inventory 70,000 Bank Loan Payable 222,000
Prepaid Expenses 22,500 Note Payable 80,000
Building, net 360,000 Bonds Payable 450,000
Goodwill 82,000 Ordinary Shares 120,000
Capital Deficit (41,000)
Total Assets P 999,500 Total Liabilities and Equity P 999,500

The inventory has a realizable value of P53,000. Of the accounts payable, P60,000 is secured by 1/4 of the receivable which is 30% not
collectible. The balance in the book value of the receivables which has a realizable value of P235,000 is used to secure the bank loan payable.
The bonds payable is secured by the building having a book value of P360,000 and a realizable value of P375,000.
Unrecognized liabilities as of Jan. 2, 2013 are as follows: accrued interest on bonds payable and taxes amounting to P4,000 each, and trustee’s
salary amounting to P9,500. (Use two decimal places for the recovery percentage)
How much will be paid to the partially secured creditors of ELI corporation?
a. P477,595
b. P479,102
c. P478,349
d. P480,669
33. On November 1, 2013, Goodbye To You (GTY) Inc.’s trustee prepares a Statement of Affairs with the following information:
 P340,000 cash will be received by the unsecured creditors whose claims totaled P1360000
 A received a 12% note of P124,000 from GTY on March 1, 2013, secured with machinery with a market value of P115,000
 GTY issued to B a 12%, 1-year note of P136,000 on January 1, 2013. Nothing has been pledged to this note.
 C holds a note of P137,500 on which interest of P7,452 is accrued, secured with equipment with a book value of P153,000. The fair
value of the equipment is determined to be P173,250
 GTY still owes D, its cashier, with her salary worth P12,220

Which of the following statements about the creditors of Goodbye To You is false?
a. The unsecured creditor without priority will receive P37,400
b. The unsecured creditor with priority will receive P3,055
c. The fully secured creditor will be paid an amount of P144,952
d. The partially secured creditor will be paid an amount of P119,730

34. The following data were taken from the records of Sweet Serendipity Co. before the accounts are closed for the year ended December 31,
2013. The company uses the installment method of recognizing revenue and it sells goods exclusively on installment basis.
For the year ended:
December 31, 2011 December 31, 2012 December 31, 2013
Installment Sales ? P500,000 P600,000
Cost of Goods Sold 300000 ? ?
Balances as of:
December 31, 2011 December 31, 2012 December 31, 2013
Installment AR, 2011 P350,000 P125,000 P35,000
Installment AR, 2012 P307,500 P140,000
Installment AR, 2013 P490,000
DGP, 2011 P122,500 P43,750 P43,750
DGP, 2012 P123,000 P120,000
DGP, 2013 P210,000

On January 2013, a customer defaulted and Sweet Serendipity repossessed the merchandise. The merchandise was assessed to have a cost
of P4,200 after costs of reconditioning amounting to P800. The repossessed merchandise was purchased by the customer in 2012 and the said
customer still owed the company a certain amount at the date of repossession.
How much was the realized gross profit and loss on repossession in 2013?
a. P134,000 ; P 300
b. P134,000 ; P1,100
c. P137,000 ; P3,300
d. P137,000 ; P4,100

35. Mabi Corp. was contracted by Mr. Tristan P. to construct 35 condominium units. The estimated total cost of construction was P28,000,000.
Mabi bills its clients at 120% of total costs estimated to complete a project. Details regarding the contract are given below:
Units finished Costs incurred to date Estimated cost at completion
2011 10 P8,412,500 P33,650,000
2012 18 P20,735,000 P31,900,000
2013 7 P31,500,000 ?

What is the RGP during 2012 using the output measures?

a. P1,105,000
b. P1,700,000
c. P1,360,000
d. P1,410,000

36. On December 1, 2013, Dewyze Inc. authorized Cook to operate as a franchise for an initial franchise fee of P3,400,000. P900,000 was
received upon signing the contract, and the balance is to be paid by a non-interest bearing note, due in five equal annual installments
beginning December 31, 2014. Prevailing market rate is 12%. PV factor is 3.60478. The down payment is nonrefundable and it
represents a fair measure of the services already performed by Dewyze, however, with regards to the balance, substantial future
services are still required. How much is the deferred franchise revenue to be recognized as of December 31, 2013?
a. P1,802,390
b. P2,702,390
c. P2,500,000
d. P1,518,677

37. Artemus Co. operates a branch in Manila City. On December 31, 2013, the Manila branch in the home office books showed a debit balance
of P522,110. The interoffice accounts were in agreement at the beginning of the year. For purposes of reconciling the interoffice accounts,
the following facts were given:
 Shipments from home office to Manila branch costing P72,500 were in transit as of year-end. Manila recorded the said transfer twice
at cost: one on December 31, 2013 and the other on January 1, 2014.
 The home office allocated to the Manila branch ¾ of the rent expenses it paid for the year ended 2013. The rent expense was P24,000.
The home office sent a debit memo to Manila for the allocated amount, but the branch recorded the said debit memo by debiting the
home office – current account and crediting rent payable.
 The branch wrote-off uncollectible accounts amounting to P10,120. The allowance for doubtful accounts is maintained in the books of
the home office. The home office recorded the write-off as a write-off of its own accounts receivable.
  The branch collected accounts receivable from home office’s customers amounting to P52,920, net of 2% cash discount. The branch
treated the said transaction as if it was a collection from its own customers. The home office was not yet notified of the said collection.
It is the policy of the home office to bill its branches at 20% above cost. What is the unadjusted balance of the home office-current account in
the books of Manila branch on December 31, 2013?
a. P475,990
b. P461,490
c. P459,070
d. P463,650

38. On January 1, 2001 Dairy Delight, Inc. entered into a franchise agreement with a company allowing the company to do business under
Dairy Delight's name. Dairy Delight had performed substantially all required services by January 1, 2001, and the franchisee paid the initial
franchise fee of $105,000 in full on that date. The franchise agreement specifies that the franchisee must pay a continuing franchise fee of
$9,000 annually, of which 20% must be spent on advertising by Dairy Delight. What entry should Dairy Delight make on January 1, 2001
to record receipt of the initial franchise fee and the continuing franchise fee for 2001?
a. Cash 114,000
Franchise Fee Revenue 105,000
Revenue from Continuing Franchise Fees 9,000
b. Cash 114,000
Unearned Franchise Fees 114,000
c. Cash 114,000
Franchise Fee Revenue 105,000
Revenue from Continuing Franchise Fees 7,200
Unearned Franchise Fees 1,800
d. Prepaid Advertising 1,800
Cash 114,000
Franchise Fee Revenue 105,000
Revenue from Continuing Franchise Fees 9,000
Unearned Franchise Fees 1,800

39. POC Company accounts for a long-term construction contract using the percentage-of-completion method. As of the end of the current
fiscal year, the following information was available regarding a project expected to be completed in the following year:
Cumulative progress billings $400,000
Cumulative costs incurred 300,000
Cumulative revenues recognized 80,000
The difference between construction in progress and progress billings should be reported in the statement of financial position for the
current year as
a. A current asset of $20,000.
b. A current liability of $20,000.
c. Unearned revenue of $100,000.
d. A separate component of shareholders’ equity of $100,000.

40. ABC Manufacturing Company ships merchandise costing $40,000 on consignment to XYZ Stores. ABC pays $3,000 of freight costs to a
transport company, and XYZ pays $2,000 for local advertising costs that are reimbursable from ABC. By the end of the period, three
fourths of the consigned merchandise has been sold for $50,000 cash. XYZ notifies ABC of the sales, retains a 10% commission and the
paid advertising costs, and remits the cash due ABC. Select the journal entry that appropriately records the notification of sale and the
receipt of cash by ABC. CIA 1193 IV-37
a. Cash $40,000
Advertising expense 2,000
Commission expense 5,000
Freight expense 3,000
Revenue from consignment sales $50,000
b. Cash $43,000
Advertising expense 2,000
Commission expense 5,000
Revenue from consignment sales $50,000
c. Cash $50,000
Revenue from consignment sales $50,000
d. Cash $45,000
Commission expense 5,000
Revenue from consignment sales $50,000

41. According to PFRS 15 Revenue from Contracts with Customers, each contract is accounted for separately. However, two or more
contracts entered into at or near the same time with the same customer (or related parties with the customer) shall be combined and
accounted for as a single contract if certain conditions are met. Which of the following is not one of those conditions?
a. The contracts are negotiated as a package with a commercial objective.
b. The amount of consideration to be paid in one contract depends on the price or performance of the other contract.
c. Some or all of the goods or services promised in the contracts are a single performance obligation.
d. At contract inception, the collectability of the consideration is probable of collection.

42. Which of the following does not indicate that a customer can benefit from a good or service either on its own or together with other
resources that are readily available to the customer?
 a. The good or service could be used, consumed, sold for an amount that is greater than scrap value or otherwise held in a way that
generates economic benefits.
b. The fact that the entity regularly sells a good or service separately.
c. The fact that the entity has no alternative use for the good or service.
d. All of these are indicators.

43. Direct costs of franchise incurred by a franchisor that are within the scope of PFRS 15 are recognized as expense using the
a. Matching concept
b. Immediate recognition principle
c. Effective interest method
d. Concept of conservatism or prudence

44. If, in subsequent period, the entity assesses that the collectability of the consideration in a franchise agreement is doubtful
a. The entity discontinues recognizing further revenues from the franchise contract
b. The entity assesses any existing receivable or contract asset from the franchise contract for impairment
c. The entity shall discontinue its existing accounting policy on revenue recognition and shifts to either the instalment sales method or
cost recovery method
d. a and b

45. If the promise to transfer a license is distinct

a. The entity treats all the promises in the contract as a single performance obligation
b. The entity applies the general principles of PFRS 15 to determine whether the performance obligation is satisfied over time or at a
point in time.
c. The entity applies the specific principles of PFRS 15 to determine the nature of the entity’s promise to transfer the license as either
a “right to access” or the “right to use” the entity’s intellectual property
d. b and c

46. If a franchise contract requires the franchisor to undertake activities that would affect the franchisor’s intellectual property to which the
franchisee has rights, the performance obligation is satisfied
a. at a point in time
b. over time
c. under time
d. anytime

47. The Revised Uniform Partnership Act defines a partnership as

a. Any association of two or more persons or entities.
b. An association of two or more persons to carry on as co-owners a business for profit.
c. A separate legal entity for most legal purposes.
d. An entity created by following statutory requirements.

48. Aimee Allen retires from the partnership of Allen, Beck, and Chale. Allen’s cash settlement from the partnership was based on new
goodwill determined at the date of retirement plus the carrying amount of the other net assets. As a consequence of the settlement, the
capital accounts of Beck and Chale were decreased. In accounting for Allen’s withdrawal, the partnership could have used the
a. b. c. d.
Bonus method No No Yes Yes
Goodwill method Yes No Yes No

49. In a partnership liquidation, the final cash distribution to the partners should be made in accordance with the
a. Partners’ profit and loss sharing ratio.
b. Balances of the partners’ capital accounts.
c. Ratio of capital contributions made by the partners.
d. Ratio of capital contributions less withdrawals made by the partners.

50. Prior to partnership liquidation, a schedule of possible losses is frequently prepared to determine the amount of cash that may be safely
distributed to the partners. The schedule of possible losses
a. Consists of each partner’s capital account plus loan balance, divided by that partner’s profit-and-loss sharing ratio.
b. Shows the successive losses necessary to eliminate the capital accounts of partners (assuming no contribution of personal assets
by partners).
c. Indicates the distribution of successive amounts of available cash to each partner.
d. Assumes contribution of personal assets by partners unless there is a substantial presumption of personal insolvency by the partners.

51. Deb Co. records all sales using the installment method of accounting. Installment sales contracts call for 36 equal monthly cash
payments. The amount of deferred gross profit relating to collections 12 months beyond the balance sheet date should be reported in
the
a. Current liability section as a deferred revenue.
b. Noncurrent liability section as a deferred revenue.
c. Current asset section as a contra account.
d. Noncurrent asset section as a contra account.
52. A seller is properly using the cost recovery method for a sale. Interest will be earned on the future payments. Which of the following
statements is not correct?
a. After all costs have been recovered, any additional cash collections are included in income.
b. Interest revenue may be recognized before all costs have been recovered.
c. The deferred gross profit is offset against the related receivable on the balance sheet.
Subsequent income statements report the gross profit as a separate item of revenue when it is recognized as earned.

53. When assets that have been sold and accounted for by the installment method are subsequently repossessed and returned to inventory,
they should be recorded on the books at
a. Selling price.
b. The amount of the installment receivable less associated deferred gross profit.
c. Net realizable value.
d. Net realizable value minus normal profit.

54. Slick's Used Cars sells pre-owned cars on the installment basis and carries its own notes because its customers typically cannot qualify
for a bank loan. Default rates tend to be high or unpredictable. However, in the event of nonpayment, Slick's can usually repossess the
cars without loss. The revenue method Slick would use is the:
A. Installment sales method. C. Cost recovery method.
B. Point of sales method. D. Completed contract method.

55. The rationale for adoption of the percentage-of-completion method is that:

A. Results are more conservative.
B. It provides a measure of periodic accomplishment.
C. It is a better match with legal ownership.
D. It results in a lower income tax.

56. The profession requires that the percentage-of-completion method be used when certain conditions exist. Which of the following is not
one of those necessary conditions?
a. Estimates of progress toward completion, revenues, and costs are reasonably dependable.
b. The contractor can be expected to perform the contractual obligation.
c. The buyer can be expected to satisfy some of the obligations under the contract.
d. The contract clearly specifies the enforceable rights of the parties, the consideration to be exchanged, and the manner and terms of
settlement.

57. When the percentage-of-completion method of accounting for long-term construction projects is used, why is Construction in Progress
increased by the annual recognized gross profit on long-term construction contracts?
a. The cost of the contract has increased.
b. The project's value has increased above cost.
c. The economy experiences inflation over the construction period.
d. Construction in Progress is not increased by the annual recognized profit.

58. Which of the following is not a difference between the percentage-of completion and completed-contract methods of accounting for long-
term construction contracts?

a. They report different amounts for inventory during the construction period.
b. They report different amounts for progress billings during the construction period.
c. They cause a different cash inflow during the construction period.
d. They report different amounts for accounts receivable during the construction period.

59. An enterprise uses a branch accounting system in which it establishes separate formal accounting systems for its home office operations
and its branch office operations. Which of the following statements about this arrangement is false?

A. The home office account on the books of a branch office represents the equity interest of the home office in the net assets of the
branch.
B. The branch office account on the books of the hoe office represents the equity interest of the branch office in the net assets of the
home office.
C. The home office and branch office accounts are reciprocal accounts that must be eliminated in the preparation of the enterprise’s
financial statements that are presented in accordance with GAAP.
D. Unrealized profit from internal transfers between the home office and a branch must be eliminated in the preparation of the
enterprise’s financial statements that are presented in accordance with GAAP.

60. VERDI, Inc. has several branches. Goods costing P10,000 were transferred by the head office to Cebu Branch with the latter paying P600
for freight cost. Subsequently, the head office authorized Cebu Branch to transfer the goods to Davao Branch for which the latter was
billed for the P10,000 cost of the goods and freight charge of P200 for the transfer. If the head office had shipped the goods directly to
Davao Branch, the freight charge would have been P700. The P100 difference in freight cost would be disposed of as follows:

a. Considered as savings. c. Charged to Davao Branch.

b. Charged to Cebu Branch. d. Charged to the Head Office.