Asia Pacific College of Advanced Studies

Finals Examination
Advanced Financial Accounting I

Name: Date:
Professor: Gemine Ailna Panganiban Raw Score:

1. Philippine National Bank holds a P500,000 note secured by a building owned by Luigi Software, which has
filed for bankruptcy. If the property has a book value of P600,000 and a fair market value of P450,000, what
is the best way to describe the notes held by Philippine National Bank? The bank has
a. A secured claim of P500,000.
b. An unsecured claim of P500,000.
c. A secured claim of P450,000 and an unsecured claim of P50,000.
d. A secured claim of P50,000 and an unsecured claim of P50,000.

2. P Corporation is a parent, having purchased 60% of S Company's common stock at par value for P600,000. S
Company is in financial difficulty. The parent granted an unsecured loan of P200,000 to the subsidiary. An
accounting statement of affairs for S Company shows a dividend of 30%. P Corporation can expect to receive
on the loan of appropriately:
a. P120,000 c. P36,000
b. 60,000 d. 48,000

3. P Corporation is a parent, having purchased 60% of S Company's common stock at par value for P600,000. S
Company is in financial difficulty. The parent granted as unsecured loan of P200,000 to the subsidiary. An
accounting statement of affairs for S Company shows a dividend of 30%. P Corporation can expect to receive
payment for its Investment in S Company of approximately:
a. P600,000 c. P108,000
b. 180,000 d. 0

4. Kent, Inc. has forced into bankruptcy and has begun to liquidate. Unsecured claims will be paid at the rate of
40 cents on the peso. Apex Co. holds a non-interest bearing note receivable from Kent in the amount of
P100,000, collateralized by machinery with a liquidation value of P25,000. The total amount to be realized
by Apex on this note receivable is:
a. P25,000 c. P55,000
b. 40,000 d. 65,000

5. Seco Corp. was forced into bankruptcy and is in the process of liquidating assets and paying claims.
Unsecured claims will be paid at the rate of forty cents on the peso. Hale holds a P30,000 noninterest-
bearing note receivable from Seco collateralized by an asset with a book value of P35,000 and a liquidation
value of P5,000. The amount to be realized by Hale on this note is:
a. P5,000 c. P15,000
b. 12,000 d. 17,000

6. Blueprint, Inc. signed a note payable to its bank for PI 0,000. Accrued interest on the note on February 28,
2004 amounts to P250. The note is secured by inventory with a book value of P12,000. The inventory is sold
for P8,000 and unsecured creditors receive 30 percent of their claims. The bank should receive the following
amount in settlement of the note and interest:
a. P10,250 c. P8,675
b. 10,000 d. 8,000

7. The trust for Ardolio, Inc. prepares a statement of affairs which shows that unsecured creditors whose
claims total P60,000 may expect to receive approximately P36,000 if assets are sold for the benefit of
creditors.
 Michael is an employee who is owed P750.
 Meldcan holds a note for P1,000 on which interest of P50 is accrued; nothing has been pledged
on the note.
 Compboy holds a note of P6,000 on which interest of P300 is accrued: securities with a book
value of P6,500 and a present market value of P5,000 are pledged on the note.
 Serpor holds a note for P2,500 on which interest of P150 is accrued property with a book value
of P2,000 and a present market value of P3,000 is pledged on the note.

How much may each of the following creditors hope to receive?

Michael Meldcan Compboy Serpor

a. P 0 P 0 P 0 P 0
b. 90 0 6,300 2,390
 c. 350 1,050 5,780 0
d. 750 630 5,780 2,650

8. Erap Co. filed a voluntary bankruptcy petition on August 15, 2008, and the statement of affairs reflects
the following amounts:
Estimated
Book current
value value
Assets:
Assets pledged with fully secured creditors P 300,000 P370,000
Assets pledged with partially secured creditors 180,000 120,000
Free assets…………………………………………………….. 420,000 320,000
P 900,000 P810,000
Liabilities:
Liabilities with priority…………………………………. P70,000
Fully secured creditors………………………………….. 260,000
Partially secured creditors…………………………….. 200,000
Unsecured creditors……………………………………… 540,000
P1,070,000

Assume that the assets are converted to cash at the estimated current values and the business is liquidated.
What amount of cash will be available to pay unsecured non-priority claims?

a. P240,000 c. P320,000
b. 280,000 d. 360,000

9. On December 18, 2011, the statement of affairs of Downside Company,which is in bankruptcy liquidation,
included the following:

Assets pledged for fully secured liabilities……………………………………………… P100,000

Assets pledged for partially secured liabilities………………………………………... 40,000
Free assets……………………………………………………………………………………………. 120,000
Fully secured liabilities…………………………………………………………………………. 80,000
Partially secured liabilities……………………………………………………………………. 50,000
Unsecured liabilities with priority…………………………………………………………. 60,000
Unsecured liabilities without priority……………………………………………………. 90,000

Compute the estimated amount to be paid to:

Fully Unsecured Partially Unsecured

Secured Liabilities Secured Liabilities
Liabilities w/ Priority Liabilities without priority
a. P80,000 P60,000 P50,000 P70,000
b. 64,000 60,000 48,000 88,000
c. 80,000 48,000 60,000 72,000
d. 80,000 60,000 48,000 72,000

10. Zero Na Corp. has been undergoing liquidation since January 1. As of March 31, its condensed statement of
realization and liquidation is presented below:

Assets:
Assets to be realized…………………………………………………………… P1,375,000
Assets acquired………………………………………………………………….. 750,000
Assets realized…………………………………………………………………… 1,200,000
Assets not realized……………………………………………………………… 1,375,000

Liabilities:
Liabilities liquidated………………………………………………………….. P1,875,000
Liabilities not liquidated……………………………………………………. 1,700,000
Liabilities to be liquidated…………………………………………………. 2,250,000
Liabilities assumed……………………………………………………………. 1,625,000

Revenues and Expenses:

Supplementary charge………………………………………………………. P3,125,000
Supplementary credits………………………………………………………. 2,800,000
 The net gain (loss) for the three-month period ending March 31 is:

a. P250,000 c. P425,000
b. (325,000) d. 750,000

11. MM 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………………………………………… P1,200,000 P1,500,000
Cash collections from:
2011 sales………………………………………. 400,000 500,000
2012 sales………………………………………. 600,000
Gross profit on sales……………………………………. 30% 40%

The realized gross profit for 2012 is

a. P240,000 c. P440,000
b. 390,000 d. 600,000

12. TT Company, which began business on January 1, 2011, appropriately uses the installment sales method of
accounting. The following data are available for 2008:
Installment accounts receivable, 12/31/11…………………………………………. P200,000
Deferred gross profit, 12/31/11 (before recognition of realized
gross profit)……………………………………………………………………………………….. 140,000
Gross profit on sales …………………………………………………………………………… 40%
The cash collections and the realized gross profit on installment sales for the year ended December 31, 2011
should be
Cash collections Realized gross profit
a. P100,000 P80,000
b. 100,000 60,000
c. 150,000 80,000
d. 150,000 60,000

13. Dipolog Company sells appliances on the installment basis. Below are information for the past three years:
2012 2011 2010
Installment sales……………………………………… P750,000 P600,000 P400,000
Cost of sales…………………………………………….. 450,000 375,000 260,000
Collections on:
2012 installment sales…………………. 275,000
2011 installment sales…………………. 180,000 240,000
2010 installment sales…………………. 125,000 120,000 150,000
Repossessions on defaulted accounts included one made on a 2012 sale for which the unpaid balance
amounted to P5,000. The depreciated value of the appliance repossessed was P2,500.

The realized gross profit in 2012 on collections of 2012 installment sales was:

a. P108,000 c. P221,250
b. 110,000 d. 221,500

14. On January 1, 2011, Art Company sold its idle plant facility to Tony, Inc. for P1,050,000. On this date, the
plant had a depreciated cost of P735,000. Tony paid P150,000 cash on January 1, 2011 and signed a
P900,000 note bearing interest at 10%. The note was payable in three annual installments of P300,000
beginning January 1, 2012. Art appropriately accounted for the sale under the installment method. Tony
made a timely payment of the first installment on January 1, 2012 of P390,000 which included interest of
P90,000 to date of payment. At December 31, 2012, Art has deferred gross profit of

a. P153,000 c. P225,000
b. 180,000 d. 270,000
15. On October 1, 2011, Rodel Corporation, a real estate developer, sold land to Gerry Company for P5,000,000.
Gerry paid cash of P600,000 and signed a ten-year P4,400,000 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 P110,000 beginning January 2, 2012. Rodel appropriately accounts for the sale under the
cost recovery method. On January 2, 2012, Gerry paid the first principal installment of P110,000 and interest
of P132,000. For the year ended December 31, 2012, what total amount of income should Rodel recognize
from the land sale and the financing?

a. P 0 c. P508,200
b. 208,000 d. 309,640

16. Asser Computer Co. began operation at the beginning of 2012. During the year, it had cash sales of
P6,875,000 and sales on installment basis of P16,500,000. Asser adds a markup on cost of 25% on cash sales
and 50% on installment sales. Installments receivable at the end of 2012 is P6,600,000. Total realized gross
profit for 2012 is:

a. P1,375,000 c. P4,675,000
b. 3,300,000 d. 3,575,000

17. EMC Motors, a dealer of motor vehicle, sales exclusively on installment basis. One of its customers, Mr. Ambo
purchased a motorcycle for P45,375. The cost to EMC was P25,410. After making an initial payment of
P6,050, Mr. Ambo defaulted on subsequent payments. EMC lost no time in repossessing the motor vehicle
which, by this time, was appraised at a value of P12,650. EMC had to incur additional cost of repairs/
remodeling of P1,650 before the motor vehicle was subsequently resold for P27,500 to Mr. Joey who made
an initial payment of P6,875.
How much profit was realized on the sale to Mr. Joey?
a. P3,025 c. P3,575
b. 3,300 d. 3,850

18. The Central Plains Subdivision sells residential subdivision lots on installment basis. The following
information was taken from the company's records as at December 31, 2011:

Installment Accounts Receivable:

January 1, 2011…………………………………………………………………………. P755,000
December 31, 2011…………………………………………………………………… 840,000
Unrealized Gross Profit, January 1, 2011…………………………………………………. 339,750
Installment Sales……………………………………………………………………………………. 950,000

How much is the balance of Unrealized Gross Profit as at December 31, 2011?
a. P378,000 c. P427,500
b. 339,750 d. 389,250

19. Vic Corporation, which began business on January 1, 2011, appropriately uses the installment sales method
of accounting. The following data are available:
12/31/2011 12/31/2012
Balance of deferred gross profit on sales account:
2011…………………………………………………….. P300,000 PI 20,000
2012…………………………………………………….. 440,000
Gross profit rate on sales………………………………….. 30% 40%

The installment accounts receivable balance at December 31, 2012 is

a. P1,000,000 c. P1,400,000
b. 1,000,000 d. 1,500,000

20. Cente, Inc. appropriately uses the installmentmethod of accounting to recognize income in its financial
statements. Some pertinent data relatingto this method of accounting include:
 2010 2011 2012
Installment sales………………………………….. P300,000 P375,000 P360,000
Cost of installment sales ……………………... 225,000 285,000 252,000

Gross profit………………………………………… P 75,000 P 90,000 P108,000

Rate of gross profit on installment
Sales……………………………………………………. 25% 24% 30%

2010 2011 2012

Balance of deferred gross profit at year end:
From 2010 sales P 52,500 P 15,000 P -
From 2011 sales 54,000 9,000
From 2012 sales 72,000
Total………………………………………………….
HP 52,500 P 69,000 P 81,000

What amount of installment accounts receivable should be presented in Cente’s December 31, 2012
balance sheet?
a. P270,000 c. P279,000
b. 277,000 d. 300,000

21. Mediocre Inc. has entered into a very profitable fixed price contract for constructing a high-rise building
over a period of three years. It incurs the following costs relating to the contract during the first year:
 Cost of material = P2.5 million
 Site labor cost = P2.0 million
 Agreed administrative costs as per contract to be reimbursed by the customer = P 1 million.
 Depreciation of the plant used for the construction = P0.5 million.
 Marketing costs for selling apartments, when they are ready = P1.0 million.

Total estimated cost of the project = P18 million.

The percentage of completion of this contract at the year-end is:

a. 33 I /3% (= 6.0/18.0) c. 25% (= 4.5/18.0)

b. 27% (= 4.5/16.5) d. 39% (= 7.0/18)

22. Dante Construction Company uses the percentage-of-completion method of accounting. During 2011, Dante
contracted to build an apartment house for Rizza for P10,000,000. Dante estimated that total costs would
amount to P8,000,000 over the period of construction. In connection with this contract, Dante incurred
P1,000,000 of construction costs during 2011. Dante billed and collected P1,500,000 from Rizza in 2011.
How much gross profit should Dante recognize in 2011?

a. P300,000 c. P187,500
b. 250,000 d. 125,000

23. DJ Builders, Inc. has consistently used the percentage-of-completion method of accounting for construction-
type contracts. During 2011, DJ started work on a P9,000,000 fixed-price construction contract that was
completed in 2012. DJ's accounting records disclosed the following:
12/31/2011 12/31/2012

Cumulative contract costs incurred………………………………. P3,900,000 P6,300,000

Estimated total costs at completion……………………………… 7,800,000 8,100,000

How much income would DJ have recognized on this contract for the year ended December 31, 2012?

a. P100,000 c. P600,000
b. 300,000 d. 700,000
24. DJ Builders Construction Corporation contracted to construct a building for P400,000. Construction began in
2011 and was completed in 2012. Data relating to the contract are summarized below:

Year endedDecember 31,

2011 2012

Costs incurred …………………………………………………………….. P200,000P 110,000

Estimated costs to complete………………………………………… 100,000 -

DJ Builders uses the percentage-of-completion method as the basis for income recognition.

For the years ended December 31, 2011 and 2012, respectively, DJ Builders should report recognized
revenue of:
2011 2012 2011 2012
a. P66,667 P 23,333 c. P -0- P 90,000
b. -0- 400,000 d.266,667 133,333

25. Bon Construction Company has consistently used the percentage-of-completion method of recognizing
income. During 2011, Bon started work on a P3,000,000 construction contract which was completed in
2012. The accounting records provided the following data:

2011 2012
Progress billings…………………………………………………………….. P1,100,000 P1,900,000
Costs incurred each year………………………………………………… 900,000 1,800,000
Collections…………………………………………………………………….. 700,000 2,300,000
Estimated cost to complete…………………………………………….. 1,800,000

How much income should Bon have recognized in 2012?

a. P100,000 c. P150,000
b. 110,000 d. 200,000

26. The following information relates to a flood control project of JJD Construction Co. which was started in
2011 and completed in 2012:

Costs incurred to-date: Estimated total cost on completion:

As at June 30, 2011………………. P 9,750,000 As at June 30, 2011…………….19,500.000
As at June 30, 2012………………. 15,750,000 As at June 30, 2012…………….20,250,000

The project is a P22,500,000 fixed-price construction contract, and JJD uses the percentage-of-completion
method of revenue accounting. On June 30, 2012, how much income would JJD report on the project?

a. P250,000 c. P750,000
b. 300,000 d. 900,000

27. During 2011, Mitch Corporation started a construction job with a total contract price of P600,000. Any costs
incurred are expected to be recoverable. The job was completed on December 15, 2012. Additional data are
as follows:
2011 2012

Actual costs incurred………………………………………………………. P225,000 P255,000

Estimated remaining costs………………………………………………. 225,000 -
Billed to customer…………………………………………………………… 240,000 360,000

Received from customer………………………………………………….. 225,000 375,000

Under the cost recovery method of construction accounting (zero-profit approach) what amount should
Mitch recognize as gross profit for 2011 and 2012?

2011 2012 2011 2012

a. P -0- P -0- c. P -0- P120,000
b. 75,000 120,000 d. 120,000 120,000

28. The following data relate to a construction job started by Jay Company during 2011:

Total contract price……………………………………………………………………… P100,000

 Actual costs during 2011……………………………………………………………… 20,000
Estimated remaining costs……………………………………………………………. 40,000
Billed to customer during 2011……………………………………………………. 30,000
Received from customer during 2011…………………………………………… 20,000

Any costs incurred are expected to be recoverable. Under the cost recovery method-construction accounting
(zero-profit approach), what amount should Jay Company recognize as gross profit for 2011:

a. P -0- c. P10,000
b. 4,000 d. 12,000

29. The Gamboa Construction Company started work on three job sites during the current year. Any costs
incurred are expected to be recoverable. Data relating to the three jobs are given below:

Contract Costs Estimated costs Billings Collections

Site price incurred to complete on contract on contract

Batangas…….. P500,000 P375,000 P500,000 P500,000
Laguna……….. 700,000 100,000 P400,000 100,000 100,000
San Fernando 250,000 100,000 100,000 150,000 100,000

What would be the amount of construction in progress to be reported on the year-end balance sheet if the
percentage-of-completion method and cost recovery method - construction accounting (zero-profit
approach) is used?
(Zero-profit approach)
Percentage-of- Cost Recovery Method
Completion Method of Construction Accounting

a. P765,000 P700,000
b. 765,000 765,000
c. 265,000 265,000
d. 265,000 200,000

30. Lovely Co. recognizes construction revenue and expenses using the percentage-of-completion method.
During 2011, a single long-term project was begun, which continued through 2012. Information on the
project follows:
2011 2012
Accounts receivable from construction contract………………. P 100,000 P300,000
Construction expenses……………………………………………………. 105,000 192,000
Construction in progress………………………………………………… 122,000 364,000
Partial billings on contract……………………………………………… 100,000 420,000

Profit recognized from the long-term construction contract in 2012 should be

a. P 50,000 c. P128,000
b. 108,000 d. 228,000

31. On January 2, 2011, RR Enterprises, Inc. authorized XX Company to operate as a franchisee over a twenty-
year period for an initial franchise fee of P60,000 received on signing the agreement. XX started operations
on June 30, 2011, by which date RR had performed all of the required initial services. In its income
statement for the six months ended June 30, 2011, what amount should RR report as revenue from franchise
fees in connection with XX franchise?
a. P 0 c. P30,000
b. 1,500 d. 60,000

32. On January 3, 2011, PP Services, Inc. signed an agreement authorizing CC Company to operate as a
franchisee over a 20-year period for an initial franchise fee of P50,000 received when the agreement was
signed. CC commenced operations on July 1, 2011, at which date all of the initial services required of PP had
been performed. The agreement also provides that CC must pay annually to PP a continuing franchise fee
equal to 5% of the revenue from the franchise. CC's franchise revenue for 2011 was P400,000. For the year
ended December 31, 2011, how much should PP record as revenue from franchise fees in respect of the CC's
franchise?
a. P70,000 c. P45,000
b. 50,000 d. 22,500

33. On December 31, 2011, RR, Inc. authorized Fay to operate as a franchisee for an initial franchise fee of
P75,000. Of this amount, P30,000 was received upon signing the agreement, and the balance, represented by
a note, is due in three annual payments of P 15,000 each, beginning December 31, 2012. The present value
 on December 31, 2011 of the three annual payments appropriately discounted is P36,000. According to the
agreement, the nonrefundable down payment represents a fair measure of the services already performed
by RR, however, substantial future services are required of RR. Collectibility of the note is reasonably
certain. On December 31, 2011. RR should record unearned franchise fees in respect of the Fay franchise of

a. P 0 c. P45,000
b. 36,000 d. 75,000

34. On December 31, 2011, RR, Inc. authorized GG to operate as a franchisee for an initial franchise fee of
P150,000. Of this amount, P60,000 was received upon signing the agreement and the balance, represented
by a note, is due in three annual payments of P30,000 each beginning December 31, 2012. The present value
on December 31, 2011, of the three annual payments appropriately discounted is P72,000. According to the
agreement, the nonrefundable down payment represents a fair measure of the services already performed
by RR, however, substantial future services are required of RR. Collectibility of the note is reasonably
certain. In RR's December 31, 2011, balance sheet, unearned franchise fees from GG's franchise should be
reported as
a. P90,000 c. P150,000
b. 132,000 d. 72,000

35. On December 31, 2011, PP Inc. signed an agreement authorizing ZZ Company to operate as a franchisee for
an initial franchise fee of P50,000. Of this amount, P20,000 was received upon signing of the agreement and
the balance is due in three annual payments of P10,000 each beginning December 31, 2012. The agreement
provides that the down payment (representing a fair measure of the services already performed by PP) is
not refundable and no substantial future services are required to be performed. ZZ Company's credit rating
is such that collection of the note is reasonably assured. The present value at December 31, 2011 of the three
annual payments discounted at 14% (the implicit rate for a loan of this type) is P23,220. On December 31,
2011, PP should record unearned franchise fees of
a. P 0 c. P43,220
b. 23,220 d. 30,000

36. Zoe Corp. sells a franchise for an initial fee of P700,000. A down payment of P200,000 is required, with the
balance covered by a P500,000, 10% note payable in five equal annual installments. If all the material
services have been performed and collectibility of the notes is reasonably assured, but the refund period has
not yet expired, what journal entry is needed to record the transaction?

a. Cash…………………………………………………………. 200,000
Notes Receivable………………………………………. 500,000
Franchise Fees……………………………… 700,000

b. Cash…………………………………………………………. 200,000
Notes Receivable……………………………………… 500,000
Unearned Franchise Fees……………… 700,000

c. Cash…………………………………………………………. 200,000
Notes Receivable………………………………………. 500,000
Franchise Fees……………………………… 200,000
Unearned Franchise Fees……………… 500,000

d. Cash…………………………………………………………. 200,000
Notes Receivable………………………………………. 500,000
Franchise Fees……………………………… 500,000
Unearned Franchise Fees……………… 200,000

37. On May 31, 2011, Kenny received P200,000 from Rogers representing the down payment on the franchise
agreement signed on that date. Rogers issued promissory notes for the balance of P1,000,000, payable in
four equal semi-annual installments. Franchise services are substantially completed by Kenny on semi-
annual installment due on November 20, 2011 at an aggregate cost of P900,000. The first semi-annual
installment due on November 30, 2011 was appropriately paid by Rogers. Accordingly, Kenny uses the
accrual method in recording franchise revenue. In its December 31, 2011 financial statements, how much
would Kenny report as deferred franchise revenue for the year?

a. P 0 c. P600,000
b. 300,000 d. 750,000

38. Jolibi, Inc. enters into an agreement with Ronald's Co., clothing the laterwith full authority to operate as its
franchise for a period of ten years. An initialfranchise fee of P275,000, among others, was stipulated in the
contract andwas promptly paid during the year 2011.
 Assuming that Jolibi was able to perform the initial services during 2011, what is the franchise revenue to be
recognized in its year-end income statement?

a. P 0 c. P137,500
b. 27,500 ` d. 275,000

39. Shake's, Inc., franchisor, enters into a franchising agreement with Sha, franchisee, on June 30, 2011. The
agreement calls for a total franchise fee of P1,000,000 of which P100,000 is payable upon signing of the
contract and the balance in four equal semi-annual installments. It is agreed that the down payment is
nonrefundable notwithstanding lack of substantial performance of services by the franchisor.
When Shake's, Inc. prepares its financial statements as of June 30, 2011, the unearned franchise fee to be
reported is:
a. P 0 c. P 900,000
b. 100,000 d. 1,000,000

40. On September 30, 2011, Criselda's, Inc. received from Ambo P550,000 representing franchise fee. Franchise
services were immediately started by Criselda's and these were completed on October 31, 2011 at cost
amounting to P330,000. The franchise fee revenue to be reported by Criselda's in its October 31, 2011
income statement is:
a. P 0 c. P220,000
b. 137,500 d. 550,000

41. Noynoy invested cash of P60,000; land of P200,000 with an appraised value of P410,000; store furniture
costing P40,000 less accumulated depreciation of P10,000; mortgage note payable P15,000 plus accrued
interest for a year at 18%. If the mortgage note is to be assumed by the partnership, Noynoy capital should be
credited for
a. 485,000 b. 545,000 c. 482,300 d. 515,000

42. A partner invested into a partnership a building with a P500,000 carrying value and P800,000 fair market
value. The related mortgage payable of P250,000 was assumed by the partnership. As a result of the
investment, the partner’s capital account will be credited for
a. 800,000 b. 500,000 c. 550,000 d. 250,000

43. On March 1, 2011, Lorezco, Narvasa and Soria formed a partnership by combining their separate business
proprietorships. Lorezco contributed cash ofP120,000. Narvasa contributed property with a P70,000
carrying amount, a P80,000 original cost and P160,000 fair value. There is a mortgage liability of P60,000
assumed by the partnership. Soria contributed equipment with a P60,000 carrying amount, a P150,000
original cost and P110,000 fair value. The partnership agreement specifies that profits and losses are to be
shared equally. Which partner has the largest March 1, 2011, capital balance?
a. Lorezco
b. Narvasa
c. Soria
d. All capital account balances are equal

44. Aris, Terry and Fely have the following profit and loss agreement. Partners Aris and Terry will receive
salaries of P80,000 each. Partner Fely will get a bonus of 10% of profit after salaries and bonus. Remaining
profits are shared by Aris, Terry and Fely in the ratio of 3:4:3 respectively. The partnership had a profit of
P182,000. How much should be allocated toFely?
a. 54,600 b. 8,000 c. 8,140 d. 18,200

45. Garcia invested P200,000 for a 1/3 interest in a partnership in which the other partners have capital
totaling P520,000 before admitting Garcia. After distribution of the bonus, what is Garcia’s capital?
a. 200,000 b. 240,000 c. 173,340 d. 106,660

46. RST Partnership is selling electronic equipment and supplies. Profits and losses are shared 5:3:2. The books
are kept on a calendar basis. After the business has been in operation for several years, Sonny died on
September 30. The wife of Sonny desired to sell Sonny’s interest to the partnership for P370,000. After the
books were closed, the partners’ capital accounts had credit balances as follows:
Roy P500,000
Sonny 300,000
 Troy 200,000

The capital balance of Roy after the cash settlement to Sonny’s wife is
a. P450,000 b. 465,000 c. 550,000 d. 535,000
47. On December 31, 2010, ABC Partnership was dissolved. The fair market values of its assets and liabilities are
as follows:
Current assets P1,600,000
Equipment 2,100,000
Liabilities 700,000
On January 2, 2011, ABC Partnership was incorporated, with 5,000 shares of P100 par value ordinary
shares issued. How much should be credited to share premium?
a. 3,200,000 b. 2,500,000 c. 2,300,000 d. 2,000,000

48. E,G,L and D share profits in the ratio of 2:1:1:1. The partnership cannot meet its obligations to creditors and
dissolution is authorized on March31,2011. A balance sheet for the partnership on this date shows balances
as follows:

Cash P90,000 Liabilities P265,000

Other assets 400,000 D, Loan 25,000
E, Capital 50,000
G, Capital 50,000
L, Capital 50,000
D, Capital 50,000

Total Assets P490,000 Total Liabilities and Capital P490,000

The personal status of partners on this date is determined to be as follows:
Partners Personal Assets Personal Liabilities
E P250,000 P150,000
G 100,000 150,000
L 150,000 125,000
D 200,000 250,000
Other assets of the partnership are sold and realized for P120,000. Additional contribution by
appropriate parties in meeting the claims of firm creditors were made. The amount that will be paid to
the personal creditors of D would be:
a. P250,000 b. 217,500 c. 200,000 d. 235,000

49. King, Queen and Prince are partners sharing profit and loss in the ratio of 1:1:2, respectively. Their capital
balances are P500,000 for King, P300,000 for Queen and P200,000 for Prince. Liabilities amounted
toP200,000. There is also a loan payable to Prince, P50,000. The cash balance amounted to P300,000 and it
increased to P1,400,000 as a result of the sale of the non-cash assets. How much is the available cash for
distribution to the partners?
a. 1,400,000 b. 1,200,000 c. 1,150,000 d. 250,000

50. Annie, Emy and Mary are in the process of liquidating their partnership and their account balances as
of March 1, 2011 are as follows:

Debit Credit

Cash 15,000
Non-cashassets 35,000
Emy,Loan 7,000
Annie,capital 5,000
Emy,capital 17,500
Mary,capital 20,500
The profit and loss sharing ratio has been 4:3:3 between Annie, Emy and Mary, respectively. If Annie has
personal assets of P25,000 and personal liabilities of P22,500 and that the partnership realized P12,500 from
the sale of its non-cash assets, Mary must receive
a. 20,500 b. 12,500 c. 13,000 d. Not given