Question 1

As at January 1, 2017, BB and CC decided to form a partnership. Their balance sheets

on this date are as follows:

ASSETS CC DD

Cash 15,000 37,500

Accounts receivable 540,000 225,000

Inventories - 202,500

Machinery and equipment 150,000 270,000

Trademarks 25,000 -

Total Assets 730,000 735,000

LIABILITIES

Accounts payable 160,000 240,000

Mortgage payable - 75,000

Total Liabilities 160,000 315,000

EQUITY

CC, Capital 570,000 -

DD, Capital - 420,000

Total Equity 570,000 420,000

The partners agreed that the machinery and equipment of CC is under-depreciated by

15,000 and that of DD by 45,000. Mortgage payable is not to be assumed by the
partnership. Allowance for doubtful accounts is to be set up amounting to 120,000 for
CC and 45,000 for DD. The Partnership agreement provides for a profit or loss ratio and
capital interest of 60% to CC and 40% to DD.

How much cash must CC invest to bring the partners’ capital balances
proportionate to their profit and loss ratio?
 Question 2

On October 1, 2016, Rodel Corporation, a real estate developer, sold land to Gerry
Corporation for 5,000,000. Gerry paid cash of 600,000 and signed a ten-year 4,400,000
note bearing interest at 12%. The carrying amount of the land was 4,000,000 on the
date of sale. The note was payable in forty quarterly principal installments of 110,000
beginning January 2, 2017. Rodel Corporation accounts the sale under the cost
recovery method. On January 2, 2017, Gerry paid the first principal installment of
110,000 and interest of 132,000.

For the year ended December 31, 2017, what total amount of income should Rodel
recognize from the land sale and the financing?

Question 3

Carane Company which began operations on January 1, 2013 appropriately uses the
installment method of accounting. The following data pertain to Carane operations for
year 2013.

Installment Sales (before over/under-allowance) 3,150,000

Operating expenses 367,500
Regular Sales 1,312,500
Total Collections during the year (excluding interest of 84k) 2,088,000
Cost of Regular Sales 752,500
Cost of Installment Sales 2,205,000
Accounts Receivable 12/31/13 512,500
Installment Receivable written-off (no provision was made) 154,000
Estimated resale value of repossessed goods 290,000
Profit usual on the sale of repossessed goods 15%
Repossessed Accounts 350,000
Actual value of trade-in Merchandise 280,000
Trade-in Allowance 490,000
Reconditioning Cost of the repossessed goods 57,500

How much is the Deferred Gross Profit at December 31, 2013?

 Question 4

Paulyne an owner of Construction Company finds the following information regarding a

recently completed building project for which the total contract was 2,000,000.

2015 2016 2017

Gross Profit 40,000 140,000 (20,000)

Cost incurred each year 360,000 ? 820,000

Paulyne wants to know how effectively the company operated during the 3 years on this
project and, since the information is not complete, has asked for the answer to the
following questions:

What percentage of the project was completed by the end of 2016?

Question 5

Monik Company recognizes revenue and expense using the percentage of completion
method. During 2016 a single long-term project was begun, which continued through
2017. Information on the project follows:

2016 2017

Accounts receivable 100,000 300,000

Construction expenses 105,000 192,000

Construction in Progress 122,000 364,000

Partial billing on contract 100,000 420,000

What is the profit recognized from the long-term construction in 2017?

Question 6

The partners’ capital (income-sharing ratio in parenthesis) of NN, OO, PP, and QQ on
May 31, 2017, were as follows:

NN (20%) 60,000 PP (20%) 70,000

OO (20%) 80,000 QQ (40%) 40,000

Total 250,000

On May 31, 2017, with consent of all partners:

 PP retired from the partnership and was paid 50,000 cash in full settlement of his
interest in the partnership.
 RR was admitted to the partnership with a 20,000 cash investment for a 10%
interest in the nest assets of NN, OO and QQ.

The Capital account to be credited to RR is_______________________?

Question 7

The following data relates to a construction job started by Bonus Inc:

Total contract price 2,000,000

Actual cost incurred in 2011 400,000
Estimated remaining costs 800,000
Billings to customers in 2011 600,000
Collections from customers in 2011 200,000

How much gross profit is to be recognized by Novy Inc. using Zero Profit
Method?

Question 8

Alichi Construction Company has consistently used the percentage of completion

method of recognizing income. During 2016, Nava entered into a fixed-price contract to
construct an office building for 20,000,000. Information relating to the contract is as
follows:
 December 31 2016 2017
Percentage of Completion 20% 60%
Estimated total costs at completion 15,000,000 16,000,000
Income recognized (cumulative) 1,000,000 2,400,000

What is the contract costs incurred during 2017?

Question 9

On January 1, 2016, Art Company sold its idle plant facility to Tony, Inc. for 1,050,000.
On this date, the plant had a depreciated cost of 735,000. Tony paid 150,000 cash on
January 1, 2016 and signed a 900,000 note bearing interest at 10%. The note was
payable in three annual installments of 300,000 beginning January 1, 2017. Art
appropriately accounted for the sale under the installment method. Tony made a timely
payment of the first installment on January 1, 2017 of 390,000 which included interest of
90,000 to date of payment.

At December 31, 2017, Art has Deferred Gross Profit of ___________________.

Question 10

Paulyne an owner of Construction Company finds the following information regarding a

recently completed building project for which the total contract was 2,000,000.

2015 2016 2017

Gross Profit 40,000 140,000 (20,000)

Cost incurred each year 360,000 ? 820,000

Paulyne wants to know how effectively the company operated during the 3 years on this
project and, since the information is not complete, has asked for the answer to the
following questions:

How much cost was incurred in 2016?

Question 11

AA Company, which began business on January 1, 2016, appropriately uses the

installment method of accounting. The following data are available in 2016:

Installment accounts receivable, 12/31/2016 200,000

Deferred gross profit, 12/31/2016

(before recognition of realized gross profit) 140,000

Gross profit on Sales 40%

The cash collection and the realized gross profit on installment sales for the year
ended December 31, 2016 should be:

Question 12

The following selected accounts appeared in the trial balance of Union Sales as of
December 31, 2017:

Debit Credit
Installment receivable- 2016 sales 15,000
Installment receivable- 2017 sales 200,000
Inventory, December 31, 2016 70,000
Purchases 555,000
Repossessions 3,000
Installment Sales 425,000
Sales (regular) 385,000
Unrealized gross profit (2016) 54,000

Additional information:

Installment receivable – 2016 sales as of

120,000
December 31, 2016
Inventory of new and repossessed
95,000
merchandise as of December 31, 2017
Gross Profit percentage of regular sales
30% on sales
during the year
Repossession was made during the year. It was a 2016 sale and the corresponding
uncollected account at the time of repossession was 7,750.

Compute for the Total Realized Gross Profit on installment sale in

2017_______________.

Question 13

AA, BB and CC are partners in textile distribution business, sharing profits and losses
equally. On December 31, 2017, the partnership capital and drawings were as follows:

Capital Drawing
AA 100,000 60,000
BB 80,000 40,000
CC 300,000 20,000
Total 480,000 120,000

The partnership was unable to collect on trade receivable and was forced to liquidate.
Operating profit in 2012 amounted to 72,000 which were all exhausted, including the
partnership assets. Unsettled creditors’ claims at December 31, 2017 totaled 84,000.
BB and CC have substantial private resources, but AA has no personal assets.

The final cash distribution to CC was______________.

Question 14

On July 1, 2012, Great Corp. obtained a contract to construct a building. The building
was estimated to be built at a total cost of 5,250,000 and is scheduled for completion on
October 2014. The contract contains a penalty clause to the effect that the other party
as to deduct 17,500 from the contract price of each week of delay. Completion was
delayed for three weeks. Below are data pertaining to the construction period. In 2013,
there was an increase in the contract price in the amount of 200,000 per cost escalation
clause. Great corp. uses percentage of completion method.

2012 2013 2014

Cost incurred 525,000 1,932,000 325,500
Estimated cost to
2,100,000 273,000
complete
 Billings to customers 420,000 4,567,500 1,260,000

How much is the excess of construction in progress over billings or progress

billings over construction in progress in 2012? (current asset or current liability)

Question 15

Paulyne an owner of Construction Company finds the following information regarding a

recently completed building project for which the total contract was 2,000,000.

2015 2016 2017

Gross Profit 40,000 140,000 (20,000)

Cost incurred each year 360,000 ? 820,000

Paulyne wants to know how effectively the company operated during the 3 years on this
project and, since the information is not complete, has asked for the answer to the
following questions:

What was the estimated cost to complete the project at the end of 2016?

Question 16

The following selected accounts are taken from the trial balance on December 31, 2017
of Cebu Company:

Debit Credit
Accounts receivable – charge sales 75,000
Installments receivable -2015 15,000
Installments receivable -2016 45,000
Installments receivable -2017 270,000
Merchandise inventory 1/1/2017 52,500
Purchases 390,000
Freight-in 3,000
Repossessed merchandise 15,000
Repossession loss 24,000
Cash sales 90,000
Charge sales 180,000
Installment sales 446,400
Deferred gross profit – 2015 22,200
Deferred gross profit – 2016 39,360

Additional information:

 Gross profit rate on 2015 installment sales was 30% and for 2016, the rate was
32%.
 Installment sales prices exceed cash sales prices by 24% while charge sales
prices exceed cash sales prices by 20%.
 The entry for repossessed goods was:

Repossessed merchandise 15,000

Repossession loss 24,000

Installment receivable – 2015 18,000

Installment receivable – 2016 21,000

 Merchandise on hand at the end of 2017 (new and repossessed) amounted to

70,500.

Compute for the 2017 Cost of Goods sold on installment sales________________

Question 17

Thor following selected accounts was taken from the trial balance of Costner Company
as of December 31, 2013:

Accounts receivable 750,000

Installment Receivable - 2011 150,000
Installment Receivable - 2012 450,000
Installment Receivable - 2013 2,700,000
Merchandise inventory 525, 000
Purchases 3,900,000
Freight-in 30,000
Repossessed Merchandise 150,000
Repossessed Loss 240,000
Cash sales 900,000
Charge sales 1,800,000
Installment sales 4,460,000
Deferred gross profit – 2011 222,000
Deferred gross profit – 2012 393,600
Operating expenses 150,000
Shipment on Installment sales 2,787,500
Additional information:

 Gross profit rates for 2011 and 2012 installment sales were 30% and 32%,
respectively.
 The entry for repossessed goods was:

Repossessed merchandise 150,000

Repossessed loss 240,000
Installment receivable – 2011 180,000
Installment receivable – 2012 210,000
 Merchandise on hand at the end of 2013 (new and repossessed) was 282,000.

How much is the Total Realized Gross Profit in 2013?

Question 18

Dipolog Company sells appliances on an installment basis. Below are information for
the past three years:

2017 2016 2015

Installment Sales 750,000 600,000 400,000
Cost of Sales 450,000 375,000 260,000
Collections on:
2017 installment sales 275,000
2016 installment sales 180,000 240,000
2015 installment sales 125,000 120,000 150,000

Repossession on defaulted accounts included one made on a 2017 sale for which the
unpaid balance amounted to 5,000. The depreciated value on the appliance
repossessed was 2,500.

The realized gross profit in 2017 on collection of 2017 installment sales

was_______________.

Question 19
 Gianne Co. sold a computer on an installment basis on October 1, 2016. The unit cost
to the Company was 86,400 but the installment selling price was set at 122,400. Terms
of payment included the acceptance of a used computer with a trade-in allowance of
43,200. Cash of 7,200 was paid in addition to the traded-in computer with the balance to
be paid in ten monthly installments due at the end of each month commencing the
month of sale.

It would require 1,800 to recondition the used computer so that it could be resold for
36,000. A 15% gross profit was usual from the sale of used computer.

The Realized Gross Profit from the 2016 collections amounted to______________.

Question 20

Paulyne an owner of Construction Company finds the following information regarding a

recently completed building project for which the total contract was 2,000,000.

2015 2016 2017

Gross Profit 40,000 140,000 (20,000)

Cost incurred each year 360,000 ? 820,000

Paulyne wants to know how effectively the company operated during the 3 years on this
project and, since the information is not complete, has asked for the answer to the
following questions:

What was the Total Estimated Gross Profit on the project by the end of 2016?

Question 21
The Cuares Construction Company began construction work under a three year
contract. The contract price was 800,000. VV uses the percentage of completion
method for financial accounting purposes. The income to be recognized each year is
based on the proportion of the cost incurred to the total estimated costs for completing
the contract. The financial statement presentation relating to this contract at December
31, 2016 is presented below:

Statement of Financial Position

Accounts receivable-construction billings 15, 000

Construction in progress 50,000

Less: Contract billings 47,000

Excess of CIP over billings 3,000

Statement of Comprehensive Income

Income (before tax) on the contract recognized in 2016 10,000

What is the amount of cash collected in 2016 and the estimated gross profit on
this contract is?

Question 22

James Smith Appliance Co. sold an equipment costing 10,000 for 16,000 on September
30, 2016. The down payment was 1,600 and the same amount was to be paid at the
end of succeeding month. Interest was charged on the unpaid balance of the contract at
½ of 1% a month, payments being considered as applying first to accrued interest and
the balance to principal.

After paying a total of 6,400, the customer defaulted. The equipment was repossessed
in January 5, 2017. It was estimated that the equipment had a value of 5,600.

Compute for the gain or loss on repossession_________________.