CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

ADVANCE FINANCIAL ACCOUNTING AND REPORTING

FINAL PREBOARD EXAMINATIONS

Numbers 1 and 2

AB Corp. has two users, Department A and Department B. The following data apply for both
departments for the year:
Budgeted Overhead costs:
Fixed costs 3,700,000
Variable cost per direct labor hour 37.5
Budgeted direct labor hours:
Department A 80,000
Department B 120,000
Actual usage of direct labor hours:
Department A 60,000
Department B 80,000
AB Corp. applies overhead based on direct labor hours or uses a single overhead rate based on direct
labor hours.

1. What is the amount of overhead applied to Department A?

a. 3,360,000
b. 5,950,000
c. 5,025,000
d. 3,730,000

2. What is the amount of overhead applied to Department B?

a. 5,220,000
b. 4,480,000
c. 5,466,667
d. 6,700,000

Numbers 3 and 4
AB Corp. processes two products from a single raw material, Product A and Product B. The cost of
processing the two products up to the split-off point was P102,000. AB Corp. uses the NRV method of
allocating the joint cost. The following data were ascertained for the year:
Produced (gallons) Sales price Sales (gallons) Separable cost
Product A 12,000 P 7.00 8,500 P30,000
Product B 10,500 P18.00 9,000 P71,600

3. What is the joint cost allocated to Product A? (Round allocation ratio to the nearest percentage
ex. .71545 = 72%)
a. 25,500
b. 54,060
c. 32,640
d. 28,560

4. What is the joint cost allocated to Product B? (Round allocation ratio to the nearest percentage
ex. .71545 = 72%)
a. 69,360
b. 76,500
c. 47,940
d. 73,440
 Page 2

Number 5
AB Corp. processes two products from a single raw material, Product A and Product B. The cost of
processing the two products up to the split-off point was P376,960.
The following data were extracted at the split-off point:
Produced (gallons) Sales price at split-off
Product A 42,500 P6.50
Product B 59,500 P5.50
The following data were extracted after further processing:
Produced (gallons) Final sales price Separable cost per gallon
Product A 42,000 P40.00 P8.00
Product B 58,200 P24.00 P8.00

What is the approximated/estimated net realizable value of Product B at the split-off point?
a. 1,360,000
b. 931,200
c. 1,344,000
d. 952,000

Numbers 6, 7 and 8
AB Corp. is experiencing financial difficulty and about to liquidate. The following data were available:
Book value of assets:
Cash 150,000
Inventories 200,000
Land 800,000
Stockholders’ equity:
Ordinary shares 500,000
Retained earnings (deficit) (325,000)
Book value of the liabilities of AB Corp. consists of accounts payable, salaries payable, loan payable,
and mortgage payable. The loan payable in the amount of P300,000 is secured by the inventories. The
mortgage payable in the amount of P450,000 is secured by the land with an estimated market value of
P400,000. Total liabilities with priority was P200,000 (including P50,000 estimated liquidation expenses
and salaries to employees). The holder of the mortgage payable received P440,000 at the end of
liquidation.

6. What is the estimated deficiency?

a. 15,000
b. 25,000
c. 10,000
d. 5,000

7. What is the amount received by the holder of the accounts payable?

a. 60,000
b. 75,000
c. 50,000
d. 65,000

8. What is the estimated market value of the inventories?

a. 350,000
b. 200,000
c. 450,000
d. 150,000
 Page 3

Numbers 9, 10, 11, 12 and 13

Bacolod Manufacturing Corp. has the following cost of production data for the year:
Work-in-process beginning:
Job 03 Job 04
Direct materials 2,400 1,500
Direct labor 3,600 2,880
Applied overhead ? ?
Finished goods beginning:
Job 01 Job 02
Direct materials 18,000 1,500
Direct labor 24,000 2,880
Applied overhead ? ?
Total manufacturing cost added during the year:
Job 03 Job 04 Job 05 Job 06
Direct materials 10,920 13,200 36,000 4,800
Direct labor 14,400 16,800 42,000 7,200
Applied overhead ? ? ? ?
At the end of the year, Job 03, Job 04, Job 05, were completed. The predetermined overhead rate was
65% of direct labor cost. Actual overhead at the end of the year was P33,000.

9. What is the cost of goods manufactured at the end of the year?

a. 195,492
b. 180,900
c. 143,700
d. 180,912

10. What is the cost of goods manufactured for Job 03?

a. 105,300
b. 43,020
c. 47,172
d. 103,300

11. What is the cost of goods manufactured for Job 04?

a. 47,172
b. 40,920
c. 42,300
d. 43,020

12. What is the cost of goods manufactured for Job 05?

a. 8,340
b. 57,600
c. 34,680
d. 105,300

13. Assuming Job 06 was also completed, what is the cost of goods manufactured of Job 06?
a. 6,252
b. 20,580
c. 40,920
d. 16,680

14. What is the proper period for recording direct labor rate variance?
a. At the time of payment of salaries to factory workers
b. At the time of hiring of factory workers
c. At the time of rendition of services by factory workers
d. At the time of termination of employment of factory workers
 Page 4
Number 15

On October 1, 2020, the Muntinlupa Main Office established a sales agency in Marikina.

 The main office sent samples of its merchandise amounting to P8,400 and a working fund
amounting to P72,000 to be maintained on the imprest basis.
 The samples sent were intended to last until June 1, 2021. During the first two months of
operations, the agency transmitted to the home office sale of goods amounting to P364,500, but the
home office were not able to fill-up 25% of the said transmitted sales orders.
 Collections from customers amounted to P73,941, net of 2% sales discount.
 Payments made by the agency during October and November were as follows: annual rent of
P57,600, transportation expense worth P5,600 and utilities amounting to P7,200.

 It also purchased an equipment worth P9,000 which will be depreciated at 20% per annum.
 The gross profit rate on sales agency order is 20% of gross sales.
What is the net income of the agency for the two months ended November 30, 2020?
a. 17,431
b. 28,366
c. 29,875
d. 26,866

Numbers 16, 17 and 18

The trial balance before adjustment for the Caloocan home office and Malabon branch show the
following items on December 31. Differences in the shipments account balances result from the home
office policy of billing the branch at a 20% mark-up based on cost.
Home Office books Branch books
Allowance for overvaluation of Branch merchandise P756,000
Shipments to branch ?
Purchases P 525,000
Shipments from Home Office 2,016,000
Merchandise Inventory, January 1 3,150,000
Sales 6,300,000
Expenses 378,000
The ending inventory of the branch amount to P2,100,000 composed of merchandise from the home
office amounting to P1,764,000. The remaining amount from outsiders.

16. By what amount did the Allowance for Overvaluation before adjustment increased during the
year?
a. 336,000
b. 756,000
c. 462,000
d. 420,000

17. In the books of the home office, what is the amount of adjustment to Income Summary –
Branch account at the end of the year?
a. 2,331,000
b. 510,996
c. 294,000
d. 462,000

18. Before closing, the Home Office Current account in the separate books of the branch is
understated by what amount?
a. 2,793,000
b. 462,000
c. 336,000
d. 2,331,000
 Page 5

Numbers 19 and 20
Taguig Company has a branch in Makati and Pasig. The reciprocal accounts between the home office
and the branches were in agreement at the beginning of 2020. However at December 31, 2020, the
following reciprocal balances are found in the home office books: Investment in Makati, P186,500:
Investment in Pasig, P84,000.
Data for reconciliation of the reciprocal accounts are as follows:
a. On December 29, 2020, the home office has instructed Makati to transfer P74,000 cash to Pasig.
Makati recorded this transaction immediately. Upon receipt, Pasig has recorded this transfer at
P47,000. Taguig Company however has not yet recorded this interbranch transaction as of end of
the year.
b. Taguig has transferred goods costing P28,900 to Makati branch and paid P2,500 of shipping cost
on December 16, 2020. Makati shipped all of these goods to Pasig upon instruction of the home
office on December 30, 2020. Shipping cost is P3,600 freight collect. Had the goods were shipped
directly to the Pasig, P5,000 of freight cost should have been incurred. The interbranch shipment
was not recorded by the branches and the home office as well.
c. Makati has collected cash of P5,750 from Pasig’s customer. This transaction is not yet recorded
by Pasig and Taguig Company.
d. Taguig Company has already allocated P11,000 and P9,000 of administrative expenses to Makati
and Pasig respectively. The branches are not yet notified.
e. Makati remitted P14,300 cash to Taguig Company on December 12, 2020. The home office has
failed to record the said remittance.
f. Pasig returned goods costing P6,850 to Taguig Company. The goods were shipped on December
19 and received on December 24 but no entries have been made in the home office books.
Compute for the following:

19. What is the unadjusted balance of Home Office Current account in the books of Makati
branch?
a. 52,150
b. 87,200
c. 107,250
d. 92,950

20. What is the unadjusted balance of Home Office Current account in the books of Pasig branch?
a. 236,250
b. 122,000
c. 115,150
d. 84,850

21. How shall expenses of a nonprofit organization be presented in its statement of activities?
a. Addition to temporarily restricted net assets
b. Addition to permanently restricted net assets
c. Deduction from permanently restricted net assets
d. Deduction from unrestricted net assets

22. What is the cash account to be used by national government agencies for cash payments?
a. Cash modified disbursements system (MDS) regular
b. Cash treasury agency (TA) deposit regular
c. Cash in bank – Land Bank of the Philippines
d. Cash on hand

Page 6
Numbers 23, 24, 25 and 26
On January 1, 2018, MDC Inc. entered into a long-term construction contract for the construction of a
building at a contract price of P175M. Because of changes in the design of the project, the price increased
by P35M on January 1, 2020. The project was completed on December 31, 2021. The following
additional data are provided:
 Dependable estimates are available.
 Mobilization fee equivalent to 3% of original contract price must be made by the client
deductible on the first billing. Billings on the project were made 12%, 20%, 30% of the contract
price, respectively, for the first three years of the project.
 MDC made cash collection from the customer amounting to P17.5M and P52.5M on year 2019
and 2020.
 The cost incurred on year 2018 was P17.5M while the estimated cost to complete at the end of
2018 was P70M.
 The cumulative cost incurred in 2019 was P122.5M with a 50% degree of work completed as
of the end of 2019.
 The cost incurred on year 2020 was 35M with percentage of completion of 90% as of the end
of 2020.

23. What is the excess of construction in progress over progress billings (excess of
progress billings over construction in progress) on December 31, 2018?
a. 8.75M
b. 19.25M
c. 14M
d. 10.5M

24. What is the realized gross profit (loss) for the year ended December 31, 2019?
a. (87.5M)
b. (52.5M)
c. (70M)
d. (17.5M)

25. What is the amount of construction cost presented in the Statement of Comprehensive Income
in 2019?
a. 122.5M
b. 105M
c. 140M
d. 245M

26. What is the amount of account receivable to be reported by MDC on December 31, 2020?
a. 33.25M
b. 49M
c. 43.75M
d. 31.5M

27. Under PFRS 10, which financial statements must be presented by a parent corporation?
a. Separate financial statements
b. Combined financial statements
c. Consolidated financial statements
d. Condensed financial statements

28. Under PFRS 10, which of the following is not an essential element of control?
a. Power
b. Ability
c. Exposure or Right
d. Ownership of majority of voting stocks

Page 7
Numbers 29 and 30
On August 1, 2020, Tea-Account Inc. granted a franchise right to a franchisee for the operation of tea
shop using Tea-Account’s trade name for a period of 10 years starting August 1, 2020. The franchisee
is required to pay non-refundable initial franchise fee of P1,960,000 and continuing franchise fee of 4%
of franchisee’s annual sales. As part of its initial service, it is the obligation of the franchiser to train nine
staff and crew of the tea shop. In addition to that, Tea-Account has the obligation to deliver 1,200 units
of raw materials to the franchisee. The stand alone selling price of the right to use Tea-Account’s trade
name is P1,800,000. The stand alone selling price of the training of nine staff and crew is P225,000 while
the stand alone selling price of the 1,200 units of raw materials is P90,000.
On December 2, 2020, the franchisee started to operate. 800 units of raw materials were already delivered
and seven staff and crew were already trained as of December 31, 2020. The franchisee reported sales
revenue amounting to P280,000 on its first month of operation.

29. Under IFRS 15, what is the amount of Sales Revenue to be credited by Tea-Account Inc. on
December 31, 2020?
a. 55,603
b. 162,175
c. 83,404
d. 69,504

30. Under IFRS 15, what is the amount of Service Revenue to be credited by Tea-Account Inc. on
December 31, 2020?
a. 162,175
b. 217,778
c. 228,978
d. 287,282

31 Which of the following costs incurred by the acquirer in relation to business combination shall be
expensed as incurred?
a. Bond issue costs of financial liability at amortized cost
b. Direct costs of business combination
c. Stock issuance costs
d. Contingent consideration

Number 32
QRS Manufacturing Company ships merchandise costing P360,000 on consignment to XYZ Stores
under a perpetual inventory system with P37,500 of freight prepaid. XYZ pays P22,500 for local
advertising costs that are reimbursable from QRS. By the end of the period, XYZ has sold 2/5 of the
consigned merchandise for P210,000 cash. XYZ notifies QRS of the sales, retains 15% commission,
and remits the cash due to QRS.
Which of the following statements regarding the transactions above is TRUE?
a. XYZ will debit an expense account upon remittance to QRS.
b. QRS will debit a liability account upon receipt of the remittance from XYZ.
c. XYZ will prepare a memo entry for the P37,500 freight.
d. QRS will credit an asset account in the amount of P159,000 upon receiving the sales report.

33. Under PFRS 15, when shall an entity recognize its revenue from contract with customers?
a. When an entity enters into a contract with its customers
b. When an entity receives the consideration from its customers
c. When an entity satisfies its performance obligation to its customers
d. When an entity transfers the risk and rewards of ownership of the goods or services to its
customers

Page 8
34. When will the equivalent unit of production of direct materials under FIFO Process Costing be
always equal to Average Process Costing?
a. When all direct materials are added at the start of production process
b. When all direct materials are added at the end of production process
c. When all direct materials are added at the middle of production process
d. When direct materials are added uniformly throughout the production process

Number 35
An acquirer incurred the following costs in relation to the acquisition of a business:
 Stock issuance costs 100,000
 Direct costs of business combination 200,000
 Bond issue costs 300,000
How much of the abovementioned costs shall be capitalized as goodwill arising from business
combination?
a. 200,000
b. 300,000
c. 400,000
d. 0

Numbers 36 and 37
On January 1, 2021, Entity A and Entity B established a joint venture by investing P5,000,000 each for
equal capital interest in the arrangement. The joint venture reported the following data for the years
ended 2021, 2022 and 2023:
Year Net Income / (net Loss) Dividends Declared
2021 1,000,000 200,000
2022 (12,000,000) -
2023 6,000,000 3,000,000
36. What is the investment loss to be reported by Entity A in relation to the joint venture for the
year ended December 31, 2022?
a. (5,000,000)
b. (6,000,000)
c. (5,400,000)
d. (5,500,000)

37. What is the investment income to be reported by Entity B in relation to the joint venture for
the year ended December 31, 2023?
a. 3,000,000
b. 2,400,000
c. 1,500,000
d. 900,000

38. Which of the following claims shall be preferred in the liquidation of general partnership?
a. Just and equitable share of industrial partner in partnership profit
b. Proportionate share of capitalist partners in partnership profit
c. Advances to partnership by managing partner
d. Capital contribution of controlling partner

39. Which of the following claims during corporate liquidation shall be settled last?
a. Book value per share of ordinary shareholders
b. Liquidation value per share of preferred stockholders
c. Redemption value of redeemable preferred shareholders
d. Claims of unsecured creditors without priority

Page 9
Number 40
On January 1, 2021, Entity P acquired 80% of the common stocks of Entity S at a price of P2,400,000.
On the said date, the fair value of net assets of Entity S is estimated to be P3,200,000. The fair value of
the non-controlling interest is approximated at P650,000. It is the company policy to measure the non-
controlling interest at the minimum.
What is the gain on bargain purchase to be recognized by Entity P on January 1, 2021?
a. 160,000
b. 200,000
c. 150,000
d. 210,000

Numbers 41 and 42

The following assets are translated at the end of reporting period:

Assets Historical Rate Closing Rate

Cash 10,000,000 15,000,000
Inventory 20,000,000 25,000,000
Land 30,000,000 40,000,000

41. If the entity is translating from foreign currency to functional currency, what is the amount of
total assets to be presented by the entity at the end of reporting period?
a. 60,000,000
b. 80,000,000
c. 65,000,000
d. 75,000,000

42. Assuming the entity is translating from functional currency to its presentation currency, what
is the amount of total assets to be presented by the entity at the end of reporting period?
a. 60,000,000
b. 80,000,000
c. 65,000,000
d. 75,000,000

Numbers 43 and 44

On January 1, 2021, Entity P acquired 70% of the common stocks of Entity S at a price of P7,000,000
when the fair value of net assets of Entity S is approximated at P9,500,000. All the assets of entity S are
properly valued except for a building which is undervalued by P300,000 with a remaining useful life of
6 years. For the year ended December 31, 2021, Entity S reported net income of P250,000 and declared
P100,000 dividends to its common stockholders.

43. Under Equity Method, what is the book value of Investment in Entity S to be reported by Entity
P on its December 31, 2021 Statement of Financial Position?
a. 7,105,000
b. 7,000,000
c. 7,175,000
d. 7,070,000

44. If Entity P uses Cost Method, what is the income to be reported by Entity P in relation to its
investment in Entity S in its separate income statement for the year ended December 31, 2021?
a. 70,000
b. 140,000
c. 175,000
d. 75,000

Page 10

45. Which of the following costs shall be classified as conversion costs?

 a. Direct labor costs and direct material costs
b. Direct labor costs and factory overhead costs
c. Direct material costs and factory overhead costs
d. Direct material costs, direct labor costs and factory overhead costs

Numbers 46 and 47
On July 1, 2021, Entity P acquired 60% of common stocks of Entity S. On the said date, all assets of
Entity S are properly valued except for an equipment with book value of P100,000 and fair value of
P150,000. On July 1, 2021, the equipment has remaining useful life of 5 years. On October 1, 2021,
Entity S sold the said undervalued equipment to Entity P at a price of P120,000. On December 31, 2021,
Entity P sold the said equipment to a third party at a price of P100,000.

46. What is the consolidated depreciation expense on the said equipment that will be reported by
Entity P for the year ended December 31, 2021?
a. 30,000
b. 15,000
c. 10,000
d. 13,500

47. What is the consolidated gain (loss) on sale of equipment to be reported by Entity for the year
ended December 31, 2021?
a. (35,000)
b. 10,000
c. (8,000)
d. 15,000

48. What is the proper classification of infrastructure asset if the concession operator has right or license
to charge users of the infrastructure asset over a specific period but it does not have guaranteed right
to receive cash from the grantor?
a. Property, plant and equipment
b. Investment property
c. Intangible asset
d. Financial asset

49. What is the accounting method to be used by an acquirer to treat each business combination?
a. Equity Method
b. Acquisition Method
c. Cost Method
d. Fair Value Method

Number 50
The following dividends were received by a parent entity from its investment in shares of stocks:
Cash dividend from Trading Securities 100,000
Property dividend from Associate at fair value 200,000
Property dividend from Joint Venture at fair value 300,000
Cash dividend from Subsidiary 400,000
What is the consolidated dividend income to be reported by parent entity in its consolidated
income statement?
a. 500,000
b. 400,000
c. 300,000
d. 100,000

Page 11

51. Which of the following transactions will increase the capital balance of a partner?
 a. Share in other comprehensive loss of the partnership
b. Share in profit of the partnership
c. Drawing made during the period
d. Share in impairment loss arising from admission of a new partner

Numbers 52 and 53

On December 1, 2021, an entity acquired inventory on account at a cost of $1,000 payable on February
28, 2022. The functional currency of the entity is Philippine Peso. The following direct exchange rates
were given:

December 1, 2021 December 31, 2021 February 28, 2022

Buying Spot P50 P52 P47
Selling Spot P50 P59 P53

52. What is the foreign currency gain or (loss) to be reported by the entity for the year ended
December 31, 2022?
a. (5,000) loss
b. 6,000 gain
c. (4,000) loss
d. 2,000 gain

53. What is the book value of accounts payable to be reported by the entity on December 31, 2021?
a. 59,000
b. 55,000
c. 50,000
d. 52,000

54. When translating an entity’s financial statements from its functional currency to its presentation
currency, what is the exchange rate to be used to translate income or expense accounts?
a. Closing rate
b. Average rate
c. Transaction rate
d. Rate at the end of reporting period

55. In which method of accounting of investment in subsidiary in the separate financial statements of
parent corporation will the dividend income from subsidiary not appear?
a. Equity method
b. Cost method
c. FAFVPL
d. FAFVOCI

Number 56

Partner A and B have profits and loss agreement with the following provisions: Salaries of P30,000 and
P45,000 for A and B, respectively; a bonus to A of 10% of net income after salaries and bonus; and
interest of 10% on average capital balances of P20,000 and P35,000 for A and B, respectively. One-third
of any remaining profits are allocated to A and the balance to B.
If the partnership had net income of P102,500, how much should be allocated to partner A?
a. 41,000
b. 44,250
c. 41,167
d. 47,500

Page 12

57. Which of the following transactions will result to debit to investment in branch account?
a. Reporting net loss of the branch
 b. Collection by the branch of home office’s receivable
c. Return by the branch to the home office of shipped inventory
d. Payment by the home office of its own liability

58. In which of the following contract shall the resulting revenue be recognized over a period of time?
a. Long-term construction contract
b. Consignment sale contract
c. Sale or return arrangement
d. Installment sale contract

Number 59
The UST Hospital had the following cash receipts and disbursements for the year ended December 31,
2020:
Collections of Receivables 500,000
Contribution restricted by the donor to the acquisition of medical supplies 70,000
Contribution for an establish of quasi endowment (Board-Designated) 100,000
Contribution restricted by donor to the acquisition of furniture and fixtures 90,000
Tuition from nursing school 200,000
Interest received from investment in regular endowments 35,000
Contribution for an establishment of term endowment 90,000
Payment of supporting expenses 150,000
Payment for the acquisition of furniture and fixtures related to the restricted
donation above. 60,000
Payment of program expenses 215,000
The interest received from regular endowment is restricted by the donor for acquisition of medical
equipment.
How much is the net cash provided by operating activities?
a. 335,000
b. 375,000
c. 410,000
d. 435,000

60. Which of the following statements is true?

a. Contributed services and facilities are recognized both as asset and contributions revenue, net of
expense.
b. Financial statements of not for profit organization, focuses on distinctions between current and
non-current fund.
c. Unconditional pledges are recognized as receivables and contributions revenue when collected.
d. The required financial statements for nonprofit organizations include: statement of
financial position, statement of cash flows, statement of activities and specifically for
Voluntary Health and Welfare Organizations – Statement of Functional Expenses.

61. Where shall foreign currency gain or loss arising from translating foreign currency denominated
elements of financial statements to entity’s functional currency be presented?
a. Income from Continuing Operation of Profit or Loss Section of Statement of
Comprehensive Income
b. Income from Continuing Operation of Profit or Loss Section of Statement of Comprehensive
Income
c. Other Comprehensive Income with Reclassification Adjustment Section of Statement of
Comprehensive Income
d. Other Comprehensive Income without Reclassification Adjustment Section of Statement of
Comprehensive Income

Page 13

Number 62
E, R and G operate a local accounting firm as partnership. After working together for several years, they
have decided to liquidate the partnership. The partners have presented the following balance sheet;

Cash P 200,000 Liabilities P400,000

Receivable from E 80,000 Loan Payable to R 100,000
Non-cash assets 1,620,000 E, Capital (10%) 900,000
R, Capital (50%) 300,000
G, Capital (40%) 200,000

The non-cash assets are sold for P800,000 with P210,000 of this amount being used to pay liquidation
expenses. All partners are personally insolvent.
How much of the cash must E received?
a. 261,667
b. 128,333
c. 390,000
d. 305,000

Number 63

FAR, MAS and TAX share profits and losses from their partnership in the ratio of 35%, 45% and 20%
respectively. Capital and loan balances related to each partner are as follows:

Loan to Partner from Partnership Loan to Partnership from partner Capital

FAR 100,000 500,000
MAS 70,000 280,000
TAX 200,000 250,000

In addition to loan to partner, assets of the partnership includes cash of P110,000, inventory of P360,000,
receivable of P260,000 and plant and equipment of P710,000. Partnership liabilities to non-partners
amount to P180,000.
If FAR receives already P450,000, how much TAX receives at this point?
a. 321,155
b. 364,286
c. 450,000
d. 375,000

Number 64

On May 1, 2020, the capital accounts of S, T and C are P1,260,000; P787,500 and P472,500 ,
respectively.
At this time, I is admitted to the firm, he purchased a 1/6 interest in the firm for P288,750. The old
partners equalized their capital investments. Afterwards, all the partners agree to divide profits and losses
equally. The new partnership closes its books June 30, 2020 reporting profit of P44,100 for two months.
Each partner made the following withdrawals: S and C P2,625 per month while T and I, P3,500 per
month. On June 30, 2020, I invest enough cash to increase his capital to a 1/3 interest in the partnership.
How much cash is to be invested by I?
a. 211,165.50
b. 70,000
c. 632,642.50
d. 633,762.50

Page 14
Number 65

Max decided to withdraw from his partnership with Fried and Chic. Before his withdrawal, Max’ capital
balance was P58,000, while Fried’s was P64,000 and Chic’s was P77,000. Also, the partnership’s total
assets amounted to P450,000, but the partners agreed that a fixed asset was under depreciated by
P15,000. Max, Fried and Chic share profits and losses in the ration of 2:4:4, respectively.
If Max was paid P53,200 upon his retirement, how much is the remaining partnership net assets
after Max’ withdrawal?
a. 182,800
b. 197,800
c. 130,800
d. 160,800

Number 66
Partners Irish, Ivan and Irvin share profits and losses in the ratio of 4:3:3. at the end of a very unprofitable
year, they decided to liquidate the firm. The balances of their accounts on this date are:
Cash 18,000
Other assets ?
Liabilities 90,000
Irish, cap 66,000
Ivan, cap 74,700
Irvin, cap 45,000
The liabilities included a loan of P30,000 from Irish. All the partners are personally solvent. The partners
plan to sell the assets on instalment.
If Ivan received P33,000 from the first distribution of cash, how much did Irish received at that
time?
a. 40,400
b. 24,750
c. 36,000
d. 33,000

Number 67
Solly and Dante are partners who share profits and losses in the ratio of 7:3, respectively. On February
1, 2020, their respective capital accounts were as follows: Solly P140,000 and Dante P120,000.
On that date they agree to admit Jam as partner with 1/3 interest in the capital and profit and losses, and
upon his investment of P100,000. The new partnership will begin with a total capital of P360,000.
Immediately after Jam’s admission, what are the capital balance of Solly, Dante and Jam?
a. 120,000; 120,000; 120,000
b. 126,000; 114,000; 120,000
c. 126,668; 113,322; 120,000
d. 140,000; 120,000; 100,000

68. What is the proper classification of Joint Arrangement when the parties exercising joint control
over arrangement has rights to the net assets of the said arrangement?
a. Joint operation
b. Jointly controlled asset
c. Joint venture
d. Jointly controlled operation

Page 15

Number 69
During 2020, Agency ABC transferred cash of P300,000 to Agency QRS for a land beautification
project. Subsequently, Agency ABC received a report from Agency QRS about the project. What is the
journal entry of Agency ABC to record the transfer of funds?
a. Debit Due from ABC P300,000 and Credit Cash, MDS, Regular P300,000.
b. Debit Cash-Treasury/Agency Deposit/Trust P300,000 and Credit Cash-Collecting Officers
P300,000.
c. Debit Cash Collecting Officers P300,000 and Credit Due to ABC P300,000
d. Debit Cash-Treasury/Agency Deposit/Trust P300,000 and Credit Cash-Collecting Officers
P300,000.

Number 70

An entity spent P5,600,000 (inclusive of VAT) in acquiring its new software package from outside party
at the beginning of the year. Such software shall be installed and used to speed up processing the entity’s
operations. The useful life of the software is determined to be 10 years and no residual value was assigned
to it.

What is the journal entry to record the purchase of a software package?

a. Computer Software 5,600,000

Cash-MDS, Regular 5,600,000

b. Computer Software 5,600,000

Cash Disbursing Officer 5,250,000
Due to BIR 350,000

c. Computer Software 5,600,000

Cash-Treasury/Agency Deposit 5,000,000
Due to BIR 600,000

d. Computer Software 5,600,000

Cash-MDS, regular 5,250,000
Due to BIR 350,000

-- E N D --