Professional Documents
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Review Questions
13. Differentiate restricted from free interests.
Answer: A restricted interest of a partner represents the part of a partner’s interest
which should remain available to absorb possible future losses. These are provided for
assumed non-sale of the remaining non-cash assets and for assumed insolvency of
deficient partners. When all these restricted interests are met and satisfied, the resulting
balances will be referred to as free interests which are the amounts to be paid to the
partners. This payment is applied to loan then to capital in accordance with the rules on
the order of preference in liquidation.
MC – Theories
11. In a liquidation, the liabilities of the partnership should be paid
a. before any sales of assets.
b. before the distribution of cash to partners.
c. before the distribution of gains and losses on the disposal of assets.
d. after a revaluation of assets.
According to the rules or procedures to be followed in liquidation, the first step is
the sale of assets and after its realization, the gains and losses on realization shall be
distributed. The distribution of cash to partners is made after the payment of liabilities.
MC – Problems
11. Total cash received by Tudtud is:
a. P2,000
b. P1,500
c. P5,000
d. P-0-
T,
Cash NCA Liabilities D, Loan D, Capital A, Capital
Capital
Cumulative preference share is paid to the shareholders based on the amount that may
have been missed in the past. Noncumulative and nonparticipating preferred stock is
not entitled to be paid if it may have been missed in the past.
Problem
11.
8 Cash 273,000.
00
Subscriptions Receivable-Ordinary 273,000.
00
received 65% of the subscriptions of May 08 on
14,000 shares (P420,000x0.65)
Jul-06 Cash
Subscriptions Receivable-Ordinary
received 15% of the subscriptions of May 08
on 14,000 shares (P420,000x0.15)
14 Cash 82,560.0
0
Subscriptions Receivable-Ordinary 82,560.0
0
received 60% of the subscriptions of Sept.
14 on 4,300 shares (P137,600x0.60)
Chapter 7 Retained Earnings
True or False
11. Cash dividends are declared by the board of directors with the concurrence of the
shareholders of the corporation.
MC-Theories
2. B
Insurance (90,000 x 60,000.00
8/12)
Loan 120,000.00
Interest (120,000 x 2,400.00
2%)
Rent 40,000.00
222,400.00
MC-Problems
6. C. P40,000
The amount to be paid to the preferred shareholders is 60,000 (30,000 x 10 x 5%).
Since the preferred shareholders are the first priority on the payment of dividends, the
60,000 pesos shall be paid first to them and the ordinary shareholders are entitled to
receive P40,000 (100,000 - 30,000).
Problems
18. Preference Shares, 1st year: P0.40 (1% x P40 x 25,000)b
Ordinary Shares, 1st year: P0.15 ((P17,00 – P10,000)/50,000)
Chapter 9 Analysis of Financial Statement
MC-Theories
9. Which of the following is not a quick asset?
a. Cash
b. Cash Equivalents
c. Accounts receivable
d. Inventory
Quick assets are those that can be converted into cash within a short period of time
including cash, cash equivalents, and receivables. Inventory is not included because it
is normally sold on credit and then the receivables must be collected before cash is
realized which makes inventory a two steps away from cash.