CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

ADVANCED FINANCIAL ACCOUNTING GERMAN/LIM/VALIX/K. DELA CRUZ/MARASIGAN

SELFTEST

1. The partnership of A and B were formed. A, invested P50,000 cash and an office equipment with an
agreed value of P30,000. B, on the other hand invested cash P70,000, merchandise with an agreed
value of P110,000, and furnitures and fixtures with an agreed value of P100,000, and subject to a
mortgage of P50,000 which the partnership will assume. The partners will share profits and losses
75:25. They further agreed that once they formed, both of them must have and equal capital interest
ratio.

1. How much is the total capital of the partnership after formation?

a. 310,000
b. 360,000
c. 300,000
d. 350,000

2. Assuming that A is to invest sufficient amount of cash to be in agreement with their capital
interest ratio, how much is the total capital of the partnership after formation?
a. 160,000
b. 560,000
c. 460,000
d. 920,000

2. C and D have just formed a partnership. C contributed cash of P126,000 and an equipment which have
a cost of P54,000. The equipment had been used and had been depreciated to P24,000. The fair value
of the equipment is P36,000. C also contributed a note payable of P12,000 which is assumed by the
partnership. C is to have 60% interest in the partnership. D, on the other hand invested P90,000 cash
only.

3. Assuming C is to invest or withdraw sufficient amount of cash to be in agreement with their

capital interest ratio, how much did C invest or withdraw?
a. 27,000 withdraw
b. 15,000 withdraw
c. 3,000 withdraw
d. 111,000 invest

4. Assuming D is to invest or withdraw sufficient amount of cash to be in agreement with their

capital interest ratio, how much is the total capital after formation?
a. 280,000
b. 230,000
c. 270,000
d. 250,000

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3. On January 1, 2022, A, B and C formed ABC Partnership with original capital contribution of
P300,000, P500,000 and P200,000. A is appointed as managing partner.

During 2022, A, B and C made additional investments of P500,000, P200,000 and P300,000,
respectively. At the end of 2022, A, B and C made drawings of P200,000, P100,000 and P400,000,
respectively. At the end of 2022, the capital balance of C is reported at P320,000. The profit or loss
agreement of the partners is as follows:

 10% interest on original capital contribution of the partners.

 Quarterly salary of P40,000 and P10,000 for A and B, respectively.
 Bonus to A equivalent to 20% of Net Income after deducting the interest and salary to all partners
 Remainder is to be distributed equally among the partners.

5. What is the partnership profit for the year ended December 31, 2022?
a. 900,000
b. 1,020,000
c. 1,050,000
d. 960,000

6. What is A’s share in partnership profit for 2022?

a. 190,000
b. 340,000
c. 540,000
d. 200,000

4. A, B, C are partners with average capital balances in 2022 of P240,000, P120,000, and P80,000
respectively. Partners receive 10% interest on their average capital balances. After deducting salaries
of P60,000 to A, and P40,000 to C, and after deducting the total interest, any residual profit or loss is
divided equally. At the end of 2020, the partnership sustained a P66,000 net loss.

7. What amount should, C’s capital account change?

a. 30,000 decrease
b. 48,000 increase
c. 22,000 decrease
d. 28,000 increase

5. Partner A has 30% share in the profits and losses. A’s capital account had a net decrease of P60,000
during 2022. During 2022, Partner A withdrew P130,000 and invested a property valued at P25,000.

8. What is the net income of the partnership for 2022?

a. 150,000
b. 233,333
c. 350,000
d. 550,000

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6. Presented below is the condensed statement of financial position of the partnership of A, B, and C
who share profits and loss ratio 6:3:1 respectively:
Cash 85,000 Liabilities 80,000
Other assets 415,000 A, Capital 252,000
B, Capital 126,000
C, Capital 42,000
Total 500,000 Total 500,000
The partnership agree to sell D 20% of their respective capital and profit and loss interest for a total
payment of P90,000. The partnership also agreed that there is an implied asset revaluation upward /
downward.
9. What is the capital balance of Partner B after admission of D?
a. 100,800
b. 135,000
c. 109,800
d. 108,000

7. C and D are partners with capital balances of P200,000 and P100,000, sharing profits and losses 3:1
respectively. In the statement of financial position of the partnership, presented is a loan from C in the
amount of P10,000 and a loan to D in the amount of P15,000. The agree to admit partner E and he is
to invest P125,000 for 25% interest in the capital and 20% interest in the profits. The partners also
agreed that upon admission of E, the total capital will be P425,000.

10. How much is the capital balance of E upon his admission?

a. 106,250
b. 85,000
c. 125,000
d. 191,250

11. How much is the capital balance of C and D respectively after admission of E?
a. 227,812.5 ; 90,937.5
b. 214,062.5 ; 104,687.5
c. 213,750 ; 86,250
d. 185,937.5 ; 95,312.5

8. The following are the statement of financial position of ABC partnership before Partner C retires:
Cash 148,000 Liabilities 90,000
Receivables, net 72,000 A, Capital (50%) 200,000
Inventories 60,000 B, Capital (30%) 96,000
Equipment 270,000 C, Capital (20%) 84,000
Income Summary 80,000
Total 550,000 Total 550,000

The partners also agreed to write-off the inventories and to adjust the equipment to its fair value in the
amount of P230,000. C is paid P110,000 for his total interest.

12. What are the capital balances of A, and B after retirement of C

a. 131,250 ; 54,750
b. 190,000 ; 90,000
c. 208,750 ; 101,250
d. 171,250 ; 78,750
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9. Louis, Vuitton, and Hermes, with capital balances of P133,600; P83,250; and P65,900 respectively,
decided to dissolve the partnership 6 months prior to year-end. Their profit and loss ratio is 45:25:30.
Net income for the 6 months period is P72,000. Prior to liquidation the Statement of Financial
Position shows cash at P126,700 and liabilities at P174,960. If Hermes received P98,750 after
payment of P139,710 to outside creditors,

13. How much was the proceeds from sale of non-cash assets?
a. 365,510
b. 330,260
c. 405,260
d. 440,510

14. How much is the total amount of cash distributed to the partners?
a. 567,210
b. 531,960
c. 427,500
d. 392,250

10. After a long dispute, C, L, and T decided to liquidate their partnership. Their total capital as of
January 1, 2020 are: C (25%) P937,500 ; L (40%) P1,125,000 ; T (35%) P700,000. Partnership’s
total assets on this date include P312,500 cash and a receivable from C amounting to P62,500 and
noncash assets of a certain amount. Total liabilities to outside creditors are P800,000 and the
partnership still owes T an amount of P50,000. At the end of the liquidation, L received P187,500.

15. How much is the total book value of the noncash assets?
a. 3,200,000
b. 3,250,000
c. 3,125,000
d. 3,237,500

11. The following data are provided by ABC Corp. which is undergoing liquidation process:

I. Total liabilities amounts to P692,000. 35% of which is fully secured by assets with recorded
amount of P270,000 and an estimated realizable amount of P250,000; 40% of the total liabilities
is partially secured by assets amounting to P300,000 with an estimated realizable amount of
P225,000; and the remaining balance is unsecured.
II. Total assets amounts to P890,000 and has an estimated realizable value of P695,000.
III. Unpaid income taxes amounts to P35,000. Additional salaries payable and administrative
expenses totaled P28,000.
IV. Deficit amounts to P79,000.

16. Which of the following statements is correct?

a. The assets available to all unsecured creditors with and without priority is P227,800
b. The estimated payment to partially secured creditors is P225,000
c. The estate deficit amount to P60,000
d. The estimated payment to all secured creditors is P695,000

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12. The following data were taken from the statement of realization and liquidation of LMN Corp. for the
quarter ended June 30, 2020

Supplementary credits 796,875

Assets to be realized 522,750
Liabilities to be liquidated 948,375
Supplementary charges 731,250
Liabilities liquidated 562,500
Assets realized 656,250
Liabilities assumed 281,250
Assets not realized 234,375

The ending capital balances of capital stock and retained earnings are P648,750 and P178,500,
respectively. A net loss of P226,500 for the period.

17. How much is the ending balance of cash?

a. 1,125,000
b. 1,260,000
c. 978,750
d. 807,000

13. A review of the assets and liabilities of QRS Corp. in bankruptcy on Nov. 30, 2020, discloses the
following:

I. A mortgage payable of P77,000, is secured by a building with an estimated value in the amount
of P14,000 more than its book value of P68,000
II. Notes payable of P39,000 is secured by furniture and equipment with book value of P46,000 that
is estimated to be 4/5 realizable.
III. Assets other than those mentioned above have an estimated realizable value of P25,000, an
amount that is P6,000 more than its book value
IV. Liabilities other than those mentioned above amount to P31,000, which excluded claims with
priority of P8,000

18. Which of the following statements is correct?

a. Actual recovery percentage is P66.27%
b. Total free assets is P22,000
c. Estimated deficiency to unsecured creditors is P11,200
d. Payment to partially secured creditors amount to 36,800

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14. On October 31, 2020, Michael Inc.’s trustee prepares a Statement of Affairs with the following
information:
 P77,000 cash will be received by the unsecured creditors whose claims total P 140,000.
 Raffy the messenger of the company has a claim of P2,625.
 Michael issued to Kerwin a 12%, 1yr note of P17,500 on January 1, 2020, nothing has been
pledged to this note.
 Jan holds a note of P26,250 on which interest of P787.50 is accrued, equipment with book value
of P24,500 has been pledged on this note. Estimated realizable amount of the equipment is
P28,875.
 Helen received a 10% note of P21,000 from Michael on Feb.1, 2020, pledged with equipment with
estimated realizable amount of P17,500.

19. Which of the following statements is false?

a. Helen will receive P20,291.25
b. Jan will receive P27,037.50
c. Raffy will receive P1,443.75
d. Kerwin will receive P10,587.50

15. On January 1, 2020, LGU Co. entered into liquidation. The partners’ capital balances on this date
were as follows: LBC (25%) P875,000 ; GNC (35%) P1,890,000 ; USB (40%) P1,295,000. The
partnership has liabilities amounting to P1,330,000, excluding a loan from GNC P210,000. Cash on
hand before the start of liquidation is P280,000. All partners are insolvent. If GNC received
P789,250,

20. How much was the loss from the realization of the noncash assets?
a. P3,480,750
b. P3,745,000
c. P1,839,250
d. P3,683,750

END

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Suggested Answers:

1. A 6. C 11. B 16. A
2. C 7. C 12. D 17. B
3. B 8. A 13. D 18. C
4. D 9. D 14. D 19. C
5. C 10. A 15. D 20. A