Midterm Examination

Acctg. 207A
Instruction:
 Make a summary of answers and show your solutions; and
 send to my messenger account the picture of the summary of answers and
solutions.
Multiple choice
A, B and C are partners in an accounting firm. Their capital account balances at year-
end were: A, P90,000; B, P110,000; C, P50,000. They share profits and losses in a
4:4:2 ratio, after the following special terms:
a.Partner C is to receive a bonus of 10% of the net income after the bonus.
b.Interest of 10% shall be paid on that portion of a partner’s capital in excess of
P100,000.
c. Salaries of P10,000 and P12,000 shall be paid to partners A and C,
respectively.
1) Assuming a net income of P44,000 for the year, the total profit share of partner C
would be:
a. P7,800
b. P16,800
c. P19,400
d. P19,800
A and B agreed to form a partnership. The contributions of the partners are as follows:
  A B
Cash 600,000
Inventory 20,000
Land 400,000
Equipment 50,000
Additional information:
 Half of the inventory is unpaid. The partnership agreed to assume the related
accounts payable.
 The land has a fair value of P700,000 and is subject to a mortgage of P100,000.
However, B agreed to settle the mortgage personally.
2) How much are the adjusted capital contributions of A and B, respectively?
a. 670,000; 690,000
b. 670,000; 700,000
c. 660,000; 700,000
d. 670,000; 600,000
A and B formed a partnership. The partnership agreement stipulates the following:
 Annual salary allowances ofP10,000 for A andP40,000 for B.
 Bonus to A of 10% of the profit after partner’s salaries but before bonus and
interest.
 Interest of 12% on the beginning capital balance of A.
 The partners share profits and losses on a 60:40 ratio.
During the period the partnership earned profit ofP200,000 before deduction for
salaries. B’s beginning capital balance wasP60,000.
3) How much is the share of A in the profit?
a. 101,680
b. 110,820
c. 98,320
d. 96,720
4) Which of the following statements is false concerning the Schedule of Liquidation?
a. Liquidations may take a considerable length of time to complete.
b. Frequent reporting by the accountant is rarely necessary.
c. The Schedule of Liquidation provides a listing of transactions to date, current
cash, and capital balances.
d. The Schedule of Liquidation provides a listing of property still being held by the
partnership and liabilities remaining unpaid.
e. The Schedule of Liquidation keeps creditors and partners apprised of the
results of the process of dissolution.
5) What accounting transactions are not recorded by an accountant during
liquidation?
a. The conversion of partnership assets into cash.
b. The allocation of the resulting gains and losses.
c. The payment of liabilities and expenses.
d. Remaining unpaid debts settled, and the distribution of any remaining assets to
the partners based on their profit and loss ratio.
In October 2013, bids were submitted for a construction project to build a warehouse.
The winning bid of P6,000,000 was submitted by Buy More Builders, Inc. The
activities on this project are summarized below:
Estimated Progress
Year Cost incurred Cost to complete Billings
2013 P1,350,000 P3,150,000 P1,500,000
2014 2,100,000 1,150,000 2,800,000
2015 1,400,000 - 1,700,000
Buy More Builders uses the cost-to-cost percentage of completion method of revenue
recognition.
6) The gross profit recognized in 2015 was
a. P100,000
b. P450,000
c. P600,000
d. P1,150,000
Sigma Inc. employs the cost-to-cost basis in determining the percentage of completion
for revenue recognition. The company’s records show the following information on a
recently completed project for a contract price of P5,000,000
2014 2015 2016
Cost incurred to date P900,000 P2,550,000 ?
Gross profit 100,000 350,000 (50,000)
7) How much was the estimated cost to complete the project at December 31, 2015?
a. P1,500,000
b. P1,600,000
c. P1,700,000
d. P1,800,000
8) How much was the actual cost incurred during the year 2016?
a. P1,750,000
b. P1,900,000
c. P2,050,000
d. P2,200,00
9) How much is the construction in progress account recognized on December 31,
2015?
a. 2,900,000
b. 3,800,000
c. 3,000,000
d. 2,550,000
ABC Co. was contracted by Y, Inc. for the construction of a flyover in 2021. The
contract price isP10M. Information on costs is as follows:
2021 2022
Total costs incurred to 1,600,00 6,000,00
date 0 0
Estimated costs to 6,400,00 1,500,00
complete 0 0
10) How much revenue is recognized in 2022?
a. 8,000,000
b. 6,000,000
c. 4,000,000
d. d. 0
11) What is the percentage completed in 2022?
a. 60%
b. 50%
c. 40%
 d. 16%

ABC Co. uses the “installment sales method.” Information on ABC’s transactions
during 2001 and 2002 is shown below:
  2001 2002
4,000,00 4,800,00
Installment sales 0 0
2,400,00 2,640,00
Cost of sales 0 0
1,600,00 2,160,00
Gross profit 0 0
Cash collections
from:
1,600,00 800,00
20x1 sales 0 0
1,920,00
20x2 sales 0
12) How much is the realized gross profit in 2002?
a. 1,484,000 c. 1,184,000
b. 1,284,000 d. 984,000
ABC Co. uses the installment method. The following information was taken from
ABC’s records:
201 201
 
1 2
2,000,00 2,400,00
Installment sales
0 0
1,200,00 1,320,00
Cost of sales
0 0
Cash collections
from:
20x1 sales 800,000 400,000
20x2 sales 960,000
13) How much is the total deferred gross profit on December 31, 2012?
a. 320,000 c. 648,000
b. 1,440,000 d. 968,000
14) How much is the realized gross profit in 2012 from 2011 sales?
a. 320,000 d. 180,000
b. 160,000 e. None of these
c. 432,000
15) The estimated recovery of unsecured creditors without priority is equal
a. to the realizable value of the assets pledged plus the excess amount multiplied
by the estimated recovery percentage.
b. to the realizable value of the assets pledged minus the excess amount
multiplied by the estimated recovery percentage.
c. to their claims multiplied by the estimated recovery percentage.
d. any of these
16) The estimated recovery of partially secured creditors is equal to
a. the realizable value of the assets pledged plus the excess amount multiplied by
the estimated recovery percentage.
b. the realizable value of the assets pledged minus the excess amount multiplied
by the estimated recovery percentage.
c. their claims multiplied by the estimated recovery percentage.
d. any of these
When ABC Company filed for liquidation with Securities and Exchange Commission, it
prepared the following balance sheet.
Current assets, with net realizable value, P50,000) P 80,000
Land and Building, fair value, P240,000) 200,000
Goodwill, fair value, P 0 40,000
Total assets P 320,000
Accounts Payable P 160,000
 Mortgage Payable, secured by Land and Building 200,000
Common Stock 100,000
Retained Earnings, deficit (140,000)
Total liabilities and equity P 320,000
17) What is the estimated deficiency to unsecured creditors?
a. P 70,000 c. P120,000
b. P90,000 d. P140,000
18) What percentage of their claims are the unsecured creditors likely to get?
a. 43.75%
b. 50.00%
c. 56.25%
d. 100.00%
A, B, and C formed a joint operation. Profit or loss shall be divided equally. The
following were taken from the joint operation’s books:
  Debit Credit
JO – Cash 80
Joint operation 20
B, Capital 60
C, Capital 40
A’s share in the joint operation’s profit is P16. A agreed to be charged for the unsold
merchandise as of year-end.
19) How much is the cost of unsold merchandise charged to A?
a. 56 c. 68
b. 62 d. 72
G, H, and M is considering possible liquidation because M is insolvent. The partners
have the following capital balances: P60,000, P70,000, and P40,000, respectively, and
share profits and losses 30%, 45%, and 25%, respectively. The partnership has
P200,000 in assets that can be sold for P150,000.
20) What is the minimum that M’s creditors would receive if they have filed a claim for
P50,000?
a. 0. d. 47,500.
b. 27,500. e. 50,000.
c. 45,000.
Santos Co. Sells heavy duty batteries, which cost P7,000 at a total instalment price of
P12,000. A regular customer buys a unit and trades in his old unit for an allowance of
P2,500. Santos spends P250 to recondition each unit traded in and then sells them at
P3,250 each. A profit of 20% results from the sale of used batteries.
21) What was the trade-in over(under) allowance granted to the customer?
a. 150 over-allowance c. 500 over-allowance
b. 150 under allowance d. 500 under allowance
Wall, Inc., entered into a 10 year franchise agreement with ABC, franchisee, on July 1,
2001. The total franchise fees agreed upon is P1,100,000 of which P100,000 is
payable upon signing and the balance payable in four equal annual installments at
the end of each year. The effective rate for this note is 10%. It was determined that the
performance obligation is satisfied overtime.
22) How much Revenue recognized from initial franchise fee at the end of the current
year?
a. 792,500 c. 892,500
b. 128,875 d. 89,250
23) How much is the net income at the end of the current year?
a. 792,500 c. 128,875
b. 892,500 d. 89,250
24) When the percentage-of-completion method of accounting for long-term
construction projects is used, why is the balance of the Construction in Progress
account increased by the annual recognized gross profit on long-term construction
contracts?
a. The cost of the contract has increased
b. The project’s value has increased above cost
c. The economy experiences inflation over the construction period
d. Construction in Progress is not increased by the annual recognized profit
25) Statement I - If there is no separate set of books of accounts used for the joint
venture transactions, the balance of the Income summary account represents
either the venture profit or loss;
Statement II - If there is a separate set of books of accounts used for the joint
venture, the amount due to or from each participant is represented by his capital
account
a. both statements are true
b. both statements are false
c. only the first statement is true
d. only the second statement is true.

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