1. Which of the following revenue recognition method is the most conservative?

a. Installment method c. Profit realization method

b. Cost recovery method d. All of the choices

2. The excess of fair value of trade-in merchandise over the trade-in value in an installment sale is known as
a. Over allowance c. Net realizable value
b. Under allowance d. Realized gross profit

3. ABC Company produces expensive equipment for sale on installment contracts. When there is doubt about eventual
collectibility, the income recognition method least likely to overstate income is
a. Cost recovery method c. Installment method
b. At the time the equipment is completed d. At the time of delivery

4. It is the statement sent by the consignee to the consignor regarding the sale of goods consigned.
a. Billing c. Invoice
b. Purchase Order d. Account Sales

5. The consignee is the

a. Principal c. Buyer
b. Agent d. Seller

6. In the books of the consignee, the sale of goods is credited to

a. Consignee receivable c. Consignee payable
b. Consignor receivable d. Consignor payable

7. The excess of the Construction in Progress over Progress Billings is treated as

a. Current asset c. Other asset
b. Current liability d. Non-current asset

8. A company uses the percentage of completion method to account for a three year construction contract. Which of the
following would be used in the calculation of the income recognized in the frits year?
a. Collection of progress billings c. Mobilization fee
b. Progress billings d. Cost incurred

9. It is a construction contract in which the contractor agrees to a fixed contract price, or a fixed rate per unit of output,
which in some cases is subject to cost escalation clauses.
a. Fixed price contract c. Cost plus fixed fee contract
b. Cost plus variable fee contract d. Both a and c

10. Franchise fees should be recognized

a. When the franchise commence its business operations
b. On the date the franchise contract is signed
c. When the performance obligation is already satisfied
d. On the date when the consideration is received

11. The franchise revenue is satisfied overtime when:

a. The franchise fee is payable upon signing of contract
b. The performance obligations regarding the franchise rights are completed when the franchise opens
c. Franchise rights are transferred at a point in time
d. The franchisor provides access to the right rather than transferring the control

12. All revenue from franchise is derived from:

a. Assistance in site selection and negotiating leases
b. Advertising and promotion
c. Bookkeeping and advisory services
d. Sales of initial franchise and continuing fees

13. The freight on shipments to branch paid by the branch is recorded by the home office as
a. Credit to investment account c. Debit freight in
b. Credit freight in d. Not recorded
14. Which of the following reconciling transactions will require credit to home office current account in Branch A’s Book
for the adjustment?
a. Collection by Branch A of Branch B’s accounts receivable
b. Payment by Branch A of Home Office’s accounts payable
c. Credit memo received by Branch A from Home Office
d. Reshipment of goods received by Branch A to Branch B

15. Which of the following statement is correct? The allowance for overvaluation of branch inventory:
a. It is credited to record the realized portion of the markup
b. Eliminated in preparing the combined financial statements
c. It is debited to record the allowance on shipment made during the year
d. It is credited to eliminate the allowance in beginning inventory in preparing the working paper

16. Consider the following statements:

Statement 1: Under PFRS15, output methods recognize revenue on the basis of direct measurements of the value to the
customer of the goods or services transferred to date relative to the remaining goods or services promised under the
contract

Statement 2: If a repurchase agreement provides an entity the obligation to repurchase an asset, under PFRS 15, the
agreement may be treated as either a lease or sale with a right of return.

Statement 3: An entity and a customer do not always have to be committed to fulfilling all of their respective rights and
obligations for a contract to meet the criteria under PFRS 15.

How many of the above statements are reasonable within the context of PFRS 15?
a. None c. Two (2)
b. One (1) d. Three (3)

17. Oheb Company operates a branch in Butuan. The interoffice accounts were in agreement at the beginning of the year.
Which of the following could be a reason why the home office account of the branch is higher than the investment of
Butuan branch at the end of the year?
a. The home office inadvertently recorded a remittance from its Butuan branch as a remittance from its Batangas branch.
b. The branch inadvertently recorded a remittance made to it by a home office customer as collection from its own
customer.
c. The branch returned excess merchandise to the home office and upon receipt of such, the home office credited its
investment in Bataan branch account.
d. The home office sent a check to its Butuan branch to settle an account, but the home office erroneously recorded the
transaction as a payment for the acquisition of equipment.

18. A del credere commission is a commission payable to the consignee by consignor for
a. protecting himself from bad debts c. loyalty payment
b. making sales above sales price d. patronage

19. In consignment sales, freight costs

a. Paid by the consignor to deliver the merchandise to its premises are period costs
b. Paid by the consignor to deliver the merchandise to the consignee’s premises are product costs
c. Paid by the consignee to deliver the merchandise to its premises are period costs
d. Paid by the consignee to deliver the merchandise to the customer’s premises are product costs

20. An entity, a well-known sports team, licenses the use of its name and logo to a customer. The customer, an apparel
designer, has the right to use the sports team’s name and logo on items including t-shirts, caps, mugs, and towels for one
year. The customer expects that the entity will continue to play games and provide a competitive team. The performance
obligation may most likely be
a. satisfied at a point in time since the entity provides the customer with the right to access the license
b. satisfied at a point in time since the entity provides the customer with the right to use the license
c. satisfied over time since the entity provides the customer with the right to access the license
d. satisfied over time since the entity provides the customer with the right to use the license
21. This approach on estimating the stand-alone selling price of a good or service might also include referring to prices
from the entity’s competitors for similar goods or services and adjusting those prices as necessary to reflect the entity’s
costs and margins.
a. Adjusted market assessment approach c. Residual approach
b. Expected cost plus a margin approach d. Income approach

22. The adjusted balance of the allowance for overvaluation, assuming all merchandise of a branch comes from the head
office, represents the
a. Shipments from home office c. Total cost of goods available for sale
b. Cost of goods sold d. Ending balance of the inventories

23. For installment sale transactions which have not yet met all criteria to recognize revenue, where periodic payment
includes interest and principal, how will the interest be accounted by the entity?
a. Interest shall be lodged temporarily as part of deposit liability until the contract meets all the criteria set by PFRS 15.
b. Interest is recognized as revenue when actually received.
c. Interest is recognized as revenue when earned.
d. Interest shall be recorded as other income as this is only ancillary to the main contract of installment sale.

24. Under installment sales method, an under allowance in trade-in is

a. treated as addition to the installment sale price when computing for the gross profit
b. treated as reduction to the installment sale price when computing for the gross profit
c. not accounted for
d. none of these

25. Under PFRS 15, gross profit from an installment sale

a. is recognized in full at the point of sale
b. is initially deferred and amortized over the settlement using the effective interest method
c. is initially deferred and periodically recognized as the installment payments are received
d. is recognized upon the satisfaction of performance obligation at a point in time or over time

26. A performance obligation is satisfied over time if

a. The customer receives and consumes the benefits provided by the entity’s performance as the entity performs.
b. The entity’s performance creates or enhances an asset (e.g. work in progress) that the customer controls as the asset is
created or enhanced.
c. The entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable
right to payment for performance completed to date.
d. All of the above

27. Which of the following describes the revenue recognition issue met in the accounting for construction contracts?
a. Performance obligation regarding construction contracts are generally satisfied at a point in time. Thus, the primary
issue is the collectability of the consideration.
b. Performance obligation regarding construction contracts are generally satisfied over time. Thus, the primary issue is the
collectability of the consideration.
c. Construction contracts are generally for long term. The start and completion of the project may fall in different
accounting periods. Thus, the primary issue is the timing of recognition of revenue and costs.
d. Construction contracts general involve a high cost of financing. Thus, the primary concern is whether the contractor can
sustain the project cost until completion.

28. An entity uses the input method based on costs in measuring the progress of performance obligation satisfied over
time. Which of the following does not affect the computation of revenue to be recognized each year?
a. Revenue previously recognized c. Estimated cost to complete
b. Progress billings d. Transaction Price

29. Which of the following is false regarding the scope of PFRS 15?
a. Transactions involving financial instruments shall be covered by PFRS 9.
b. Lease contracts shall be accounted under the provisions of PRFS 16.
c. The accounting of revenue pertaining to investment in associates shall follow PAS 28.
d. PAS 18, Revenue, remains in force.
30. If the gross profit rate based on cost is 20%, the cost ratio is computed
a. 80 / 120 c. 83 1/3 / 120
b. 100 / 120 d. 80 / 100

31. In accounting for a long-term construction contract for which there is a projected profit, the balance in the
Construction in Progress account at the end of the first year of work using the percentage of completion method would be
a. Lower than the zero profit method c. The same as zero profit method
b. Higher than the zero profit method d. Zero

32. The entity shall recognize revenue from the right to operate the franchise using:
a. At point in time c. Accrual method
b. Over time d. Installment method

33. On the transfer of consigned goods by the consignor to consignee, the journal entry in the books of the consignee will
be a credit of:
a. Inventory received from the consignor c. Memo Entry
b. Inventory on consignment d. Consignee Payable

34. If the branch receives credit memo from the home office, the branch shall record it in its separate statement of
financial position by
a. Increasing the home office account c. Debiting the home office account
b. Crediting the home office account d. Disclosure

35. In installment sales, how shall the seller classify and present deferred gross profit account on its statement of financial
position?
a. Asset valuation allowance or contract-receivable account
b. Unearned revenue account
c. Equity account
d. Income account

36. Irvin Company, which began business on January 1, 2030, appropriately uses the installment sales method of
accounting. The following information is available for 2030:
Installment accounts receivable, Dec. 31, 2030 320,000
Deferred gross profit, Dec. 31, 2030
(Before recognition of realized gross profit for 2030) 224,000
Gross profit on sales 40%

The realized gross profit on installment sales for the year ended December 31, 2030
a. 96,000 c. 89,600
b. 128,000 d. 136,000

(37 to 38) Abueva Company uses installment sales method. Information regarding an installment sale made on January 1,
2030 is shown below:
- Gross profit rate of 45%
- Collection (principal and interest) - December 31, 2030 is 20,000,000
- Deferred gross profit - 2030 (after year-end adjustments) is 15,210,460
- Interest income - 2030 is 5,764,400

37. How much is the realized gross profit in 2030?

a. 12,435,600 c. 6,406,025
b. 14,235,600 d. 7,391,050

38. How much is the sale price exclusive of interest?

a. 48,036,620 c. 48,351,620
b. 48,036,215 d. 48,386,170
39. Vonne Company had the following consignment transactions during the month of December 2030:
Inventory shipped on consignment to Cyrus Company 90,000
Freight paid by Vonne 4,500
Inventory received on consignment from Mike Company 60,000
Freight paid by Mike Company 2,500

No sales of consigned goods were made through December 31, 2030.

Vonne’s December 31, statement of financial position should include consigned inventory at:
a. 94,500 c. 60,000
b. 90,000 d. 62,500

(40 to 41) German Company received 75 stereos on consignment from the Chris Company. The stereos cost 500 each to
manufacture and 100 each to ship to German. German paid the freight, although the contract called for Chris to do so.
German sold 25 stereos at 1,600 each and received a 25% commission. Payment in full is made to the Chris Company.

40. German pays Chris

a. 22,500 c. 30,000
b. 27,500 d. 40,000

41. Chris profit is

a. 10,000 c. 30,000
b. 15,000 d. 40,000

42. Lim Construction was recently awarded a 6,730,000 contract to construct a trade center for Ayala Company. Lim
Construction estimates it will take 46 months to complete the contract. The company uses the percentage of completion
method to estimate profits.

The following information details the actual and estimated costs for the year 2027-2030:
Year Actual Cost Each Year Estimated Cost to Complete
2027 3,120,000 3,264,000
2028 1,584,000 1,800,000
2029 1,152,000 912,000
2030 1,080,000 P0

How much is the balance of Construction in Progress account as of 2029?

a. 5,818,000 c. 5,856,000
b. 5,808,000 d. 5,800,000

(43 to 44) On January 1, 2026, Avida Company was contracted to construct a townhouse for SM Company for a total
contract price of 50,400,000. The building was completed by November 31, 2028. The following are the data of Avida:
2026 2027 2028
Contract cost incurred during the year 19,200,000 15,600,000 8,700,000
Estimated cost at completion 38,400,000 43,500,000 43,500,000
Billing during the year 19,200,000 21,000,000 10,200,000

43. The entry to record the recognized profit in 2028 includes credit to:
a. CIP 1,380,000 c. Contract revenue 10,080,000
b. CIP 50,400,000 d. Contract cost 8,700,000

44. How much is the total Construction in Progress at December 31, 2027?
a. 34,800,000 c. 21,120,000
b. 40,320,000 d. 46,320,000

45. Crabs Company (franchisor) entered into a franchise agreement with Liwayway Company (franchisee) on July 1,
2020. The total franchise fees agreed upon is 1,100,000, of which 100,000 is payable upon signing and the balance
payable in four equal annual installments. It was agreed that the down payment is not refundable, notwithstanding lack of
substantial performance of services by the franchisor. When Crabs prepares its financial statements on July 31, 2020, the
unearned franchise fees to be reported is
a. P0 c. 1,000,000
b. 100,000 d. 1,100,000
46. Mike Company sold a fast food restaurant franchise to an individual. The sale agreement, signed on January 2020
called for a 100,000 down payment plus two 50,000 annual payments representing the value of initial franchise services
rendered by Mike. In addition, the agreement required the franchisee to pay 8% of its gross revenues to the franchisor.
The restaurant opened early in 2020 and its sales for the year amounted to 750,000. Assuming a 12% interest rate is
appropriate, Mike’s 2020 total revenue will be (PV of annuity of 1 at 12% for two periods is 1.6901).
a. 84,505 c. 254,646
b. 244,505 d. 266,646

47. On April 30, 2020, Dine Company entered into a franchise agreement with Food Company to sell their product. The
agreement provides for an initial franchise fee of 1,200,000 which is payable as follows: 400,000 cash to be paid upon
signing the contract, and the balance in five equal annual installments every December 1, starting 2020. Dine signs a non-
interest bearing note for the balance. The credit rating of the franchisee indicates that the money can be borrowed at 10%.
The present value factor of an ordinary annuity at 10% for 5 periods is 3.7908.

The agreement further provides that the franchisee must pay a continuing franchise fee equal to 5% of its monthly gross
sales. Food Company incurred direct cost of 540,000 of which 170,000 is related to continuing services and indirect costs
of 72,000 of which 18,000 is related to continuing services. The franchisee started business operations on September 2,
2020 and was able to generate sales of 950,000 for 2020. The first installment payment was made in due date.

Assuming that the collectibility of the note is not reasonably assured, how much is the net income of the franchisor for the
fiscal year ended December 31, 2020?
a. 252,206 c. 172,650
b. 174,508 d. 254,935

(48 to 50) The following information is available from the books of the home office and branch:
Home Office Books Branch Books
Cash 2,200,000 132,000
Accounts receivable 360,000 200,000
Inventory beginning 600,000
Shipment from home office 912,000
Purchases 2,400,000 80,000
Freight-in 64,000 36,000
Shipment to branch 760,000
Investment in branch 1,200,000
Allowance for mark-up 152,000
Equipment 1,440,000 800,000
Accumulated depreciation 144,000 80,000
Accounts payable 144,000 80,000
Share capital 4,000,000
Retained earnings beginning 304,000
Home office 1,200,000
Sales 3,200,000 1,000,000
Operating expenses 440,000 200,000
Inventory end:
From outside purchases 920,000 20,000
From home office 480,000

48. How much is the combined net income?

a. 1,756,000 c. 1,748,000
b. 1,720,000 d. 1,648,000

49. How much is the ending inventory in the combined financial statement?
a. 920,000 c. 1,320,000
b. 1,420,000 d. 1,340,000

50. The total home office account in the books of the branch:
a. P0 c. 1,544,000
b. 1,472,000 d. 1,000,000
(51 to 53) The income statement submitted by the branch to the main office for the year 2022 is shown below:
Sales 600,000
Cost of sales:
Inventory, January 1 80,000
Shipments from H.O. 350,000
Local purchases 30,000
Total available for sale 460,000
Inventory, December 31 (100,000) 360,000
Gross profit 240,000
Operating expenses (180,000)
Net income 60,000

The branch inventories include those purchased from outsiders amounting to Php16,000 and Php10,000 as of December
31 and January 1, respectively. After effecting the necessary adjustments, the true net income of the branch was
ascertained to be Php156,000.

51. The ending inventory of the branch as far as the home office is concerned is:
a. 73,000 c. 77,600
b. 76,000 d. 83,200

52. The unadjusted balance of the allowance for overvaluation of the branch inventories as of December 31, 2022
amounted to:
a. 70,000 c. 120,000
b. 112,000 d. 135,000

53. How much is the understatement of the home office account prior to closing entries?
a. 60,000 c. 156,000
b. 96,000 d. 264,000

54. Tomato Corner, Inc. a franchisor, enters into a franchise agreement on October 1, 2022 with a franchisee. The initial
franchise fee is set in the franchise agreement at an upfront fee of Php4,800,000. The review of the franchise agreement
discloses the following:
- Franchisor grants the franchisee the right to the trade name, market area and proprietary knowhow for five years. These
rights are not individually distinct since each one is not sold separately and cannot be used with other goods or services
that are readily available to the franchisee. Stand-alone selling price of these rights amounted to Php2,000,000.
- Franchisee is responsible for recruiting its employees, but the franchisor is obligated to provide training services, with
instructional materials, which are updated for technology changes on a monthly basis for the first year starting on the
month in which the agreement is signed. Stand-alone selling price of the training services amounted to P800,000.
- Franchisor shall provide the franchisee with the equipment costing Php2,000,000 with a stand-alone selling price of
Php2,200,000. The equipment is expected to have a five-year useful life. The equipment was delivered on November 1,
2022, one month prior to the start of the business operations.

Determine the revenue to be reported by the franchisor under PFRS 15, Revenue from Contracts with Customers, in 2022
from the initial franchise fee.
a. 2,400,000 c. 3,264,000
b. 2,976,000 d. 4,800,000

55. At the beginning of 2022, Bennyqt Co., consignee, entered into a consignment agreement with Hatred, Inc., consignor,
for products with a total cost of Php1,170,000. As part of the consignment agreement, the consignor needs to draw a sight
draft amounting to Php135,000. The advance is recoverable periodically by monthly deductions (in proportion to the
units sold) from the remittances. The consignee remitted Php486,000 for the first quarter of 2022 after recouping 30% of
the sight draft and 10% commission based on the sales proceeds. For the quarter ended March 31, 2022, how much will
Bennyqt Co. report as profit from this consignment arrangement?
a. 135,000 c. 216,000
b. 175,500 d. 229,500
56. The contract of ECHO Company, an SME, with a franchisee provides that in the event the first year would result in an
operating loss, the franchising agreement may be cancelled without the need for returning any portion of the franchise fee
already paid nor the payment of any balances still unpaid. If the franchise was awarded on July 1, 2022 for a fee of
Php800,000 – 30% payable at the start of the contract and the remainder is payable in four annual instalments starting one
year from the date the contract was signed. Under PFRS for SMEs, determine the unearned franchise revenue as of
December 31, 2023.
a. P0 c. 420,000
b. 560,000 d. 280,000

(57 to 58) On June 30, 2022, an entity grants a franchisee the right to operate a restaurant in a specific market using the
entity’s brand name, concept and menu for a period of ten years. The entity has granted others similar rights to operate
this restaurant concept in other markets. The entity commonly conducts national advertising campaigns, promoting the
brand name, and restaurant concept generally. The franchisee will also purchase kitchen equipment from the entity. The
consideration of the franchise agreement is Php9,500,000 for the initial franchise fee plus a royalty, paid quarterly, based
on 4% of the franchisee’s sales over the life of the contract. The entity assesses the performance obligations to transfer
the equipment and to provide access to the franchise right as distinct. Their stand-alone selling prices are Php1,000,000
and Php9,00,000, respectively. The equipment was transferred on July 15, 2021 and the franchisee reported sales of
Php34,000,000 in 2022. Round present and future value factors, if any, to two decimal places.

57. Assume that Php1,500,000 of the franchise fee is payable on agreement date and the remainder in two annual
payments starting one year from agreement date, evidenced by a six percent interest bearing note. The contractual
interest, however, is significantly lower than the twelve percent interest rate that would be used in a separate financing
transaction between the entity and its customer at contract inception. Determine the franchisor’s net income in 2022.
a. 1,287,484 c. 1,730,236
b. 1,527,484 d. 1,796,830

58. Assume that the consideration is paid up front. Determine the contract liability as of December 31, 2024 (assuming
that the entity has concluded that there is no significant financing component).
a. 7,367,500 c. 7,267,500
b. 7,362,500 d. 6,412,500

59. NMB has its business of selling cars through installment. Pertinent data is shown for Yr. 1-3.
Year 1 Year 2 Year 3
Installment Sales 2,000,000 2,400,000 1,850,000
GP Rate ? ? 25%
Collections:
From Y1 sales 1,000,000 600,000 400,000
From Y2 sales 1,200,000 720,000
From Y3 sales 1,830,000

Upon the satisfaction of performance obligation, collection of these installment sales is not probable. However, all
payments received are nonrefundable. Applying the revenue recognition principles under PFRS 15, how much revenue
shall be recognized in Year 3?
a. 1,850,000 c. 2,950,000
b. 2,000,000 d. 3,830,000

60. Pol Corporation sells completed apartments on installment basis. At the inception of the year, it sold one of its units
costing P1,050,000 to a customer for P1.8 million under the following terms:
1. 15% shall be paid upon the execution of sale.
2. Balance is collectible in 10 annual installments of P153,000 starting December 31 this year.
3. 12% is the currently prevailing interest rate.
4. At the inception of sale, the collection was determined not probable.

At the end of Year 2 where collection remained improbable, how much shall be reported as deposit liability?
a. P576,000 c. P1,134,484
b. P528,578 d. P1,800,000
61. Drei Corporation sells completed apartments on installment basis. At the inception of the year, it sold one of its units
costing P950,000 to a customer for P1.5 million under the following terms:
1. 15% shall be paid upon the execution of sale.
2. Balance is collectible in 10 annual installments of P127,500 starting December 31 this year.
3. 8% is the currently prevailing interest rate.

Collection was determined probable for this sale. How much total revenue shall be recognized in year 1?
a. P1,148,978 c. P1,080,535
b. P452,366 d. P1,500,000

62. On January 1, 2020, Helen, Inc. sealed a contract with Leopold, Inc. for the construction of a building at a contract
price of P4.2 million. The entity uses the input method in determining the POC. Relevant data follows:
- Initial estimate of total construction cost is P3.8 million
- Cost data follow:
Year 1 Year 2 Year 3
Cost incurred to date 2,500,000 3,800,000 4,000,000
Est. cost to complete 1,300,000 700,000 -

How much gain on reversal of provision for onerous contract shall be recognized in Year 3?
a. P19,247 c. P46,667
b. P18,333 d. P33,333

(63 to 64) On January 1, 2022, Joy Company sold appliances costing P300,000 to Dory with the following terms: 25%
down payment on the date of sale and the balance payable in 5 equal installments every 6 months.

Prior to the grant of sale, Joy performed credit investigation to assess Dory’s capability to pay the amount. Joy sells its
appliances at a profit of 20%.

63. Ignoring the time value of money, how much gross profit shall Joy recognize for the period ending December 31,
2022?
a. P100,000 c. P125,000
b. P55,000 d. P75,000

64. Using the same scenario in the previous item, the entry to record the transaction would not include?
a. a credit to inventory by P300,000 c. a credit to installment sale by P375,000
b. a debit to receivable by P231, 250 d. all of the choices are found in the entry

65. Viki, Inc. started a project with a contract price of P55 million. The cost incurred to date is P12.5 million and the
estimated cost to complete is still P38.2 million. The company is unable to reliably estimate its percentage of completion
despite having data on actual cost and estimated cost to complete. During the year, how much is the balance of
construction in progress?
a. P13,560,000 c. P12,500,000
b. P50,700,000 d. P0

66. Macapinlac Company works on a 10,500,000 contract in 2023 to construct an office building. During 2023,
Macapinlac uses the cost to cost method. At December 31, 2023, the balances in certain accounts were:
Construction in progress 3,780,000
Accounts receivable 360,000
Billings on construction in progress 1,800,000
Contract retention 180,000
Mobilization fee 140,000

At December 31, 2023, the estimated cost at completion is 7,500,000. The realized gross profit in 2023 is
a. 1,102,500 c. 1,242,500
b. 1,062,500 d. 1,134,000
(67 to 68) On January 1, 2021, Lomi Company charges initial fee 8,000,000 for franchise, with 1,600,000 amount paid
when the agreement was signed by both parties and the balance in four equal annual payments. The present value of the
four equal annual payments is 5,070,000, which is discounted at 10%. The franchisee has the right to purchase 300,000 of
supplies and equipment for 250,000. An additional part of the initial fee is for advertising to be provided by Lomi during
the next five years. The amount of advertising is 5,000 a month. The collectibility is reasonably assured and Lomi has
performed all the initial services provided in the contract.

67. How much is the revenue from franchise?

a. 6,670,000 c. 6,320,000
b. 8,000,000 d. 7,650,000

68. The journal entry to record the transaction would include?

a. Debit cash of 8,000,000
b. Credit unearned interest income of 1,680,000
c. Credit unearned franchise revenue of 350,000
d. Credit franchise revenue of 6,670,000

(69 to70) The Cruz Company is a dealer of air conditioners. For the period May 1, 2030, Cruz Company gives a trade
discount of 10% to all its buyer. On May 1, 2030, five units of air conditioners with a total list price of 100,000 and total
cost of 59,800 were sold to Mr. Rusty. Cruz Company granted an allowance of 10,000 for Mr. Rusty used air conditioner
as trade-in, the current market value of the equipment is 12,000. The balance was payable as follows:
20% of the balance paid at the time of purchase
The rest payable in 10 months June 1, 2030

After six months of paying, Mr. Rusty defaulted in the payment of December 1, 2030. The five units of air conditioners
were repossessed and it would require 2,000 reconditioning cost for each air conditioner before it could be resold for
6,000 each. A 15% gross profit rate was usual from the sale of used equipment. Operating expenses, exclusive of loss on
repossession amounted to 5,380.

69. How much is the realized gross profit on installment sales?

a. 16,720 c. 19,040
b. 17,860 d. 23,240

70. How much is the net income for 2030?

a. 16,720 c. 19,040
b. 17,860 d. 23,240