TRUE 1. start-up cost incurred by a branch in the initial
In a statement of realization and liquidation, if the
months of operations are appropriately deferred and
amortized in subsequent profitable accounting periods.
TRUE 2. The home office capital account is less than the
investment in branch account when the home office received
a remittance from a branch customer but has not yet notified
the branch
FALSE 3. The estimated deficiency to unsecured creditors is
total unsecured liabilities less total free assets.
FALSE 4. The statement of Realization and liquidation reports
actual liquidation results only at final completions of the
liquidation process
TRUE 5. In the preparation of schedule of safe payment it is
assumed that partners with capital deficiency has no capacity
to make additional investment
FALSE 6. During liquidation, partner with the largest capital
account balance will receive the first allocation of
distribution.
FALSE 7. The document used by the trustee to report on the
status of operation periodically is the statement of affairs.
TRUE 8. The beginning and ending balances of the accounts in
the statement or realization and liquidation are always stated
at book values
FALSE 9. A CREDIT MEMO send by the branch to the home
office signifies a decrease in investment in branch account in
the home office.
FALSE 10. If the home office maintains several branches,
transaction between or among these branches need not be
acknowledge at the home office, since each branches are
given the authority to transact directly with each other
FALSE 11. One of the legitimate expenses of the partnership
is the interest paid to partners base on the amount of their
invested capital
FALSE 12. The admission of a new partner effected through
purchase of interest in the partnership is not recorded in its
entirety since the transaction is personal between the selling
and buying partner.
FALSE 13. In case of retirement of a partner from the
partnership, the ownership interest of which may be acquired
by the existing partners, or outside parties but not the
partnership.
FALSE 14. In a limited partnership, the entity may still operate
in the absence of a general partner
FALSE 15. The estimated recovery percentage maybe arrived
by total amount of free assets divided by total unsecured
liabilities without priority.
TRUE 16.
total debits exceeds the total credits it signifies a loss incurred
by the trustee during receivership
FALSE 17. PFRS allows recognition of goodwill arising from
formation of partnership
FALSE 18. Advances made by a partner to the partnership will
be one of the items that decreases the capital balance of a
partner
FALSE 19. An expenses item being allocated by Branch 1 to
branch 2, is recorded by the branch 2 by a debit to expenses
account and credit Branch 1.
TRUE 20. A debit to Home office equity account and credit
cash account in the accounting record of a branch may
indicate that the specific branch paid in advance an expense
of other branch
FALSE 21. Since the investment in branch account on the
book of home office represents the investment of the home
office in the branch, thus the home office equity account on
the book branch office represents the equity interest of
branch office in the net assets of the home office
TRUE 22. Reciprocal accounts on the internal transactions
between the home office and a branch must be eliminated in
the preparation of the enterprise's financial statements that
are presented in accordance with GAAP.
TRUE 23. In the absence of agreement as to distribution of
loss, the industrial partner shall be exempted from
partnership loss, while the capitalist partners shall be
distributed in accordance profit agreement ratio
FALSE 24. In the absence of agreement as to distribution of
profit, the industrial partner shall receive a just and equitable
share and the remainder shall be distributed to the capitalist
partners on the basis of average capital contribution ratio.
FALSE 25. When bankruptcy was voluntary made by an
organization it means the company is release from past
obligation and such release is applied to all forms of debt.
TRUE 26. The going concern assumption which is primarily
one of the principles underlying the preparation of financial
statements is abandoned when bankruptcy proceedings is the
only recourse of a corporation which is in financial trouble.
TRUE 27. The doctrine of marshaling the assets is applicable if
either the partnership is insolvent or individual partners are
insolvent.
FALSE 28. In a partnership liquidation, the final cash payment
to the partners should be made in accordance with the profit
and loss ratio
XX and YY are partners who have capital of P300,000 and
P240,000 sharing profits in the ratio of 3:2. ZZ is admitted as a
partner upon investing P250,000 for 25% interests in the firm,
profits are to be allocated equally. Given the choice between
goodwill and bonus method, ZZ will:

• Prefer bonus method due to ZZ’s gain of P17,500

• Prefer bonus method due to ZZ’s gain of P70,000
• Prefer goodwill method due to ZZ’s gain of P70,000
• Be indifferent for the goodwill and bonus methods
are the same
• Cannot be determined

XX and YY are partners who have capital of P300,000 and

P240,000 sharing profits in the ratio of 3:2. ZZ is admitted as a
partner upon investing P250,000 for 25% interests in the firm,
white the other partners continue to participate profits and
losses in their original ratio. Given the choice between
goodwill and bonus method, ZZ will:

• Prefer goodwill method due to ZZ’s gain of P70,000

• Cannot be determined.
• Prefer bonus method due to ZZ’s gain of P17,500
• Prefer bonus method due to ZZ’s gain of P70,000
• Be indifferent for the goodwill and bonus methods
are the same.