DRILL 1

1. What is the valuation if a partner contributes a noncash property to the partnership?

a. Book value of the property c. Actual amount of the property
b. Acquisition cost of the property d. Fair value of the property
2. Temporary withdrawals made by the partner is posted in ledger as
a. Partner’s drawing, debit c. Partner’s capital, debit
b. Partner’s drawing, credit d. Partner’s capital, credit
3. Partnership drawings are
a. Always maintained in a separate account from the partner’s capital account
b. Equal to partners’ salaries
c. Usually maintained in a separate drawing account with any excess draws being deducted
directly to the capital account
d. Not discussed in the specific contract provisions of the partnership
4. Under the entity theory, a partnership is
a. Viewed through the eyes of the partners
b. Viewed as having its own existence apart from the partners
c. A separate legal and tax entity
d. Unable to enter into contracts in its own name
5. The Red and black partnership agreement provides for Red to receive a 20% bonus on profits before the
bonus. Remaining profits and losses are divided between Red and black in the ratio of 2:3, respectively.
Which partner has a greater advantage when the partnership has a profit or when it has a loss?
Profit Loss Profit Loss
a. Red Black c. Black Red
b. Red Red d. Black Black
6. WW and MM drafted a partnership agreement that lists the following assets contributed at the partnership’s
formation:
Contributions by: WW MM
Cash P20,000 P30,000
Inventory P15,000
Building P40,000
Furniture & equipment 15,000
The building is subject to a mortgage of P10,000, which the partnership has assumed. The partnership
agreement also specifies that profits and losses are to be distributed evenly. What amounts should be
recorded as capital for WW and MM at the formation of the partnership
WW MM WW MM
a. P35,000 P85,000 c. P55,000 P55,000
b. P35,000 P75,000 d. P60,000 P60,000
7. Anne, Iris and Alfred formed a partnership on April 30, with the following assets, measured at their fair
market value, contributed by each partner:
Particulars Anne Iris Alfred
Cash P200,000 P240,000 P600,000
Automobile 170,000
Delivery Trucks 560,000
Computer and printer 102,000
Office furniture 70,000 50,000
Land and Building 3,000,000
Totals P3,370,000 P972,000 P650,000
Although Alfred has contributed the most cash to the partnership, he did not have the full amount of
P600,000 available and was forced to borrow P400,000. The land and building contributed by Anne has a

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 mortgage of P1,800,000 and the partnership is to assume responsibility of the loan. If the profit and loss
sharing agreement is 40 percent, 40 percent, and 20 percent respectively, for Anne, Iris and Alfred, what is
the total capital investment of all the partners at the opening of the business on April 30?
a. P4,992,000 b. P3,192,000 c. P2,792,000 d. P3,328,000
8. Mahal admits Mora as a partner in the business. Balance sheet accounts of Mahal on September 30, just
before admission of Mora show:
Cash P31,200 Accounts payable P74,400
Accounts receivable 144,000 Mahal, capital 316,800
Merchandise inventory 216,000
It is agreed that for purpose of establishing Mahal’s interest, the following adjustments shall be made:
• An allowance for doubtful accounts of 2% is to be established
• Merchandise inventory is to be valued at P242,400
• Prepaid expense of P4,200 and accrued expenses of P4,800 are to be recognized
Mora is to invest sufficient cash to obtain a 1/3 interest in the partnership. How much is Mora’s investment to
the partnership?
a. P169,860 b. P211,200 c. P171,660 d. P95,040

On March 1, 20x4, CC and FF formed a partnership with each contributing the following assets:
Accounts CC FF
Cash P30,000 P70,000
Machinery 25,000 75,000
Building -- 225,000
Furniture and Fixtures 10,000 --
The building is subject to a mortgage loan of P90,000, which is to be assumed by the partnership. The agreement
provides that CC and FF share profits and losses 30% and 70%, respectively
9. On March 1, 20x4 the capital account of FF would show a balance of
a. P280,000 b. P305,000 c. P314,000 d. P370,000
10. Assuming that the partners agreed to bring their respective capital in proportion to their respective profit and
loss ratio, and using FF’s capital as the base, how much cash is to be invested by CC?
a. P19,000 b. P30,000 c. P40,000 d. P55,000
CC admits DD as a partner in business. Accounts in the ledger for CC on November 30, 20x4, just before the
admission of DD, show the following balances:
Cash P6,800
Accounts receivable 14,200
Merchandise inventory 20,000
Accounts payable 8,000
CC, capital 33,000
It is agreed that for purpose of establishing CC’s interest the following adjustments shall be made:
An allowance for doubtful accounts of 3% of accounts receivable is to be established
The merchandise inventory is to be valued at P23,000
Prepaid salary expense of P600 and accrued rent expense of P800 are to be recognized
11. DD is to invest sufficient cash to obtain a 1/3 interest in the partnership. CC’s adjusted capital before the
admission of CC
a. P28,174 b. P35,347 c. P35,374 d. P36,374
12. The amount of cash investment by DD
a. P11,971 b. P14,087 c. P17,687 d. P18,487
13. In 2011, Jessie and Anne agreed to contribute equal amounts into a new partnership for a 50% interest in
profit (loss) and in capital to each of them. Their respective contributions will come from old proprietorships
they owned and will both be dissolved. Jessie contributed the following items and amounts:
Cash P585,000

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 Machineries (at book value per her proprietorship records) P400,000
Anne contributed the following items at their carrying amounts in the proprietorship records:
Accounts receivable P75,000
Inventory 210,000
Furniture and fixtures 402,000
Intangibles 172,500
All non cash contributions are not property valued. The two partners have agreed that (a) P6,000 of the
accounts receivable are uncollectible; (b) the inventories are overstated by P15,000; (c) the furniture and
fixtures are understated by P9,000; and the intangibles includes a patent with a carrying value of P10,500,
which must now be derecognized due to the result of unsuccessful litigation promulgated by the court just
before the partnership formation.
What is the fair value of the machineries invested by Jessie into the partnership?
a. P336,000 b. P252,000 c. P390,000 d. P350,000
14. I and Q formed a partnership on January 2, 2016, and agreed to share income 90%, 10%, respectively. I
contributed a capital of P12,500. Q contributed no capital but has a specialized expertise and manages the
firm full-time. There were no withdrawals during the year. The partnership agreement provides for the
following:
a. Capital accounts are to be credited annually with interest at 5% of beginning capital
b. Q is to be paid a salary of P500 a month
c. Q is to receive a bonus of 20% of income calculated before deducting his bonus, his salary and interest
on both capital accounts
d. Bonus, interest, and Q’s salary are to be considered partnership expenses
The partnership’s 2016 income statement follows:
Revenues P48,225
Expenses 24,850
Net income P23,375
How much is the total share of Q on the 2016 partnership net income?
a. P15,837.50 b. P14,325 c. P16,194 d. P14,169
15. R and J, partners, divide profits and losses on the basis of average capitals. Capital accounts for the year
ended December 31, 2016, are shown below. The net profit for 2016 is P135,000. (Changes in capitals during
the first half of the month are the regarded as effective as the beginning of the month; changes during the
second half of a month are regarded as effective as of the beginning of the following month.)
Particulars R, Capital J, Capital
Dr Cr Dr Cr
January 1 P300,000 P330,000
March 9 P50,000
April 14 150,000
July 1 100,000
Sept 4 P40,000
Sept 22 100,000
October 26 75,000
The share of R on the 2016 profit is:
a. P57,250 b. P77,250 c. P57,750 d. P62,630
16. Efren and Frenz operate The Gourmet Restaurant as a partnership. Their partnership agreement has the
following provisions for sharing profits and losses:
A. Income is distributed only as far as it is available
B. Available income is to be distributed in the following sequence:
1. Efren, who is the chef, gets a salary of P25,000 a year; Frenz, who is still learning, gets a salary of
P10,000
2. Interest is imputed on the average capital balances at 15 percent

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 3. Any remaining profits and losses are to be shared equally

The average capital balances during the year were P270,000 for Efren and P50,000 for Frenz. If the
partnership income for the year is P17,500, it should be distributed to the partners as follows:
a. Efren P8,000; Frenz P9,500 c. Efren P12,500; Frenz P5,000
b. Efren P8,750; Frenz P8,750 d. Efren P14,000; Frenz P3,500
17. Partner Alta had a capital balance on January 1, 20x4 of P45,000 and made additional capital contributions
during 20x4 totaling P50,000. During the year 20x4, Alta withdrew P8,000 per month. Alta’s post-closing trial
balance on December 31, 20x4 is P30,000. Alta’s share of 20x4 partnership income is:
a. P96,000 b. P50,000 c. P31,000 d. P8,000
18. Partners A and B have a profit and loss agreement with the following provisions: salaries of P20,000 and
P25,000 for A and B respectively; a bonus to A of 10% of net income after bonus; and interest of 20% on
average capital balances of P40,000 and P50,000 for A and B, respectively. Any remainder is to be split
equally. If the partnership had net income of P88,000, how much should be allocated to Partner A
a. P36,000 b. P44,500 c. P50,000 d. P43,500
X, Y and Z, a partnership formed on January 1, 20x4 had the following initial investment:
X P100,000
Y P150,000
Z P225,000
The partnership agreement states that the profits and losses are to be shared equally by the partners after
consideration is made for the following:
• Salaries allowed to partners: P60,000 for X, P48,000 for Y, and P36,000 for Z
• Average partners’ capital balances during the year shall be allowed10%
• Additional information:
• On June 30, 20x4, X invested an additional P60,000
• Z withdrew P70,000 from the partnership on September 30, 20x4
• Share the remaining partnership profit was P5,000 for each partner
19. Partnership net profit of December 31, 20x4 before salaries, interests and partner’s share on the remainder
was
a. P199,750 b. P207,750 c. P211,625 d. P222,750
A partnership begins its first year with the following capital balances:
A, capital P60,000
B, capital P80,000
C, capital P100,000
The articles of partnership stipulate that profits and losses be assigned in the following manner
• Each partner is allocated interest equal to 10 percent of the beginning capital balance
• B is allocated compensation of P20,000 per year
• Amy remaining profits and losses are allocated on a 3:3:4 basis, respectively
• Each partner is allowed to withdraw up to P5,000 cash per year
20. Assuming that the net income is P50,000 and that each partner withdraws the maximum amount allowed.
What is the balance in C’s capital account at the end of that year?
a. P105,800 b. P106,200 c. P106,900 d. P107,400
21. The following balance sheet for the partnership of LuzVisMin was taken from the books on October 1, 2010
Cash P200,000 Accounts payable P400,000
Other assets 800,000 Luz, capital 240,000
Vis, capital 190,000
Min, capital 170,000
Total P1,000,000 Total P1,000,000
The profit and loss agreement among the partners follows:
• Annual salaries to Luz and Vis of P10,000 each

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• Annual interest of 5% on beginning capital
• Bonus of 15% to Luz based on income after salaries, interest and bonus. Remaining profit 25% to Luz, 35%
to Vis, and 40% to Min.
The partnership began its operations on October 1, 2010. Net income for the year ended December 31, 2010
is P139,000.
Which of the following is true?
a. The bonus to Luz is P11,608
b. Net income after salaries, interest and bonus is P77,392
c. Vis total share in net income is P43,375
d. Min’s share on the profit after salaries, interest and bonus is P27,086
22. The dissolution of a partnership occurs
a. Only when the partnership sells its assets and permanently closes its books
b. Only when a partner leaves the partnership
c. Only when a new partner is admitted to the partnership
d. When there is any change in the individuals who make up the partnership
23. The process of terminating the business, selling the assets, paying the liabilities and disbursing the remaining
cash to the partners is called
a. Dissolution c. Liquidation
b. Formation of a partnership d. Withdrawal
24. The selling of noncash assets for cash in partnership liquidation, any difference between book value and the
cash proceeds is called
a. Net profit or loss on sale c. Capital gain or loss
b. Gain or loss on realization d. Sales differential value
25. The main characteristic of a lump sum liquidation done in one transaction is that all the
a. Assets are sold in one transaction
b. Liabilities are paid on one transaction
c. Cash available to partners is distributed to them in one transaction
d. Assets are sold in one transaction and all the available cash is distributed to creditors and partners in
one transaction.
26. The cash available for distribution to partners in an installment liquidation is equal to the
a. Cash available after a sale of noncash assets is made
b. Cash available after payment to creditors are made
c. Cash available after payment to creditors are made and after reserve for future liquidation is set
aside
d. All of the above
27. When advance cash distribution plan is prepared, a partner’s loan payable to partnership is
a. Added to other liabilities
b. Added to the credit balance in the partner’s capital account
c. Subtracted from the credit balance in the partner’s capital account
d. Omitted from the calculation
28. Capital balance and profit and loss sharing ratios of the partners in the ABC partnership are as follows:
A, capital (40%) P168,000
B, capital (40%) 192,000
C, capital (20%) 120,000
Total P480,000
A needs money and agrees to assign one-fourth of his interest in the partnership to D for P45,000 cash. D
pays P45,000 directly to A. Compute the (1) capital balance of D, and (2) the total capital of the ABC
Partnership immediately after the assignment of the interest to D?
a. (1) P42,000; (2) P547,200 c. (1) P42,000; (2) P480,000
b. (1) P67,200; (2) P480,000 d. (1) P67,200; (2) P547,200

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 29. A partnership has the following capital balances:
Elgin (40% of gains and losses) P100,000
Jethro (30%) 200,000
Foy (30%) 300,000
Oscar is going to pay a total of P200,000 to these three partners to acquire a 25 percent ownership interest
from each. Goodwill (or revaluation of asset) is to be recorded. What is Jethro’s capital balance after the
transaction?
a. P150,000 b. P175,000 c. P195,000 d. P200,000
30. Partners Allen, Baker and Coe share profits and losses 5:3:2, respectively. The balance sheet as of April 30,
2014 follows:
Assets Liabilities and Capital
Cash P40,000 Accounts payable P100,000
Other assets 360,000 Allen, Capital 74,000
Baker, Capital 130,000
Coe, Capital 96,000
The assets and liabilities are recorded and presented at their respective fair values. Jones is to be admitted as
a new partner with a 20% capital interest and a 20% share in the profits and losses in exchange for a cash
contribution. No goodwill or bonus is to be recorded. How much cash should Jones contribute?
a. P60,000 b. P72,000 c. P75,000 d. P80,000
The partners in the Kim, Gerald and Maja partnership have capital balances as follows:
Kim, capital P17,500
Gerald, capital P17,500
Maja, capital P20,000
Profits and losses are shared 30%, 30% and 40% respectively. On this date, Maja withdraws and the partners agree
to pay him P22,500 out of partnership cash (Tangible assets are already stated at values approximating their fair
market values).
31. Using bonus method, how much must be the ending capital of Kim immediately after Maja’s withdrawal?
a. P17,500 b. P16,250 c. P16,750 d. P19,375
32. Using partial goodwill method, how much must be the ending capital of Kim immediately after Maja’s
withdrawal?
a. P17,500 b. P16,250 c. P16,750 d. P19,375
33. Using full goodwill method, how much must be the ending capital of Kim immediately after Maja’s
withdrawal?
a. P17,500 b. P16,250 c. P16,750 d. P19,375
34. Elton and Don are partners who share profits and losses in the ratio of 7:3, respectively. On November 5,
20x4, their respective capital accounts were as follows:
Elton P70,000
Don 60,000
On that date they agreed to admit Kravitz as a partner with a one-third interest in the capital and profits and
losses upon his investment of P50,000. The new partnership will began with a total capital of P180,000.
Immediately after Kravitz’s admission, what are the capital balances of Elton, Don and Kravitz, respectively?
a. P60,000; P60,000; P60,000 c. P63,333; P56,667; P60,000
b. P63,000; P57,000; P60,000 d. P70,000; P60,000; P50,000
35. Kris and Mark are partners who share profits and losses 70:30. They have capital account balances of
P170,000 and P260,000, respectively at the date they admit Frank into the partnership. Frank invests
P120,000 in the partnership for a 25 percent equity interest and the bonus method is applied. What is the
peso amount of bonus recognized in Frank’s capital account at the date of admission?
a. P70,000 b. P52,500 c. P23,333 d. P17,500
36. On December 31, 20x4, AN and DE are partners with capital balances of P80,000 and P40,000 and they share
profits and losses in the ratio of 2:1, respectively. On this date, ST invests P36,000 cash for a one-fifth

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 interest in the capital and profit of the new partnership. The partners agree that the implied partnership
goodwill (total revaluation of assets) is to be recorded simultaneously with the admission of ST. The total
implied goodwill of the firm is
a. P4,800 b. P6,000 c. P24,000 d. P30,000
37. Bishop has a capital balance of P120,000 in a local partnership, and Cotton has a P90,000 balance. These two
partners share profits and losses by a ratio of 60 percent to Bishop and 40 percent to Cotton. Lovett invests
P60,000 in cash in the partnership for a 20 percent ownership. The goodwill (or revaluation of asset) method
will be used. What is Cotton’s capital balance after this new investment?
a. P99,600 b. P102,000 c. P112,000 d. P126,000
38. On June 30, 20x4, the balance sheet for the partnership of William, Brown and Lowe, together with their
respective profit and loss ratios, is summarized as follows:
Assets, at cost P300,000 Williams, loan P15,000
Williams, capital 70,000
Brown, capital 65,000
Lowe, capital 150,000
Williams has decided to retire from the partnership, and by mutual agreement the assets are to be adjusted
to their fair value of P360,000 at June 30, 20x4. It is agreed that the partnership will pay Williams P102,000
cash for his partnership interest exclusive of his loan, which is to be repaid in full. Goodwill is to be recognized
in this transaction, as implied (total) by the excess payment to Williams. After Williams’ retirement, what are
the capital balances of Brown and Lowe, respectively?
a. P65,000 and P150,000 c. P73,000 and P174,000
b. P97,000 and P246,000 d. P77,000 and P186,000
39. Prior to liquidation, the liabilities and partners’ capital account are reported with the following balances:
Partner’s Capitals Profit ratio
Alaska P160,000 1/3
Beermen P290,000 2/3
Totals P450,000
The total liabilities of the partnership amount to P150,000, and all assets available are non-cash assets which
were realized at P540,000. The cash distribution to partners upon liquidation would be
Alaska Beermen Alaska Beermen
a. P135,000 P270,000 c. P140,000 P250,000
b. P130,000 P260,000 d. P190,000 P350,000
40. X, Y, and Z have capital balances of P40,000, P50,000 and P18,000, respectively and a profit sharing ratio of
4:2:1, respectively. If X received P8,000 upon liquidation, the total amount received by all partners was
a. P108,000 b. P56,000 c. P24,000 d. P52,000
41. Based on #38 above, except the X received P26,000 as a result of liquidation, Z received as part of the
liquidation
a. P26,000 b. P18,000 c. P14,500 d. P14,000
42. The statement of financial position of the firm A, B, C and D, just prior to liquidation shows the following: A,
loan, P1,000, A, capital, P5,500, B, capital, P5,150, C, capital, P6,850, D, capital, P4,500.
A, B, C and D share profits 4:3:2:1 respectively. Certain assets are sold for P6,000 and this is distributed to
partners. How much cash should C receive?
a. P3,283 b. P 0 c. P2,717 d. P6,000
43. On January 1, year 1, the partners of Cobb, Davis, and Eddy, who share profits and losses in the ratio of
5:3:2, respectively, decided to liquidate their partnership. On this date the partnership condensed balance
sheet was as follows:
Assets Liabilities and Capital
Cash P 50,000 Liabilities P 60,000
Other assets 250,000 Cobb, capital 80,000
Davis, capital 90,000

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 Eddy, capital 70,000
Total assets P300,000 Total Liabilities and Capital P300,000
On January 15, year 1, the first cash sale of other assets with a carrying amount of P150,000 realized
P120,000. Safe installment payments to the partners were made the same date. How much cash should be
distributed to each partner?
Cobb Davis Eddy Cobb Davis Eddy
a. P15,000 P51,000 P44,000 c. P55,000 P33,000 P22,000
b. P40,000 P45,000 P35,000 d. P60,000 P36,000 P24,000
The balance sheet of Kate, Tim and Mar partnership shows the following information as of December 31, 2015:
Cash P4,000 Liabilities P10,000
Other assets 56,000 Kate, loan 5,000
Kate, capital 25,000
Tim, capital 14,000
Mar, capital 6,000
Total 60,000 Total 60,000
Profit and loss ratio is 3:2:1 for Tim, Kate and Mar respectively. Other assets were realized as follows:
Date Cash received Book value
January 2016 P12,000 P18,000
February 2016 7,000 15,400
March 2016 25,000 22,600
Cash is distributed as assets are realized
44. The total loss to Kate is
a. P6,000 b. P2,000 c. P2,000 d. None
45. The total cash received by Tim is
a. P4,000 b. Zero c. P10,000 d. P3,000
46. Cash received by Mar in January 2016 is:
a. P400 b. P2,000 c. P1,000 d. Zero

Rosa, Susan, and Tina are partners sharing profits on a 5:3:2. On January 1 , 20x1. Vida was admitted into the
partnership with a 20% in profits. The old partners continue to participate in profits in their original ratios. For the
year the partnership book showed a net income of P25,000. It was disclosed however, that the following errors were
committed:
Particulars 20x0 20x1
Accrued expenses not recorded at year-end P1,200
Inventory overstated P3,100
Purchases not recorded for which goods have been received
And inventoried P2,000
Income received in advance not adjusted P1,500
Unused supplies not taken up at year-end P900

47. The new profit and loss ratio of Rosa, Susan, Tina, and Vida, respectively for 20x1 is
a. 40%, 25%, 15%; and 20% c. 45%, 30%, 15% and 20%
b. 50%, 20%, 10% and 20% d. 40%, 24%, 16% and 20%
48. The share of partner Rosa in the 20x1 corrected net income is
a. P 9,400 b. P10,000 c. P11,750 d. P12,500

49. PFRS 11 Joint Arrangements provide that joint control exists where:
a. One party alone has power to control the strategic operating decisions of the joint arrangement
b. No single party is in a position to control the activity unilaterally

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 c. The decisions in areas essential to the goals of the joint arrangement do not require the consent of the
parties
d. No one party may be appointed as the manager of the joint arrangement
50. Which if the following is correct?
a. Where the joint operators have designed the joint arrangement so that its activities primarily aim to
provide parties with an output it will be classified as a joint control
b. All joint arrangements are not structured through a separate vehicle are classified as joint ventures
c. For a joint venture, the rights pertain to the rights and obligations associated with individual assets and
liabilities, whereas with a joint operation, the rights and obligations pertain to the net assets
d. In considering the legal form of the separate vehicle if the legal form establishes rights to individual
assets and obligations, the arrangement is a joint operation. If the legal form establishes rights to the net
assets of the arrangement, then the arrangement is a joint venture
51. Which of the following statements is not true in relation to joint control?
a. Joint control exist only where there is contractually agreed sharing of control
b. Entities over which a party has joint control are accounted for in accordance with PFRS 11 Joint
Arrangements
c. Joint control requires the unanimous consent of the parties sharing control
d. Each party must have an equal interest for joint control to exist
52. In relation to supply of service to a joint operation by one of the joint operators, which of the following
statements is correct?
a. A joint operator cannot earn a profit on supplying services to itself
b. A joint operator is not able to recognize the service revenue or service cost for the services supplied to the
joint operation
c. A joint operator can recognize 100% of the earned through the supply of services to the joint operation
d. A joint operator is entitled to recognize a profit from the supply of services to itself
53. ON December 31, 2015, Intel, Inc. authorized Chiquito to operate as a franchisee for an initial franchise fee of
P15,000. Of this amount, P6,000 was received upon signing the agreement and the balance represented by
an note due in three annual instalments of P3,000 each beginning December 31, 2017. The present value on
December 31, 2015, for three annual payment appropriately discounted is P7,200. According to the
agreement, the non-refundable downpayment represents a fair measure of the services already performed by
Intel and substantial future services are still to be rendered. However, the collectability of the note is not
reasonably assured. Intel’s December 31, 2015, balance sheet unearned franchisee fee from Chiquito’s
franchise should report as:
a. P13,200 b. P10,000 c. P 0 d. P7,200
54. On December 31, 2015, McKing Inc. signed an agreement authorizing Burge Company to operate as a
franchise for an initial franchise fee of P500,000. Of this amount, P200,000 was received upon signing of the
agreement and the balance is due in three annual payment of P100,000 each, beginning December 31, 2011.
No future services are required to be performed. Burge Company’s credit rating is such that collection of the
note is reasonably assured. The present value at December 31, 8 of the three annual payments discounted at
14% (the implicit rate for a loan of this type) is P232,200. On December 31, 2016, McKing should record
earned franchise fees of
a. P232,200 b. P432,200 c. P300,000 d. P 0
55. On December 31, 2015 Bulaklak Company signed an agreement to operate as franchisee of Bluewich for a
franchise fee of P800,000. Of this amount, P300,000 was paid upon signing of the agreement and the balance
is payable in five annual payments of P100,000 each beginning December 31, 2016. The present value of the
five payment, at an appropriate rate of interest, is P560,000 at December 31, 2015. The agreement provides
that the downpayment is not refundable and no future services are required of the franchisor. The collection
of note receivable is reasonably certain. Bluewich’s Company should report unearned revenue from franchise
fee in its December 31, 2012 balance sheet at:
a. P800,000 b. P300,000 c. P660,000 d. P 0

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56. The franchise agreement between Minute Burger and Ms. Paganda which was signed at the beginning of the
year required a P5,000,000 franchise fee payable P1,000,000 upon signing of the franchise and the balance in
four annual instalments starting the end of the current year. At the time of granting of the franchise, the
present value using 12% as discount rate of the four instalments would approximate P1,996,500. The fees
once paid are not refundable. The franchise may be cancelled subject to the provisions of the agreement.
Should there be unpaid franchise fee attributed to the balance of main fee (P5,000,000), same would become
due and demandable upon cancellation. Further, the franchisor is entitled to a 5% fee on gross sale payable
monthly within the first ten days of the following month. The Credit Investigation Bureau rated Ms. Paganda
as AA credit rating. Further the balance of the franchise fee was guaranteed by a commercial bank. The first
year of operations yielded gross sales of P90 million. As of the signing of the franchise agreement, Minute
Burger’s unearned franchise fee amounted to
a. P6,496,500 b. P4,000,000 c. zero d. P1,996,500
57. Mike and Noel formed a joint venture to purchase and sell a special type of merchandise. The venturers
agreed to contribute cash of P270,000 each to be used in purchasing the merchandise, and to share profits
and lossess equally. They also agreed that each shall record his purchases, sales, and expenses in their own
books.
Upon termination of the joint venture, the following data are made available:
Particulars Mike Noel
Joint venture P234,000 credit P170,600 debit
Inventory taken 10,800 33,750
Expenses paid from joint venture cash 5,400 9,900
How much cash is to be received by Noel in the final settlement?
a. P267,950 b. P290,225 c. P323,975 d. P280,325
58. ABS and CBN formed a joint venture on January 1, 2013 to operate two stores to be managed by each
ventures/participants. They agree to contribute cash as follows:
ABS P 30,000
CBN P 20,000
Profits and losses are to be divided in the capital ratio. All venture transactions are for cash. Cash receipts and
disbursements of the business during the 4-month period handled through the participant’s/venturer’s bank
accounts are as follows:
Particulars ABS CBN
Recepits P78,920 P65,425
Disbursements 62,275 70,695
On April 30, the remaining non-cash venture assets in the hands of the particiapants/venturers were sold for
P60,000. The venture is terminated and settlement is made between ABS and CBN
The P60,000 is divided between the particiapants/venturers as follows:
a. ABS, P16,180; CBN, P43,820 c. ABS, P26,180; CBN, P33,820
b. ABS, P21,905; CBN, P38,095 d. ABS, P48,095; CBN, P11,905

59. In the reporting of a corporate liquidation, assets are shown at

a. Present value calculated using an appropriate discount rate
b. Net realizable value
c. Historical rate
d. Book value
60. In a statement of affairs, assets are classified
a. According to whether they are pledged with particular creditors
b. As current or non-current
c. As monetary or non-monetary
d. As operating or non-operating
61. What are free assets?

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 a. Assets for which net realizable value is greater than historical cost
b. Assets for which no market exists
c. Assets for which replacement cost is greater than historical cost
d. Assets available to be distributed for liabilities with priority and other unsecured obligations
62. What is an inherent limitation of statement of financial affairs?
a. Many of the amounts reported are only estimations that might prove to be inaccurate
b. The statement is applicable only to bankruptcy
c. The statement covers only a short time, whereas a bankruptcy may last much longer
d. The figures on the statement vary as to voluntary and an involuntary bankruptcy
63. In the accounting statement of affairs, the gains and losses upon liquidation would equal
a. Net book value of assets minus book value of liabilities
b. The book value of assets minus the realizable value
c. Total estimated realizable value of assets minus the amount assigned to secured creditors
d. Total estimated realizable value of assets minus the amount remaining for unsecured creditors
64. Lakeside Bank holds a P100,000 note secured by a building owned by Fly-by-Night Manufacturing, which has
filed by bankruptcy. If the property has a book value of P120,000 and a fair market value of P90,000, what is
the best way to describe the note held by the bank? It has a/an
a. Secured claim of P100,000
b. Unsecured claim of P100,000
c. Secured claim of P90,000 and an unsecured claim of P10,000
d. Secured claim of P100,000 and an unsecured claim of P20,000

The following was taken from the Statement of Affairs of Paradigm Company at August 30, 2018:
Assets pledged with fully secured creditors P71,000
Assets pledged with partially secured creditors 12,500
Free assets 11,000
Liabilities with priority 3,000
Fully secured liabilities 69,000
Partially secured liabilities 20,000
Liabilities without priority 18,000
65. The estimated deficiency to unsecured creditors without priority amounts is
a. P15,500 b. P15,150 c. P10,550 d. P10,050
66. The estimated amount payable to partially-secured liabilities is
a. P14,450 b. P14,045 c. P15,441 d. P14,540
67. The estimated amount payable to liabilities without priority is
a. P7,059 b. P5,790 c. P9,750 d. P9,570
68. Zero na Corp has been undergoing liquidation since January 1. As of March 31, its condensed statement of
realization and liquidation is presented below:
Assets:
Assets to be realized P95,000
Assets acquired 5,000
Assets realized 30,000
Assets not realized 42,000
Liabilities:
Liabilities liquidated 35,000
Liabilities not liquidated 31,850
Liabilities to be liquidated 65,000
Liabilities assumed 1,500
Revenues and expenses:
Sales on account (credit) 5,000

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 Purchases (debit) 1,500
Payment of expenses of trustee 7,500
Sales for cash 25,000
Interest on marketable securities 150
The net gain (loss) for the three-month period ending March 31 is
a. P7,200 b. (P7,200) c. P49,500 d. (P17,500)
69. Rap Company is insolvent and its statement of affairs shows the following information:
Estimated gains on realization of assets P1,440,000
Estimated losses on realization of assets 2,000,000
Additional assets 1,280,000
Additional liabilities 960,000
Capital stock 2,000,000
Deficit 1,200,000
The pro-rate payment on the peso to stockholders (estimated amount to be recovered by stockholders) is:
a. P0.30 b. P0.43 c. P0.57 d. P0.70
70. S and L owes the Merian Corpozation P6,000 on account, which is secured by accounts receivable with a book
value of P5,000. Its statement of affairs lists the accounts receivable securing the Merian account with an
estimated realizable value of P4,500. If the dividend to general unsecured creditors is 80%, how much can,
Merian expect to receive?
a. P6,000 b. P5,800 c. P5,700 d. P4,800

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