ANSWERS:

1. D
2. E
3. A
4. A Equipment at net selling price of 800,000

5. A
Solution:
Liquidation costs 120,000
Salaries payable 100,000
Current tax payable 1,400,000
Unsecured creditors w/ priority 1,620,000

6. D
Solution:
Excess of note payable (1.2M - 800K RV of equipt.) 400,000
Accrued exp., net of sal. (884K - 100K) 784,000
Accounts payable 4,000,000
Unsecured creditors without priority 5,184,000

7. C
Solution:
Net free assets
Estimated recovery percentage of unsecured creditors
Total unsecured liabilities without
without priority =
priority

Cash 160,000
Accounts receivable (880K x 76%) 668,800
Note receivable 400,000
Interest receivable 40,000
Inventory (1.68M - 40K) 1,640,000
Prepaid assets -
Land and building 10,400,000
Equipment 800,000
Total assets at realizable value 14,108,800
Less: Fully secured liabilities:
Loan payable (8,000,000)
Interest payable (60,000) (8,060,000)
Less: Partially secured:
Realizable value of equipment (800,000)
Total free assets 5,248,800
 Less: Unsecured creditors w/ priority:
Liquidation costs (120,000)
Salaries payable (100,000)
Current tax payable (1,400,000) (1,620,000)
Net free assets 3,628,800

➢ 3,628,800 ÷ 5,184,000 see previous solution = 70%

8. B

Solutions:
Profit or loss is computed as follows:
Joint operation
Merchandise – A 800 3200 Sales – C
Purchases - A's cash 400
Merchandise – B 1600 840 Unsold inventory charged to C*
Freight - in – B 80
Expenses – C 800

360 Profit before salary and bonus - Credit balance

Salaries expense - C 120
Profit after salary but before bonus - Credit
240
balance
Bonus expense** 48
192 Profit after salary and bonus

*Unsold inventory: (₱1,600 plus ₱80 freight-in) multiplied by one-half.

**Bonus is computed as follows:
P
B = P -
1 + Br
B = 240 – (240 ÷ 1.25%) = 48

9. C
Solution:
Profit is allocated to the joint operators as follows:
Allocation to: A B C Totals
Profit before salary and bonus 360
Salary to C 120 (120)
Bonus to C (see previous computation) 48 (48)
Profit after salary and bonus 192
Interest on capital: -
A - (300 x 10%) 120 (120)
 B - (420 x 10%) 168 (168)
Profit after interests on capital (96)
Allocation (24 ÷ 3) (32) (32) (32) 96
Net share - as allocated 88 136 136 -

Cash settlement is determined as follows:

Joint operation - A
Inventory contributed by A 400
Cash contribution 800
Net share in profit 88
Cash settlement – receipt 1,288

Joint operation - B
Inventory contributed 1,600
Freight paid 80
Net share in profit 136
Cash settlement – receipt 1,816

Joint operation – C
Expenses paid 800 840 Cost of inventory taken
Net share in profit 136
Cash settlement – receipt 96

10. A
Solution:
Requirement (a): Profit or loss
Joint operation - A
Purchases – A 400 960 Sales – A
Purchases – B 320 720 Sales – B
Expenses – A 800 40 Other income – B
200 Profit - credit balance

11. B
Solution:
Profit is allocated as follows:
Allocation to: A B Totals
Profit for the year 200
10% commission on purchases:
(10% x 400) – A 40 (40)
 (10% x 320) – B 32 (32)
20% commission on sales:
(20% x 960) – A 192 (192)
(20% x 720) – B 144 (144)
Total to be divided equally (208)
Allocation: (208 ÷ 2) (104) (104) 208
Net share - as allocated 128 72 -

Cash settlement is determined as follows:

Joint operation - A
Purchases 400 960 Collections on sales
Expenses 800
Net share 128
Cash settlement – receipt 368

Joint operation – B
Purchases 320 720 Collections on sales
Net share 72 40 Collections on other income
368 Cash settlement - payment

12. C
Solution:
The joint operation’s profit is computed as follows:
Joint operation
Account with A 16 56 Account with C
Account with B 48 88 Unsold inventory
80 Profit before bonus - credit balance

Profit is allocated as follows:

Allocation to: A B C Totals
Profit before bonus 80
Bonus to A (80 x 10%) 8 (8)
Profit after bonus 72
Equal allocation (72 ÷ 3) 24 24 24 (72)
As allocated 32 24 24 -

Cash settlement is determined as follows:

Joint operation – A
Contributions 16 88 Inventory taken
Net share in profit 32
 40 Cash settlement - payment

Joint operation – B
Contributions 48
Net share in profit 24
Cash settlement – receipt 72

Joint operation – C
56 Withdrawals
Net share in profit 24
32 Cash settlement - payment

13. C
Solution:

Joint operation
Debit balance 20
68 Unsold merchandise (squeeze)
48 Profit - credit balance (₱16 x 3)

14. A
Solution:
Joint operation
Debit balance (squeeze) 28
72 Unsold merchandise
44 Profit - credit balance