ICARE First Preboard AFAR

No. 125 Brgy.
San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com
AFAR FIRST PREBOARD EXAMINATION

MAY 2022 BATCH
1. A partner’s initial capital contribution on date of partnership formation is generally equal

to:
A. The sum of the fair values of the assets contributed to the partnership increased by
any liabilities assumed by the partnership
B. The sum of the carrying values of the assets contributed to the partnership increased
by any liabilities assumed by the partnership
C. The sum of the fair values of the assets contributed to the partnership decreased by
any liabilities assumed by the partnership
D. The sum of the carrying values of the assets contributed to the partnership decreased
by any liabilities assumed by the partnership
2. When the investment of a new partner into the partnership exceeds his/her initial capital
credit, there is:
A. Bonus from the old partners to the new partner
B. Partnership revaluation
C. Bonus from the new partner to the old partners
D. Cannot be determined based on the given
3. When a partner’s capital balance becomes a deficit,

A. The deficit will be absorbed the richest partner
B. The partner with a deficit balance should contribute additional assets to offset the
deficit balance
C. The other partners should file a case against the partner with the deficit
D. The deficit will be considered as a partnership loss
4. In the cash distribution plan, which partner gets the first cash distribution?
A. The partner with the largest loss absorption potential
B. The partner with the largest profit and loss ratio
C. The partner with the largest partnership interest
D. The partner with the largest capital balance
5. In preparing the statement of affairs, assets are valued at:

A. Net realizable values
B. Book value
C. Value in use
D. Historical cost
6. Which of the following methods can be used to estimate the amount of variable
consideration?
A. Expected value method
B. Most likely amount
C. Both A and B
D. Neither A nor B
7. Which is an allowed method to measure progress towards complete satisfaction of a

performance obligation that is satisfied over time?
A. Survey of performance completed to date
B. Cost-to-cost method
C. Based on machine hours used
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No. 125 Brgy. San Sebastian
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D. All of the above are allowed
8. If the construction in progress exceeds the progress billing:

A. A contract asset is recognized
B. A receivable is recognized
C. Either A or B
D. Neither A nor B
Assume that two parties, A and B, structure arrangement in an incorporated entity (entity C) in
which each party has a 50 per cent ownership interest. The purpose of the arrangement is to
manufacture materials required by the parties both for their own, individual manufacturing
processes, or re-sold to third parties. The arrangement ensures that the parties operate the facility
that produces the materials to the quantity and quality specifications of the parties. The legal form
of entity C (an incorporated ability) through which the activities are conducted are initially
indicates that the assets and liabilities held in entity C are the assets and the liabilities of entity C.
The contractual agreement between the parties does specifies that the parties have rights to the
assets and obligations for the liabilities of entity C.
However, the parties also consider the following aspects of the arrangement:
 The parties agreed to purchase all the output produced by entity C in the ratio of 50:50.
Entity C cannot sell any of the output to the third parties, unless this is approved by the
two parties of the arrangement. Because the purpose of the arrangement is to provide
with output they require, such sales to the third parties are expected to be uncommon and
not material.
 The price of the output sold to the parties is set by both parties at a level that is designed
to cover the costs of production and administrative expenses incurred by entity C. On the
basis of this operating level, the arrangement is intended to operate a break-even level. In
other words, the party, not entity C, assumes demand, inventory and credit risks one-half
of the produced are subsequently re-sold by A and B to third parties. The incorporated
entity has the following financial information of 2016:
Debit Credit
Cash P60,000,000 Accounts payable P360,000,000
Inventory 420,000,000 Defined benefit plan obligation 150,000,000
PPE 300,000,000 Equity, beg. 210,000,000
Expenses 120,000,000 Revenues 180,000,000
9. How should A and B classify and present the arrangement in their own financial
statement under IFRS 11?
A. Joint Venture, using either equity, cost or fair and value
B. Joint Venture, with Investment in JV using equity method
C. Joint Operation, A and B will recognize their share of assets, liabilities, revenue and
expenses of Entity C per line item
D. Joint Operation, but since Entity C is a separate vehicle, an Investment in JV is
presented in the financial statements of A and B.
Use the following information for the next two items.

A, B and C decided to form ABC Partnership. It was agreed that A will contribute an equipment
with value in use of P200,000 with historical cost of P1,600,000 and accumulated depreciation of
P1,200,000. A day after the partnership formation, the equipment was sold for P600,000.
B will contribute a land and building with carrying amount of P2,400,000 and fair value of
P3,000,000. The land and building are subject to a mortgage payable amounting to P600,000 to be

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assumed by the partnership. The partners agreed that B will have 60% capital interest in the
partnership. The partners also agreed that C will contribute sufficient cash to the partnership.
10. What is the total agreed capitalization of the ABC Partnership?

A. P3,000,000
B. P4,000,000
C. P5,000,000
D. P6,000,000
11. What is the cash to be contributed by C in the ABC Partnership?

A. P1,000,000
B. P1,200,000
C. P1,400,000
D. P1,600,000
Use the following information for the next three items.

A, B, and C agree to form a partnership and to share profits in the ratio of 5:3:2. They also agreed
that C is to be allowed a salary of P28,000 and that B is to be guaranteed P21,000 as his share of
the profits. During the first year of operation, income from fees is P180,000, while expenses total
P96,000.
12. How much of the net income is to be credited to A?

A. P24,000
B. P25,000
C. P28,000
D. None of the above
13. How much of the net income is to be credited to B?

A. P22,000
B. P21,000
C. P16,000
14. How much of the net income is to be credited to C?

A. P38,000
B. P39,000
C. P11,200

Belle Corporation is a financially distressed corporation with the following financial information
on April 15,2022.
Estimated
Book Realized
Values Values
Cash P20,000 P20,000
Accounts receivable.net 100,000 75,000
Inventories 150,000 70,000
Plant assets 250,000 280,000
Total assets 520,000
Accounts payable, unsecured 150,000

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Liabilities with priority claims 80,000

Note payable, secured by Accounts 100,000
Receivable
Mortgage payable, secured by all Plant 220,000
assets
Total liabilities 550,000
15. The estimated deficiency to unsecured creditors is

A. P70,000
B. P105,000
C. P150,000
D. P175,000
16. The expected recovery per peso of unsecured claims is

A. P0.40
B. P0.60
C. P0.86
D. P1.00

The following data were taken from the statement of realization and liquidation of XYZ
Corporation for the quarter ended September 30, 2022:
Assets to be realized P41,250
Assets acquired 45,000
Assets realized 52,500
Assets not realized 18,750
Liabilities to be liquidated 67,500
Liabilities assumed 22,500
Liabilities liquidated 45,000
Liabilities not liquidated 56,250
Supplementary credits 63,750
Supplementary charges 58,500
The ending balances of capital stock and retained earnings are P37,500 and P15,000, respectively.
17. What is the net income (loss) for the period?

A. P21,000
B. (P26,250)
C. (P21,000)
D. P5,250
18. What is the ending cash balance?

A. P70,000
B. P90,000
C. P69,000
D. P78,750

On January 1, 2022, an entity granted franchise to a franchisee. The franchise agreement required
the franchise to pay a nonrefundable upfront fee in the amount of P800,000 and on-going payment
of royalties equivalent to a 5% of the sales of the franchisee. The franchise paid the nonrefundable
upfront fee on January 1, 2022.

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In relation to the nonrefundable upfront fee, the franchise agreement required the entity to render
the following performance obligations:
 To construct the franchisee’s stall with stand- alone selling price of P400,000.
 To deliver 20,000 units of raw materials to the franchisee with stand- alone selling price
of P500,000.
 To allow the franchisee to use the entity trade name for a period of 10 years starting
January 1, 2022 with stand- alone selling price of P100,000
On June 30, 2022, the entity completed the construction of the franchisee’s stall. On December
31, 2022, the entity was able to deliver 6,000 units of raw materials to the franchisee. For the year
ended December 31, 2022, the franchisee reported sale revenue amounting to P200,000.
The entity had determined that the performance obligations are separate and distinct from one
another.
19. What is the amount of nonrefundable upfront fee to be allocated to the construction f the
franchisee’s stall?
A. P400,000
B. P320,000
C. P500,000
D. P240,000
20. What is the amount of revenue to be recognised in relation to the use of delivery of raw
materials for the year ended December 31, 2019?
A. P200,000
B. P400,000
C. P120,000
D. P150,000
21. What is the amount revenue to be recognised in relation to the use of entity’s trade name
for the year ended December 31, 2019?
A. P10,000
B. P8,000
C. P100,000
D. P20,000

On January 1, 2021, the Star Corporation entered into a contract to construct a P10 million building
that is expected to be completed on December 1,2023. The total estimated cost is P8 million. The
following information pertain to this project's construction period:
2021 2022 2023
Cost-to-date P2,000,000 P4,050,000 P8,100,000
Estimated cost to complete 6,000,000 4,050,000
Progress billings 1,000,000 3,500,000 3,600,000
Collections 800,000 2,600,000 3,000,000
22. The realized gross profit reported in the income statements for 2021 is
A. 2021, P500,000
B. 2021, P500,000
C. 2021, P500,000
D. 2021, P500,000

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23. The construction in progress account balance at the end of year 2021 is
A. 2021, P500,000
B. 2021, P2,000,000
C. 2021, P2,500,000
D. 2021, P2,950,000
E. 2022, P450,000
F. 2022, P450,000
G. 2022, P500,000
H. 2022, P950,000
25. The construction in progress account balance at the end of year 2022 is
E. 2022, P950,000
F. 2022, P5,000,000 – ICHANGE IT 2022, P5,250,000
G. 2022, P5,000,000
H. 2022, P5,950,000
I. 2023 P950,000
J. 2023 P1,900,000
K. 2023 P950,000
L. 2023 P1,900,000

On January 1, 2021, Snake Company accepted a long- term construction project for an initial
contract price of P2,000,000 fixed amount with a P1,000,000 variable consideration in the form of
an incentive to be completed on June 30, 2023. It was determined it was not highly probable that
Snake Company will be entitled to the variable consideration on 2021. On January 1, 2022, due to
change in circumstances, it was determined that it is highly probable that the entity will be entitled
to the variable consideration. The outcome of the construction contract can be estimated reliability.
The entity provided for the following data concerning the direct costs related to the said project
for 2021 and 2022:
2021 2022
Cost during the year P880,000 P1,360,000
Remaining estimated cost to complete at year-end 1,320,000 560,000
27. What is the construction revenue for the year ended December 31, 2021?
A. P680,000
B. P800,000
C. P880,000
D. P720,000
28. What is the realized profit for the year ended December 31, 2022?
A. P400,000
B. P160,000
C. P360,000
D. P200,000
29. What is the balance construction in progress on December 31, 2022?

A. P2,400,000
B. P2,040,000
C. P2,240,000

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D. P1,800,000

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30. The following are the capital account balances and profit and loss ratio of the partners in ABC
Company
Capital P&L ratio

A 120,000 25%
B 160,000 50%
C 400,000 25%
On January 2, 2020, D is admitted to the partnership under the following agreement:

- D is to share 1/3 in the profits and losses while the other partners continue to participate in
profits and loss ratio in their original ratio.
- D is to pay B, P48,000 for a ¼ interest of the latter’s capital in the partnership net assets
and is to invest P280,000 cash in the partnership.
- The total capital after D’s admission is to be 1,040,000 of which, D’s capital account is to
show P300,000.
The capital account of the partners after D’s admission:

A B C
a. 147,000 166,000 427,000
b. 145,000 170,000 425,000
c. 138,366 156,744 418,336
d. 145,000 166,000 427,000
31. Paul is an industrial partner. Besides his services, he also contributed capital to the partnership.
There is no agreement as to distribution of profits or losses. The share of Ocama in the profit
is
a. to be determined by the remaining partners
b. such share as may be just and equitable under the circumstances
c. pro-rata to his contribution.
d. combination of b and c.
32. Partners De Jesus, Espiritu, Aquinde and De Lemos share profits 50%, 30%, 10% and 10%.
Accounts maintained with partners just prior to liquidation follow:
Advances (Dr. Loans (CR Capitals (CR

Balances) balances) balances)
De Jesus 10,000 80,000
Espiritu 20,000 60,000
Aquinde 9,000 30,000
De Lemos 5,000 50,000
At this point P36,000 is available for distribution to partners. How much cash is to be
distributed to De Lemos?
a. P13,250
c. P22,750
b. P0
d. P24,750
33. Partner a and B have profits and loss agreement with the following provisions: Salaries of
P30,000 and P45,000 for A and B, respectively; a bonus to A of 10% of net income after
salaries and bonus; and interest of 10% on average capital balances of P20,000 and P35,000
for A and B, respectively. One-third of any remaining profits are allocated to A and the balance
to B.

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If the partnership had net income of P102,500, how much should be allocated to partner A?
a. P41,000 c. P41,167
b. P44,250 d. P47,500
34. E, F and G invest P40,000; P30;000 and P25,000, respectively in a partnership on June 30,
2020. They agree to divide the net income or loss as follows:
 Interest at 10% on beginning capital account balances
 Salaries of P10,000; P8,000 and P6,000, respectively, to E, F and G
 Remaining net income loss divided equally
 A minimum of P15,000 of income guaranteed to G
If the net income for the year ended June 30, 2021, before interest and salary allowances to
partners was P44,000, the net income credited to E is:
a. P16,000 c. P14,000
b. P16,500 d. P17,500
35. E, R and G operate a local accounting firm as partnership. After working together for several
years, they have decided to liquidate the partnership. The partners have presented the
following balance sheet;
Cash P200,000 Liabilities P400,000

Receivable from E 80,000 Loan Payable to R 100,000
Non-cash assets 1,620,000 E, Capital (10%) 900,000
R, Capital (50%) 300,000
G, Capital (40%) 200,000
The non-cash assets are sold for P800,000 with P210,000 of this amount being used to pay
liquidation expenses. All partners are personally insolvent.
How much of the cash must E received?

a. P261,667 c. P390,000
b. P128,333 d. P305,000
36. PAUL, MARIE and IRISH share profits and losses from their partnership in the ratio of 35%,
45% and 20% respectively. Capital and loan balances related to each partner are as follows:
Loan to Partner Loan to Capital

from Partnership Partnership
from partner
PAUL P100,000 P500,000
MARIE P70,000 280,000
IRISH 200,000 250,000
In addition to loan to partner, assets of the partnership includes cash of P110,000, inventory of
P360,000, receivable of P260,000 and plant and equipment of P710,000. Partnership liabilities
to non-partners amount to P180,000.
If PAUL receives already P450,000, how much IRISH receives at this point?
a. P321,155 c. P450,000
b. P364,286 d. P375,000

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37. Max decided to withdraw from his partnership with Fried and Chic. Before his withdrawal,
Max’ capital balance was P58,000, while Fried’s was P64,000 and Chic’s was P77,000. Also,
the partnership’s total assets amounted to P450,000, but the partners agreed that a fixed asset
was under depreciated by P15,000. Max, Fried and Chic share profits and losses in the ration
of 2:4:4, respectively. If Max was paid P53,200 upon his retirement, how much is the
remaining partnership net assets after Max’ withdrawal?
a. P182,800 c. P130,800
b. P197,800 d. P160,800
38. Due to financial difficulty, partners G, H, I decided to liquidate. Before liquidation, the capital
balances of G, H, I are P10,000, P25,000, and P20,000 respectively, Loan from G is P25,000
and cash is P25,000. The profit and loss ratio of G, H and I is 30:35:35, respectively.
Partner H received P10,650 upon liquidation and the share in the liquidation expenses of
partner G is P1,800. Meanwhile, the cash available after realizing the noncash asset and paying
the liquidation expenses is P69,000.
What is the carrying amount of the noncash asset sold?

a. 85,000 c. 86,000
b. 80,000 d. 85,500
39. What is the amount paid to the outside creditors?

a. 35,000 c. 30,000
b. 45,000 d. 40,000
40. A balance sheet for the partnership of Net, Elena and Tin who share profits in the ratio of 2:1:1,
shows the following balances just before the liquidation:
Cash 48,000
Other assets 238,000
Liabilities 80,000
Net, capital 88,000
Elena, capital 62,000
Tin, capital 56,000
On the first installment of the liquidation, certain assets are sold for P 128,000. Liquidation
expenses of P4,000 are paid and additional liquidation expenses are anticipated. Liabilities are
paid amounting to P21,600 and sufficient cash is retained to insure the payment to creditors
before making payment to partners. On the first payment to partners, Net receives P25,000.
The total cash payment to partners in the first installment is:

a. P100,000 c. P50,000
b. P80,000 d. P40,000
41. The amount of cash withheld for anticipated liquidation expenses and unpaid liabilities are
a. P12,000 c. P16,600
b. P14,600 d. P17,600
42. On January 1, 2018, A, B and C formed ABC Partnership with original capital contribution of
P600,000, P1,000,000 and P400,000. A is appointed as managing partner.
During 2018, A, B and C made additional investments of P1,000,000, P400,000 and P600,000,
respectively. At the end of 2018, A, B and C made drawings of P400,000, P200,000 and
P800,000, respectively. At the end of 2018, the capital balance of C is reported at P640,000.
The profit or loss agreement of the partners is as follows:
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 10% interest on original capital contribution of the partners.

 Quarterly salary of P80,000 and P20,000 for A and B, respectively.
 Bonus to A equivalent to 20% of Net Income after interest and salary to all partners
 Remainder is to be distributed equally among the partners.
What is the partnership profit for the year ended December 31, 2018?
a. 1,800,000 c. 2,100,000
b. 2,040,000 d. 1,920,000
43. What is A’s share in partnership profit for 2018?

a. 380,000 c. 1,080,000
b. 680,000 d. 400,000
44. What is B’s share in partnership profit for 2018?

a. 400,000 c. 100,000
b. 580,000 d. 180,000
45. ABC Corp. works on a 140 million contract in 2021 to construct a building for Bacolod
Company. During 2021, ABC Corp. uses the percentage of completion method to recognized
revenue over time. At December 31, 2021, the following account balances are recorded in the
books of the company.
Accounts receivable 4,800,000

Contract Billing 24,000,000
Construction in Progress 49,100,000
Estimated cost to complete 63,700,000
What is total actual cost incurred in year 2021?

a. 98 million c. 49 million
b. 34.3 million d. 15 million
46. A partnership agreement calls for allocation of profits and losses by salary allocation; a bonus
allocation; interest on capital contribution; and any remainder to be allocated by the preset
ratios. If a partnership has a loss to allocate, generally which of the following procedures would
be applied?
a. The loss should be allocated using the profit and loss ratio only
b. Any salary allocation criteria would not be used
c. Any loss would be allocated equally to all partners
d. The bonus criteria would not be used
47. Which of the following would be least likely to used as a means of allocating profit among the
partners who are active in the management of the partnership?
a. Salaries
b. Bonus as a percentage of net income before the bonus
c. Bonus a percentage of sales in excess of a targeted amount
d. Interest on average capital balances
48. Which of the following is not a possible claim against a partner’s personal assets?
a. Other partners, if the partner in question has a capital deficiency
b. Personal creditors of other partners
c. Personal creditor of partner in question
d. Partnership creditors if claims is not fully paid from partnership assets.

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49. Which of the following is not a component of the formula used to distribute partnership’s
income?
a. Capital investment of the partners.
b. Salary allocation to working partners.
c. After all other allocations, the remainder divided according to the
profit and loss sharing ratio.
d. Interest on notes to partners.
50. If a new partner acquires a partnership interest directly from the partners rather than from the
partnership itself,
a. The partnership asset should be revalued.
b. The partnership has undergone a quasi-reorganization.
c. The existing partners’ capital accounts should be reduced and the
new partner’s account increased.
d. No entry is required because it is a transaction between them.
51. The primary difference between a balance sheet and an accounting statement of affairs is that:
a. A balance sheet reflects book values, while a statement of affairs
emphasizes realization values.
b. Assets are arranged in a different sequence.
c. Liabilities are arranged in a different sequence.
d. Owners’ equity is not considered in the statement of affairs.
52. Where a contract with a customer is partially within the scope of IFRS 15, Revenue from
Contracts with Customers and partially within the scope of another standard
a. The requirements of the Conceptual Framework are applied to
determine how to measure the separate parts of the contract.
b. The requirements of the IFRS 15 are applied, regardless of whether
the other standard specifies how to measure or initially measure
one or more parts of the contract.
c. If the other standard does not specify how to separate or initially
measure one or more parts of the contract, then an entity shall
apply the other standard to the contract.
d. If the other standard specifies how to separate or initially measure
one or more parts of the contract, then the entity shall apply those
separation or measurement requirements first.
53. The percentage of completion can be measured in a number of ways, including

a. Physical estimates or surveys of the work performed to date.
b. The work plan basis, which uses the project management plan to
calculate the percentage of the construction completed.
c. The billing basis, using the proportion that progress billings to
date bear to the total estimated billings for the contract.
d. Physical estimates or surveys of the work performed to date and
the billings basis, using the proportion that contract costs incurred
for work performed to date bear to the estimated total contract
costs.

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54. A franchise agreement grants the franchisor an option to purchase the franchisee’s business.
It is probable that the option will be exercised. When recording the initial franchise fee, the
franchisor should
a. Record the entire initial franchise fee as a deferred credit which
will reduce the franchisor’s investment in the purchased outlet
when the option is exercised.
b. Record the entire initial franchise fee as unearned revenue which
will reduce the amount of cash paid when the option is exercised.
c. Record the portion of the initial franchise fee which is attributable
to the bargain purchase option as a reduction of the future amounts
receivable from the franchisee.
d. None of these.
55. In consignment sales, the consignee

a. Records the merchandise as an asset on its books.
b. Records a liability for the merchandise held for consignment
c. Recognizes revenue when it ships merchandise to the consignor.
d. Prepares an account report for the consignor which shows sales,
expenses, and cash receipts.
56. A joint arrangement that is not structured through a separate vehicle is called
a. A joint venture
b. A Joint operation
c. An expense joint venture or a joint operation
d. A partnership
57. Monroe admits John as a partner in the business. The balance sheet accounts of Monroe just
before the admission of John show the following: Cash – P26,000, Accounts receivable –
P120,000, Inventory – P180,000, and Accounts payable – P62,000. It was agreed that for the
purpose of establishing Monroe’s interest, the following adjustments shall be made: an
allowance for doubtful accounts of 3% of accounts receivable is to be established; inventory
is to be adjusted upward by P25,000; and prepaid expenses of P3,600 and accrued liabilities
of P4,000 are to be recognized. If john is to invest sufficient cash to obtain 2/5 interest in the
partnership, how much would John contribute to the new partnership?
a. 190,000
b. 176,000
c. 113,980
d. 95,000
58. Electricity companies A and B (involved in electricity sales but not distribution) jointly
establish a power generation entity (company C) to build and operate a CCGT power plant.
Companies A and B each have a 50% ownership interest in company C, which is structured
as a corporation. The incorporation enables the separation of company C from companies A
and B and, as a consequence, the assets and liabilities held in company C are the assets and
liabilities of company C. The contractual arrangement between the parties does not specify
that the parties have rights to the assets or obligations for the liabilities of company C.
However, the parties also enter into an off-take agreement requiring the following:
• Companies A and B agree to purchase all the power generated by company C in a ratio
of 50:50. Company C cannot sell any of the output to third parties, unless this is approved
by companies A and B. Because the purpose of the arrangement is to provide companies
A and B with power they require, such sales to third parties are expected to be uncommon
and not material.

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• The price of the power sold to companies A and B is set forth in the off-take agreement
at a level that is designed to cover the costs of production and administrative expenses
incurred by company C. The arrangement is intended to operate at a break-even level.
Given the relevant data, what is the proper classification of this joint arrangement?
a. It is classified as joint venture because the arrangement is established through a

separate vehicle, an incorporated entity Company C.
b. It is classified as joint venture because the incorporation enables the separation of
company C from companies A and B and, as a consequence, the assets and
liabilities held in company C are the assets and liabilities of company C.
c. It is classified as joint operation because the off-take agreement reflects the
exclusive dependence of company C upon companies A and B for the generation
of cash flows and the rights of Company A and B to all of the economic benefits of
the assets of company C.
d. It is classified as joint operation because IFRS 11 provides that in case of doubt, a
joint arrangement shall be classified as joint operation instead of joint venture.
59. On December 31 of the current year, the partners of MNP Partnership decided to liquidate
their business. Immediately before the liquidation, the following condensed balance sheet was
prepared:
Cash 50,000 Liabilities 375,000
Non-cash assets 900,000 N, loan 80,000
P, Loan 25,000
M, capital (50%) 312,500
N, capital (30%) 107,500
P, capital (20%) 50,000
Total 950,000 Total 950,000
The non-cash assets were sold for P400,000. Assuming partner P is the only solvent partner,
what amount of additional cash will be invested by partner P (rounded to the nearest peso)?
a. 37,143
b. 25,000
c. 5,000
d. 0
60. The following selected account balances were taken from the balance sheet of Quitting Corp.
as of December 31, immediately before the take over of the trustee:
Marketable securities P 300,000

Inventories 110,000
Land 150,000
Building 400,000
Additional information:
 Marketable securities have present market value of P320,000. These securities have been
pledged to secure notes payable of P280,000.
 The estimated worth of inventories is P70,000. However, inventories with book value of
P50,000 have been pledged to secure notes payable of P60,000. The realizable value of
the inventories pledged is estimated to be P40,000.
 Land and building are estimated to have a total realizable value of P450,000. This
property is pledged to secure the mortgage payable of P250,000.

Mobile : 0927 283 8234
Telephone : (043) 723 8412
What is the estimated amount available for preferred claims and unsecured creditors out of
assets pledged with fully secured creditors?
a. 840,000
b. 810,000
c. 770,000
d. 240,000
61. On November 30, 2021, Northup Co. consigned 90 freezers to Watson Co. for sale at P1,600
each and paid P1,200 in transportation costs. A report of sales was received on December 30,
2021 from Watson reporting the sale of 20 freezers, together with a remittance was net of the
agreed 15% commission. How much, and what month, should Northup recognize as
consignment sales revenue?
November Decembe
r
a. 0 32,000
b. 0 27,200
c. 144,000 0
d. 142,800 0
62. On December 1, 2030, LEM Inc. delivered 10 boxes of Candies and 10 packs of sample
candies, for tasting-purposes, to MIMI retail store on a consignment arrangement. The retail
store does not take title to the products and has no obligation to pay LEM Inc. until they are
sold to the final customers. Any unsold products, excluding those that are lost or damages,
can be returned to LEM Inc. and the latter has discretion to call products back or transfer
products to another customer.
LEM manufactures the product at a cost of P5,000 per box of Candies and P100 per pack of sample
candies. There is freight collect of P2,000 for the delivery of 10 boxes of Candies to MIMI but
none for the sample candies. The selling price of the product is P8,000 per box for cash sales and
P10,000 per box for credit sales with a term of 2/10 n/30. The retail store is entitled to a 5%
commission on cash sales and 10% commission on net credit sales already collected. The retail
store has the right to be reimbursed for the freight it incurred for its delivery to final customers.
LEM Inc. provides bad debt expense at an estimate of 8% based on ending receivables.
For the month ended December 31, 2030, MIMI retail store was able to sell to final consumers 3
boxes of Candies on cash basis and 5 boxes of Candies on account. There is freight prepaid of
P3,000 for the delivery of boxes of Candies to final consumers. Also, five packs of sample candies
were consumed by final customers during the tasting period. The customers on account paid to
MIMI three out of five boxes sold on credit within the discount period but the remainder continued
to be unpaid as of December 31, 2030. At December 31, 2030, MIMI Retail Store made its net
remittance to LEM Inc.
Under IFRS 15, what is LEM’s net income for 2030 in connection with the consignment
arraignment?
a. P22,560
b. P21,240
c. P20,520
d. P23,420

Mobile : 0927 283 8234
Telephone : (043) 723 8412
On January 1, 2021, an entity accepted a long-term construction project for an initial contract price
of P1,000,000 to be completed on June 30, 2023. On January 1, 2022, the contract price was
increased to P1,500,000 by reason of change in the design of the project. The project was
completed on December 31, 2023 which resulted to penalty amounting to P200,000.
The entity provided the following data concerning the direct costs related to the said project:
Year 2021 Year 2022 Year 2023

Costs during the year P440,000 P680,000 P130,000
Remaining estimated P660,000 P280,000 -
costs to complete at
the end of the year
The outcome of the construction contract can be estimated reliably.
63. What is the construction revenue to be recognized by the entity for the year ended
December 31, 2021?
a. P340,000
b. P400,000
c. P440,000
d. P360,000
64. What is the realized gross profit (gross loss) to be recognized by the entity for the year
ended December 31, 2022?
a. P200,000
b. P80,000
c. P180,000
d. (P20,000)
65. What is the balance of construction in progress on December 31, 2022?

a. P1,200,000
b. P900,000
c. P1,120,000
d. P1,020,000
66. What is the realized gross profit (gross loss) to be recognized by the entity for the year
ended December 31, 2023?
a. P50,000
b. (P30,000)
c. P170,000
d. (P120,000)

Mobile : 0927 283 8234
Telephone : (043) 723 8412
67. At the end of the year, Marcs decided to withdraw from an accounting firm when the
partners’ capital balances were: Micks, P600,000; Rocks, P600,000; and Marcs P400,000.
It was agreed that Marcs is to take the partnership’s fully depreciated computer with a
second hand value of P24,000 that cost the partnership P36,000. If profits and losses are
shared equally, what would be the capital balances of Micks after the retirement of Marcs?
Micks
a. 612,000
b. 608,000
c. 600,000
d. 592,000
68. At the end of the year, Marcs decided to withdraw from an accounting firm when the partners’
capital balances were: Micks, P600,000; Rocks, P600,000; and Marcs P400,000. It was agreed
that Marcs is to take the partnership’s fully depreciated computer with a second hand value of
P24,000 that cost the partnership P36,000. If profits and losses are shared equally, what would
be the capital balances of Rocks after the retirement of Marcs?
Rocks
a. 612,000
b. 608,000
c. 600,000
d. 592,000
END

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No. 125 Brgy.

AFAR FIRST PREBOARD EXAMINATION

1. A partner’s initial capital contribution on date of partnership formation is generally equal

3. When a partner’s capital balance becomes a deficit,

5. In preparing the statement of affairs, assets are valued at:

7. Which is an allowed method to measure progress towards complete satisfaction of a

1|P a g e RFERRER/RLACO/AT ANG /PDEJESUS

D. All of the above are allowed

8. If the construction in progress exceeds the progress billing:

Use the following information for the next two items.

2|P a g e RFERRER/RLACO/AT ANG /PDEJESUS

10. What is the total agreed capitalization of the ABC Partnership?

11. What is the cash to be contributed by C in the ABC Partnership?

Use the following information for the next three items.

12. How much of the net income is to be credited to A?

13. How much of the net income is to be credited to B?

14. How much of the net income is to be credited to C?

Use the following information for the next two items.

Accounts payable, unsecured 150,000

3|P a g e RFERRER/RLACO/AT ANG /PDEJESUS

Liabilities with priority claims 80,000

15. The estimated deficiency to unsecured creditors is

16. The expected recovery per peso of unsecured claims is

Use the following information for the next two items.

17. What is the net income (loss) for the period?

18. What is the ending cash balance?

Use the following information for the next three items.

4|P a g e RFERRER/RLACO/AT ANG /PDEJESUS

Use the following information for the next two items.

5|P a g e RFERRER/RLACO/AT ANG /PDEJESUS

Use the following information for the next three items.

29. What is the balance construction in progress on December 31, 2022?

6|P a g e RFERRER/RLACO/AT ANG /PDEJESUS

7|P a g e RFERRER/RLACO/AT ANG /PDEJESUS

Capital P&L ratio

On January 2, 2020, D is admitted to the partnership under the following agreement:

The capital account of the partners after D’s admission:

Advances (Dr. Loans (CR Capitals (CR

8|P a g e RFERRER/RLACO/AT ANG /PDEJESUS

Cash P200,000 Liabilities P400,000

How much of the cash must E received?

Loan to Partner Loan to Capital

9|P a g e RFERRER/RLACO/AT ANG /PDEJESUS

What is the carrying amount of the noncash asset sold?

39. What is the amount paid to the outside creditors?

The total cash payment to partners in the first installment is:

10 | P a g e RFERRER/RLACO/AT ANG /PDEJESUS

 10% interest on original capital contribution of the partners.

43. What is A’s share in partnership profit for 2018?

44. What is B’s share in partnership profit for 2018?

Accounts receivable 4,800,000

What is total actual cost incurred in year 2021?

11 | P a g e RFERRER/RLACO/AT ANG /PDEJESUS

53. The percentage of completion can be measured in a number of ways, including

12 | P a g e RFERRER/RLACO/AT ANG /PDEJESUS

55. In consignment sales, the consignee

13 | P a g e RFERRER/RLACO/AT ANG /PDEJESUS

a. It is classified as joint venture because the arrangement is established through a

Marketable securities P 300,000

14 | P a g e RFERRER/RLACO/AT ANG /PDEJESUS

15 | P a g e RFERRER/RLACO/AT ANG /PDEJESUS

Year 2021 Year 2022 Year 2023

The outcome of the construction contract can be estimated reliably.