Resa Afar 2205 Quiz 1

ReSA -The Review School of Accountancy Advanced Financial Accounting and Reporting
MAY 2022 Batch

AFAR Quiz 1
COVERAGE - Week 1 to Week 7 Lecture
 AFAR-01: Partnership Formation & Operations
 AFAR-02: Partnership Dissolution & Liquidation
 AFAR-03: Corporate Liquidation
 AFAR-04: Construction Accounting
 AFAR-05: Licenses, Royalties, Upfront Fees, Franchise & Consignments
 AFAR-06: Revenue from Customer Contracts – Other Topics
 AFAR-07: Home Office and Branch Accounting
1. On May 1, 20x7, the business assets XX and YY were as summarized below:

XX YY
Cash P 11,000 P 22,354
Accounts Receivable 234,536 567,890
Inventories 120,035 260,102
Land 603,000 -0-
Building -0- 428,267
Furniture and Fixtures 50,345 34,789
Other Assets 2,000 3,600
Total P1,020,916 P1,317,002
Accounts payable P 178,940 P 243,650

Notes payable 200,000 345,000
XX, capital 641,976 -0-
YY, capital ___-0-___ 728,352
Total P1,020,916 P1,317,002
XX and YY agreed to form a partnership, contributing their respective assets and equities subject to the following
adjustments:
• Accounts receivable of P20,000 in the books of XX and P35,000 in YY’s books are uncollectible.
• Inventories of P5,500 and P6,700 are worthless in books of XX and YY, respectively.
• Other assets of P2,000 and P3,600 in the respective books of XX and YY are to be written-off.
1. How much assets does the partnership have?

a. P2,337,918 c. P2,265,118
b. 2,237,918 d. 2,365,218
2. Using the same information in No. 1, ZZ offered to invest sufficient cash to give him a 20% interest in the
firm. How much cash should ZZ contribute?
a. P330,870 c. P344,237
b. 337,487 d. 324,382
3. Using the same information in No. 1, after ZZ’s admission, the profit and loss sharing ratio was agreed to be
4:4:2 based on capital credits. How much should the cash settlement be between XX and YY?
a. P33,602 c. P32,272
b. 32,930 d. 34,288
4. Benz and Hannah formed a partnership to manufacture and sell computer software. Benz brings to the
partnership cash of P10,000, accounts receivable of P30,000, inventory of P70,000, computer equipment with
a cost of P400,000, and accounts payable of P85,000. Hannah contributes cash of P5,000 and a software
program. The development of this program cost Hannah P18,000, but its current market value is much
greater. The partners agree on the following values based on an independent appraisal:
Benz’s contributions:
Cash, P10,000; inventory, P70,000; and accounts payable, P85,000 (the appraiser believes that the
current market values for these items equal Benz’s values).
Accounts receivable, P30,000 less allowance for doubtful accounts of P5,000.
Computer equipment, P500,000 less accumulated depreciation of P50,000.
Hannah’s contributions:
Cash, P5,000.
Computer software, P100,000.
Page 1 of 16 pages
ReSA - The Review School of Accountancy AFAR Quiz 1
Coverage: AFAR – 01 to 07 (ReSA Batch 43 – May 2022 Batch)
Compute the adjusted capital balance of Hannah and Benz to be presented on the balance sheet.
a. Benz, P425,000; Hannah, P 23,000 c. Benz, P425,000; Hannah, P105,000
b. Benz, P470,000; Hannah, P 23,000 d. Benz, P470,000; Hannah, P105,000
5. Warner, Deitmer, and Mullaney have formed a partnership. Warner invested P20,000, Deitmer, P40,000, and
Mullaney, P60,000. Warner will manage the store, Deitmer will work in the store three quarters of the time,
and Mullaney will not work in the business.
Net income for the year ended September 30, 20x6 is P81,000. The first P42,000 is allocated based on
partner’s capital contributions. The next P30,000 is based on service, with P20,000 going to Warner and
P10,000 going to Deitmer. Any remainder is shared equally. Compute the partner’s share of profits:
a. Warner, P27,000; Deitmer, P27,000; and Mullaney, P27,000.
b. Warner, P26,667; Deitmer, P23,667; and Mullaney, P30,667.
c. Warner, P27,000; Deitmer, P24,000; and Mullaney, P30,000.
d. Warner, P30,000; Deitmer, P27,000; and Mullaney, P24,000.
6. XX, YY and ZZ formed a partnership on January 1, 20x7. Each contributed P120,000. Salaries were to be
allocated as follows:
XX……………………………………………………………………………….P 30,000
YY……………………………………………………………………………….. 30,000
ZZ…………………………..…………………………………………………… 45,000
Drawings were equal to salaries and be taken out evenly throughout the year. With sufficient partnership net
income, XX and YY could split a bonus equal to 25% of partnership net income after salaries and bonus (in
no event could the bonus go below zero).
Remaining profits were to be split as follows: 30% for XX; 30% for YY; and 40% for ZZ. For the year,
partnership net income was P120,000.
Compute the ending capital for each partner:
a. XX, P155,100; YY, P155,100; ZZ, P169,800
b. XX, P126,000; YY, P126,000; ZZ, P124,500
c. XX, P125,100; YY, P125,100; ZZ, P124,800
d. XX, P125,500; YY, P125,500; ZZ, P124,000
7. The DJD Builders has the following amounts:
• Sales, P84,000
• Cost of goods sold, P48,000
• Operating expenses, P12,000
• Salary allocations to partners, P15,600
• Interest paid to banks, P2,400
• Partners’ withdrawals, P9,600
Compute the partnership net income (loss):
a. P24,000 c. P 6,000
b. 21,600 d. ( 3,600)
8. On December 31, 20x7, TT and WW, who share profits and losses equally, have capital balances of
P170,000 and P200,000, respectively. They agree to admit ZZ for a one-third interest in capital and
profits for his investment of P200,000. Partnership net assets are not to be revalued. Capital accounts
of TT, WW, and ZZ, respectively, immediately after ZZ’s admission to the partnership are:
a. P170,000; P200,000; and P200,000
b. P165,000; P195,000; and P200,000
c. P175,000; P205,000; and P190,000
d. P185,000; P215,000; and P200,000
9. The assets and equities of the QQ, RR, and SS partnership at the end of its fiscal year on October 31, 20x7
are as follows:
Cash P 15,000 Liabilities P 50,000
Receivables, net 20,000 Loan from SS 10,000
Inventory 40,000 QQ, capital (30%) 45,000
Plant assets – net 70,000 RR, capital (50%) 30,000
Loan to RR 5,000 SS, capital (20%) 15,000
P150,000 P 150,000
Page 2 of 16 pages
The partners decide to liquidate the partnership. They estimate that the non-cash assets, other than the loan
to RR, can be converted into P100,000 cash over the two-month period ending December 31, 20x7. Cash is
to be distributed to the appropriate parties as it becomes available during the liquidation process. The partner
most vulnerable to partnership losses on liquidation:
a. QQ c. QQ and RR equally
b. RR d. SS
10. Using the same information in No. 9, assume that P65,000 cash is available for the first distribution, it should
be paid to:
Priority QQ RR SS
Creditors
a. P60,000 P 5,000 P -0- P -0-
b. 60,000 1,500 2,500 1,000
c. 50,000 5,000 -0- 10,000
d. 50,000 12,000 -0- 3,000
11. The Michael, Albert and Gilbert partnership became insolvent on January 1, 20x2, and the partnership is
being liquidated as soon as practicable. In this respect the following information for the partners has been
marshaled:
Capital Balances Personal Assets Personal Liabilities
Michael P 70,000 P 80,000 P 40,000
Albert (60,000) 30,000 50,000
Gilbert (30,000) 70,000 30,000
Total P(20,000)
Assume that residual profits and losses are shared equally among the three partners. Based on this
information, calculate the maximum amount that Michael can expect to receive from the partnership
liquidation.
a. P 40,000 c. P110,000
b. P 70,000 d. 20,000
12. The partnership of Alice, Rhea, and Dalen became insolvent during 20x7, and the partnership ledgers shows
the following balances after all partnership assets have been converted into cash and all available cash
distributed:
Debit Credit
Accounts payable P 30,000
Alice capital 20,000
Rhea capital P120,000
Dalen, capital _ 70,000
P120,000 P120,000
Profit and loss sharing percentages for the three partners are Alice, 30%; Rhea, 40%; and Dalen, 30%. The
personal assets and liabilities of the partners are as follows:
Alice Rhea Dalen
Personal assets P60,000 P110,000 60,000
Personal liabilities 50,000 60,000 40,000
If the partnership creditors recover P30,000 from Rhea, compute the amount to be received by Dalen.
a. P20,000 c. P35,000
b. P30,000 d. P70,000
13. A balance sheet for the partnership of KK, LL, and MM, who share profits 2:1:1 respectively, shows the
following balances just before liquidation:
Cash Other Assets Liabilities KK, Capital LL, Capital MM, Capital
P 48,000 P 238,000 P 80,000 P 88,000 P 62,000 P 56,000
In the first month of liquidation, P128,000 was received on the sale of certain assets. Liquidation expenses
of P4,000 were paid, and additional liquidation expenses of P3,200 are anticipated before liquidation is
completed. Creditors were paid P22,400. Available cash is distributed to the partners. The cash to be received
by each partner based on the above data:
a. KK, P56,600; LL, P28,300; MM, P28,300
b. KK, P86,000; LL, P61,000; MM, P55,000
c. KK, P29,400; LL, P32,700; MM, P26,700
d. KK, P88,000; LL, P62,000; MM, P56,000
Page 3 of 16 pages
14. DD Corporation filed for a petition for bankruptcy on June 30, 20x7. Data relevant to its financial position
as of this date are:
Estimated
Book Realizable
Values Values
Cash P 2,200 P 2,200
Accounts receivable-net 15,000 13,500
Inventories 20,000 22,500
Equipment 55,000 28,000
P 92,200
Accounts payable P 26,400
Rent payable 7,600
Wages payable 12,000
Note payable plus accrued interest (secured by
equipment) 31,000
Capital stock 55,000
Retained earnings (deficit) (39,800)
P 92,200
Determine the expected recovery per peso of unsecured creditors if priority liquidating expenses including
trustee fees are P4,000.
a. P .71 c. P .60
b. .92 d. .65
15. 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………………………………………………..P1,375,000
Assets acquired……………………………………………………… 750,000
Assets realized………………………………………………………..1,200,000
Assets not realized…………………………………………………. 1,375,000
Liabilities:
Liabilities liquidated………………………………………………..P 1,875,000
Liabilities not liquidated…………………………………………… 1,700,000
Liabilities to be liquidated………………………………………...... 2,250,000
Liabilities assumed………………………………………………….. 1,625,000
Revenues and Expenses:
Supplementary charges/debits……………………………………… P3,125,000
Supplementary credits…………………………………………….. 2,800,000
The net gain (loss) for the three-month period ending March 31 is:
a. P 250,000 c. P 425,000
b. ( 325,000) d. 750,000
Items 16 to 18 are based on the following information:

Hotel Dian Sta. Ana Resort House constructed a new subdivision during 20x8 and 20x9 under contract with
Cactus Development Co. Relevant data are summarized below:
Contract amount P3,000,000

Costs: 20x8 1,200,000
20x9 600,000
Gross profit: 20x8 800,000
20x9 400,000
Contract billings: 20x8 1,500,000
20x9 1,500,000
Hotel Dian Sta. Ana Resort House uses the percentage-of-completion method to recognize revenue.
Page 4 of 16 pages
16. What would be the journal entry made in 20x8 to record revenue?
a. Accounts receivable 1,500,000
Revenue for long-term contracts 1,500,000
b. Accounts receivable 2,300,000
Gross profit 800,000
c. Construction-in-progress 800,000
Costs of construction 1,200,000
d. Accounts receivable 1,500,000
Billings in excess of costs 300,000
17. In its December 31, 20x8 balance sheet, Hotel Dian Sta. Ana Resort House would report:
a. The asset, cost and profits in excess of billings, of P500,000.
b. The liability, billings in excess of cost and profits, of P300,000.
c. The asset, contract amount in excess of billings, of P1,500,000.
d. The asset, deferred profit, of P400,000.
18. What would be the journal entry to record revenue in 20x9?
b. Construction-in-progress 400,000
Costs of construction 600,000
c. Costs of construction 2,000,000
Gross profit 1,000,000
d. Accounts receivable 1,500,000
Deferred revenue 300,000
Hotel Dian Aparri reports under PFRS 15, and constructed a new subdivision during 20x8 and 20x9 under
contract with Cactus Development Co. Relevant data are summarized below:
Contract amount P3,000,000
Costs: 20x8 1,200,000
20x9 600,000
Gross profit: 20x8 800,000
20x9 400,000
Contract billings: 20x8 1,500,000
20x9 1,500,000
Hotel Dian Aparri uses the cost recovery method under PFRS 15 to recognize revenue.
19. What would be the journal entry made in 20x8 to record revenue?
b. Accounts receivable 2,300,000
c. Construction-in-progress 800,000
Costs of construction 1,200,000
d. Costs of construction 1,200,000
20. In its December 31, 20x8 balance sheet, Hotel Dian Aparri would report:
a. The asset, cost and profits in excess of billings, of P500,000.
b. The liability, billings in excess of cost, of P300,000.
c. The asset, contract amount in excess of billings, of P1,500,000.
d. The asset, deferred profit, of P400,000.
Page 5 of 16 pages
21. What would be the journal entry Hotel Dian Aparri would use to record revenue in 20x9?
b. Construction-in-progress 400,000
c. Costs of construction 2,000,000
Gross profit 1,000,000
d. Construction-in-progress 1,200,000
22. AJD Company recognizes construction revenue and expenses using the percentage of completion
method. During 20x4, a single long-term project was begun which continued through 2005. Information
on the project were as follows:
20x4 20x5
Accounts Receivable from construction contract P 200,000 P 600,000
Construction expenses 210,000 384,000
Construction in progress 244,000 728,000
Partial billings on 200,000 840,000
The profit recognize from the long-term construction contract should amount to:
20x4 20x5 20x4 20x5
D a. P44,000 P456,000 c. P34,000 P256,000
b. P44,000 P200,000 d. P34,000 P100,000
Use the following information for questions 23 and 24:
Chicane Builders, Inc. employs the cost-to-cost method in determining the percentage-of-completion for
revenue recognition. The company’s records show the following information on a recently completed project
for a contract price of P5,000,000
20x4 20x5 20x6
Costs incurred to date P 900,000 P2,550,000 P ?
Gross profit (loss) 100,000 350,000 (50,000)
23. The estimated costs to complete the project at December 31, 20x5:
a. P 850,000 c. P2,300,000
b. P1,700,000 d. P2,550,000
24. The actual costs incurred during the year 20x6.
a. P2,550,000 c. P2,200,000
b. P2,300,000 d. P2,050,000
Items 25 and 26 are based on the following information:
On January 1, 20x5, Lesley Benjamin signed an agreement (covering 5 years) to operate as a franchisee of
Campbell Inc. for an initial franchise fee of P50,000. The amount of P10,000 was paid when the agreement
was signed, and the balance is payable in five annual payments of P8,000 each, beginning January 1, 20x6.
The agreement provides that the down payment is non-refundable and that no future services are required of
the franchisor once the franchise commences operations on April 1, 20x5. Lesley Benjamin’s credit rating
indicates that she can borrow money at 11% for a loan of this type.
25. The amount of franchise revenue on January 1, 20x5:
a. Zero. c. P39,567
b. P10,433 d. P50,000
26. The amount of franchise revenue on April 1, 20x5:
a. Zero. c. P39,567
b. P10,433 d. P50,000
AL Company consigned five calculators, with cost of P800 each, to the OO Company which was to sell these
goods for the account and ink of the former for a commission of 15% of selling price. The AL Company paid
shipping costs of P200 on the shipment. Correspondingly, OO Company paid P320 on the freight of the
shipment.
Page 6 of 16 pages
On the last day of the year, OO Company reported that it had sold three of the calculators, two for cash at
P1,500 each and one on credit at P1,800, of which 25% was collected as down payment. OO Company remitted
all the cash due.
27. The amount of cash remitted by OO Company is:
a. P3,760 c. P1,350
b. P2,410 d. None of the above
28. The consignment profit (loss) is:
a. P1,368 c. P1,040
29. The amount of inventory on consignment of AL Company is:
a. P1,720 c. P2,712
30. XX Company is a full-service technology company. They provide equipment, and installation services
as well as training. Customers can purchase any product or service separately or as a bundled package.
YY Corporation purchased computer equipment, installation and training for a total cost of P144,000 on
March 15, 20x4. Estimated standalone fair values of the equipment, installation, and training are P90,000,
P60,000, and P30,000 respectively.
The transaction price allocated to equipment, installation and training is
a. P90,000, P60,000, P30,000 respectively c. P144,000 for the entire bundle
b. P48,000, P48,000, P48,000 respectively d. P72,000, P48,000 and P24,000 respectively.
31. On May 1, 20x6, Meta Computer, Inc., enters into a contract to sell 5,000 units of Comfort Office
Keyboard to one of its clients, Bionics, Inc., at a fixed price of P95,000, to be settled by a cash payment
on May 1. Delivery is scheduled for June 1, 20x6. As part of the contract, the seller offers a 25% discount
coupon to Bionics for any purchases in the next six months. The seller will continue to offer a 5%
discount on all sales during the same time period, which will be available to all customers. Based on
experience, Meta Computer estimates a 50% probability that Bionics will redeem the 25% discount
voucher, and that the coupon will be applied to P20,000 of purchases. The stand-alone selling price for
the Comfort Office Keyboard is P19.60 per unit. How many performance obligations are in this contract?
a. 0 c. 2
b. 1 d. 3
32. Charito Corporation retails merchandise through its home office store and through a branch store in a
distant city. Separate ledgers are maintained by the home office and the branch. The branch store
purchases merchandise from the home office (at 120% of home office cost), as well as from outside
suppliers. Selected information from the December 31, 20x8 trial balances of the home office and branch
is as follows:
Home Office Branch
Sales P 120,000 P 60,000
Shipments to branch 16,000 -
Purchases 70,000 11,000
Inventory, January 1, 20x8 40,000 30,000
Shipments from home office - 19,200
Expenses 28,000 12,000
Unrealized profit in branch inventory 7,200 -
Additional information:
• The entire difference between the shipment account is due to the practice of billing the branch
at cost plus 20%.
• The December 31, 20x8 inventories are P40,000 and P20,000 for the home office and the
branch, respectively. (The branch purchased 16% of its ending inventory from outside
suppliers.)
• Branch beginning and ending inventories include merchandise acquired from the home office
as well as from outside suppliers. Merchandise acquired from home office is inventoried at
120% of home office cost.
Compute the:
Overvaluation Cost of Goods Sold Adjusted Branch Net Income
a. P 4,400 P50,200
b. 2,800 10,600
c. 7,200 15,000
d. 4,400 12,200
Page 7 of 16 pages
33. Trial balances for the home office and the branch of the Helen Company show the following accounts
on December 31, 20x8. The home office policy of billing the branch for merchandise is 20% above cost.
Home Office Branch
Allowance for overvaluation of branch merchandise P 10,800
Shipments to branch 24,000
Purchases (outsiders) P 7,500
Shipments from home office 28,800
Merchandise inventory, January 1, 20x8 45,000
What part of the branch inventory as of January 1, 20x8 represent purchases from outsiders and what
part represents goods acquired from the home office?
Outsiders Home Office
a. P12,000 P33,000
b. P16,500 P28,500
c. P15,000 P30,000
d. P 9,000 P36,000
34. Ryder Corporation has one branch operation located 500 miles away from the home office. The branch
office sells merchandise which is shipped to it from the home office. The merchandise is transferred at
cost but the branch pays reasonable freight charges. The branch office makes sales and incurs and pays
operating expenses. At the end of the current accounting period the true adjusted balance for the home
office account on the branch’s books and the branch office account on the home office’s books is
P500,000.
The following items may or may not be reconciling items. The current year is 20x8.
1) The home office has shipped merchandise to the branch office which cost P10,000 and which
incurs P500 freight charges paid by the home office but charged to the branch. This merchandise
is received by the branch on January 5, 20x9.
2) The branch has transmitted P17,000 in cash back to the home office as a partial payment on such
purchased merchandise. This cash is received by the home office on January 6 th, 20x9.
3) The branch office returns some defective merchandise to the home office. The cost of the returned
merchandise is P750. The branch office pays P25 of freight costs which will be charged back to
the home office.
4) On December 1, 20x8, the home office sends a check for P25,000 to replenish the branch’s
working capital. The check is received on January 4, 20x9.
5) The branch pays an advertising expense of P800 that should have been paid by the home office
since it applied to advertising fees incurred by the home office for its own benefit.
6) The home office allocated P12,000 of general and administrative expenses to the branch. The
branch had not entered the allocation as of the end of the year.
7) The home office pays insurance premiums on the branch store. The amount paid by the home
office is P1,000 but the branch erroneously records it as P776.00
Compute the unadjusted balances for the branch and home office accounts as of December 31, 20x8.
Home Office Current Branch Current
a. P481,425 P433,701
b. 500,000 500,000
c. 452,276 518,575
d. 518,575 452,276
35. When a partnership is formed, equity dictates that assets contributed to the partnership be recorded in the
general ledger at their:
a. Adjusted tax basis. d. Book value.
b. Fair (or current) value e. Historical cost.
c. Replacement value.
Page 8 of 16 pages
36. If the partnership agreement provides a formula for the computation of a bonus to the partners, the
bonus would be computed
a. next to last, because the final allocation is the distribution of the profit residual.
b. before income tax allocations are made.
c. after the salary and interest allocations are made.
d. in any manner agreed to by the partners.
37. The following is the priority sequence in which liquidation proceeds will be distributed for a
partnership:
a. partnership drawings, partnership liabilities, partnership loans, partnership capital balances.
b. partnership drawings, partnership liabilities, partnership loans, partnership capital balances.
c. partnership liabilities, partnership loans, partnership drawings, partnership capital balances.
d. partnership liabilities, partnership capital balances, partnership loans.
38. In corporate liquidation, do creditors having priority include?
Partially Secured Creditors Specified Unsecured Creditors
a. Yes Yes
b. Yes No
c. No Yes
d. No No
39. Cost estimates at the end of the second year indicate a loss will result on completion of the entire contract.
Which of the following statements is correct?
a. Under the cost recovery method, the loss is not recognized until the year the construction is
completed.
b. Under the percentage-of-completion (overtime) method, the gross profit recognized in the
first year must not be changed.
c. Under the cost recovery (point-in-time) method, when the billings exceed the accumulated
costs, the amount of the estimated loss is reported as a current liability.
d. Under the cost recovery method, when the Construction in Process balance exceeds the
billings, the estimated loss is added to the accumulated costs.
40. The last step in the process for revenue recognition is to
a. allocate transaction price to the separate performance obligations.
b. recognize revenue when each performance obligation is satisfied.
c. determine the transaction price.
d. identify the contract with customers.
END
- Good luck and GOD BLESS!!!

Once in a Long While
*************************
Once in a long while, someone special walks into your life and really makes a difference.
They take the time to show you so many little ways that you matter,
They see and hear the worst in you and ugliest in you, but they don’t walk away in fact,
they may care about you.
Their heart break with yours, their tears fall with yours, their laughter is shared with yours.
Once in a long while, somebody special walks into your life and then has to go and separate ways.
Every time you see a certain gesture, hear a certain laugh or phrase or return to a certain place,
it reminds you of them.
Your eyes filled with tears, and a big smile comes across your face,
and then you thank GOD that someone can still touch your heart so deeply.
You remember their words, their looks, their expressions,
You remember how much of themselves they gave – not just to you, but to all.
You remember the strength that amazed you, the courage that impressed you,
and the love that touched you…
Page 9 of 16 pages
Suggested Answers and Solutions
1. C
Unadjusted total assets (P1,020,916 + P1,317,002)……………………………. P2,337,918
Less: Adjustments:
Accounts Receivable Uncollectible (P20,000 + P35,000)………… 55,000
Inventories Written-off (P5,500 + P6,700)………………………….. 12,200
Other Assets Written-off (P2,000 + P3,600)……………………….. 5,600
Adjusted Total Assets………………………………………………………………… P2,265,118
2. D
Unadjusted capital (P641,976 + P728,352)…………………………………P1,370,328
Less: Adjustments (P55,000 + P12,200 + P5,600)……………………….. 72,800
Adjusted capital of XX and YY before ZZ’s admission……………………P1,297,528
Divided by: Interest of XX and YY after the admission
of ZZ (100% - 20%)………………………………………… 80%
Total agreed capital after admission of ZZ………………………………….P1,621,910
Less: Adjusted capital of XX and YY before ZZ’s admission……………. 1,297,528
Cash Investment of ZZ………………………………………………………P 324,382
Or, alternatively:
Total Agreed Capital…………………………………………………… P1,621,910
Multiplied by: Interest acquired by ZZ…………………………………. 20%
Cash Investment by ZZ……………………………………………………P 324,382
3. D
XX YY ZZ Total
Unadjusted Capital………………… P641,976 P728,352 - P1,370,328
Less: Adjustments
Accounts Receivable Uncoll. 20,000 35,000 55,000
Inventories written-off……… 5,500 6,700 12,200
Other assets written-off……. 2,000 3,600 5,600
Adjusted capital……………………. P614,476 P683,052 P1,297,528
Investment by ZZ………………….. ________ ________ P324,382 324,382
Total contributed capital………….. P614,476 P683,052 P324,386 P1,621,910
Less: Total agreed capital
(40%; 40%; 20% P&L ratio)….… 648,764 648,764 324,382 1,621,910
Cash Settlement…………………… P 34,288 P (34,288) P -0- P -0- .
Therefore, XX will pay YY, P34,288. Incidentally, the entry for cash settlement would be:
YY, Capital………………………………………………….. 34,288
XX, Capital………………………………………….. 34,288
Or, alternatively; the cash settlement may also be computed by simply focusing on the capital balances of XX
and YY, thus:
XX YY Total
Total contributed / Adjusted capital………… P614,476 P683,052 P1,297,528
Less: Total agreed capital (4:4 or equally)… 648,764 648,764 1,297,528
Cash Settlement……………………………… P 34,288 P (34,288) P -0- .
4. D
Benz Hannah
Cash 10,000 5,000
Accounts receivable (net) 25,000
Inventory 70,000
Computer equipment (P500,000 – P50,000) 450,000
Computed software 100,000
Total Assets 555,000 105,000
Less: Liabilities – accounts payable ( 85,000) -0-
Net Assets or Capital balances 470,000 105,000
Page 10 of 16 pages
5. D
Warner Deitmer Mullaney Total
Based on capital balance 7,000 14,000 21,000 42,000
Based on service 20,000 10,000 30,000
Equally 3,000 3,000 3,000 9,000
Net Income 30,000 27,000 24,000 81,000
6. C
XX YY ZZ Total
Capital, beginning balances P120,000 P120,000 P120,000 P360,000
Add: Net income………… 35,100 35,100 49,800 120,000
Less: Personal withdrawals 30,000 30,000 45,000 105,000
Capital, ending balances… P125,100 P125,100 P124,800 P375,000
Allocation of Net Income:
XX YY ZZ Total
Salaries…………………… P30,000 P30,000 P45,000 P360,000
Bonus…………………… 1,500 1,500 - 3,000
Balance (30%; 30%; 40%) 3,600 3,600 4,800 12,000
P35,100 P35,100 P49,800 P120,000
Bonus = .25 (NI – salaries – B)
B = .25 (120,000 – 105,000 – B)
B = 3,750 - .25 B
1.25 B = 3,750
B = P3,000
7. B
Sales……………………………………………………………………………P84,000
Less: Cost of good sold…………………………………………………………48,000
Operating expenses……………………………………………………….12,000
Interest (expense) paid to bank………………………………………. 2,400
Net Income……………………………………………………………………..P21,600
Salary allocations to partner’s is considered as a distribution (or allocation) of net income rather than as a
determinant of net income. In other words, salaries to partners are not treated as an expense in computing net
income.
Partner’s withdrawals affects capital balance but not net income.
8. C
Contributed Agreed
Capital Capital Bonus
TT…………………………. 170,000 175,000 5,000 1/2
WW………………………... 200,000 205,000 5,000 1/2
370,000 380,000 10,000
ZZ………………………… 200,000 190,000 1/3 (10,000)
570,000 570,000 - .
9. B
QQ RR SS
Loan………………………………. (5,000) 10,000
Capital……………………………. 45,000 30,000 15,000
Total interest………………… 45,000 25,000 25,000
Divided by P&L ratio……………. 30% 50% 20%
Loss absorption ability…………. 150,000 50,000 125,000
Since RR had the lowest absorption ability, therefore, partner RR would be the last partner to receive cash after
satisfying the amount of priority allotted to QQ and SS which is also an indication that RR would be first to suffer
partnership losses.
Page 11 of 16 pages
10. D
QQ RR SS Total
Total Interest (refer to no. 14).. 45,000 25,000 25,000 95,000
Loss (3:5:2)………………… (24,000) (40,000) (16,000) (80,000)
21,000 (15,000) 9,000 15,000*
Possible insolvency (3:2)……. (9,000) 15,000 (6,000) - .
Payments to partners………… 12,000 3,000 15,000
*Cash available………………………………….. P 65,000
Less: Payment of liabilities……………………. 50,000
Payment to partners……………………………. P 15,000
11. D
Michael Albert Gerry
Balances before realization 70,000 ( 60,000) (30,000)
Additional investment ______ _______ 30,000
Balances 70,000 ( 60,000)
Additional loss (1:1) (30,000) 60,000 (30,000)
Balances 40,000 ( 30,000)
Additional investment (P70,000 – P30,000 – P30,000) _______ 10,000
Balances 40,000 ( 20,000)
Additional loss ( 20,000) 20,000
Balances 20,000
12. B
Alice Rhea Dalen
Balances before realization 20,000 (120,000) 70,000
Additional investment to pay balance to Creditors 30,000 ________
Balances 20,000 ( 90,000) 70,000
Additional investment (P110,000-P30,000-P60,000) _______ 20,000 ________
Balances 20,000 ( 70,000) 70,000
Additional loss for possible insolvency ( 35,000) 70,000 ( 35,000)
Balances ( 15,000) -0- 35,000
Additional investment (P60,000-P50,000) 10,000 ________ _________
Balances ( 5,,000) -0- 35,000
Additional loss for possible insolvency 5,000 ( 5,000)
Balance _0- -0- 30,000
13. C
KK LL MM Total
Capital Interests 88,000 62,000 56,000 206,000
Total Reduction in Interests ( 58,600) ( 29,300) ( 29,300) ( 117,200)***
Payment to Partners 29,400 32,700 26,700 88,800 *
* The problem can be solved by determining the cash available for payment to partners after adding the cash
beginning balance to the proceeds from realization and deducting items such as payment of liquidation
expenses, cash withheld for anticipated liquidation expenses, and payment of liabilities whether partial or full
(if partial payment is made, then the balance will still be assumed to have been paid). Thus, payment to partners
would be:
Cash, beginning balance……………………………………….P. . 48,000
Add: Proceeds from sale………………………………………… 128,000
Less: Payment of liquidation expenses…………………………… 4,000
Cash withheld for anticipated liquidation expenses…… . 3,200
Actual payment of liabilities……………………………... 22,400**
Assumed payment of liabilities (P80,000 – P22,400)… 57,600
Payment to Partners P 88,800
** This may be treated by deducting the liabilities in full amount regardless of partial or full payment.
Page 12 of 16 pages
*** Alternatively, the problem can be solved by determining the total reduction in interests:
Loss/Unrealized loss in liquidation (P128,000 – P238,000)…...P 110,000
Payment of liquidation expenses……………………………………4,000
Anticipated liquidation expenses (cash withheld)……………... 3,200
P 117,200
14. C
Free Assets on Assets Pledged to Fully Secured Assets……………………. P -0-
Free Assets:
Cash………………………………………………………………P 2,200
Accounts Receivable……………………………………………...13,500
Inventories………………………………………………………22,500 38,200
Total Free Assets……………………………………………………………...P 38,200
Less: Unsecured Creditors with Priority
Wages Payable……….……………………………………….P12,000
Administrative expenses……………………………………… 4,000 16,000
Net Free Assets……………………………………………………………… P 26,200
Unsecured Creditors:
Partially Secured Creditors:
Notes Payable (P31,000 – P28,000)……………………………P 3,000
Unsecured Creditors with Priority:
Accounts Payable………………………………………………..26,400
Rent Payable…………………………………………………… 7,600
Total Unsecured Creditors……………………………………………………P 37,000
Expected Recovery per peso of unsecured creditors:
Net Free Assets / Total Unsecured Creditors:
P 22,200/ P 37,000 ……………………………………………………..P .60
15. C
Statement of Realization and Liquidation
Assets to be Realized…………P 1,375,000 Assets Realized………………..P 1,200,000

Assets Acquired……………….… 750,000 Assets Not Realized…………… 1,375,000
Liabilities Liquidated…………. 1,875,000 Liabilities to be Liquidated…. 2,250,000
Liabilities Not Liquidated……. 1,700,000 Liabilities Assumed………….. 1,625,000
Supplementary charges/ Supplementary credits……… 2,800,000
Debits……………………. 3,125,000
P 8,825,000 P 9,250,000
Net Gain…………………………….. P 425,000

16. C - 20x8:
Cost Inc. debited to Costs of Construction……………………… P1,200,000
Gross Profit debited to CIP account……………………………… 800,000
Revenue for long-term construction contracts………………… P2,000,000
17. A – 20x8
Construction-in-Progress Account (same with
Revenue in No. 16 above) …………………………………….P2,000,000
Less: Progress Billings in 20x8…………………………………...1,500,000
Current Asset, net………………………………………………...P 500,000
18. B - 20x9:
Cost Inc. debited to Costs of Construction……………………...P 600,000
Gross Profit debited to CIP account……………………………… 400,000
Revenue for long-term construction contracts…………………P1,000,000
Page 13 of 16 pages
19. D
Under the Cost Recovery Method of Construction Accounting (Point in Time/Zero-Profit Approach), revenue
should be recognized up to the extent of costs incurred that it is probable will be recoverable. Therefore, the
basis for 20x9 entry for revenue, costs and profit would be:
Cost Inc. debited to Costs of Construction………………………………… P1,200,000
Zero-profit………………………………………………………………………. 0
Revenue, equivalent to the Costs Incurred………………………………….P1,200,000
20. B
Progress Billings in 20x8…………………………………………………….P1,500,000
Less: Construction-in-Progress Account (same with
Revenue in No. 19 above)……………………………………………..….1,200,000
Current liability, net …………………………………………………………P 300,000
21. D
Contract Price……………………………………………………………….P3,000,000
Less: Revenue in 20x8 equivalent to costs incurred also
in 20x8…………………………………………………………………. 1,200,000
Revenue in 20x9 (year of completion) ……………………………………..P1,800,000
The entry composed of the following:
Cost Inc. debited to Costs of Construction, P1,200,000
Gross Profit (balancing figure)…………………… 600,000
Revenue for long-term construction contracts P1,800,000
22. D - Under the percentage of completion (overtime) method, the Construction-In-Progress account is used for cost
incurred during the year and any realized gross profit (loss). The following T-account is prepared:
Construction-In-Progress
CI in 20x4 210,000
RGP in 20x4 (?) 34,000
End of 20x4 244,000
CI in 20x5 384,000
RGP in 20x5 (?) 100,000
End of 20x5 728,000
23. B
20x4 20x5 20x6
Contract price………………………….. P5,000,000 P5,000,000 P5,000,000
Cost incurred each year………………. P2,050,000
Add: Cost incurred in prior year……… __900,000 2,550,000
Costs incurred to date………………… P 900,000 P2,550,000 P4,600,000
Add: Estimated costs to complete 3,600,000 1,700,000 _______-0-
Total estimated costs…………………. 4,500,000 P4,250,000 P4,600,000
Estimated gross profit………………… P 500,000 P 750,000 P 400,000
Multiply by: percentage of completion. _____20% 60% 100%
Recognized gross profit to date……… P 100,000 P 450,000 P 400,000
Less: Recognized gross profit in prior years -0- 100,000 450,000
Recognized gross profit each year…. P 100,000 P 350,000 P( 50,000)
24. D – refer to No. 23
25. A
January 1, 20x5: (Date of Signing)
Cash……………………………………………………………………………10,000
Notes Receivable………………………………………………………………40,000
Unearned Interest Income/Discount on Notes Receivable…………… 10,433
Unearned Franchise Revenue (P10,000 + P29,567)……………………… 39,567*
*Down payment made on 4/1/x5…………………………..P10,000.00
Present value of an ordinary annuity (P8,000 x 3.69590).. 29,567.20
Total revenue recorded by Campbell and total
acquisition cost recorded by Lesley Benjamin………..P39,567.20
Page 14 of 16 pages
26. C
April 1, 20x5 (Date of Opening)
Unearned Franchise Revenue…………………………………………………… 39,567
Franchise Revenue…………………………………………………………… 39,567
27. B
Collection made:
Cash sale (P1,500 x 2) P 3,000
Credit sale (P1,800 x 25%) ___450
Total P3,450
Less: Charges
Freight P 320
Commission [(P3,000 + P1,800) x 15%] __720 __1,040
Amount remitted P 2,410
28. A
Charges Related to
Total Consignment Inventory on
Charges Sales Consignment
(5) (3) (2)
Consignor’s charges:
Cost P4,000 P 2,400 P 1,600
Freight 200 120 80
Consignee’s charges:
Freight 320 192 128
Commission 720 720 ______
Total P5,240 P 3,432 P1,808
Sales price 4,800
Profit on Consignment P 1,368
29. B – refer to No. 28 for computation
30. D
P90,000 + P60,000 + P30,000 = P180,000
P90,000/ P180,000  P144,000 = P72,000
P60,000/ P180,000  P144,000 = P48,000
P30,000/ P180,000  P144,000 = P24,000.
31. C
Number of performance obligations in the contract: 2 - Delivery of keyboards is one performance obligation. The
special discount coupon is a second performance obligation, as it provides a material right that the customer
would not receive otherwise. In this particular instance, the customer has the right to receive a 25% discount,
which is a20% discount in addition to the normal 5% discount offered to other customers. The coupon is both
capable of being distinct, as it could be sold or provided separately, and it is separately identifiable, as it is not
highly interrelated with the other performance obligation of delivering keyboards and the seller’s role is not to
integrate and customize them to create one product. So, it is distinct and qualifies as a performance obligation.
Page 15 of 16 pages
32. D
Overvaluation of Cost of Goods Sold:
Unrealized Profit in branch inventory/ before adjustment……………….P 7,200
Less: Allowance of ending branch inventory (P20,000 x 84% =
P16,800 x 20/120…………………………………………………….. 2,800
Overvaluation of Cost of Goods Sold……………………………………P 4,400
Adjusted branch net income:

Sales…………………………………………………………………….P60,000
Less: Cost of goods sold:
Inventory, January 1, 20x8…………………………...P 30,000
Add: Purchases…………………………………………11,000
Shipments from home office…………………….. 19,200
Cost of Goods available for sale……………………..P 60,200

Less: Inventory, December 31, 20x8………………… 20,000 40,200
Gross profit…………………………………………………………… P 19,800
Less: Expenses………………………………………………………….. 12,000
Unadjusted branch net income…………………………………………P 7,800
Add: Overvaluation of Cost of Goods Sold……………………………. 4,400
Adjusted branch net income……………………………………………P 12,200
33. D
Billed Price Cost Allowance

Merchandise Inventory, 1/1/20x8 *P 36,000 P 30,000 P 6,000
Shipments 28,800 24,000 4,800
Cost of Goods Sold P 10,800
*P6,000 / 20% = P30,000 + P6,000 = P36,000.
P45,000 – P36,000 = P9,000.
34. C
Home Office Books Branch Books
Branch Current (Dr.) Home Office Current (Cr.)
Unadjusted 518,575 452,276 Unadjusted

1. Ship 10,500 10,500
2. Cash-IT 17,000 17,000
3. Returns 775 775
4. Check 25,000 25,000
5. Exp. –HO 800 800
6. Exp. – Br. 12,000 12,000
7. Error 1,000 776
224
Adjusted 500,000 500,000 Adjusted
35. B
36. D
37. B
38. C
39. C
40. B
*Never take direction from a crowd for your personal life. And never choose to quit just because somebody
disagrees with you*
*Opportunities are usually disguised as hardwork, so most people don’t recognize them*
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ReSA -The Review School of Accountancy Advanced Financial Accounting and Reporting

MAY 2022 Batch

1. On May 1, 20x7, the business assets XX and YY were as summarized below:

Accounts payable P 178,940 P 243,650

1. How much assets does the partnership have?

Items 16 to 18 are based on the following information:

Contract amount P3,000,000

- Good luck and GOD BLESS!!!

Suggested Answers and Solutions

Assets to be Realized…………P 1,375,000 Assets Realized………………..P 1,200,000

Net Gain…………………………….. P 425,000

Adjusted branch net income:

Cost of Goods available for sale……………………..P 60,200

Billed Price Cost Allowance

Unadjusted 518,575 452,276 Unadjusted

Adjusted 500,000 500,000 Adjusted

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