Mastery in Practical Accounting 2

1. On December 1, 2019, EE and FF formed a partnership, agreeing to share for profits and losses in the
ratio of 2:3, respectively. EE invested a parcel of land that cost him P25,000. FF invested P30,000
cash. The land was sold for P50,000 on the same date, three hours after formation of the partnership.
How much should be the capital balance of EE right after the formation?
a. P25,000 b. P30,000 c. P60,000 d. P50,000

2. On August 1, AA and BB pooled their assets to form a partnership, with the firm to take over their
business assets and assume the liabilities. Partners capitals are to be based on net assets transferred
after the following adjustments. (Profit and loss are to be allocated equally.)

BB’s inventory is to be increased by P4,000; an allowance for doubtful accounts of P1,000 and P1,500
are to be set up in the books of AA and BB respectively; and accounts payable of P4,000 is to be
recognized in AA’s books. The individual trial balances on August 1, before adjustments, follows:
AA BB
Assets..................................................................P 75,000 P113,000
Liabilities............................................................. 5,000 34,000

What is the capital of AA and BB after the above adjustments?

a. AA, P68,750; BB, P77,250 c. AA, P65,000; B, P76,000
b. AA, P75,000; BB, P81,000 d. AA, P65,000; B, P81,000

3. CC admits DD as a partner in Business. Accounts in the Ledger for CC on November 30, 2019, just
before the admission of DD, show the following balances:

Cash............................................................................. P 6,800
Accounts Receivable.................................................... 14,200
Merchandise inventory............................................... 20,000
Accounts Payable........................................................ 8,000
CC, Capital................................................................... 33,000

It is agreed that for purposes of establishing CC’s interest, the following adjustments shall be made:

a) An allowance for doubtful accounts of 3% of accounts receivable is to be established.

b) The merchandise inventory is to be valued at P23,000
c) Prepaid salary expenses of P600 and accrued rent expenses of P800 are to be recognized.
DD is to invest sufficient cash to obtain a 1/3 interest in the paartnership.

Compute for: (1) CC’s adjusted capital before the admission of DD: and (2) the amount of cash
investment by DD:
 a. (1) P35,347; (2) P11,971 c. (1) P35,374; (2) P17,687
b. (1) P36,374; (2) P18,487 d. (1) P28,174; (2) P14,087

Items 4-6 are based on the following data:

On January 1, 2019, Jackson and Kendall formed a partnership. Jackson, who has many years of experience
in this line of business, contributed P100,000 in cash. Kendall contributed assets having the following book
values and fair market values:
Book Value Market Value
Merchadise P15,000 P25,000
Building 40,000 150,000
Equipment 60,000 85,000

The Partnership assumed a mortgage of P40,000 on the building. Capital accounts are set equal to net assets
invested.

4. The increase in capital of Kendall:

a. None b. By P100,000 c. By P160,000 d. By P220,000

5. The partners have an equal interest in the initial total partnership capital, and the bonus method is used,
the increase in capital of Jackson:
a. None b. By P100,000 c. By P160,000 d. By P220,000

6. The partners have an equal interest in the initial total partnership capital, and the goodwill method is used,
the increase in capital of Jackson:
a. None b. By P100,000 c. By P160,000 d. By P220,000

7. JJ and KK are partners who share profits and losses in the ratio of 60%; 40%, respectively. Jj’s salary is
P60,000 and P30,000 for KK. The partners are also paid interest on their average capital balances. In 2019, Jj
received P30,000 of interest and KK, P12,000. The profit and loss allocation is determined after deductions
for the salary and interest payments. If KK’s share in the residual income(income after deductiong salaries
and interest) was p60,000 in 2019. What was the total partnership income?

a. P192,000 b. P345,000 c. P282,000 d. 387,000

8. Nick, Joe and Mike are partners. The company has P150,000 net income for the period. How is this income
divided to the partners if the following profit and loss allocation process is followed?
Nick Joe Mike
Weighted average capital P200,000 P350,000 P180,000
Salary 25,000 15,000 35,000
Bonus .1 (NI-P100,000)
Residual profit/loss ratios .25 .45 .30
Return on invested capital 9%
 Nick Joe Mike
a. P43,000 P46,500 P60,500
b. P45,325 P50,685 P53,990
c. P50,000 P50,000 P50,000
d. P44,075 P48,435 P57,490

9. James and Bruce are partners. They have shared profits and losses 70/30 for several years. The partnership
profit allocation agreement is currently being modified to 60/40. At the date of the change, the partners
choose to revalue assets with market value different from book value. One asset revalued is a building with
a book value of P370,000 and a market value of P520,000. One year after the profit and loss ratio is changed
the building is sold for P650,000. What is the amount of change to Bruce’s capital account at the date the
building is revalued?
a. P105,000 b. P91,000 c. P45,000 d. P39,000

10. Capital balances and profit and loss sharing ratios of the partners in the Big Entertainment Gallery are as
follows:

Betty, capital (50%)............................................................P140,000

Iggy, capital (30%).............................................................. 160,000
Grabby, capital (20%)......................................................... 100,000
Total....................................................................................P400,000

Betty needs money and agrees to assign half of her interest in the partnership to Yessir for P90,000 cash.
Yessir pays directly to Betty. Yessir does not become a partner.

What is the total capital of the BIG Partnership immediately after the assignment of the interest to Yessir?

a.P310,000 b. P200,000 c. P490,000 d. P400,000

11. PP contributed P24,000 and CC contributed P48,000 to form a partnership, and they agreed to share profits
in the ratio of their original capital contributions. During the fifth year of operations, they made a profit of
P16,290; PP withdrew P5,050 and CC P8,000. At the start of the following year they agreed to admit GG into
the partnership. He was to receive a one-fourt interest in the capital and profits upon payment of P30,000
to PP and CC, whose capital accounts were to be reduced by transfers to GG’s capital account of amounts
sufficient to bring back to their original capital ratio.

How should the P30,000 paid by GG be divided between PP and CC?

a. PP, P9,825; CC, P20,175 c. PP, P10,000; CC, P20,000

b. PP, P15,000; CC, P15,000 d. PP, P9,300; CC, P20,700

12. P Corporation is a parent, having purchased 60% of S company’s common stock at par for P600,000. S
Company is in financial difficulty. The parent granted an unsecured loan of P200,000 to the subsidiary. An
ccounting statement of affairs for S company shows a dividend of 30%. P Corporation can expect to receive
a loan of appropriately:
a.P120,000 b. P60,000 c. P36,000 d. P0
 13. Blueprint, Inc. Signed a note payable to its bank for P10,000. Accrued interest on the note on February
28,2019 amounts to P250. The note is secured by inventory with book value of P12,000. The inventory is
sold for P8,000 and unsecured creditors receive 30 percent of their claims. The bank should receive the
following amount in settlement of the note and interest:
a. P10,250 b. P10,000 c. P8,675 d. P8,000

14. Erap Co, filed a voluntary bankcrupcy petition o August 15, 2019 and statement of affairs reflects the
following amounts:
Book Value Estimated current value
Assets:
Assets pledge with fully secured creditors P 300,000 P370,000
Assets pledge with partially secured creditors 180,000 120,000
Free assets 420,000 320,000
P 900,000 P 810,000

Liabilities:
Liabilities with priority P 70,000
Fully secured creditors 260,000
Partially secured creditors 200,000
Unsecured creditors 540,000
P 1,070,000
Assume that the assets are converted to cash at the estimated curent values and the business is liquidated.
What amount of cash will be available to pay unsecured non priority claims?

a. P240,000 b. P280,000 c. P320,000 d. P360,000

Items 15-18 are based on the following informations:

A company enters into bankrupcy proceedings on April 30. Its balance sheet on that date is as follows:

Cash P 25,000 Accounts Payable P 70,000

Merchandise 60,000 Loans Payable 150,000
Plant and equipment, net 100,000 Stockholder’s equity (35,000)
Total P185,000 P185,000

None of the liabilities are secured. The following transactions occur between April 30 and August 31.
 Merchandise with a book value of P45,000 was sold for P30,000.
 Plant and equipment with a book value of P40,000 was sold for P25,000.
 Wages and administrative expenses of P10,000 were accrued
 An initial payment of 30cents per dollar of indebtedness was paid to the unsecured creditors.

15. The statement of realization and liquidation would show total “assets to be realized” of
a. P55,000 b. P75,000 c. P105,000 d. P160,000

16. The statement of realization and liquidation would show total “assets not realized” of
a. P55,000 b. P75,000 c. P105,000 d. P160,000

17. The statement of realization and liquidation would show total “liabilities not liquidated” of
a. P154,000 b. P164,000 c. P220,000 d. P230,000
18. The statement of realization and liquidation would show total “liabilities to be liquidated” of
a. P154,000 b. P164,000 c. P220,000 d. P230,000

19. Gupta Industries received a P300,000 prepayment from Packard Associates for the sale of new equipment.
Gupta will bill Packard an additional P100,000 upon delivery of the equipment. Upon receipt of the
P300,000 prepayment. How much should holt recognized for a contract asset, a contract liability and
accounts receivable?
a. Contract Assets: P0; Contract Liability P300,000; Accounts Receivable, P0
b. Contract Assets: P300,000; Contract Liability P0; Accounts Receivable, P0
c. Contract Assets: P0; Contract Liability P300,000; Accounts Receivable, P100,000
d. Contract Assets: P300,000; Contract Liability P0; Accounts Receivable, P100,000

20. On July 1, 2016, Apache Company, a real estate developer, sold a parcel of land to a construction company
for P 3,000,000. The book value of the land on Apache’s book was 1,200,000. Terms of the sale required a
down payment of P150,000 and 19 annual payments of P150,000 plus interest at an appropriate interest
rate due on each July 1, beggining in2017. How much revenue will Apache recognize for the sale(ignoring
interest) assuming that it recognizes revenue at the point in time at which it transfers the land to the
construction company?
a. P150,000 b. P1,200,000 c. P3,000,000 d. P4,200,000

21. On December 31, 2015, Dieker Company sells equipment to Tabor Inc. for P62, 500. Dieker includes a 1-
year assurance warranty service with the sale of all its equipment. The customer receives and pays for the
equipment on Decemebr 31, 2015. Dieker estimates the prices to be P61,000 for the equipment and P1,500
for the cost of warranty. In addition to the assurance warranty, Dieker sold an extended warranty (service
type warranty) for an additional 2 years (2017-2018) for P1,000, How much is the service revenue-extended
warranty for 2018?
a. None b. P500 c. P1,000 d. 1,500

22. On August 5, 2015, Famous Furniture shipped 20 dining sets on consignment to Furniture Outlet, Inc. The
cost of each dining set was P350. The cost of shipping the dining sets amounted to P 1,800 and was paid for
by Famous Furniture. On December 20, 2015, the consignee reported the sale of 15 dining sets at P850
each. The consignee remitted payment for the amount due after deducting a 6% commission, advertising
expenses of P300 and installation aand setup costs of P390. The amount cash received by Famous Furniture
is
a. P12,750 b. P11,985 c. P11,295 d. P11,685

23. The Dumaguete City branch of Siliman Enterprise, Negros, was billed for Merchandise shipments from home
office at cost plus 25% in 2015 and cost plus 20% in 2016. Other pertinent data for 2016 show:
Dumaguete Branch Home Office
Sales................................................................... P 63,000 P212,000
Inventory, beginning
At cost.................................................... 23,000
At billed price......................................... 8,900
Purchases............................................................ 164,000
Inventory transfer
 To Dumaguete, at cost........................... 42,000
From Negros, at billed price................... 50,400
Inventory, end
At cost.................................................... 28,500
At billed price......................................... 11,700
Expenses............................................................. 20,300 76,400

Compute the (1) net income (loss) of Dumaguete City per branch books and (2) the combined net income
(loss) of Siliman Enterprise.
a. (1) P(4,900); (2) P18,740 c. (1) P3,330; (2) P22,430
b. (1) P(4,900); (2) P22,430 d. (1) P8,230; (2) P25,270

24. KK Inc. was merged into LL Inc. in a combination properly accounted for as acquisition of interests. Their
condensed balance sheets before the combination show:
LL KK
Current assets...............................P2,288,000 P1,627,600
Plant and eqipment, net............... 4,654,000 1,040,000
Patents.......................................... - 260,000
Total Assets P 6,942,000 P2,927,600

Liabilities.......................................P2,704,000 P 171,600
Capital Stock, par 100................... 2,600,000 1,300,000
Additional Paid-in Capital.............. 390,000 390,000
Retained Earnings.......................... 1,248,000 1,066,000
Total Liabilities and Equity............ P 6,942,000 P2,927,600
Per independent appraiser’s report, KK’s assets have fair market values of P1,653,600 for current assets,
P1,248,000 fro plant and equipment and P338,000 for patents. KK’s liabilities are properly valued. LL
purchases KK’s net assets for P3,068,000. How should the difference between the book value of KK’s assets
and the consideration paid by Ll be considered?
a. Goodwill: P 0; Increase in Assets: P234,000
b. Goodwill: P 0; Increase in Assets: P312,000
c. Goodwill: P 338,000; Increase in Assets: P234,000
d. Goodwill: P 338,000; Increase in Assets: P78,000

25. Bats Inc. , a new corporation formed and organized because of the recent consolidation of II Inc. and JJ, Inc.,
shall issue 10% perticipating preferred stocks with par value of P100 for II and JJ net assets contributions,
and common shres with a par value of P50 for the difference beween the total shares to be issued and the
preferred shares to be issued. The total shares to be issued by Bats shall be equivalent to average annual
earnings capitalized at 10%. Relevant data on II and JJ follows:
II JJ
Total Assets P720,000 P921,600
Total Liabilities 432,000 345,600
Annual earnings(average) 46,080 69,120
The total preferred shares to be issued and the amount of goodwill to be recognized by Bats are:
a. Pref.Shares: 8,640 Goodwill: P288,000 c. Pref.Shares: 2,880 Goodwill: P864,000
b. Pref.Shares: 5,760 Goodwill: P288,000 c. Pref.Shares: 7,280 Goodwill: P864,000

26. General, Inc., a calendar-year corporation acquires 70% of Problem Company on September 1, 2015 and
additional 10% on April 1, 2016. Total annual amortization of P6,000 relates to the first acquisition. Problem
reports the following figures for 2016:
Revenues P500,000
 Expenses 400,000
Retained earnings, 1/1/2016 300,000
Dividends paid 50,000
Commons Stock 200,000

Without regard for this investment, General earns P300,000 in net income during 2016. All net income is
earned evenly throughout the year. What is the cotrolling interest in teh consolidated net income for 2016?
a. P371,500 b. P372,850 c. 373,300 d. P394,000

27. Three joint operators are involved in a joint operation that manufactures ships chandlery. At the beginning
of the year, the joint operation held P50,000 in cash. During the year the joint operation incurred thee
following expenses: Wages paid P20,000. Overheads accrued P10,000. Additionally, creditors amounting to
P40,000 were paid and the joint operators contributed P15,000 cash each to the joint operation. The
balance of cash held by the joint operation at the end of the year is:
a. P5,000 b.P25,000 c. P35,000 d. P75,000

Use the following information to answer questions 28 to 30 below:

Star Corporation sells inventory on June 20 to a foriegn company for 86,000 FC (foreign currencies). Payment
occurs on August 10. The exchange rate on June 20 is 1 FC= P1.016 and 1 FC =P1.022 on August

28. What is the amount recorded on Wizard’s financial records for the sale on June 20?
a. P516 b. P87,376 c. P87,892 d. P175,268

29. What is the amount on Exchange Gain or Loss recorded on Wizard’s financial records on August 10?
a. P516 b. P87,376 c. P87,892 d. P175,268

30. What is the debit to cash when Wizard collects the Accounts Receivable?
a. P516 b. P87,376 c. P87,892 d. P175,268

31. Meisner Co. Ordered parts costing 100,000 baht for a foreign supplier on May 12 when the spot rate was
P.24 per baht. A one-month forward contract was signed on that date to purchase 100,000 bhts at a forward
rate of P.25 per baht. On June 12, when the parts were received and payment was made, the spot rate was
P.28 per baht. At what amount shoud inventory be reported?
a. P0 b. P28,000 c. P24,200 d. P25,000

Items 32-33 are based on the following informations:

On October 1, 2017, JMI Company ordered some equipment from a supplier for 200,000 baht. Delivery and payment
is to occur on November 30, 2017. The spot rates on October 1 and November 30 are P1.50 and P1.30, respectively.

32. If the company does not hedge the commitment, at what amount amount is the recorded on the books on
November 30, 2017?
a. P300,000 b. P260,000 c. P200,000 d. P0

33. If the company acquires on October 1, 2017 a forward contract to hedge any unfavorable changes in the fair
value of the equipment, at what amount is the equipment recorded on the books on November 30
settlement is P1.35.
a. P300,000 b. P270,000 c. P260,000 d. P200,000
Use the following to answer question 34-36

Dacosta Company had only one job in process on May 1. The ob had been charged with P1,800 of direct materials,
P6,966 of direct labor and P9,936 of manufacturing overhead cost. The company assigns overhead cost to jobs using
the predetermined overhead rate of P18.40 per direct labor hour. During May, the activity was recorded:

Raw materiasl (all direct):

Beg. Balance P 8,500
Purchases during the month 38,000
Used in production 39,300
Labor:
Direct labor-hours work during the month 1,900
Direct labor cost incurred P24,510
Actual maufacturing overhead costs incurred 33,300
Inventories:
Raw materials, May 30 ?
Work in process, May 30 P16,937

Work in process inventory on May 30, contains P3,741 of direct labor cost. Raw materials consists solely of
items that are classified as direct materials.

34. The balance in teh raw materials inventory account on may 30 was:
a. P1,300 b. P7,200 c. P29,500 d. 30,800

35. The cost of goods manufactured for May was?

a. P97,110 b. P98,770 c. P100,535 d. P110,600

36. The entry to dispose of theunderapplied or over applied overhead cost for the month would include a:
a. Credit of P5,336 to Manufacturing overhead
b. Credit of P1,660 to Manufacturing overhead
c. Debit of P5,336 to Manufacturing overhead
d. Debit of P1,660 to Manufacturing overhead

37. HarperCO.’s Job 501 for the manufacture of P2,200 coats, which was completed during August at the unit
costs presented below. Final inspection of Job 501 disclosed 200 spoiled coats which were sold to a jobber
for P6,000.
Direct materials P20
Direct labor 18
Factory overhead (includes an allowance
of P1 for spoiled work) 18
P56
Assume that spoilage loss is charged to all production during August. What would be the unit cost of the
good coats produced on Job 501?
a. P53.00 b. P55.00 c. P56.00 d. P58.00

38. Using the same information in No. 37, assume instead that teh spoilage loss is attributed to the exacting
specification of Job 501 and is charged to this specific job. What would be the unit cost of the good
produced on Job 501?
a. P55.00 b. P57.50 c. P58.60 d. 61.60
Items 39-45

Apex Disk Company operates a computer disk manufacturing plant. Direct materials are added at the end of the
process. The following data were presented for August 2018?

Work in process, beg. Inventory 100,000 units

Transferred in cost(100% complete)
Direct materials (0% complete)
Conversion costs (90% complete)

Transferred in during current period 300,000 units

Completed and transferred out 350,000 units

Work in process, end. Inventory

Transferred in cost(100% complete)
Direct materials (0% complete)
Conversion costs (65% complete)

39. The equivalent units of in-process ending for materrials:

a. 0 b. 25,000 c. 32,500 d. 50,000

40. How many units must be accounted for during the period?
a. 450,000 units b. 400,000 units c. 359,000 units d.300,000 units

41. How many units remain in the ending work in process?

a. 200,000 units b. 150,000 units c. 100,000 units d. 50,000 units

42. Calculate the equivalent units for conversion cost using the weighted-average method.
a. 300,000 units b. 350,000 units c. 382,500 units d. 450,920 units

43. Calculate the equivalent units for conversion cost using the FIFO method.
a. 401,500 units b. 350,000 units c. 300,000 units d. 292,500 units

44. Calculate the equivalent units for direct materials using the weighted-average method.
a. 100,000 units b. 350,000 units c. 400,000 units d. 450,000 units

45. Calculate the equivalent units for direct materials using the FIFO method.
b. 100,000 units b. 350,000 units c. 400,000 units d. 450,000 units

46. A company manufactures products X and Y using a joint process. The joint prcessing costs are P10,000.
Products X and Y can be sold at split-off for P12,000 and P8,000 respectively. After split-off, product x is
processed further at a cost of P5,000 aand sold for P21,000 whereas product Y is sold without further
processing. If the company uses the net realizable value method for allocating joint cost allocated to X is
a. P4,000 b. 5,000 c. P6,000 d. P6.667
 47. The Bulacan Manufacturing Company produces only for customer order and most work is shipped within
thirty-six hours of the receipt of an order. Bulacan uses raw and in process (RIP) inventory account and
expenses all conversion cost to the cost of good sold account. Work is shipped immediately upon
completion, so there is no finish good account. At teh end of each month, inventory is counted, its
conversion cost is estimated, and the RIP account balance is adjusted accordingly. Raw material costs is
buckflushed from RIP to Cost of good sold. The following information is for the month od May:
Beg. Balance of RIP account, including P1,300
of conversion cost P 12,300
Raw material recceived on credit 246,000
End. RIP inventory per pysical count, including
P2,100 conversion cost estimate 12,100

Compute the amount to be backflushed from RIP to Cost of Good Sold:

a. P246,000 b. P246,200 c. P247,000 d. P245,000

48. Using the same information in No. 47, compute the amount of Cost of Good Sold after all transactions and
adjustment were made:
a. P246,000 b. P246,200 c. P247,000 d. P245,000

49. Zeta Company is preparing its annual profit plan. As part of its analysis of the profitability of individual
products, the controller esimates the amount of overhead that should be allocated to the individual product
lines from the information given as follows:
Wall mirrors Specialty Windows
Units produced 25 25
Material moves per product line 5 15
Direct labor hours per unit 200 200
Budgeted materials handling cost P50,000

Under costing system that allocates overhead on the basis of direct labor hours(traditional), the materials
handling cost allocated to one uit of wall mirrors would be?
a. P1,000 b. P500 c. P2,000 d. P5000

50. Using the same information in No. 49, the materials handling cost allocated to one unit of wall mirrors under
Activity Based Costing would be?
a. P1,000 b. P500 c. P1,500 d. P2,500

To God be all the Glory!