1.

Whenever there is a change in the profit sharing arrangements among partners, which of the
following need adjustments?
a) Goodwill not recorded or partly recorded in the books

b) Work in progress which is usually not recorded in partnership of professionals

c) Any asset not recorded at its fair value on that date

d) partnership joint life policy where the premiums paid have been written off

a. a, b & d b. b, c & d c. a, c & d d. All four

2. With regard to interest charged on partners’ drawings which one or more of the following statements
is / are correct?
a) Interest is charged to ensure partners do not draw their profit share at all

b) Interest is charged to discourage drawings prior to the year end

c) Irrespective of the date of drawing interest is payable for the whole accounting year

d) Interest is an additional earning for the partnership

a. c & d b. a & b c. b & d d. b only

3. With regard to death or retirement of a partner which of the following statement (s) is / are correct
a) When a partner leaves his dues should be settled at once

b) If retiring partner’s due are not immediately settled interest becomes payable at 5%

c) A deceased partner’s dues, if not immediately settled, is recorded as an Estate

d) Interest on a deceased partner’s dues is a charge (rather than appropriation) of profit

a. a, b & c b. a & b c. c & d d. b, c & d

ALEK-SYA (A) and MAT-YO (M) were in partnership sharing profits in the ratio 3:2 respectively. They
admitted BAW-YUN (B) for a fourth share of profit. What will be the new profit sharing ratio of all three
partners in each of the following independent scenarios:

4. If A and M agreed to hand over equally the portion of profit B is being admitted to.
a. A: 1; M: 1; B: 1
b. A: 3; M: 2; B: 1
c. A: 19; M: 11; B: 10
5. If A and M agreed to hand over equally the portion of profit B is being admitted to.
a. A: 1; M: 1; B: 1
b. A: 19; M: 11; B: 10
c. A: 3; M: 2; B: 1
6. If partners agree that the whole of the share B is entitled to should be given up by A.
a. A: 7; M: 8; B: 5
b. A: 3; M: 2; B: 1
c. A: 1; M: 1; B: 1
7. If the examiner gives no instruction what ever
 a. A: 1; M: 1; B: 1;
b. A: 3; M: 2; B: 1
c. A: 9; M: 6; B: 5;
ABBY and GAIL were in partnership without any agreement. They admitted ANNA to partnership on 1st
October 2015. Profit of the partnership for the year ended 31st December 2015 was P714,000
.Determine each partner’s share of profit in each of the following independent scenarios:

8. If sales in each of the three months after admission of ANNA was double that in the previous nine
months.
a. ABBY: P309,400; GAIL: P309,400; ANNA: P95,200
b. ABBY: P327,250; GAIL: P327,250; ANNA: P59,500
c. ABBY: P238,000; GAIL: P238,000; ANNA: P238,000
9. Profits accrued consistently throughout the year. But at admission, ANNA’s share of partnership
profit was guaranteed by the partnership at £240,000 per annum.
a. ABBY: P237,000; GAIL: P237,000; ANNA: P240,000
b. ABBY: P327,000; GAIL: P327,000; ANNA: P60,000
c. ABBY: P137,300; GAIL: P139,800; ANNA: P161,300
10. Profits accrued consistently throughout the year. But at admission, GAIL was assured by ABBY that
if ANNA’s share of profit exceeds P200,000 per annum, ABBY will bear the whole of the excess.
a. ABBY: P317,750; GAIL: P336,750; ANNA: P59,500
b. ABBY: P322,500; GAIL: P332,000; ANNA: P59,500
c. ABBY: P326,750; GAIL: P327,250; ANNA: P60,000
11. Assuming that profit accrued consistently throughout the year.
a. ABBY: P357,000; GAIL: P357,000; ANNA: -
b. ABBY: P238,000; GAIL: P238,000; ANNA: P238,000
c. ABBY: P327,250; GAIL: P327,250; ANNA: P59,500
12. Profits accrued consistently throughout the year. But at admission ANNA’s share of partnership profit
was guaranteed by ABBY at P240,000 per annum.
a. ABBY: P326,750; GAIL: P327,250; ANNA: P60,000
b. ABBY: P146,750; GAIL: P327,250; ANNA: P240,000
c. ABBY: P268,800; GAIL: P232,800; ANNA: P226,800
13. If sales in the three months after admission of ANNA was double that in the previous nine months
and you are informed that when arriving at the profit of P714,000 for the year, distribution cost of
P280,400 and administrative expenses of P989,100 have been written off.
a. ABBY: P284,673; GAIL: P284,672; ANNA: P144,655
b. ABBY: P238,000; GAIL: P238,000; ANNA: P238,000
c. ABBY: P327,250; GAIL: P327,250; ANNA: P59,500

14. Under an installment liquidation of the company:

a. A safe payment schedule must be prepared before each cash distribution to avoid excessive
payments to partners
b. A cash distribution program must be prepared so that each partner will know when he or she
will be included in the cash distribution
c. Cash will be distributed in the profit and loss sharing ratio as it becomes available
d. No cash should be distributed until all Noncash assets are converted into cash
The after-closing trial balance of PPP Partnership at December 31,2005 is summarized as follows:

Cash 30,000 Accounts payable 200,000

Loan to Pete 40,000 Loans from Peter 50,000

Other assets 480,000 Peter, capital (25%) 70,000

Paul, capital (25%) 80,000

Pete, Capital (50%) 150,000

15. The partners agree to liquidate the business and distribute cash, as it becomes available. A cash
distribution plan for the partnership will show that cash available after non-partner liabilities are paid
will go to:
a. Paul in the amount of P55,000 c. Peter in the amount of P 40,000
b. Paul in the amount of P45,000 d. Pete in the amount of P 90,000

16. Which of the following statement(s) is(are) correct?

Statement 1 When the outcome of a construction contract can be estimated reliably, contract
revenue and contract costs associated with the construction contract shall be recognised as revenue and
expenses respectively by reference to the stage of completion of the contract activity at the reporting date.
Statement 2 If the borrower prepays interest, the inflow of future economic benefits represented by
the prepayment would not constitute an item of revenue to the lender because the lender has a present
obligation to the borrower to provide finance for the period to which the prepayment relates.
Statement 3 Under the AASB (IASB) Conceptual Framework an increase in economic benefits in
the form of the reduction of a liability that is not a contribution by equity participants and results in an
increase in equity during the reporting period, is income.
A. All statements C. Statements 1 and 3
B. Statements 1 and 2 D. Statements 2 and 3
17. Which of the following statement(s) is(are) correct?
Statement 1 Construction costs plus gross profit earned to date from a construction contract are
accumulated in the construction in progress account less progress billings and these are disclosed in the
liability section of the statement of financial position.
Statement 2 Accounting standards require that the provision for doubtful debts should be shown
as a deduction from the class of assets to which it relates. The net expense in relation to bad and doubtful
debts must also be disclosed.
Statement 3 With the percentage-of-completion method of accounting for construction contracts,
profit is recognised in proportion to the work performed in each reporting period.
A. All statements C. Statements 1 and 3
B. Statements 1 and 2 D. Statements 2 and 3
18. Which of the following statement(s) is(are) not correct?
 Statement 1 Construction costs plus gross profit earned to date from a construction

contract are accumulated in the construction in progress account less progress billings and

these are disclosed in the liability section of the statement of financial position.

Statement 2 When it is probable that total contract costs will exceed total contract

revenue, the expected loss should not be recognised as an expense until the future

economic sacrifice eventuates.

Statement 3 If the borrower prepays interest, the inflow of future economic benefits

represented by the prepayment would not constitute an item of revenue to the lender

because the lender has a present obligation to the borrower to provide finance for the

period to which the prepayment relates.

A. All statements C. Statements 1 and 3
B. Statements 1 and 2 D. Statements 2 and 3
19. Which of the following statement(s) is(are) not correct?

Statement 1 If a company sells its product but gives the buyer the right to return the

product, IASB (2011) requires revenue from the sales transaction to be recognised at the time

of sale.

Statement 2 Accounting standards require that the provision for doubtful debts

should be shown as a deduction from the class of assets to which it relates. The net expense

in relation to bad and doubtful debts must also be disclosed.

Statement 3 Where the percentage-of-completion method is based on costs, costs

that relate to the contract activity generally and are not normally related to specific

contracts, such as finance costs, should be allocated across the projects currently in

progress.
A. All statements C. Statements 1 and 3
 B. Statements 1 and 2 D. Statements 2 and 3
On January 3, 2015, PAKIUSAPMAGARALKAKUNGGUS2MONGPUMASA Inc., enters into a contract to
construct a dam for P80,000,000. The Company uses cost-to-cost method to determine the percentage
completed. During the construction period, the original contract was modified that the eventually changed
the provisions of the contract. The following schedule summarizes these changes made in 2015:
Cost to incurred Estimated Cost to Contract Price
(2015) Complete
Original Contract P16,000,000 P50,050,000 P80,000,000
Change order no.1 100,000 100,000 250,000
Change order no. 2 - 100,000 -
Change order no. 3 600,000 600,000 Negotiable
(at least cost)
Change order no. 4 260,000 200,000
20. What was the percentage of completion for this project in 2015?
a. 21% b. 23% c. 25% d.30%
21. What is the amount of estimated gross profit that will recognized in 2015?
a. 1,450,000 b. 1,829,500 c. 3,050,000 d. 3,462,500

If the construction in progress account has a balance of P1 million while the progress in billings on contract
account’s balance is P800,000.
22. Show how should these accounts be reflected on the balance sheet?
a. Construction in progress will be shown as a current asset.
b. Progress billings on contracts will be shown as a current liability.
c. The difference between the two accounts will be reflected as a current asset.
d. The difference between the two accounts will be reflected as a current liability.

MINAHALKITASATAGLAYMONGPAMBIHIRA Construction Co. uses the percentage of completion method of

accounting. During 2015, The management of the Company contracted to build an apartment house for
Roper for P10,000,000. The builder estimated that total costs would amount to over 8,000,000 over the
period of construction. In connection with this contract, the builder incurred P1,000,000 of construction
costs during the period of 2015. Adams billed and collected P1,500,000 for, Roper in 2015.
23. How much gross profit should Adams recognized in 2015?
a. 300,000 b. 250,000 c. 187,500 d. 125,000

PIMPLENALANGBAANGTAPAT Construction, Inc. has consistently used the percentage of completion method
of recognizing income. During 2015, the Company started work on a P1,500,000 fixed-price construction
contract. The accounting record disclosed the following data for the year ended December 31, 2015:
Cost incurred P465,000
Estimated cost to complete 1,085,000
Progress billings 550,000
Collections 350,000
24. How much loss have recognized in 2015?
a. 15,000 b. 35,000 c. 50,000 d. 115,000
Selected balances from LINSON Company’s Branches A and B are as follows:
Branch A Branch B

Inventory, Jan. 1, 2009 P21,000 P19,000

Imprest balance fund 2,000 1,500

Inventory, December 31, 2009 19,000 12,000

Accts. Rec., Jan. 1, 2009 55,000 43,500

Accts. Rec Dec., 31,2009 70,000 53,500

Mdse from Home Office 61,000 47,000

Cash Collections 85,000 70,000

Sales 100,000 80,000

Cash Expenses 21,000 14,300

All sales, collections, and expenses are handled at the branch. All cash received from sales

And collections are sent directly to the home office. Expenses are paid by the branch from the imprest fund
and reimbursed and immediately reimbursed by the home office and credited to the Home Office Account.
All expenses are paid by the branch are recorded in the branch books.

25. The net profit of Branch A is:

a. 16,000 b. 21,000 c. 15,000 d. 18,000
26. The balance of the Home Office account of Branch A on January 1,2009 is:
a. 80,000 b. 64,000 c. 78,000 d. 75,000
27. The balance of the Home Office account of Branch B on January 1, 2009 is:
a. 80,000 b. 64,000 c. 78,000 d. 95,000
28. The balance of Branch current Account of Branch B on December 31, 2009 is:
a. 70,000 b. 64,000 c. 67,000 d. 65,000
29. The entry in Branch B records to update the reciprocal account Home Office Current on December 31,
2009 is
a. Dr. – Home Office / Cr.- Profit and loss c. Dr.- Branch Current / Cr.-Profit and Loss
b. Dr.- Profit and loss / Cr. – Branch Current d. Dr.- Profit and Loss / Cr. – Home Office Current
The income statement submitted by the Tarlac branch to the Home office
for the month of December 31, 2013 follows:
Sales P600, 000
Cost of sales:
Inventory, December 1, P80,000
2013
Shipments from home 350,000
office
 Purchase locally by 30, 000
branch
Total 460,000
Inventory, December 31, 100,000 360,000
2013
Gross margin 240,000
Operating expenses 180,000
Net income for the month 60,000

The branch inventories consisted of:

12/1/2013 12/31/2013

Merchandise from home office P70, 000 P84, 000

Local purchase 10, 000 16, 000

Total P80, 000 P100, 000

After effecting necessary adjustments, the Home Office ascertained the

true net income of the branch to be P156, 000.
30. At what percentage of cost did the home office bill the branch for
merchandise shipped to it?
A. 100% C. 140%
B. 120% D. 150%
31. What is the balance of the allowance for overvaluation in the branch
inventory at December 31, 2013?
A. P10,000 C. P24,000
B. P16, 000 D. P34,000
32. Following is the income statement at XYZ Branch in Cebu City
Company, for the six months period ending June 30, 2013:
Sales P620, 000
Cost of sales:
Shipments from home P550, 000
office
Purchases 50, 000
Total 600, 000
Inventory, June 30,
2013:
From Home office P75, 000
From purchases 10, 000 85, 000 515, 000

Gross margin P105, 000

Operating expenses 85, 000

Net income for the month 60,000

The home office ships merchandise to and bills the Branch office at 125%
of cost.
The rent of the Branch office for six months at a monthly rate of P1,000
was paid by the home.
The Home office net profit from its branch office in Cebu city for the
six (6) months ending June 30, 2013 is:
A. P14,000 C. P125,000
B. P109, 000 D. P139,000

The after-closing balance of Catler Corporation’s home office and its

branch at January 1, 2013 were as follows:

Home Office Branch

Cash………………………………………………………………………… P 7,000 P 2,000

Accounts receivable-net……………………… 10,000 3,500
Inventory…………………………………………………………… 15,000 5,500
Plant assets-net………………………………………… 45,000 20,000
Branch…………………………………………………………………… 28,000 -
Total assets…………………………………… P 105,000 P 31,000

Accounts payable……………………………………… P 4,500 P 2,500

Other liabilities……………………………………… 3,000 500
Unrealized profit-branch inventory 500 -
Home office………………………………………………………… - 28,000
Capital stock……………………………………………………… 80,000 -
Retained earnings…………………………………………… 17,000 -
Total equities………………………………………P 105,000 P 31,000

A summary of the operations of the home office and branch for 2008
follows:

1. Home office sales: P100,000, including P33,000 to the branch. A

standard 15% markup on cost applies to all sales to the branch.
Branch sales to its customers totaled P50,000.
2. Purchases from outside entities: home office P50,000; branch P7,000
3. Collections from sales: home office, P98,000 (including P30,000 from
branch); branch collections, P51,000
4. Payments on account; home office, P51,500; branch P4,000.
5. Operating expenses paid: home office, P20,000; branch P6,000.
6. Depreciation on plant assets: home office, P4,000; branch P1,000
7. Home office operating expenses allocated to the branch, P2,000.
 8. At December 31, 2013, the home office inventory is P11,000 and the
branch inventory is P6,000, of which P1,050 was acquired from
outside suppliers.
33. The combined net income amounted to:
A. P 0 C. P21,000
B. P 4,550 D. P25,550

PART 2 (STRAIGHT PROBLEMS)

The following information are extracted from the books and records of Maroon Company and its Red branch.
The balances are at December 31, the fourth year of the company’s operations.

Home Office Books Branch Books

Sales P600,000
Shipments to branch P200,000
Shipments from Home Office 240,000
Purchases 60,000
Expenses 120,000
Inventory, January 1 112,000
Allowance for overvaluation of branch inventory P56,000

There are no shipments in transit between the HO and branch. Both shipments accounts are properly
recorded. The ending inventory at billed price includes merchandise acquired from the HO in the amount of
P60,000 and P7,000 acquired from vendors for total of P67,000.

34. Question No. 1 How much of the beginning inventory was acquired from “outsiders”? 16000
35. Question No. 2 How much is the true branch net income? 181000

Fuchsia Trading bills its Pink Company branch for shipment of goods at 20% above cost. At the close of
business on October 30, 2010, a fire gutted the branch warehouse and 60% of the merchandise stocks stored
therein were totally destroyed. The branch sold the recovered inventory at 40% lower than the normal selling
price. Thereafter, the following data were gathered:

January inventory, at billed price P 500,000

Shipments from home office 1,300,000
Net sales to October 30 1,000,000
Selling Expenses 5% of normal selling price
Total amount of undamaged inventory sold 300,000

36. Question No. 1 What is the estimated cost of the merchandise destroyed by the fire? 468750
37. Question No. 2 How much net income / loss would the branch be reported for the year 2010? (575000)
The following information is taken from the books and records of Beige Company and its Brown branch. The
balances are at December 31, 2010, the second year of operations.

Home Office books Branch books

Sales 500,000
Expenses 150,000
Shipments to branch 180,000
Allowance for overvaluation of branch inventory 37,500
The branch obtains all of its merchandise from the home office. The home office ships the merchandise at
120% of its cost. The ending inventory of the branch is P60,000 billed price.

38. Question No. 1 How much is the net income reflected in the books of the branch? 185000
39. Question No. 2 How much is the true income of the branch? 212500