Practical Accounting it SETA INSTRUCTIONS: Select the best answer for each of the following questions. Mark only one answer for each item on the answer sheet provided. Strictly NO ERASURES ALLOWED. Erasures will render your examination answer sheet INVALID. Use PENCIL NO. 2 only. GOODLUCKIG The following is the income statement of Yellow Branch of COLORED COMPANY for the year ended December 31, 20x4: Sales P 620,000 Cost of sales Inventory, 1/1 P 60,000 Shipment from home office 450,000 Purchases 90,000 Inventory, 12/31 ( 85,000)* 515,000 Gross profit on sales 105,000 Operating expenses * 85,000 Net income P 20,000 *P10,000 are purchased from local vendors; the home office the branch at 125% of cost. At this point, the following items are shown in the Home Office records: Is Deferred profit, before adjustment 104,000 Shipment to Branch 380,000 Inventory, 01/01 100,000 Inventory, 12/31 120,000 1. The Inventory, 01/01 to be reported in the combined income statement for 20x4 is a. P160,000 _2© P170,000 b. P151,000 d. P148,000 2. The inventory, 12/31 to be reported in the combined balance sheet at the end of 20x4 is a. P205,000 ¢. P210,000 b. 190,000 AB P200,000 Fage Fore wow.prtccom.ph < PA OpanistPBOS 14 SETA The following items were found in your examination of the inter- plant accounts between the Home Office and its Bulacan Branch: a. Transfer of fixed assets from home office in the amount of P53,960 was not booked by the Bulacan branch. b. 10,000 covering marketing expenses of the Davao branch was charged by home office to the Bulacan branch. . Bulacan branch reported a debit note on inventory transfers from home office of P75,000 twice. d. Home office recorded a cash transfer of P65,700 from the Bulacan branch as ‘coming from the Davao branch. e. Bulacan branch recorded a debit memo from home office of 4,650 as P4,560. 3-AWihe unadjusted balance of the Bulacan Branch account is P165,920, the adjusted balance of the reciprocal account is 84,087 c. P 99,200 Ce 90,220 d. P109;120 ‘The net assets of Manila Company were acquired by Quezon Company for a total price of P18,000,000, paying cash of 8,000,000 and issuing 40,000 shares of its stocks quoted at P250 per share at the time of the acquisition. Quezon’s stocks has @ par value of P100 each. The balance sheet of Manila ‘Company just before the merger follows: Current assets 5,000,000 Current 1,000,000 Plant and 6,250,000 Long term 1,500,006 equipment Share Capital ,P50 2,500,006 par 2 ‘Share premium 1,750,000 Retained earnings 4,500,006 Total 11,250,000 Total 11,250,006 4, How should the stocks of Quezon be distributed among the stockholders of Manila Comfany? a. One share of Quezon Company stock per share of Manila come HM TQ err amcor nePractical Accounting It SETA b. 0.80 share of Quezon Company stock 0.00 shora of y Per share of manita 0.50 share of Quezon Company stock can Snare of Y er share of Manila 4. 0.25 share of Q uezon Company stock per shi cone to er share of Manita White Corporation, a smal 100,000 shares of P20 iguist 1, 2014. White Corporation common stock was selling at P30 per share at the date oF Fomuisition. Out-of-pocket costs of the business combination follows: = WZ Dutt Pockep Finder's fee MMB IY P 30,000 42 Accountant's fee (advisory) , Legal fe (advisory) 20,000 Printing cost of stock certificates 8,000, SEC registration costs and fees 12,000-——~ Total Wet x0 = 3.urw — P97,000 5. The acquisition cost of the combination to White Company is ‘a. P3,105,000 ¢. P3,050,000 4. 3,000,000 CONCLUSION ENTERPRISES, a franchisor, charges an initial franchise fee of P500,000 and 4% of the franchisee’s sales revenues for continuing services. During 2014, pre-signing initial services costing P50,000 had been already provided by the franchisor for the OPINION COMPANY franchise and required 2 non-refundable down payment for the same amount upon signing of the contract on April 1, 2014. The balance is payat by 10% interest-bearing notes in six equal semi-annual installments. The notes are reasonably assured of collection. b. 3,080,000 Paget ora aaa — ea TS Practical Accounting i SETA On April 1, 2004 CONCLUSION ENTERPRISES recorded the following entries for the OPINION franchise: Cash P 50,000 Notes receivable 450,000 Franchise revenue ~ 1FF 50,000 Unearned franchise revenue - IFF 450,000 Franchise cost 50,000 Deferred franchise cost 50,000 CONCLUSION ENTERPRISES incurred post-signing initial services. ‘at a cost of P150,000, and also indirect costs of P16,500. ‘OPINION COMPANY started operations on June 1, 2014 and had a revenue of P185,000 during the remainder of the year. 6. late the net income to be recognized by the franchisor from. this franchisee during 2014. 122,875 c, P397,000 b. P322,775 d. P108,875 the percentage of KOUILD CONSTRUCTIONS, INC. uses platen method for recopniing came. I 2033 work Was Searea'on on P1800, 600 prec tat was completed in 2014. Records n 2013 show the folloig: Progress billings 5,600,000 Construction costs incurred 5,400,000 Collections from billed amounts 209,000 Costs to complete 800, > fit recognized on the project in 2013 was ” Gy eraco.a00 cP 900,000 P1,200,000 d. P 600,000 SOLID CONSTRUCTIONS, INC. uses the percentage of completion is, for revenue recognition. In 2012, method on a ee const a bul for P10,000,000. At the capa or 2013, due to changes made on original plans, the beginning of 2013, Soreed to. reduce the contract price te pa ui : £51500,000. Relevant information on the project folio Pz OpenTRPBOSTA ee z pope Sora secacae_ [em ae qi Ise vw Gua ov a“ Im Om Pracical Accounting @UVU Oy fea ani Costs to Progr Costs incurred __complete lings 2012 P 2,000,000 P 6,000,000 —_—2, 250,000 2013 4,150,000 2,050,000 —_P4.750/000 2014 2,100,000 = P2,500,000 8. Boat on ‘the amount of gross profit recognized by SOLID In 475,000 ©. P850,000 (&) Ps00,000 4. P975,000 LS ek was the amount of gross profit recognized by SOLID in a. 275,000 )P325,000 b. P300,000 d. P400,000 SLOWBREAK COMPANY, a construction firm, uses the zero profit method for revenue recognition. In May, 2013, the company began work on a project that has a contract price of P5,000,000. At the end of 2014, @ summary of the company’s cost data follows: 2013 2014 Costs incurred to date P 1,125,000 P3,825,000 Estimated cost to complete 3,375,000 1,275,000 Total estimated cost 4,500,000 5,100,000 ans income statement for the year ended December 31, 014, the company would recognize a gross profit (loss) of > (100,000) ‘c. P(200,000) BP 125,000 d. P225,000 BURGOS and CASINO are participants in a joint venture for the burchase thru bidding and sales of surplus auto parts from PORD. The winning bid price of P400,000 was paid equally by BURGOS and CASINO, constituting their investments in the joint venture. They agreed that each records his purchases, sales, and expenses in his own books and share in profits and losses equaliy. Fogo. — ere stzanca FES panaTBOETE Practical Accounting |! SETA After seven (7) months the joint venture was terminated and the following data relate to the joint venture, BURGOS CASINO Joint venture account 155,000 Cr. P175,000 Cr. Expenses paid from JV cash 7,500 15,000 Cost of auto parts taken 5,500 18,000 11, How much is the joint venture sales? a. P752,500 API16,000 b. P330,000 d, P730,000 L final settlement, how much will Burgos receive? seats epa7.280 b. P384,250 d. 176,750 Mr. Zoom and Mr. Boom formed a partnership on January 1, 2014, with Zoom contributing P16,000 in cash and Boom Contributing equipment with book value of P6,400 and fair value ‘of P4,800, and inventory items with book value of 2,400 and fair value of P3,200. During 2014, Boom made additional investments of P1,600 on April 1 and P1,600 on June 1, and withdrew P4,000 fon September 1. Zoom had no additional investments or “during the year. Teta wos the average capital balance of Hr. Boom, during ‘goo ys OUD x 79,600 c. 8,000 Fon Zz © Wee , &. pr200 Weoxjyn = te P8,800 h Me ‘Fee KY iv oe 1 te 1, 2014, Zeep and Beep have capital 7200,000 ‘and 160,000, respectively. On July 1, 2014, Zeep Fereeked an additional P40,000 while Beep withdrew P10,000. Profits and losses are divided as follows: Beep is the managing Ot ae ee cuch shall receive P160,000 as salary with Beep Parte and 3.000; both partners shall receive interest of 109% on thir benlnning capital balances to offset whatever difference in thelr Beanie cttney have, and, any remainder shall be divided capital nse net income ofthe partnership for 2014 was P96,000, = PE paataiPOOB. iF eer onanPractical Acoourting i load Practical Accounting SETA 14. What was Zeep’s Share in the fiet income for 2014? a. P92,000- - ~~ c P 8, ari b. 48,000 dP eon _AB. By what amount would the capital account of Roe! change? : (B P14,000 increase ¢. P70,000 decrease Moonbits Partnership had a net income of P8,000 for the month Te P22,000tincreass Ss ROA O00 cecrease ended September 30, 2014. Sunshine purchased an interest in Selected accounts from the December 31, 2014 trial balances of Moonbits Partnership of Liz and Dick by aying Liz i i: half of her capital and nat of her 50% profit-sharing interest oy |_—_NICTORY COMPA and its FIVE STAR Branch flow: October 1, 2014. At this time, Liz's capital balance was P24,000 | VICTORY FIVE STAR and Dick’s capital balance was P56,000. ! Inventory, 1/1 P 46,000 P 23,100 15. Sunshine should receive a credit to her capital balance of Investment in Branch 116,600 7 P12,000 c. P20,000 Purchases 380,000 iS Bypté.000, d. P26,667 Shipment from Home Office > 209,000 Dulce Martin, a Partner in a partnership that carries the name of Coances 104,000 comer BF) the Sweet Shop, has a 30% participation in partnership profit. Home Office eo Her capital account had a net decrease of P48,000 during 2014, Sales Bion). Aeneen In the same year, she withdrew P104,000 (charged against her Shipments to Branch (200,000) capital account) and contributed property valued at P20,000 to Branch, merchandise mark-up ( 22,000) the partnership. | 16. The net income of the partnership in 2014 was ‘As of December 31, 2014, a shipment with a billed price of a. P 36,000 c. P132,000 [ 12,000 was in transit to the branch Freight cost, typically ome of . c ome , ig inventoriable. Merch peiaeace anaes < end were! Home Office, P64,000 at cost; at Branch, P33,000 at Justine Michelle, an active partner in the Justine-Esme billed price. 19. As far as the Home Office is concerned, the branch's net P. ‘artnership, receives an annual bonus of 25% of the partnership As for 25 the year ended December 31, 2014 was OY income after deducting the bonus. For the year ended December 31,350 31, 2014, the partnership income before the bonus amounts to Zz a. P12,350 4. 33,000 240,000 A b. 14,000 } Bee LieThe bonus of Justine Michelle for the year 014 is STA ANA branch for goods shipped to oo 45,000 c. P60,000 Zz Quaranta ot. For the month of October, 2014 the 48,000 d, P80,000 re tat L. @ oS following data 272 sun ge OFFICE FROM OUTSIDERS Roel, Wilma, and Bless are partners who had average capital Z veritiiat P14,000 P 3,00 balances of 240,000, P120,000, and P80,000 during 2014. Begining ie 78,400 Bow Partners received 10% interest on their average capital balances. A Acquis rentorles 16,800 Z After deducting salaries ‘of P60,000 for Roel and P40,000 for Ending in ee Bless, the residual profit or loss ‘is divided equally. In 2014, the xs PL Open iRPBOS. 14 2 y Can Deo asPractical Accounting ft SETA — 20. What is the balance of the unrealized profit account before adjustments for sales made during the month? a. P22,400 . P33,000 (6P26,400 d. P36,960 The condensed balance sheets of X Company, Y Company, and Z Company as of December 31, 2014 are shown below: xX Company Y Company Z Company Assets P2,000,000 2,750,000 P 250,000 Liabilities P1,425,000 P 750,000 P —_87,500 Share capital, PS par. 750,000» 500,000 125,000 Additional paid-in = 200,000 62,500 capital Retained (175,000) 1,300.000 (25,000) Earnings(Deficit) Total equities P2,000,000 P2,750,000 P 250,000 X Company's stocks has a market value of P7.50 per share while the other companies have no available stock market quotations. X Company acquired the net assets of the other companies by issuing, in exchange, unissued shares of its stocks as fol 300,986 shares to Y Company and 25,000 shares to Z Company. “How much goodwill would X Company recognize from these acquisitions? 2. PO c. P325,000 P275,000 4. P812,500 A refrigerator was sold to Dona Fernandina de Crisologo ¥ Verdasco for P16,000, which included a 40% mark-up on selling price. She made a down payment of 20%, paid four of the Femaining sixteen equal payments and then defaulted on further payments. The refrigerator was repossessed, at which time the fair value was determined to be P6,800. 22. The repossession resulted in the following gain or loss “a. P 56.80 2,960.00 b. P1,040.00 d. P2,056.80 pa cyan POOE EE eas Practical Accounting SETA Quincy Enterprise uses the instal Iment method of it has the following data for year-end: wreclilid Gross margin on cost 66-2/3% Unrealized gross profit 192,000 Cash collections including down payments 360,000 23. What was the amount of sales on installment basis? a. P480,000 SP 648,000 b. 552,000 ‘4. P840,000 Light Drops Company started operations on January 1, 2013, selling home appliances on the installment basis. For 2013 and 2014, the following information are available 2013 2014 Installment sales 1,200,000 1,500,000 Cost of installment sales 720,000 1,050,000 Collections of 2013 sales 630,000 450,000 Collections of 2014 sales 900,000 On January 6, 2015, an installment sale account balance of 2013 was defauted and the merchandise, with current value of P15,000 was repossessed, The account balance defaulted was P24,000. 24, The balance of the unrealized gross profit account as at the end of 2014 was a. 214,800 . P450,000 _b- P275,000 4. 228,000 Since there is no reasonable basis for estimating the degree of collectability, ANETEO COMPANY uses the installment method of revenue recognition for the following sales: 2014 2013 Installment Sales 720,000 P480,000 Collections from 2013 Installment sales 80,000 160,000 2014 Installment sales 240,000 ~ Accounts defaulted 2013 Installment sales 80,000 40,000 2014 Installment saies 40,000 % pen istPB05. 14 a FDEP TOE TE esPraca Acouning SETA Value assigned to repossessed items 2013 Installment sales 40,000 22,000 2014 Installment sales 20,000 Gross profit rate 40% 30% Aion much is the realized gross profit in 2013? 6 ® 48,000 ©. P120,000 ? p1aa‘o00 d. P 24,000 The following selected accounts appeared in the trial balance of NIKKI SALES, INC. as of December 31, 2014: Debit Credit Installment Accounts Receivable - 2013 P15,000 Installment Accounts Receivable ~ 2014 200,000 Inventory, December 31, 2013 70,000 Purchases 555,000 Repossessions 3,000 Installment Sales 425,000 Sales 385,000 Deferred Gross Profit ~ 2013 54,000 Additional information: @. Installment Accounts Receivable - 2013, as of P135,000 December 31, 2013 b. Inventory of new and repossessed merchandise as of December 31, 2014 95,000 ©. Gross profit percentage on regular sales during the year sake fePossession was made during the year. It was a 2013 sale and 'e corresponding uncollected a jossession pelt iccount at the time of rep 26. How much is the 2014 total realized gross profit, net of loss on repossession? a. P201,000 c. P245,880 b. P130,380 a. beak aod ‘Pipe 12012 ween pri. ania ——=>—y-——pa.GventstP BOE 4 Practical Accounting i SETA CANDY CORPORATION has two branches to which merchandise is transferred at cost plus 20% plus freight charges. On November 30, 2014, CANDY shipped merchandise that cost P150,000 to its ANGELES CITY BRANCH and the P4,000 shipping charges were paid by CANDY. On December 15, 2014, the SASMUAN BRANCH encountered an inventory shortage, and the ANGELES CITY BRANCH shipped the merchandise to the SASMUAN BRANCH, at 2 freight cost of P3,200 paid by SASMUAN. Shipping charges from the home office ‘to the SASMUAN BRANCH would have been P6,000, ——~ 27<4$ a result of the inter-branch inventory transfer, determine "the total amount debited to the Home office account by the ANGELES CITY BRANCH. a. P180,000 184,000 ig jo ye b. P187,200 P154,000 * 4 The KALIBO CITY BRANCH of MAXINNE CORPORATION submitted the following trial balance as of December 31, 2014 after its first year of operations: Debit Credit fv 4 Cash 10,400 4 Accounts Receivable 63,200 hu Shipments from Home Office 168,000 Re t Expenses 10,800 soles? 123,600 P134,400 ihe Home Office 118,000 ie € Merchandise Inventory, December 31 - P50,400 bj. B Shipments to the branch are billed at 140% of costSup IB a. P 6,000 }P39,600 b. P33,600 54,000 Trial balances for the home office and the branch of ALESSANDRA COMPANY show the following accounts before adjustments on December 31, 2013. The home office policy of the branch for merchandise is 20% above cost. Pope 1500 cama aoe oatPractical Accounting I — Practical Accounting Home sera Office Branch In Jul ly, assets with bc Sorennoasen eee tambien sa oa o ec 2 to partne, a Of P12,500 is paid Purchases (outsiders) 60,000 on Morte recuiye a a5sets are Sold for P22,500. Shipments from home office 230,400 Po Paci Merchandise inventory, Dec. 1, 2,000 ©. P1,000 2014 80,000 . re The following balance she The branch Merchandise inventory on December 31, 2014 of Partnership on July 1 2014, 0" PTeP@red for the A, B, and ¢ 40,000 includes purchases from outsiders of P16,000, Assets Liabilities & Capital . Cash P 20,000 Accounts payable P 41,600 29. The working paper entry to eliminate the profit in beginning Non-cash assets 144,000 A, Capital (40%) 32,000 inventory includes a debit to j B, Capital (40%) 52,000 a. Allowance for overvatuation, P38,400 =. C, Capital (20%) 38/400 be Branch income, P4,000 { Total Assets "P164,000 Total Liab & 64.000 =~ Merchandise inventory, December 1, P9,600. Capital d. Allowance for overvaluation, 9,600 The partnership is being liquidated on the installment basi first sale of 40,004 30. The entry on the books of the home office to reflect the true results of branch operations includes a credit to: Mount of cash each partner should receive in the first 32, He —<" Allowance for overvaluation, P4,000 b. Branch income, 44,000 i instal ihe 7 c. Merchandise inventory, December 31, P4, d. Branch income, P4,000 Po P 4,000 —P14,400 P_ 9,600 10,400 P17\600 rr ¢. P21,600 P 4,000 P14,40 The balance sheet for M & M Partnership on June 1, 2014, before Batson P 4000 a peepee 430 partners agreed to revalue, the. inventories Tort 50,000 to u_ (OK 70,000, The partners agreed further to pay Perez PL95,000 from AN. ‘Partnership cash in settlement of his interest. F a x 4 Sores ——wromaceoma {= a wml 2.OpenistPB0s.1 iwi = Fase iB oF a : (He) ftPractical Account set, fat are the capital balances of the remaining partners after retirement of Perez? 3 )Reyes, P189,000; Suarez, P226,000 ~~ Reyes, P198,000; Suarez, P232,000 c._ Reyes, P207,000; Suarez, P238,000 G._ Reyes, P220,000; Suarez, P226,000 CITIMAT Enterprises, a franchisor, charges franchisees a “franchise fee” of P500,000. Of this amount, a nonrefundable 200,000 is paid upon signing of the contract with the balance in three equal installments after each year thereafter, | assist in locating a suitable business site, conduct ly, oversee the construction of facilities, and provide initial training for employees. On October 1, 20x4, CITIMAT entered into a franchising agreement to cover an entirely new and untested area. By December 31, 20x4, CITIMAT had substantially completed and rendered appropriate services at a total cost of P150,000 but, somehow, has raised some doubts on the collectability of the lange-6f the franchise fee. Ss 20x4 income statement, CITIMAT Enterprises should recognize realized gross profit of . P50,000 c. 200,000 be“ P140,000 d. P350,000 On May 31, 20x4, CHOW QUEEN received P200,000 from Mr. Chang representing the down payment on the franchise agreement signed on that date. Mr. Chang issued promissory notes for the balance of P1,000,000 payable in four equal se annual installments. Franchise services are substantial completed by CHOW QUEEN on November 20, 20x4 at an aggregate cost of P900,000. The first semi-annual installment due on November 30, 20x4 was appropriately pald by Mr. Chan. Accordingly, CHOW QUEEN raises no doubt as to the reasonable collection of the unpaid balance of the notes. ee \e Me eam Tag waa =a Pe opaniB05: rocical Accounting SeTA its December 31, 20x4 financial statements, how fnuch would CHOW QUEEN re the year? Port as. deferred franchise revenue for a & P600,000 b. P300,000 4. 750,000 REGENT Construction Co. was engaged on October 1, 20x5 to construct a building for a contract price of P8,400,000 payable in 5 installments. One fifth of the contract price was to be paid upon completion of each quarter of the work (as defined in detail by the terms of the contract), the final payment being due within 10 days after acceptance of the completed project. By December 29, 20x5, % of the building had been completed Whereupon the third billing was made in accordance with the terms of the contract (cash had been received on the previous billings). During 20x5, a total of 4,200,000 had been disbursed by REGENT for costs incurred and, at year-end, outstanding accounts payable for materials purchases totaled P1,000,000. REGENT expected that an additional P1,800,000 would be required to complete the project. 44. Using percentage-of-completion method on an output basis, the total gross profit to be recognized in the 20x5 income statement would be a. P.950,000 OP 1,950,000 b, 1,040,000 d. P 1,100,000 45. Using percentage-of-completion method on an input basis (use 5 decimal positions), the total gross profit to be gnized in the 20x5 income statement would be Me P-950,000 c. P 1,050,000 1,040,000 4. P 1, 100