Midterm Exam Ans: True

Which of the following is not a liability that has priority

in a liquidation?
A net loss reported by a branch is recorded by the home
Ans: Advertising expense incurred before the company office by a debit to the investment in Branch ledger
became insolvent account

Ans: False

On a statement of affairs, how are liabilities classified?

Ans: Secured and unsecured Goods are sent out to the branch at cost plus 20% mark
up based on cost. The loading/ unrealized profit on the
invoice price will be
The liabilities preferred sequence for listing
Ans: 25%
Ans: Unsecured liabilities with priority, fully secured,
partially secured liabilities, unsecured liabilities without
priority Freight costs on merchandise shipped between home
office and branch locations should be included in

Ans: branch inventory management

In the reporting of a corporate liquidation, assets are
shown at

Ans: Net Realizable values Which of the following statements is correct regarding
accounting for home office and branch?

Ans: The allowance for overvaluation account must be

If a remittance of cash by a branch has not been
debited in the separate books of the home office to
recorded by the home office, the balance of the
adjust results of operations of the branch whether it is a
branch’s Home Office ledger account exceeds the
net income or net loss per branch books.
balance of the Home Office’s investment in Branch
Account

Ans: False The death of a partner will require that all noncash
assets are sold for cash, all liabilities are paid, and
remaining cash be distributed to the estate of the dead
If merchandise is billed to a branch at a price above partner on the basis of the partnership income and loss
home office cost, the net income reported to the home agreement.
office by the branch is overstated.
Ans: False
Ans: False

If Partner A invested twice as much as Partner B, and

In a statement of affairs, assets pledged for partially there are only two partners, the net income must be
secured creditors are divided in a ratio of 2:1 respectively.

Ans: offset against partially-secured liabilities Ans: False

If the Home Office bills its shipment to branch at above

cost, the branch’s ending inventory will always be
overstated.
 ART 1828. On dissolution the partnership is not
terminated, but continues until winding upof
partnership affairs is completed
A partner may be relieved from all existing liabilities
Ans: True
upon dissolution only by an agreement to that effect
between himself, the partnership creditor, and the In the absence of agreement among the partners, profit
other partners. The consent, however, of the creditor and loss may be divided equally
and the other partners to the novation should be
Ans: False
expressed.

Ans: False
On December 31, 2020, the home office of Tony
Company recorded a shipment of merchandise to its
The first step in preparing a cash priority program is to Calamba branch as follows:
determine the order in which partners are to participate
Calamba branch 30,000 Shipment to Calamba branch
in cash distribution
25,000 Unrealized profit in branch inventory 4,000 Cash
Ans: False (for freight charges) 1,000

The Calamba branch sells 40% of merchandise to

outside entities during the rest of December 2020. The
Choice of the goodwill method results in eventual
books of the home office and Calamba branch are
advantage to the new partner and corresponding
closed on December 31 of each year. At what amounts
disadvantage to the original partners.
should the 60% of the merchandise remaining unsold at
Ans: False December 31, 2020 should be included in the published
statement of financial position of Tony Company at
December 31, 2020?
The schedule of safe payments is more informative to Ans: 15600
both personal and partnership creditors, and to the
partners compared to cash priority program.

Ans: True Use the following information for numbers 2-5

The following Statement of Financial Position for the

partnership of A, B, and C were taken from the books:
Art. 1767. By the contract of partnership two or more
persons bind themselves to contribute money, Cash P100,000 Other Assets 400,000 Total P500,000
property, and industry to a common fund, with the
Liabilities P200,000 A, capital 120,000 B, capital 95,000
intention of dividing the profits among themselves. Two
C, capital 85,000 Total P500,000
or more persons may also form a partnership for the
exercise of a profession. The partners agreed to distribute profits as follows: a.
Annual salaries to A and B of P15,000 each b. Annual
Ans: False
interest of 10% on beginning capital c. Bonus of 20% to
A based on income after salaries, interest and bonus d.
Remaining profits: 40% to A, 25% to B and 35% to C
The conversion of assets into cash is referred to as
liquidation The partnership began operations on October 1, 2020
and net income for period ended December 31, 2020 is
Ans: True P150,000.

The net income after salaries, interest and bonus is

Ans: 112500
The bonus to A is --Ans: 22500 P616,000 ; B, P697,200 ; C, P420,000. The liabilities
accumulate to P840,000, including a loan of P280,000
B’s total share in net income is -- Ans: 34250
from A. The cash balance is P168,000. All the partners
C’s share in the profit after salaries, interest and bonus are personally solvent. The partners plan to sell the
is -- Ans: 39375 assets in installment.

If B received P100,800 from the first distribution of

cash, how much did C receive at that time?
Use the following information for numbers 6-8
Ans: 22400
Bruno, Jango and Gimo are partners sharing profits in
the ratio of 3:3:2. On July 31, their capital balances are 11. A business owned by C was short of cash and C
as follows: Bruno, P280,000 ; Jango, P200,000 ; Gimo, decided to form a partnership with D and E. D was able
P160,000. to contribute cash thrice the interest of C in the
partnership while E was able to contribute cash twice
The partners agree to admit Aldo on the following the interest of D in the partnership. The assets
agreement: I. Aldo is to pay Bruno P200,000 for 1/2 contributed by C were as follows: Cash, P18,000 ;
interest of Bruno's interest. II. Aldo is also to invest Accounts receivable, P378,000 with allowance for
P160,000 in the partnership. Ill. The total capital of the doubtful accounts of P12,000 ; Inventory, P840,000 ;
partnership is to be P960,000, of which Aldo's interest is and store equipment of P300,000 with accumulated
to be 25%. depreciation of P30,000 but with current worth of
What is the capital balance of Bruno after the admission P250,000 and agreed value of P200,000.
of Aldo? Ans: 222500 C, D and E agreed that the allowance for doubtful
What is the capital balance of Jango after the admission accounts was inadequate and should be P20,000. They
of Aldo? Ans: 282500 also agreed that the fair value of inventory is P920,000.

What is the capital balance of Gimo after the admission The total assets of the partnership are
of Aldo? Ans: 215000 Correct answers: 14960000

9. The statement of financial position as of September 12. Use the following information for numbers 12-14
30, 2020, for the partnership of D, E and F shows the
following information: Assets, P360,000 ; D, loan, The accounts of the partnership of Erwin, Ralph and
P20,000 ; D, capital P83,000 ; E, capital, P77,000 ; F, Mon at the end of its fiscal year on September 30, 2020
capital, P180,000. It was agreed among the partners are as follows:
that D retires from the partnership, and it was also
Cash P15,000 Other Assets 130,000 Loan to Ralph 5,000
further agreed that the assets should be adjusted to
Liabilities 50,000 Loan from Mon 10,000 Erwin, capital
their fair value of P345,000 as of September 30, 2020.
(30%) 45,000 Ralph, capital (50%) 30,000 Mon, capital
Net loss prior to the retirement of D amount to
(20%) 15,000
P70,000. The partnership is to pay D P62,000 cash for
D's partnership interest, which would include the If Mon received P9,000 on the first distribution of cash,
payment of his loan. No goodwill is to be recorded. D, E the cash realized from the initial sale of assets was
and F share profit 40%, 15% and 45% respectively.
Correct answers: 65000
What is F's capital balance after D's retirement?
If Mon received P9,000 on the first distribution of cash,
Ans: 147000 how much did Erwin receive

10. Partners A, B and C share profits and losses in the Correct answers: 21000
ratio of 5:3:2. At the end of a very unprofitable year,
If Mon received P9,000 on the first distribution of cash,
they decided to liquidate the firm. The partners' capital
how much did Ralph receive?
account balances at this time are as follows: A,
Correct answers: 0

15. On June 1, 2020, AZ invited MG to join him in his 19. Use the following information for numbers 19-22
business. MG agreed provided that AZ will adjust the
Fire Company has a branch in Baguio and Davao. The
accumulated depreciation of his Equipment account to
reciprocal accounts between the home office and the
a certain amount, and will recognize additional accrued
branches were in agreement at the beginning of 2020.
expenses of P40,000. After that, MG is to invest
However at December 31, 2020, the following
additional pieces of equipment to make her interest
reciprocal balances are found in the home office books:
equal to 45%. If the capital balances of AZ before and
after adjustment were P556,000 and P484,000 Investment in Baguio : P186,500 Investment in Davao: P
respectively. What is the capital balance of MG after the 84,000
formation?
Data for reconciliation of the reciprocal accounts are as
Ans: 396000 follows:
16. A home office ships inventory to its branch at a a. On December 29, 2020, the home office has
mark-up of 125% above cost. The required balance of instructed Baguio to transfer P74,000 cash to Davao.
the allowance for overvaluation account is P1,425,000. Baguio recorded this transaction immediately. Upon
During the year, the home office sent merchandise to receipt, Davao has recorded this transfer at P47,000.
the branch costing P9,000,000. At the start of the year, The home office however has not yet recorded this
the branch's Statement of Financial Position shows interbranch transaction as of the end of the year.
P1,800,000 of inventory on hand that was acquired
from the home office. b. Fire has transferred goods costing P28,900 to Baguio
branch and paid P2,500 of shipping cost on December
By what amount will the Allowance for Unrealized Gross 16, 2020. Baguio shipped all of these goods to Davao
Margin in Branch Inventory account be debited at the upon instruction of the home office on December 30,
end of the year? 2020. Shipping cost is P3,600 freight collect. Had the
goods were shipped directly to Davao, P5,000 of freight
Correct answers: 10825000
cost should have been incurred. The interbranch
shipment was not recorded by the branches and the
home office as well.
During the year 2020, goods billed at P3,250,000 were
shipped to the branch at 130% of cost. The account c. Baguio has collected cash of P5,750 from Davao's
Loading in Branch Inventory has a balance of customer. This transaction is not yet recorded by Davao
P1,225,000 before adjustment. The beginning inventory and the home office.
of the branch from the home office at cost is
d. The home office has already allocated P11,000 and
P2,375,000; the beginning inventory of the branch from
P9,000 of administrative expenses to Baguio and Davao
outsiders is P540,000; purchases from outsiders is
respectively. The branches are not yet notified.
P1,450,000.
e. Baguio remitted P14,300 cash to the home office on
From the point of view of the branch, how much is its
December 12, 2020. The home office has failed to
total goods available for sale coming from shipments
record the said remittance.
from the home office?
f. Davao returned goods costing P6,850 to the home
Correct answers: 6100000
office. The goods were shipped on December 19 and
The billing price based on cost imposed by the home received on December 24 but no entries have been
office to the branch with respect to the branch's made in the home office books.
beginning inventory is %? Ans : 120
The adjusted balance of Investment in Baguio account?
Ans: 72550
20. The adjusted balance of Investment in Davao assets amounting to P300,000 with realizable value of
account P225,000; and the remaining balance is unsecured.

Correct answers: 175700 b. Total assets amounts to P890,000 and has a total fair
market value of P695,000.
21. The unadjusted balance of Home Office Current
account in Baguio's books c. Unpaid income taxes amounts to P35,000. Additional
salaries payable and administrative expenses totaled
Correct answers: 92950
P28,000.
22. The unadjusted balance of the Home Office Current
d. Deficit amounts to P79,000.
account in Davao's books
Assets available to all unsecured creditors with and
Correct answers: 115150
without priority is
23. Use the following information for numbers 23-25
Correct answers: 227800
Jeremy Lin, Inc. established a branch in Antipolo to
27. The estimated recovery percentage is %? 73.31
distribute part of the goods purchased by the home
office. The home office prices inventory shipped to the The estimated amount to be received by partially
branch at 25% above cost. The following account secured creditors Ans: 262974
balances were taken from the ledger maintained by the
The estimated amount to be received by unsecured
home office and the branch.
creditors without priority? Ans: 126826
Jeremy Lin Inc. :

Sales: P336,000 Beginning Inventory: P69,000

30. Use the following information for numbers 30-33
Purchases: P222,000 Shipments to branch: P66,000
Operating Expenses: P68,000 Ending Inventory: P48,000 A review of the assets and liabilities of Atlantis
Corporation in bankruptcy on November 30, 2020,
Antipolo Branch:
discloses the following:
Sales (20% uncollected): P144,000 Beg. Inventory (1/3
a. A mortgage payable of P77,000, is secured by building
from HO): P38,400 Purchases (30% unpaid): P40,000
valued at P14,000 more than its book value of P68,000.
Shipments from HO: P82,500 Operating Expenses (4/5
unpaid): P11,200 Ending Inventory (10% from b. Notes payable of P39,000 is secured by furniture and
outsiders): P21,600 equipment with book value of P46,000 that is estimated
to be 4/5 realizable.
How much is the realized profit from inventory
shipments? Ans: 15172 c. Assets other than those referred to have estimated
value of P25,000, an amount that is P6,000 above its
24. The net income of the branch as far as the Home
book value.
Office is concerned is Ans: 8672
d. Liabilities other than those referred to total P31,000,
25. The net income of the Home Office is
which excluded claims with priority of P8,000.
Correct answers: 91000
The estimated deficiency to creditors is Ans: 11200

31. Net free assets is 22000

26. Use the following information for numbers 26-29
32. Estimated recovery percentage is 66.27
The following data are provided by Worldwide
33. Payment to partially secured creditors amount to
Corporation which is undergoing liquidation process:
38258
a. Total liabilities amounts to P692,000. 35% is fully
secured by assets amounting to P270,000 with fair
market value of P250,000; 40% is partially secured by
34. Use the following information for numbers 34-35

The following data were taken from the statement of

realization and liquidation of Intercontinental
Corporation for the quarter ended June 30, 2020.

Assets to be realized: P515,625 Supplementary credits:

P796,875 Liabilities to be liquidated: P843,750
Supplementary charges: P731,250 Liabilities liquidated:
P562,500 Assets acquired: P562,500 Assets realized:
P656,250 Liabilities assumed: P281,250 Assets not
realized: 234,375

The ending capital balances of capital stock and

retained earnings are P648,750 and P178,500,
respectively. A net loss on liquidation of P226,500 was
incurred for the period. How much is the ending
balance of cash?

Correct answers: 1260000

The amount of liabilities not liquidated is:

667125
 4. On August 1, 2020, JBL, Inc. consigned to Migs Store
10 ladies handbags costing P3,000 each, paying freight
charge of P3,000. At the end of the month, Migs Store
Quiz 2 reported sales of 6 handbags at P6,000 each and
expenses incurred of P2,500, and remitted the net
proceeds due to JBL after deducting a 20% commission.
1. Rex Company consigned five computer equiments, How much net income did JBL realize in August on the
with cost of P8,000 each, to the SM Appliance Store consignment?
which was to sell these goods for the account and risk
of the former for a commission of 15% of selling price. ANs 6500
Rex Company paid trucking costs of P2,000 on the
shipment. Correspondingly, SM Appliance Store paid
P3,200 on the freight of the shipment. 5. On December 31, 2013, SONA Company authorized
NOY to operate as a franchisee for an initial franchise
On the last day of the year, SM Appliance Store
fee of P 3,000,000. Of this amount, P 1,200,000 was
reported that it sold three of the computers: two for
received upon signing of contract and the balance
cash at P15,000 each and one on credit at P18,000 of
payable by a non interest bearing note, due in three
which 25% was collected as down payment. SM
annual payments of P 600,000, beginning December 31,
Appliance Store remitted all the cash due.
2014. The collectability of the note is not reasonably
The amount of inventory on consignment of Rex assured. The market rate of interest is 18%. (use two
Company is decimal places for present value factor).

Ans: 18080 Round off final answer to the nearest peso amount.

On December 31, 2013, SONA Company should

recognize revenue from franchise of?
2. Rage Against The Machine charges an initial franchise
fee of P 75,000 for the right to operate as a franchise of Correct answers: 0
Speed Racer. Of this amount, P 25,000 is collected
immediately. The remainder is collected in four equal
annual installment payments of P 12,500 each. These
installments have a present value of P 39,623. There is
reasonable expectation that the down payment may be
refunded and substantial future services are yet to be
performed by Rage Against The Machine. How much
should be recognized as revenue in the current year? 6. On October 1, 2020, Octagon Company consigned 30
Apple computer units, costing P80,000 each, to
3. ASD Inc. enters into an agreement with ZXC Co., Techzone, Inc. The units were to be sold on either cash
granting the latter with full authority to operate as its or credit basis at a commission of P15% of net sales. The
franchisee for a period of 10 years. An initial franchise consignor paid freight of P18,000 on the shipment. On
fee of P280,000, among others, was stipulated in the October 11, the consignee received the goods. Sales
contract and was promptly paid during the year. were made as follows:

Assuming that ASD Inc. was able to perform substantial October 15:10 units for cash at P130,000 each. October
services during the year, what is the revenue to be 22:12 units on account at P140,000 each.
recognized in its year end income statement? On October 30, 2020, a sales allowance of P20,000 was
Correct answers: 280000 given to a charge customer for a defective unit. On
November 10, 2020, a receivable balance of P70,000
was determined to be uncollectible. On November 11,
2020, the consignee made the proper remittance.
The consignment profit is? Ans: 672800 assured. The market rate of interest is 18%. (use two
decimal places for present value factor).

Round off final answer to the nearest peso amount.

7. Rex Company consigned five computer equiments,
with cost of P8,000 each, to the SM Appliance Store How much is the unearned interest on December 31,
which was to sell these goods for the account and risk 2014? *
of the former for a commission of 15% of selling price.
Correct answers: 263640
Rex Company paid trucking costs of P2,000 on the
shipment. Correspondingly, SM Appliance Store paid
P3,200 on the freight of the shipment.
10. On September 30, 2020, Criselda Inc. received from
On the last day of the year, SM Appliance Store ABC Company P560,000 representing franchise fee.
reported that it sold three of the computers: two for Franchise services were immediately started by Criselda
cash at P15,000 each and one on credit at P18,000 of Inc. and these were completed on October 31, 2020 at
which 25% was collected as down payment. SM cost amounting to P330,000. The revenue to be
Appliance Store remitted all the cash due. reported by Criselda in 2020
The consignment net income is 560000
13680

11. On January 1, 2020, Federrer Inc. signed an

agreement authorizing Sculptured Body works to
8. On October 1, 2020, Octagon Company consigned 30
operate as a franchisee over ten years period for initial
Apple computer units, costing P80,000 each, to
franchise fee of P 100,000 when the agreement was
Techzone, Inc. The units were to be sold on either cash
signed. Sculptured Body works commenced operations
or credit basis at a commission of P15% of net sales. The
on August 1, 2020, at which date all the initial services
consignor paid freight of P18,000 on the shipment. On
required of Federrer had been performed. The
October 11, the consignee received the goods. Sales
agreement also provides that Sculptured Body works
were made as follows:
must pay annually to Federrer a continuing franchise
October 15:10 units for cash at P130,000 each. October fee equal to 5% of the revenue of the franchise.
22: 12 units on account at P140,000 each. Sculptured Body works sales revenue for 2020 was P
800,000. For the year ended December 31, 2020, how
On October 30, 2020, a sales allowance of P20,000 was
much should Federrer as revenue from franchise fee?
given to a charge customer for a defective unit. On
November 10, 2020, a receivable balance of P70,000 140000
was determined to be uncollectible. On November 11,
2020, the consignee made the proper remittance.

The amount due from Techzone, Inc.

12. Rex Company consigned five computer equiments,
2446000
with cost of P8,000 each, to the SM Appliance Store
which was to sell these goods for the account and risk
of the former for a commission of 15% of selling price.
Rex Company paid trucking costs of P2,000 on the
9. On December 31, 2013, SONA Company authorized shipment. Correspondingly, SM Appliance Store paid
NOY to operate as a franchisee for an initial franchise P3,200 on the freight of the shipment.
fee of P 3,000,000. Of this amount, P 1,200,000 was
On the last day of the year, SM Appliance Store
received upon signing of contract and the balance
reported that it sold three of the computers: two for
payable by a non interest bearing note, due in three
cash at P15,000 each and one on credit at P18,000 of
annual payments of P 600,000, beginning December 31,
2014. The collectability of the note is not reasonably
which 25% was collected as down payment. SM On October 30, 2020, a sales allowance of P20,000 was
Appliance Store remitted all the cash due. given to a charge customer for a defective unit. On
November 10, 2020, a receivable balance of P70,000
The amount remitted by SM Appliance Store is
was determined to be uncollectible. On November 11,
Ans: 24100 2020, the consignee made the proper remittance.

The cost of inventory on consignment is

13. On August 1, 2020, JBL, Inc. consigned to Migs Store 644800

10 ladies handbags costing P3,000 each, paying freight
charge of P3,000. At the end of the month, Migs Store
reported sales of 6 handbags at P6,000 each and
expenses incurred of P2,500, and remitted the net
proceeds due to JBL after deducting a 20% commission.

What is the total cost of inventory of unsold handbags?

* (2/2 Points)

13200

14. JFC charges an initial franchise fee of P70,000. Upon

the signing of the agreement that covers 3 years, a
payment of P28,000 is due. Thereafter, three annual
payments of P14,000 are required. The credit rating of
the franchisee is such that it would have to pay interest
at 10% to borrow money. The franchise agreement is
signed on May 1, 2020, and the franchisee commences
operation on July 1, 2020. No future services are
required by the franchisor.

Round off present value factors to 4 decimal places.

Final answer must be rounded off to the nearest peso
amount.

How much should be recognized as revenue from

franchise in 2020?

Correct answers: 62816

15. On October 1, 2020, Octagon Company consigned

30 Apple computer units, costing P80,000 each, to
Techzone, Inc. The units were to be sold on either cash
or credit basis at a commission of P15% of net sales. The
consignor paid freight of P18,000 on the shipment. On
October 11, the consignee received the goods. Sales
were made as follows:

October 15:10 units for cash at P130,000 each. October

22: 12 units on account at P140,000 each.