CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

ADVANCED FINANCIAL ACCOUNTING GERMAN/VALIX/DELA CRUZ/MARASIGAN

SELFTEST

1. Bonnie and Clyde entered into a partnership agreement in which Bonnie is to have 55% interest
in the partnership and 35% in the profits and losses, while Clyde will have 45% interest in the
partnership and 65% in the profits and losses. Bonnie contributed the following:

Cost Fair Value

Building 235,000 255,000
Equipment 168,000 156,000
Land 500,000 525,000

The building and the equipment had a mortgage of P50,000 and P35,000 respectively. Clyde was
to contribute P150,000 cash and an equipment. The partners agreed that only the building
mortgage will be assumed by the partnership.

1. What is the fair market value of the equipment which Clyde contributed?
A. 615,818
B. 989,143
C. 546,273
D. 574,909

2. What is the total asset of the partnership upon formation?

A. 1,892,143
B. 1,701,818
C. 1,660,909
D. 1,632,273

2. Conrad and Pedro agreed to form a partnership. Conrad was to contribute P135,600 cash and an
equipment that had a carrying value of P135,000 and a fair value of P115,000. The equipment
however, had a mortgage attached to it and was agreed by the partners that they will assume it.
Pedro, on the other hand contributed P240,000 cash. They share profits and losses in the ratio 4:5.
Furthermore, part of their agreement was to bring their initial capital in conformity with their
profit and loss ratio.

3. Using Pedro as the basis, what is the amount of the mortgage of the equipment?
A. 58,600
B. 78,600
C. 10,600
D. 34,600

3. Partners A, B, and C have the following agreement for the distribution of profits and losses:
 All of the partners will be given 10% on their average capital balance (A: 472,500; B:
P238,650; C: P162,350)
 Salaries of P122,325 for A and P82,625 for C
 Remainder will be divided equally

At the end of the year, the partnership had a debit balance on the income summary account in the
amount of P125,624

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4. By what amount should Partner A’s capital account change?

A. 40,448 decrease
B. 28,358 increase
C. 29,476 increase
D. 30, 267 increase

5. By what amount should Partner C’s capital account change?

A. 31,235 decrease
B. 32,458 increase
C. 17,536 increase
D. 40,448 decrease

4. Partners A, B, and C share profits and losses in the ratio 7:2:1 respectively. In 2022, D was
admitted in the partnership giving him 15% in the profits and losses. The old partners agreed to
share profits and losses after admission of D using their old profit and loss ratio.

For the year ended 2022, the partnership generated a net income of P15,000. However, it was
discovered that the following transactions were disregarded:

Unrecorded at year end 2021 2022

Accrued expense - 1,050
Accrued income - 875
Prepaid expense 1,400 -
Unearned income 1,225 -

6. What is the share of Partner B in the net income?

A. 2,197.50
B. 2,490.50
C. 2,637.00
D. 3,148.75

5. Partner’s P and Q has capital balances of P358,500 and P300,000 respectively before admitting R.
P and Q share profits and losses in the ratio 6:4. R paid P225,000 in exchange for 30% interest in
the partnership as well as the profits and losses.

7. How much is the capital of partner P after admission of R?

a. 250,950
b. 250,590
c. 279,480
d. 269,580

8. How much is debited from the capital of partner Q upon R’s admission?
a. 120,000
b. 90,000
c. 79,020
d. 105,360

9. Assume that an equipment is undervalued, how much are the undervaluation of the
equipment and the capital balance of partner Q after admission of R respectively?
a. 85,000 and 336,600
b. 100,980 and 235,620
c. 91,500 and 336,600
d. 91,500 and 235,620

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6. X and Y has capital balances of P150,000 and P180,000 respectively. Z is to invest P60,000 for
15% in the partnership interest and also in the profits and losses. There is an undistributed net
income in the amount of P80,000. Partners X and Y share profits and losses 65:35.

10. How much is the capital credit of Z upon his admission?

A. 60,000
B. 61,500
C. 72,000
D. 70,500

11. How much is the bonus to partner X from partner Z?

A. 10,500
B. 6,825
C. 0
D. 3,675

12. Assume that an equipment is overvalued, how much is the share of partner Y in the
overvaluation of the equipment?
A. 24,500
B. 45,500
C. 10,500
D. 28,000

7. Partners E, F, G have capital balances of P120,000, P155,000, and P115,000 respectively. The
partnership generated net loss of P140,000 during the year. They share profits and losses 2:5:1
respectively. Due to disagreement partner F wants out of the partnership. Before retirement, the
value of their inventory increased from P85,000 to P97,000. The partners decided to pay partner F
P70,000 upon retirement.

13. How much is the capital balances of partners E and G after the retirement of partner F?
A. 84,667 and 97,333
B. 89,000 and 99,500
C. 91,333 and 100,667
D. 87,000 and 98,500

14. Assume that another asset, an equipment, is overvalued, how much is the overvaluation
of the equipment and the capital balances of partners E and G after retirement of
partner F?
A. 5,000 and 91,333 and 100,667
B. 5,000 and 84,667 and 97,333
C. 8,000 and 89,000 and 99,500
D. 8,000 and 86,000 and 98,000

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8. Partners A, B, C are partners of ABC Partnership and decided to liquidate the business. Below is
their condense statement of financial position dated December 31, 2022.

Assets Liabilities and Equity

Cash P15,000 Liabilities P75,000
Non-cash 110,000 A, Capital (35%) 5,000
B, Capital (45%) 15,000
C, Capital (20%) 30,000
Total Assets P125,000 Total Liabilities and Equity P125,000

The personal assets and liabilities of the partners on this date apart from their equities in the
partnership are as follows:
Partners Personal Assets Personal Liabilities
A P100,000 P25,000
B 50,000 50,000
C 5,000 60,000
Assume that the non-cash assets are sold for P40,000 and liquidation expenses of P13,500 are
incurred and paid.
15. How much is the total cash paid to partners?
A. 14,366
B. 22,575
C. 5,091
D. 8,209

9. The following are the balances of the accounts in the statement of financial position of Hogwarts
Partnership before liquidation:
Assets Liabilities and Equity
Cash P15,000 Loan from Ron P6,000
Non-cash 95,000 Liabilities 20,000
Receivable from 5,000 Harry, Capital (15%) 33,000
Harry
Loan to Hermione 4,000 Ron, Capital (55%) 25,000
Hermione, Capital (30%) 35,000
Total Assets P119,000 Total Liabilities and Equity P119,000

16. If P40,000 of the book value of the non-cash assets are sold for P18,000, additional
liquidation expenses of P2,500 are incurred and paid, cash withheld is P5,400, and all of
the outside creditors are paid, how much is the total cash paid to partners during the
first installment?
A. 15,265
B. 5,530
C. 5,100
D. 10,500

17. During the first instalment the following data are relevant: P56,000 of the book value of
the non-cash assets are sold for P38,000; additional liquidation expenses of P12,000 are
incurred and paid; all of the outside creditors are also paid. If Harry received P11,000
during the first installment, how much is the cash withheld?
A. 8,500
B. 10,000
C. 9,500
D. 10,500

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10. The following data were ascertained for the month of November in the Statement of realization
and liquidation of Deficiency Corp.: Estate equity at the end of October was (P18,500). Liabilities
not paid at the end of October were P310,000. Liabilities assumed were 15,800. Assets sold and
collected during the month were P235,000. Increase in assets were P36,500. Assets to be realized
in December were P13,500. Liabilities to be paid in December were P30,800. Supplementary
credits and charges were P100,800 and P28,750 respectively. Estate equity at the end of the
November was (P12,450).

18. What is the amount of assets to be realized at the beginning of November?

A. 290,100
B. 305,100
C. 278,000
D. 133,900

11. The following are the assets and liabilities of Triple V Corp. in bankruptcy:

 Mortgage payable of P350,000 was secured by the land and building which had an estimated
realizable value of P560,000
 Notes payable including its interest in the amount of P175,000 were secured by the equipment
with and estimated realizable value of P140,000
 Assets other than those stated above have an estimated realizable value of P157,500
 Liabilities other than those stated above totaled P420,000 which includes claims with priority of
P52,500

19. What is the estimated deficiency?

A. 414,000
B. 52,500
C. 87,500
D. 35,000

20. What is the estimated payment to the notes payable?

A. 167,391
B. 140,000
C. 169,999
D. 175,000

Suggested Answers:

1. D 6. B 11. C 16. C

2. C 7. A 12. A 17. B

3. A 8. B 13. C 18. C

4. D 9. D 14. D 19. C

5. D 10. D 15. C 20. A

END

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