__1. How much is the estimated deficiency to unsecured creditors?

a. (28,000)

b. (28,500)

c. (30,125)

d. 31,025

e. None

Solution:

Total assets at FV P 335,000

Priority claims:

Fully secured creditors (150,000+7,500) 157,500

Liabilities w/ priority (11,125+ 11,000) 22,125

Partially secured creditors (30,000 + 35,000) 65,000 244,625

Net amount available to unsecured creditors P 90,375

Unsecured creditors

Partially secured creditors (125,000 – 65,000) 60,500

Accounts payable 60,000 120,500

Estimated efficiency to unsecured creditors P (30,125)

_______2. Using the same information above, what is the estimated recovery

percentage for partially secured creditors?

a. 100%

b. 84.36%

c. 75%

d. 50%

e. None

Solution:

Estimated Recovery Rate

P 90,375 / 120,500 = 75%

_______3. Using the same information above, how much will be paid to accounts

payable?

a. 157,500

b. 125,500

c. 105,875

d. 45,000

e. None

Solution

Payment to accounts payable P 60,000 x 75% = P 45,000

_______4. Using the same information above, how much will be paid to Notes Payable

(including Interest)?

a. 157,500

b. 125,500

c. 105,875

d. 45,000

e. none

Solution:

Notes payable P 120,000

Interest on notes 5,500

Total 125,500

Less: 65,000

Unsecured liabilities 60,500

Multiply by 75%

Total P 110,375

_______5. What is the estimated recovery percentage for unsecured creditors without

priority?

a. 100%

b. 84%

c. 60%
d. 40%

e. None

Solution:

Estimated recovery percentage: P 390,000

Total assets at RV

Less: Priority claims

Fully secured liability 130,000

Liabilities w/priority 20,000

Partially secured 60,000 210,000

Amount available to unsecured liabilities P 180,000

Unsecured creditors:

Partially secured liabilities P 40,000

Unsecured creditors 260,000

Total P 300,000

Estimated recovery % for unsecured creditors (P180,000 / 300,000) 60% C.

_______6. If the assets are converted into cash as the estimated realizable values,

what is the ERP for partially secured creditors?

a. 100%

b. 84%

c. 60%

d. 40%

e. None

Solution:

Partially secured creditors:

Assets pledge P 60,000

Unsecured (P40,000 x 60%) 24,000

Estimated amount received (P24,000/60,000) 40% D.

7. The net gain (loss) for the three-month period ending March 31 is

a. 250,000

b. (325,000)

c. 425,000

d. 637,500

e. None

Statement of Realization and Liquidation

Asset to be realized P 2.062,500 Assets realized P 1,800,000

Assets acquired 1,125,000 Assets not realized 2,062,500

Liabilities Liquidated 2,812,500 Liabilities to be liquidated 3,375,000

Liabilities not Liquidated 2,550,000 Liabilities assumed 2,437,500

Supplementary charges 4,687,500 Supplementary credits 4,200,000

P 13,237,500 P 13,875,000

Net Gain P 637,500

________8. How much is the net gain (loss) on realization and liquidation as of

December 31,2022?

a. 17,900

b. (17,900)

c. 167,900

d. (167,900)

e. None

Solution

Assets to be realized:

Accounts receivable P 80,000

Inventory 160,000

Investment in equity security 26,400

Land 98,000
 Building 60,000

Equipment 48,000 P 472,400

Liabilities liquidated:

Bank loan 26,000

Salaries payable 40,000

Taxable payable 18,000

Estate administration expenses 7,500 P 91,500

Liabilities not liquidated

Accounts payable 278,000

Notes payable 234,000

Bank loan (188,000 – 26,000) 162,000 674,000

Total P 1,237,900

Asset realized

Investment in equity security 26,000

Inventory 150,000 176,000

Asset not realized

Accounts receivable 80,000

Land 98,000

Building 60,000

Equipment 48,000 286,000

Liabilities to be liquidated

Accounts payable 278,000

Notes payable 234,000

Salaries payable 40,000

Taxes payable 18,000

Bank loan 188,000 758,000

Net loss ( P 17,900)

________9. How much is the estate deficit as of December 31, 2022?

a. (173,600)

b. (191,500)

c. (341,500)

d. (674,000)

e. None

Solution:

Estate equity beginning

Total assets P 584,400

Total liabilities (758,000) (P 173,600)

Loss on realization (P 186,400 – 176,000) ( 10,400)

Estate administration expense ( 7,500)

Total estate deficit (P 191,500)

________10. How much is the ending cash balance on December 31, 2022?

a. 46,500

b. 112,000

c. 158,500

d. 196,500

e. None

Solution:

Cash P 112,000

Sales of investment in equity security 26,000

Sale of inventory 150,000

Total cash 288,000

Less: Payment liabilities

Bank loan P 26,000

Salaries payable 40,000

Taxes payable 18,000

 Estate admin expense 7,500 91,500

Total cash, end P 196,500

________11. How much is the estate deficit end as of June 30, 2023?

a. (85,500)

b. (191,500)

c. (235,500)

d. (385,500)

e. None

_______12. How much is the ending cash balance as of June 30,2023?

a. 99,500

b. 105,500

c. 143,500

d. 249,500

e. None

_______13. What is the entry in the book of LRT Corporation on January 1, 2022 to

account its interest or investment?

a. Cash in JO 20,000,000

Cash 20,000,000

b. Cash in JO 10,000,000

Equipment in JO 10,000,000

Cash 20,000,000

c. Equipment in JO 10,000,000

Cash in JO 10,000,000

d. Equipment in JO 20,000,000

Cash 20,000,000
e. None

_______14. How much is the share of PNR Corporation in the net income of the

operation?

a. 250,000

b. 750,000

c. 1,000,000

d. 1,500,000

e. None

_______15. How much was the Joint Operation’s sales?

a. 83,750

b. 86,550

c. 91,000

d. 92,650

e. None

25,000 Purchases (agreed capital)

25,000 Purchases (agreed capital)

1,850 Expenses (paid by Hon)

2,600 Expenses (paid by Dah)

54,450 Investment in Joint

38,200 Credit Balances (18,000 + 20,200)

92,650 Total Sales

_______16. How much was the Joint Operation’s gain?

a. 38,200

b. 41,000

c. 42,750

d. 45,550

e. None
_______17. How much is the total profit of the joint operation?

a. 8,000

b. 16,000

c. 24,000

d. 34,000

Solution:

Inventory in Joint Operation

Joint Operation P 6,000 P 30,000 (unsold)

P 24,000 JO profit (P 8,000 x 3)

_______18. How much is the unsold merchandise charged to Marc?

a. 8,000

b. 16,000

c. 24,000

d. 34,000

_______19. How much is the share in profit of Joint Venture before adjustments for

2022 and 2023?

a. 240,000 and 360,000

b. 223,000 and 367,000

c. 240,000 and 367,000

d. 223,000 and 360,000

e. None

Downstream sale of inventory

Joint Venturer Joint Venture 2022

Net profit P 1,200,000
Ending Inventory
(100,000 x 50% x 70%) net of tax (35,000)
(35,000) 1,200,000
 Multiply by 100% 20%
(35,000) 240,000 P 205,000

Joint Venturer Joint Venture 2023

Net profit P 1,800,000
Beginning Inventory
(100,000 x 50% x 70%) net of tax 35,000
35,000 1,800,000
Multiply by 100% 20%
35,000 360,000 P 395,000

Journal entries (2022)

Investment in joint venture 205,000

Share in profit in joint venture 205,000

Income tax expense 18,000

Deferred tax liability 18,000

(60,000 x 30%)

Journal entries (2023)

Investment in joint venture 395,000

Share in profit in joint venture 395,000

Deferred tax liability 18,000

Income tax benefit 18,000

(60,000 x 30%)

_______20. How much is the unrealized profit from upstream sale net of tax for 2022

and 2023?

a. 0 and 7,000

b. 7,000 and 35,000

c. 7,000 and 0

d. 35,000 and 7,000

e. None

Solution:

Ending Inventory

(100,000 x 50% x 70%) net of tax (35,000)

Beginning Inventory

(100,000 x 50% x 70%) net of tax 35,000

_______21. How much is the adjusted share in profit of the Joint Venture for 2022 and

2023?

a. 240,000 and 360,000

b. 233,000 and 367,000

c. 240,000 and 367,000

d. 233,000 and 360,000

e. None

Upstream sale of inventory

Joint Venture 2022

Net profit P 1,200,000
Ending Inventory
(100,000 x 50% x 70%) net of tax (35,000)
1,165,000
Multiply by 20%
233,000 P 233,000

Joint Venture 2023

Net profit P 1,800,000
Beginning Inventory
(100,000 x 50% x 70%) net of tax 35,000
1,835,000
Multiply by 20%
367,000 P 367,000