((©)), ICARE Accountancy Review ‘ Innovative » Competent + Responsive PREWEEK LECTURE - BATCH 7 AFAR |. Which ofthe following statement is correct? Statement I: In partnership, each partner has his own owner's capital account alla. Statement 2: A debit wo parier's capital account is made whenever Me partner borrowed substantial amount om the partnership. a. Tonly «, Both staremihts are corect b Henly 4. Both statements are incorrect 2. On January 1,20x1, A and B formed Sparinetship the AB partnership. A and B share profits and losses ina 40:60 ratio, respectively, The following ae information available on the date of Sghaton = A B Co Too, 000-| 35.000) Geen s0oio00_|~ and 500 000] Building 300,000 Accounl payable] 50,000, ‘ow much isthe capital interest ofA and B ater formation? 1. P4S0,000 and 675,000 8430.00 45,000 400,000 and 675,000 <&'Pols,000etnd P10,000 3, Assuming the partners agree to revalue the assets, so that thet api interest will agree to their profit, ‘and loss sharing ratio, which ofthe following statements i incomrect? “The capital interest of A after formation is P4S0,000 ‘The capital interest of Bali formation is P675,000 ‘The amount of revaluation PSO,000 ‘The ol capital contribution of the partners ate PI, 125,000 4. M,N and O are partners inthe MNO Co, Their capital contributed were: M P100,000; N P220,000 and (0 P100,000. + Parner 0 io receive a bonus of 10% of net income ater bonus + Interest of 10% shal be pai on that portion of egpial beginning in excess of P200,000. ‘Salaries of P20,000 and P24,000 shal be paid to pariers M and O, respectively. Assuming the net income of the partnership is P88,000, the total profit share of © a. P38,800 ©. P40,095 b. P52,000 PASS 5. On April 1,20s1. A,B and C farmed a parnership withthe fllowing capital contribution: ‘A, capital capital ©, capital 485,000 “The following are the agreements ofthe partners in distributing the profitsTosses of the partnership ‘+ Partner A willbe awarded an annual salary of P70,000 with the PL0,000 per annum assigned to partner c ‘+ Inerest of 10% based on the beginning capital contribution, ‘+The remainder wil be disibuted using 5:23 rato for A, Band C, respectively. ‘+ Each parmer is allowed to withdraw up w 35,000 per ye, ‘The partnership has a net loss of P70,000. Assume the partners withdraw the maximum amount fom the ‘business cach period, What is the capital balance of partaer A on December 31, 20x1? a. P335,150 €.P327,000 b P332\500 4 P339,500, ICARE Accountancy Review oa “ Innovative » Competent + Responsive 6. Shey, Apple, and Tan are partners with capital balances of 112,500, P46,875, and P140,625 respectively, sharing profits and losses inthe ratio of 3:21. Paz is admitted as a new partner bringing, ‘with him expertise and isto invest cash for 25% interest in the partnership which includes a P25,000 credit for goodwill upon his admission, How much cash sh contribute? &.P75,000 «PIR . P100,000 ec 1. Whats te eet of admin af new pre tan xsi peenkip rough e prt of a tw rn sein vr B: it pene prt ae he csh sid woh sing pare. ©: Hl not hangs al capil of he pani. ~ tw dese hsp of tty the cnt be sasfredio he new paar erga og Ame i gs agsbunt balances afer Personal assets and lisbiltis of the partners at September 1, 2021 are: Personal Asses QB Personal Liabilities Mike 80,000 90,000) Byron 100.000 » 61,000 Anau 192,000 80,000 snc pp any ci, amet Pigs a 9. The following condensed halance sheet is presented forthe partnership of Smith and Jones, who share profits or losses inthe ratio of 60:40, respectively: Other assets 450,000, Smith loan 20,000, Pa70,000, Accounts payable P120,000 Smith, Capital 195,000 Jones, Capital 1ss.000 ar0.000 ‘The partners decided to liquidate the partnership. Ifthe other assets are sold for P385,000, what amount ofthe available cash should be distributed to Smith? a. P195,000 «-P159,000 . P1s6,000 <.P136,000 10, The pares maximum loss absorbable is determined 1, By adding the remaining non-cash assets and cash withheld for possible loss By adding cash withheld for possible loss and remaining unpaid liabilities. ©. By dividing capital interest balance by his profit or loss ratio {4 By dividing total interest balance by his profit and loss ratio 11, Atthe end ofthe last fiscal year, Bachr Co, had the following account balances, ICARE Accountancy Review oa “ Inovative + Competent + Responsive Sn Overapplicd overtead ». 6,000 Cost at goods sold 980,000 Workin process 38,000 Finished goods 82,000 the most common teatment of assigning overapplicd overhegs usc, the final balance in cost of 00ds sold would have been "am a pos 3a0 « gvo.000 Povo 4.974.000 12, Pal Corporation reported the following data forthe month of July Iaventores Begin ing Rass materials 727,000 § P30,000 Workin process. 16,000 17,000 ~~ Finished goods 532,000 PAT. 900 Additonal information im D ‘Raw materials purchases, 56,000 Diret labor cos a Dd w1000 “Manufacturing overhead cos incl. 59,000 Indiret matenlgageided in manufaciring overhead cost incured Pe. 000 Mansa fe sd Woks Pcs S 58,000 “The dret materials cot for Jays v a P55,000 8. Pesion0 © Ps,000 . wv & 66,000 “The cos of goods manufactured for July is: 203,000 215,000 204,000 P216,000 v ‘The adjusted cost of goods sold that appears om the income statement for July is 2. P218,000 . P18R,000 ©. P203,000 4 P189,000 13, Propaganda Corporation manufactures joint products X and Y and by-product A. The joint costs are assigned to the joint products using the net realizable soles value method, which considers further processing costs in succceding operations. The joint costs are allocated to by-product using the reversal fost method. The total manufacturing costs for 10,000 units were P172,000 during the quate, Production and cost dats follow: X Y A Units produced 5,000 4000 1,000 Seles value per unit PSO P40 PS Futher processing costs per unit P10 PS - Disposal cost per unit P2 Desired profit per unt PL “The gros profit of produet X 1. P120,000 ©. P70,000 . P100,000 4. P80,000, 14, An entity is employing backflush costing in connection with just production dats forthe year is provided below: The ently acquired direct materials during the year at a cost of P100,000. {The entity reported iret labor cost of P200,000, +The setal factory overhead incured during the year emounted to P170,000, ‘The standard factory overhead application rate is 75% of direct labor cost. +The ending finished goods inventory i reporced at P120,00, time production process. The ‘What i the cost of goods sold fo be repored by the entity under backflush costing? a. P470,000 «-P300,000 b. P350,000

P Sales 36,000,000 Cost of Sales 15,000,000), Gross Profit 21,000,000 Depreciation expente (6,000,000) 2,700,000) Other expense (6,600,000) (8,000,000), Gain onsale of equipment ‘900,000 Separate Income 300,000 00 The total investment income of P Comp a. P3,240,000 «.P3,690,000 b. P2,790,000 4. P2.430,000 23, On February 1, 20x2, Peter Comp, acquired 30% of the oustanding ordinary share of Wish Inc. for 150,000. On December 31, 20%2, Irish Inc. reported net income of P400,000 and paid dividend amounting % P200,000. The fir value of the Peter investment on December 31, 20x2 amounted to 280,000, ‘On Januaty 1, 20x8, Peter Corp acquired additonal 40% ordinary share of Ish Inc. for PS00,000. On that date, the idetifible assets and lisiliies of Irish Inc. book value amounted to PI,S00,000 and 300,000. However, Irish Ine. inventories is undervalued by P10,000 and the equipment is overvalued by P42,000. The non-contolling interest is measured at NCI proportionate share Bass “The entities also agrood that Pete shall pay cash amounting to P50,000 on February 1, 20x4, i the earnings fof Peter Corp. F200,000. On the date of combination, the provisional fair Value of the contingent consideration is P10,000, ‘What isthe amount of gooduill tobe reported on January 1, 2083? a P4900 PO7,400 b. P27,600) «.P107,000, ICARE Accountancy Review zm 4 : 24. The following are data provided by XXX company. ‘Assets at book value 500,000 ‘Asscis at NRV 210,000") Tiabiiies al ook value Fully secured mortgage 720,000 | ‘Unsecured accounts and notes payable 10.900 | Unrecorded liabilities Interest on bank notes 1,000 Estimated cost of administering estate L000 ‘The court has appointed a trste to iguidate the company, How much isthe estate deficit of ‘A. P63,000 . B, P62,000 PSI, 000 = D. Ps0,000 a» 25. The AAA Coppa has decided to seek liquidation aft@ previous restructuring. and quasi ~ crzaiacon alps fle. The company his the flowing cones balance shea of May 2025; Cash 24.000 | Accrued Payroll 80.000 Receivables (aed $60,000 | Lous from Officer 100,000 Tavent 40,000 | Accounts payable 120.000 Prepaid expenies 2,000 | Equipment Loun Payable 720,000] Plant assets 700,000 | Business Loan Payable 360,000 | Goodwill 1,000 | Common Stock 120.000 | Deficit (26,000) Tota Asses “Total Liahiities and ui The equipment loan payable is secured by a specific plant assets having a book value of P600,000 and a realizable value of P700,000, OF te accounts payable, PS0,000 is secured by inventory which has a cost of 80,000 and liquidation value of P88,000, The balance of the inventory has a realizable value of P64,000, Receivables wits a book value Wl market value of P200,000 and P160,00, respectively have been pledged as collateral to business loan payable. The balance ofthe receivables have a realizable value of P300,000, “The total realizable value of fee assets to unsecured creditors before unsecured creditors before unsscured zeitors with Prot is ‘A.PL,256,000, B, Pa64,000 C.Pa4s,000, D.P396,000, 26. The percentage of completion method of inventory valuation of long term constuction contract A. Recognizes income upon completion of work B, Recognizes income on collection of billings C, Recounizes income based onthe progress of work 1. Does not recognize income atthe balance sheet date 27, The fllowing pertains to Bell Co's constuction jb, which commenced during 2026: Project | Project 2 ‘Contact Price 840,000 600,000 Cost ineured during 2026 “480,000 560,000, Esimated cots to complete 240,000, 0,000, Billed to customers during 2026 300,000, 540,000, Received from customers in 2026 80,000, 500,000, ‘What amount of pros profit (oss) would Bell report in 2026 under zero profit method andthe pereentage of| completion method? '8. 40,000) and 40,000 1B. 40,000 and (40,000) (€.40;000 and 680,000 80,000 and 840,000,, ICARE Accountancy Review - ss 28, Franchise fes ee properly recopnized as revenue a. when rocived in cash when a contractual agreement has been signed, «after the franchise business has begun operations aller the franchiser has substanilly performed its service 29,0n Anas 3,202, AAA Ing ete ino Sans wih 2 fancies. Te gresment reid a inal anh eof a, 00 as pay P60 00 every 4 oth the est Povient i davon December 31, 2026, The rks gest at 12%, Th nel dep dae Gat substan! perormancs hasbeen comple, TH along data dserbes the agreement Franshine Probabilty of Tull] Sewiees pertomed by [Toul com meured to collection franchisor 1221/2026 | 12/31/2026 Tang Tike ¢ ‘Substantial PI, £00,000 Rizal Dou 25% INA The present and future value abla! 4% for 4 periods were a follows: Present value of PL Osa Feast aol = amg 3.5299) = Future valve of PI 1.1699 Fuure value of an Ordinary amy of PL 4.2465) What amounygliet income is to be Feported by AAA in 2026, assuming P2,000,0000 was reeived from cach fanchisM@ daring the year Tansy. \ Rizal wv A.2177.890. o 1.357790. 0 €.2265058, 0 D. 2.265.058. 87,118, . ow , 30. Om June 1, AAA Company shipped 25 TV sets to Le, Inc, on consignment The sets ae to be sold at an advertised price of P40,000, The cost oF each st 10 the consign was P20,000. The cat of shipment pid by the consignor was P15,000, The consignor agreed to absorb the consigce's expenditure fr fright and also to allow the consignee P2,000 for delivery and installation ofeach sel, Commission is to be 25% ‘ofthe sales price. On June 30, Lee submitted the following summary of eonsigament sales Sets reseived 25 Ser sold 8 Sets returned to consignee (defective) = 10) Sets on hand r June 3-30 Sales, 8 sets a P40,000 320,000 Charges: Freight in 10,000 Deliveries and installation expenses 16,000 ‘Commissions of 25% of sales $0,000 (106,000 Total 214,000, Remitance enclose 50,000) Balance owed (collections from customers not yet made Piston ‘Compute the units unsold in the hands ofthe consignee A. P3100,000 1B. P306,000, .P309,000 .P315,000iS , ICARE Accountancy Review oon Innovative» Competent + Respomive nes 31, On August 1, 2036, AAA, lnc. consigned to Mags store 10 ladies bandbags costing 5,000 each paving fight charge of P0000, Ache end of the month, Mags store reported sales of 6 handbags at 12,000 each and expenses incurred of PS,000, and rmited the ne proceeés due to AAA afer decting a 20% commision. How much net income dd AAA realize in August onthe consignment? ‘A. PIS000 net income B. 13,000 net income ©. P13,400 net income D_P13/000 net loss 32, The equity method of accounting for an investaent in an sain includes de following steps 4 Ion om ow ‘Recognise the inital investment at cost Yes Yes No No [Recognise the inital investment at fair value Yes No Yer No Reduce the carrying amout by any distributions No Yes No. ¥es ‘Aciust the camying amount by the investors share ofthe assciats profit or No Yer Yes No loss . a. sm « » 35. bats Ama hepsi ll tet An ine ig a mange, Deut a a a eat cot es ‘The assets and Fables Held in Bank X ar the assets and libties of Bank X and not the assets end libities ofthe pares. Banks A and B cach have ad0% ownership interest in Bank X, with the remaining 20% being listed and widely held. The stockholders! agreement between bank A and B establishes joint ‘onto ofthe ativities of bank X —- “Transactions for the year 2026 and 2027 follows 2026 2027 Banke A Investment 100,000,000 10,000,000 Bank B -Investment 100,000,000 10,000,000 Revenues 20,000,000, 24,000,000, Cost and expenses 12,000,000 14,000,000 Dividends paid - Banke X #,000,000 ‘What is the interest of Bank A in the joint arrangement at December 31, 2026? A. 100,000,000 18, 96,800,000 96,000,000 D. 80,000,000 34, On January 1, 2026, AAA, BBB and CCC (he joint operators) jointly buy a helicopter for P60, 000,000 cash. The joint arangement includes the following agreements: A. The panties ae the joint owners ofthe helicopter B. The helicopter is atthe disposal ofeach party for 70 days each year. ©. the parties may decide toute the helicopter or lease it oa thid party. . The maintenance and disposal of the helcopte: require the unanimous consent ofthe partes LE The contractual arrangement is for the expected life (20 year) ofthe helicopter and can be change ‘only fall the partes agree. The residual value ithe helicopter is NIL. F. Revenues and expenses are to be shared equally among the joint operator. In 2026, the parties paid P600,000 meet the costs of maintaining the helicopter ‘Te helicopter each party also incurred costs of runing the helicopter wien they made use ofthe helicopter (eg AAA incured cost of P400,000 on pilot fees, aviation uel and landing costs). In 2026, the parties ‘eatmed a rental income of P5,000,000 by renting the heicoper to others ‘What isthe nt income (loss) of he joint arrangement on December 31, 2026? ‘A. 1,000,000 1B. 400,000 ©. 3,000,000 5,000,000, ICARE Accountancy Review = Innovative » Competent + Responsive 435. Sl: Startup cost incurred by a branch a the inital months of operations are appropriately deferred and mortized in subsequent profitable accounting periods, ‘2: Ite home office eaties branch equipment in is accounting records, an acquisition of equipment by the branch is recorded in the home office accounting records by a debit to the Investment in Branch ledger account and erdit to Equipment: Branch account, A-SI Trae; $2-True BSI Truc; 82 -False C11 - False; S2- True DSI -False: $2 -False 136, SI: Separate Financial stelements of home office and brani! meet the needs of investors, creditors, of other outside users of financial statement 52 ina wut pp oni omc sna ope fsa bata Sigman ioscan aes aes en can ‘A.SI ~True; $2 - True ¢ 4 Fale S2 Fale ~ an 37. Si: If perpetual inventory system is sod by both the home office end the branch, thy reciprocal ledger ‘coun ed yh bnch ngme Oe nt Shpmens on ome Othe ara ‘82 The "shipments to branch” Seeount is added to home offie's purchases ace in determining home office cost of god sold A.SI- True: 2 € BST S2 “Fake CSI Fale $2- True v D.SI ~Falge; $2— False Bien, 38, The AAA corporation establish ts Taytay b Faauary 20x6. During its fst year of operations, home office shipped tits Taytay branch merchaplise words P260,000 which included a markup of, 15% on cost, Sales on account totaled PS00,000 while cash sales amounted to P160,000. Taysay reported operating expenses of P76,000 and ending inventory of P30,000, at billed price. In so far as the home office is concered, the real net income of Tayay is A. PI4,000 1B P198,000 €.P358,000 D_P384,000 39.81: Control over the acquire assets is dnetly achieved in an asset for asset exchange but indivetly achioved in an asset (acquirer for stock (acquire) ‘82: A business combination tat occurs where only one of the original in enties existence afer the ‘combination is called a statutory consolidation, False; S2- True False; S2— False 40.81: The acquire entity is liquidated ina statutory merger. ‘82: Fora business combination to qualify as a statutory consolidation, «new corporation must be formed. ASI - Truc; $2- True 1B. SI - True, S2- False C-SI False; S2- True DSI False, $2~ False« iS , ICARE Accountancy Review = 41, Domestic company hasan accounts payable in the smouat of 10,000 Dann dinar on its books on October 1, 0x8 This account was unpaid tthe end ft fiscal yer, October 1, 2085. The spot ae forthe dinar wat October 1,20x5 = Idinar= P262 ctaber 30, 20x: dinar ~ P2665 ‘On October 31, 20x8, Domestic company should report ‘A.A accounts payable of 2,620,000 1B. An accounts payable of P2,660,000 ©. An accounts payabale of 10,000 Bahrain dinar An exchange gain of 40,000, 42. AAA, a Philippine Corporation, bought inventory items fom summa in Japan on November S,20%6 for 100,000 marks, when the spot rate was P42. At Juan's Devember 31, 20x6, yearend the spot rate was P41. On January 15, 20x7, Juan bought 100,000 mis atthe spot rat of P41.80 and paid the invoice, How much should Joan report in its statement for 20x6 and 20x7 as foreign exchange transaction gains or loss respectively? ‘A. (P100,000) and P80,000 1B, P100,000 and (P30,000), PO and P20,000, > D_P20,000 and PO a 49, BHA Co purchased merch fr 30000 fom a Yeon Lando November 0,265, Pay ih pod hon ay 80,2007 he ang ih pce pon ws asfolows 11/30720%5, —12/3120x6, 113002087 Spot ate P Pra2.00 30 day rte Ge 146.00 (60 day rate 00 150.00 Inits income statement for 20x6 and 20x7, what amount should Hunt repor as foreign exchange transaction asin oss) respectively? ~~ ww ‘A 26,000 an (F300 000) 'B. (266,000) and P 130,000 + C P,200,000 and P0000 1. 300,000) and (P72,000) 44, On October 1, 20x6, AAA Co, purged merchandize worl aoa of 100000 FCs from it forcign supplier, payable win 30 days under an open account aangement. AAA Co, ited a 30-day, noes payable in FC. On Ocaber 31,2086, AAA Co, pil the note. The olloving information om spat tes (IFC) is provided Buying. Selling. Toio120x6 PAR. Pas30 103220x6 48.20 ead oni Co-s foreign exchange gain or loss onthe transaction is ‘A. PIO080 Toss B. P14,000 loss €.P24,150 gain D_P38.220 lose, ICARE Accountancy Review = Innovative # Competent + Responsive = aes 45. On October 17, 20x7, AAA Co. purchased from a Thailand firm an inventory costing 20,000 babt, Payment is duc on January 15, 2088. Also on October 17, AAA Co. entered into a foreign exchange forward to buy 20,000 baht on January 15,2088 10720x7. —123120%7. 1/1520. Spot ate (ba) PL30 PLa2 Piao Forwardrate (baht) 1.30, Ta 140 ‘The December 31, 20x7 profit and loss statement, foreign exchange gain or loss due to hedged item amounted to AP. 400 gain 1B. P2,000 oss ©. P2,400 gain, D.P2,400 oss lta, 46. Using the same information in no. 45, the December 31@G0x7 profit and loss statement, foreign ‘exchange gain or loss due to hedging instrument forward contact AP. 400 gain 1. P2,000 loss CPD, 100 gain ‘ D.P2,400 loss 47. What ste dt called when afore rene is rignly recorded? ‘8 Origination date Balance sheet date Transaction date q ~ 2 D.Setement date 48. Forex gains and ls ‘A. Reported on the incom stateméat wv 1B Reported a a direct adjustment to xelained earings C Repored in other comprehensive income. D. Not reported, . 49, What isthe lationship tween he foreign cen fre andthe forwa rales? A. The spot rates is always higher 1B The forward rate ie alvayshighes (C.The two rates always start out the same The rates ean be diferent (ether can be higher) or they can be the same 50. Which of the following is invrret about foreign exchange translation? AA Assets are tanslated using current rate 1. Liabibis are translated using historia rte Divided is translated using histories rate Revenue i translated using historical rate END