AFAR

PUP BES- HNS Honors Society
College of Accountancy and Finance

PUP – Sta. Mesa Manila
COST ACCOUNTING
Theories
1. Cost and management accounting

a. Require an entirely separate group of accounts than financial accounting uses
b. Focus solely on determining it costs to manufacture a product or service
c. Provide product/service cost information as well as information for internal decision
making
d. Are required for business recordkeeping, just like financial and tax accounting
2. If the amount of Total Manufacturing Cost is less than the amount of the Cost of Goods
Manufactured during a certain period, then
a. Ending Work-in-Process Inventory is greater than or equal to the amount of Work-
in-Process Beginning Inventory
b. Beginning Work-in-Process Inventory is less than the amount of the Ending Work-
in-Process Inventory
c. Ending Work-in-Process Inventory is equal to the Cost of Goods Manufactured
d. Beginning Work-in-Process Inventory is greater than the amount of the Ending
Work-in-Process Inventory
3. It is a cost accounting system that focuses on an organization’s activities and collects

costs on the basis of the underlying nature and extent of those activities
a. Activity-based Management
b. Activity-based Costing
c. Process Costing
d. Job Order Costing
4. Activity-based costing is appropriate in an organization that

a. Produces and sells a wide variety of products or service
b. Uses a wide range of techniques to manufacture products or to provide services
c. Has experienced significant changes in its business environment, including
widespread adoption of new technologies
d. All of the above
e. None of the above
5. Statement 1: If actual overhead is less then the applied overhead, the variance is
unfavorable termed as underapplied overhead.
Statement 2: Cost drivers does not promote the effective and efficient management of
costs
a. Only 1 statement is correct
b. Only 1 statement is incorrect
c. No statement is not correct
d. No statement is not incorrect
6. In developing a predetermined factory overhead application rate for use in the production,
which of the following could be developed and used?
a. Actual Overhead / Actual Machine Hours
b. Estimated Overhead / Estimated Machine Hours
c. Estimated Overhead / Actual Machine Hours
d. Actual Overhead / Estimated Machine Hours
PARTNERSHIP
Theories
1. Partner’s interest in a partnership is generally equal to:

A. The fair value of net assets at the date of contribution.
B. The sum of the fair value of the assets the partner contributes to the firm, increased
by any liabilities of other partners assumed and decreased by any personal liabilities
that are assumed by other partners.
This material is protected under copyright laws. No Part of this material may be copied, reproduced, translated, reduced to any electronic medium
or machine-readable form, in whole or in part, without prior written consent of PUP BES-HNS Honors Society. No part of this handout may be
downloaded, stored in a retrieval system, or transmitted in any form or by any means, without the organization’s written consent. Any other
reproduction or storage in any form without the organization’s permission is prohibited.
C. The sum of the bases of the individual assets the partner contributes to the firm,
decreased by the partner’s share of partnership liabilities.
D. The unamortized cost of the assets to the partner.
2.
I. The capital to be credited to each partner upon formation should be equal to the amount
actually contributed by each partner.
II. In the case of both general and limited partnership, all partners are liable for all debts
of the firm.
III. When property other than cash Is invested in a partnership, the non-cash asset is
credited to the contributing partner’s capital account at contributing partner’s original
acquisition costs.
IV. Loan to partners is a liability account and Due to partners is an asset account.
Which of the following statements is/are correct?

A. Only Statement I
B. Statement I and II
C. Statement I and III
D. All of the statements are incorrect
3.
I. Assuming there was no profit-sharing scheme agreed, partnership profit must be
allocated to the partners on the basis of start-up capital of the partners.
II. If the agreement specifies only how profits are shared but silent as to the division
losses, then losses are to be divided based on the ratio of capital contribution.
III. In determining the partner’s average capital, the partner’s temporary withdrawals are
included in the computation of average capital.
Which of the following statements is/are incorrect?

A. Only Statement I
B. Statement I and II
C. Statement II and III
D. All of the statements are incorrect.
4. The XY partnership agreement provides for X to receive a 20% bonus on profits before the
bonus. Remaining profits and losses are divided between X and Y in the ratio of 2 to 3,
respectively. Which partner has a greater advantage when the partnership has a profit or
when it has a loss?
Profit Loss
A. X Y
B. X X
C. Y X
D. Y Y
5.
I. Under the bonus method of admission of a new partner by investment, the total
contributed capital is equal to the agreed capital of the firm.
II. When a new partner is admitted to the partnership through bonus method, the total
assets and capital of the partnership does not change before and after the admission.
III. Under the asset revaluation method, the asset of the firm is revalued after the
admission of a new partner.
IV. A partnership may be dissolved by the insolvency of an existing partner.
Which of the following statements are correct?

A. Only Statement I
B. Statement I and III
C. Statement II and IV
D. Only Statement IV
E. All of the statements are correct.
6. If A is the total capital of the partnership before the admission of a new partner, B is the total
capital of the partnership after the investment of a new partner, C is the amount of the new
partner’s investment, and D is the amount of capital credit to the new partner, then there is:
A. A bonus to the new partner if B = A + C and D < C
B. A bonus to the old partner if B = A + C and D > C
C. Both a and b are correct
D. Both a and b are incorrect
7.
I. Upon liquidation of a partnership, the gain or loss on realization is distributed to
the partners in accordance with their capital distribution.
II. Total interest of a partner is divided by respective P&L ratio will give the maximum
amount of loss on realization that the partnership must incur in order for that partner to
break-even.
III. A partner with the lowest loss absorption capacity is normally entitled to receive the
first peso available for payment to partners in the cash distribution plan.
IV. A partner’s loss absorption balance is calculated by dividing the partner’s total interest
by his profit and loss sharing percentage.
Which of the following statements are correct?

A. Only Statement I
B. Only Statement II
C. Only Statement III
D. Only Statement IV
E. All of the statements are incorrect.
8. In installment liquidation of a partnership, each installment of cash is distributed:

A. In the partner’s profit and loss ratio
B. As agreed to by the partners
C. In the ratio of partner’s capital accounts
D. As if no cash would be forthcoming
9. Siopao, Siomai and Suman, partners to a firm with total assets of P40,000, have a capital
balances of P11,000, P13,000 and P5,800, respectively; and share profits in the ratio of 4:2:1.
In case of installment liquidation, who among the partners shall be paid first with available
cash of P2,000?
A. Siomai
B. No one
C. Siopao
D. Suman
CORPORATE LIQUIDATION
Theories
10. The total free assets in the statement of affairs will be available to the following except:
A. Fully secured creditors
B. Partially secured creditors
C. Unsecured creditors with priority
D. Unsecured creditors without priority
11. The total net free assets will be distributed to the following:
I. Unsecured creditors without priority
II. Unsecured creditors with priority
III. Fully secured creditors
IV. Partially secured creditors
A. I and II only
B. II and IV only
C. I, II and IV only
D. All of the above
12. Which of the following is not a liability that has priority in corporate liquidation?
A. Administrative expenses incurred in the liquidation
B. Payroll taxes due to the government
C. Advertising expense incurred before the company became insolvent
D. Salaries payable
IFRS 15 – REVENUE FROM CONTRACTS FROM CUSTOMERS with LONG TERM

CONSTRUCTION CONTRACTS
Theories
1. In the computation of the realized gross profit in the final year of the construction contract
under percentage of completion methods, which of the following would be used?
Total Estimated Total Contract Income Previously

Cost to Complete Price Recognized
a) YES YES NO
b) YES YES YES
c) NO YES YES
d) YES NO YES
2. In accounting for a long-term construction contract for which there is a projected profit, the
balance in the Construction-In-Progress Account at the end of the first year of work using
the percentage of completion method would be
a. Lower than the zero-profit method
b. Higher than the zero-profit method
c. The same as the zero-profit method
d. Zero
3. Statement 1: Under the PFRS 15, revenue is recognized in the accounting period when
the performance obligation is satisfied.
Statement 2: Under the PFRS 15, a revenue from contract with customers cannot be
recognized until a contract exists.
a. Only 1 statement is correct
b. No statement is correct
c. All statements are not incorrect
d. Cannot be determined
4. On January 1, 2021, Jacke entered into a franchise agreement with Thorne. The
agreement provides for an initial franchise fee of P2,000,000. On January 3, 2021, Jacke
paid 50% down-payment and the balance to be paid at the end of January 2021. The
franchise license is granted on January 12, 2021. The contract should be recorded on:
a. January 1, 2021
b. January 3, 2021
c. January 31, 2021
d. January 12, 2021
5. The role of the agent in a principal-agent relationship is to:

a. Develop and maintain goodwill of the principal’s customers
b. Provide goods or services for the customers
c. Arrange for the principal to provide goods or services to customers
d. Market the principal goods and services to prospective customers
6. In the books of the consignor, the balance of the consigned goods inventory account would
be shown:
a. As an asset in the balance sheet of the consignee

b. As an asset in the balance sheet of the consignor
c. As a liability in the balance sheet of the consignor
d. As a liability in the balance sheet of the consignee
HOME OFFICE, BRANCH AND AGENCY

Theories
13. The freight on shipments to branch paid by the branch is recorded by the home office as:
A. Credit to investment account
B. Credit freight-in
C. Debit freight-in
D. Not recorded
14. Which of the following reconciling transactions will require credit to home office current
account in Branch A’s book for the adjustment?
A. Collection by Branch A of the Branch B’s account receivable.
B. Payment by Branch A of Home Office’s accounts payable.
C. Credit memo received by Branch A from Home Office.
D. Reshipment of goods received by Branch A to Branch B.
15. What is the main reason for the difference between the branch’s net income reported by the
branch and the true branch’s net income computed by the home office?
A. Because of overstatement of branch’s cost of sales for goods coming from outsiders.
B. Because of overstatement of branch’s cost of sales for goods coming from home
office.
C. Because of overstatement of total goods available for sale coming from home office.
D. Because of overstatement of branch’s ending inventory coming from home office.
16. In preparing the combined financial statement of the home office and its various branches:
A. Both the reciprocal and nonreciprocal account are combined.
B. Both the reciprocal and nonreciprocal account are eliminated.
C. Reciprocal accounts are eliminated but nonreciprocal accounts are combined.
D. Reciprocal accounts are combined but nonreciprocal accounts are eliminated.
17. Which represents the proper journal entry for a periodic inventory system that should be made
on the books of the branch when goods that cost the home office P100,000 to manufacture
are shipped to the branch at a price of P110,000?
A. Shipments from home office 110,000
Home office 110,000
B. Shipments from home office 100,000
Home office 100,000
C. Shipments from home office 110,000
Unrealized profit 10,000
Home office 100,000
D. Shipments to branch 100,000
Unrealized profit 25,000
Shipments from home office 125,000
18. ASO SA ASOSYASYON SA ASCUZENA Inc. has a branch operation located in Cebu. On
the home office financial record, ASO SA ASOSYASYON SA ASCUZENA reports Investment
in Cebu Branch account with a P117,000 debit balance. At the same time, the branch
operation is reporting Home Office account with a P121,500 credit balance. Which of the
following statements is true?
A. Cash may have been collected by the home office for the branch but not yet recorded
to the branch.
B. The difference indicates that cash may be in transit from the branch to the home office.
C. The difference indicates that inventory may be in transit from the home office to the
branch.
D. The difference indicates that the home office might have assigned an expense
allocation to the branch.
COST ACCOUNTING
Problems
1. The following information relates to the MLBC Company
Units required for production per year 53,125 units

Cost of placing an order P 2,550.00
Carrying cost per unit per year P 1,500.00
Assuming that the units will be required evenly throughout the year, what is the Economic
Order Quantity?
a. 425
b. 144
c. 394
d. 250
Solution:
2 𝑥 53,125 𝑥 2,550
𝐸𝑂𝑄 = √ 1,500
EOQ = √180,625
EOQ = 425
2. Delta Inc. manufactures hardware parts for a personal computer. Delta Inc. wants to
estimate the overhead costs to plan its operations. A recent trade publication revealed
that overhead costs tend to vary with machine hours. To verify such information, Delta
collected the following data for the past 5 months:
Month Machine Hours Overhead Costs

January 2,000 5,600.00
February 2,100 5,800.00
March 3,500 6,275.00
April 3,100 6,000.00
May 2,800 6,120.00
Using the high-low method, how much is the overhead costs if the actual machine hours
used is 3,200?
a. 4,700.00
b. 6,140.00
c. 1,440.00
d. 8,960.00
e. 5,737.14
Solution:
6,275−5,600 675
Variable Cost = =
3,500−2,000 1500
= 45% or 0.45
Fixed Cost = 6,275 - (3,500 x 0.45)

= 6,275 – 1,575
= 4,700
Overhead Cost = 4,700 + (3,200 x 0.45)

= 4,700 + 1,440
= 6,140
3. The following information has been taken from the records of Dahyun Company:
Direct Materials P 70,000
Prime Cost P 135,000
Conversion Cost P 110,000
If the Cost of Goods Manufactured was P205,000 in total; the Ending Work-in-Process
Inventory was P50,000; and a decrease in the Finished Goods Inventory amounting to
P10,000, the Cost of Goods Sold must be
a. 75,000
b. 180,000
c. 215,000
d. 245,000
Solution:
Cost of Goods Manufactured - 205,000
Decrease in Finished Goods
Inventory - 10,000
COST OF GOODS SOLD 215,000
4. The following information has been taken from the records of Daedaaa Corporation:
Raw materials issued in production P 320,000.00

Prime Cost for the period 550,000.00
Conversion Cost for the period 362,500.00
OH is applied at 0.45 per Direct Labor
Cost of Goods Available for Sale 755,000.00

Selling and Admin Expenses 34,000.00
Raw Materials Inventory

Beginning 80,000
Ending 95,000
Work-in-Process Inventory
Beginning 30,000
Ending 32,000
Finished Goods Inventory
Beginning 85,000
Ending 55,000
The Raw Materials Purchased for the period amounted to:

a. 315,000
b. 305,000
c. 285,000
d. 335,000
Solution:
(1) = 320,000 + 95,000 – 80,000
= 335,000
(2) Direct Materials Issued (squeezed)

550,000 – (362,500/1.45) = 300,000
Add:
Ending Inventory = 95,000
Indirect material
(320,000 – 300,000) = 20,000
Less:
Beginning Inventory = 80,000
Raw Materials Purchased = 335,000
5. A company wants to compute its predetermined overhead rate using the following
information:
Monthly budgeted overhead = P 500,000 + (130% of DL Cost)

Monthly budgeted Direct Labor Cost is P 150,000.00
The monthly cost records show the following costs for January 2021
Direct Materials 145,000
Direct Labor 255,000
Actual overhead for the month is P 825,000
The budgeted factory overhead for the year is

a. 9,978,000
b. 9,900,000
c. 8,340,000
d. 7,800,000
Solutions:
500,000 + (150,000 x 130%) = 695,000 x 12 = 8,340,000
For no. 6-7, refer to the problem below:
Antimony Manufacturing produces reusable Greeting Cards in two departments – Printing and
Laminating. These departments are supported by two service departments: Personnel and
Maintenance. Personal Department uses the number of employees as an allocation base while
Maintenance Department uses machine hours. The expected level of activity for a quarter:
No. of Employees Machine Hours

Personnel 35 -
Maintenance 50 -
Printing 100 50,000
Laminating 150 70,000
Allocation of costs are made in the order shown in the table above. Budgeted costs for the 1st
quarter are P80,000 for the Personnel Department; and P75,000 for the Maintenance
Department.
6. What is the allocated service cost to the Laminating Department using the direct method?
a. 63,250
b. 91,750
c. 91,667
d. 63,333
Solution:
(80,000 x 150/250) + (75,000 x 70/120) = 91,750
7. What is the allocated service to the Printing Department using the step method?
a. 63,472.22
b. 36,805.55
c. 51,527.78
d. 91,527.78
Solution:
Personnel Maintenance Printing Laminating
80,000.00 75,000.00 - -
(80,000.00) 13,333.33 26,666.67 40,000.00
- (88,333.33) 36,805.55 51,527.78
- - 63,472.22 91,527.78
8. Whee-In Inc. employs a job order cost system in manufacturing different kinds of table.
During August 2021, its first month of operation, the following costs are recorded in relation
to its operation
JOB ORDERS
AAA AAB AAC AAD
Direct Materials P 4,500 P 4,000 P 5,100 P 3,950
Direct Labor Cost P 1,500 P 1,700 P 1,250 P 1,650
Direct Labor Hours 350 320 335 285
Units produced 15 17 25 13
Manufacturing overhead is applied at a rate of P2.50 per direct labor hour for variable
overhead and P5.00per hour for fixed OH.
Jobs AAA, AAB, and AAC are finished during the month. What is the total cost of the
completed jobs?
a. 20,577.50
b. 33,325.00
c. 23,075.00
d. 25,587.50
Solution:
AAA AAB AAC TOTAL
Direct Materials 4,500 4,000 5,100 13,600.00
Direct Labor 1,500 1,700 1,250 4,450.00
Applied FOH
AAA - 350 x (2.50+5.00) 2,625 2,625.00
AAB – 320 x 7.50 2,400 2,400.00
AAC - 335 x 7.50 2,512.50 2,512.50
Cost of Completed Jobs 8,625.00 8,100.00 8,862.50 25,587.50
For no. 9-10, please refer to the problem below:
MLBB Tank Corp. has two service departments (Assist and Protect) and two production
departments (Control and Sustain). Data provided are as follows:
Service Departments Production Departments

Assist Protect Control Sustain
Direct Costs P 15,000 P21,000 P 25,000 P 32,000
Services by Assist Dept. - 30% 45% 25%
Services by Protect Dept. 15% - 35% 50%
MLBB TANK Corp. uses the direct method to allocate service department costs.
9. The service departments cost allocation to Control Department is:

a. 17,710.08
b. 12,352.94
c. 9,642.86
d. 18,289.92
Solution:
Assist’s Cost – 15,000 x 45/70 = 9,624.86
Protect’s Cost – 21,000 x 35/85 = 8,647.06
TOTAL ALLOCATED COSTS 18,289.92
10. Using the above information, what is the total cost for the Sustain Department?
a. 18,289.92
b. 49,710.08
c. 17,710.08
d. 43,289.92
Solution:
Assist’s Cost – 15,000 x 25/70 = 5,357.14
Protect’s Cost – 21,000 x 50/85 = 12,352.94
TOTAL ALLOCATED COSTS 17,710.08
Direct Cost 32,000.00
TOTAL COST 49,710.08
PARTNERSHIP
Problems
19. A business owned by Mark was short of finances so Mark decided to form a partnership with
Caila and Edmar. Caila was able to contribute cash thrice of Mark in the partnership, while
Edmar was able to contribute cash thrice the interest of Caila in the partnership. The assets
contributed were as follows:
Cash P18,000
Accounts receivable (net) 366,000
Inventory 840,000
Store equipment 270,000
Mark, Caila and Edmar agreed that the accounts receivable was impaired by an additional
amount of P8,000. They also agreed that the fair values of inventory and store equipment
were P920,000 and P200,000, respectively. The total assets of the partnership immediately
after the formation amounts to?
A. P1,496,000
B. P4,488,000
C. P8,976,000
D. P14,960,000
Solution:
Unadjusted capital [18K + 366K + 840K + 270K] P1,494,000
Adjustments [-8K + 80K – 70K] 2,000
Adjusted capital of Mark 1,496,000
Caila’s capital [1,496K x 3] 4,488,000
Edmar’s capital [4,488K x 2] 8,976,000
Total assets of partnership after formation P14,960,000
20. On January 1, 2021, Antipolo and Quezon agreed to form a partnership. The following are
their assets and liabilities.
Accounts Abad Quinto

Cash P136,000 P76,000
Accounts Receivable 88,000 48,000
Inventories 304,000 364,000
Machinery 480,000 440,000
Accounts Payable 216,000 144,000
Notes Payable 140,000 60,000
Antipolo decided to pay-off his notes payable from his personal assets. It was also agreed
that Quezon’s inventories were overstated by P24,000 and Antipolo’s machinery was
overstated by P20,000. Quezon is to invest/withdraw cash in order to receive a capital credit
that is 20% more than Antipolo’s total net investment in the partnership. Immediately after the
formation how much cash will be presented in the partnership’s Statement of Financial
Position?
A. P450,400
B. P410,400
C. P486,400
D. P274,400
Solution:
Antipolo Quezon
Adjusted capitals P812,000 P700,000
Quezon’s capital interest [Antipolo cap of 812K x 120%] 974,400

Quezon’s capital contribution (700,000)
Additional cash investment of Quezon 274,400
Cash investment of Antipolo 136,000
Cash investment of Quezon 76,000
Total cash investment P486,400
21. On December 1, 2021, Criz and Tonio are combining their separate business to form a
partnership. Cash and noncash assets are to be contributed. The noncash assets to be
contributed and the liabilities to be assumed are as follows:
Criz Tonio
Account BV FV BV FV
Accounts Receivable P100,000 P105,000 P80,000 P78,000
Inventory 160,000 180,000 80,000 83,000
PPE 400,000 365,000 345,000 329,000
Accounts Payable 60,000 60,000 45,000 45,000
Criz and Tonio are to invest equal amounts of cash such that the contribution of Criz would
be 10% more than the investments of Tonio. What is the amount of cash presented in the
partnership in the partnership’s Statement of Financial Position on December 1, 2021?
A. P1,105,000
B. P2,210,000
C. P1,005,000
D. P2,010,000
Solution:
Criz Tonio
Capital contributions P590,000 P445,000
Criz Tonio
590,000 + Cash = (Cash + 445,000) x 110%
590,000 + Cash = 110%Cash + 489,500
Cash = 1,005,000 each
Total Cash [1,005,000 x 2] = P2,010,000
22. Gary and Eden each operating a separate business agreed to form a partnership on July 1,
2021. The assets and liabilities of the two sole proprietorships on the date of formation follow:
Gary Eden
ASSETS
Cash 19,200 72,000
Accounts receivable 192,000 144,000
Merchandise inventory 240,000 216,000
Equipment 60,000 72,000
LIABILITIES
Accounts Payable 60,000 96,000
Notes Payable 12,000
The partners agreed on the following adjustments:

Gary’s accounts receivable are to be taken over at book value less 15% and Eden’s
accounts receivable at book value less 10%. Gary’s equipment is new and considered
adequate for the new business. Eden’s equipment is disposed at 90% of its book value. It is
agreed that Gary bears one fourth of the loss resulting from the sale.
Assuming Eden pay sufficient cash to give him one half interest in the partnership after
charging too Gary’s capital account his share of the loss on the sale by Eden of the equipment,
how much cash must Eden invest?
A. 16,800
B. 20,400
C. 12,400
D. 18,200
Solution:
Gary Eden
Unadjusted capital P439,200 P408,000
Accounts Receivable
[192K x 15%] (28,800)
[144K x 10%] (14,400)
Equipment
Loss [72K x 10% = 7,200]
Gary = 7,200 x ¼ (1,800)
Eden = 7,200 x ¾ (5,400)
Adusted capital P408,600 P388,200
Eden’s capital interest equal to Gary 408,600

Eden’s capital contribution (388,200)
Investment of Eden in cash P20,400
23. A, B, and C formed a partnership on January 1, 2021 with an initial capital contribution of
P450,000, P562,500, and P675,000, respectively. The partnership agreement provides that
income be shared among the partners as follows: Salaries are to be provided for A, B, and C
amounting to P67,500, P54,000, an P40,500, respectively. Interest of 12% on the average
capital during 2021 are to be given to A, B, and C. Bonus of 5% of the net income before
salaries and interest is to be given to A. Any remainder is to be divided among the partners
using the ratio of 1:2:2 respectively.
The partnership treats the partners salaries as part of their operating expenses. The net
income reported for the year ending December 31, 2021 amounted to P234,000. A contributed
additional capital of P67,500 on July 1 and made withdrawal of P22,500 on Oct. 1; B
contributed additional capital of P45,000 on Aug. 1 and made a withdrawal of P22,500 on Oct.
1; and C made a withdrawal of P67,500 on Nov. 1. Compute for the amount of income
allocated to each partner.
A B C
A. P139,815 P129,555 P126,630
B. P140,940 P128,430 P126,630
C. P98,055 P69,435 P66,510
D. P146,295 P126,315 P123,390
Solution: A B C Total
Interest 57,375 69,075 79,650 206,100
Bonus 19,800 19,800
Balance 1,620 3,240 3,240 8,100
Net income share 78,795 72,315 82,890 234,000
Salaries 67,500 54,000 40,500 162,000
Total income allocated 146,295 126,315 123,390
Interest:
WAC 478,125 575,625 663,750
x Interest 12% 12% 12%
Interest allowance 57,375 69,075 79,650
Bonus:
B = 5% (NI + Salaries)
B = 5% (234,000 + 162,000)
B = 19,800
A B
Jan 1 [450,000 x 6/12] 225,000 Jan. 1 [562,500 x 7/12] 328,125
Jul. 1 [517,500 x 3/12] 129,375 Aug. 1 [607,500 x 212] 101,250
Oct. 1 [495,000 x 3/12] 123,750 Oct. 1 [585,000 x 3/12] 146,250
Average Capital 478,125 Average Capital 575,625
C
Jan.1 [675,000 x 10/12] 562,500
Nov. 1 [607,500 x 2/12] 101,250

Average Capital 663,750
24. Cubico is trying to decide whether to accept a salary of P120,000 or a salary of P75,000 plus
a bonus of 10% of net income after salary and bonus as a means of allocating profit among
the partners. Salaries traceable to other partners are estimated to be P300,000. What amount
of income would be necessary so that Cubico would be indifferent among the both alternative?
A. P795,000
B. P915,000
C. 495,000
D. 870,000
Solution:
Equate the decision: Solve for net income:
120,000 = 75,000 + B B = 10% (NI – S – B)
B = 120,000 – 75,000 45,000 = 10% [NI – (300K + 75K) – 45K]
B = 45,000 45,000 = 10% [NI – 420K]
45,000 = -42,000 + 10%NI
87,000 = 10%NI
NI = P870,000
25. Partners Ly and Sol have profit and loss agreement with the following provisions: Salaries of
P90,000 and P135,000 for Ly and Sol, respective: a bonus to Ly of 10% of net income after
salaries; and interest of 10% on average capital balances of P60,000 and P105,000 for Ly
and Sol, respectively. One-third of any remaining profit will be allocated to Ly and the balance
to Sol.
If the partnership had net income of P66,000. How much should be allocated to Partner Ly,
assuming that the profit and loss agreement are ranked by order of priority starting with
salaries?
A. P26,400
B. P36,000
C. P39,600
D. P37,500
Solution:
Ly Sol Total
Salaries [90:135] 26,400 39,600 66,000
Total Share 26,400 39,600 66,000
Note: The profit is insufficient to provide all the allowances and based on the agreement the
profit and loss are ranked by order of priority starting with the salaries. Therefore, we use the
salary ratio since it cannot provide the entire salary allowance of P225,000
26. Annual drawings in excess of P20,000 is considered to be a direct reduction of capital.

Assuming Partner Ivan has the following investments(withdrawal) during the year:
January 1 100,000
April 1 20,000
June 1 (15,000)
August 1 20,000
September 1 (15,000)
November 1 40,000
What is the average capital of Ivan?

A. P126,667
B. P120,000
C. P116,250
D. P125,000
Solution:
Jan. 1 [110,000 x 3] 300,000
Apr. 1 [20,000 x 4] 480,000
Aug. 1 [140,000 x 1] 140,000

Sept. 1 [130,000 x 2] 260,000
Nov. 1 [170,000 x 2] 340,000
Total 1,520,000
Divided by 12 mos.
Annual Average Capital 126,667
27. Anthony and Paz share profits and losses in a ratio of 2:3, respectively. Anthony and Paz
receive a salary allowances of P10,000 and P20,000, respectively, also both partners receive
10% interest based upon the balance in their capital account on January 1. Partner’s drawings
are not used in determining the average capital balances. Total net income for 2021 is
P60,000. If the net income after deducting the interest and salary allocations is greater than
P20,000, Paz receives a bonus of 5% of the original amount of net income.
Anthony Paz
January 1 capital balances 200,000 300,000
Yearly drawings (1,500 a month) 18,000 18,000
What is the total amount of the allocation of interest, salary, and bonus, and how much over-
allocation is present?
A. P60,000 and P0
B. P80,000 and P20,000
C. P83,000 and P0
D. P83,000 and P23,000
Solution: Anthony Paz Total

Salary 10,000 20,000 30,000
Interest of 10% 20,000 30,000 50,000
Bonus* - - -
Total allocation of S, I and B 30,000 50,000 80,000
Remainder 2:3 (8,000) (12,000) (20,000)
Share in net income 22,000 38,000 60,000
*Bonus is zero since the net income after deducting interest and salaries is less than 20,000.
28. On January 1, 2021, Cinnamon, Basil and Garlic formed CBG partnership with original
contribution of P4,000,000, P1,000,000 and P5,000,000, respectively. The articles of co-
partnership provides that profit or loss shall be distributed under the following terms:
• Cinnamon, Basil and Garlic shall be entitled to monthly salary of P10,000, P20,000
and P30,000, respectively.
• 10% interest on the original capital contribution.
• As managing partner, Basil shall receive a bonus equal to 10% of net income after
salaries and interest but before bonus.
• The remainder shall be distributed on the basis of the original capital contribution
ratio.
During 2021, the partners regularly withdraw ¼ of their monthly salary. The December 31,
2021 Statement of Financial Position of CBG Partnership shows that the capital balance of
Cinnamon is P5,310,800. On January 1, 2022, Garlic decided to retire from the partnership
and it was agreed that Garlic shall receive P6,000,000. The retiring agreement provides that
any bonus shall be distributed on the basis of the original capital contribution ratio.
What is the net income of the partnership for the year ended December 1, 2021?
A. P3,372,000
B. 1,720,000
C. P2,872,000
D. P4,000,000
What is the capital balance of Bonn after the retirement of Garlic on January 1, 2022?
A. P1,872,400
B. P1,932,400
C. P1,890,400
D. P1,854,400
Solution:
Cinnamon, Capital
4,000,000 Beg.
1,340,800 Share in NI
Drawings. 30,000
[1,200 / 4]
5,310,800 End.
Cinnamon Basil Garlic Total

Salary 120,000 240,000 360,000 720,000
Interest 400,000 100,000 500,000 1,000,000
Bonus 228,000 228,000
Balance 820,800 205,200 1,026,000 2,052,000
Share in profits 1,340,800 773,200 1,886,000 4,000000
Beg. Capital 4,000,000 1,000,000 5,000,000 10,000,000
Drawings (30,000) (60,000) (90,000) (180,000)
Capital balance 5,310,800 1,713,200 6,796,000 13,820,000
Payment to Garlic - - (6,000,000) -
Bonus to Rem. Partners 636,800 159,200 (796,000)
Total 5,947,600 1,872,400
29. Angiomyogenesis partnership provided you with the following account balances as of
December 31, 2021.
Assets Liabilities and Capital

Cash 390,000 Liabilities 310,000
Non-cash assets 1,100,000 Loan from David 25,000
Loan to Adam 10,000 David, Capital (20%) 450,000
Lee, Capital (20%) 325,000
Adam, Capital (60%) 390,000
Total 1,500,000 Total 1,500,000
On January 1, 2022, Lee decided to leave the partnership and he got paid 80% of his capital
balance.
After four months of attempt to carry on with the partnership, David and Adam decided to
enter into liquidation. A net loss amounting to P124,000 was realized. In connection with this,
P84,000 was the net cash inflow during the first four months of 2022 and the partnership’s
liabilities increased by P40,000. Half of the noncash assets were sold at a loss of 120,000.
Liquidation expenses of P35,000 are expected to be incurred in due course of liquidating the
partnership. P275,000 of the total liabilities to the outside creditors were paid. Available cash
was distributed to the partners.
How much is David’s total interest after the first cash distribution?
A. P279,250 B. P364,240 C. P255,250 D. P125,250
Solution:
Retirement: David Lee Adam
Capital 450,000 325,000 390,000
Loan 25,000 (10,000)
Total Interest 475,000 325,000 380,000
Payment to Lee (260,000)
Bonus to Rem. Partners [2/8]16,250 (65,000) [6/8]48,750
Total 491,250 428,750
Liquidation Cash NCA Liability David Adam

Beg. Balances 130,000 1,100,000 310,000 491,250 428,750
Net Loss (31,000) (93,000)
Net cash inflow 84,000
Inc. in liab. - - 40,000 - -
Bal b4 Liq. 214,000 932,000 350,000 460,250 355,750
Realization 346,000 (466,000) (30,000) (90,000)

Payment of liab. (275,000) (275,000)
Paym. 2 partner (175,000) - - (175,000) -
Balance 110,000 466,000 75,000 255,250 245,750
Schedule to Payment to Partners Total David Adam

Total Interest 796,000 460,250 335,750
Total loss of partnership (621,000) (155,250) (465,750)
Payment to partners 175,000 305,000 (130,000)
(130,000) 130,000
175,000
Cash withheld
Cash withheld for possible losses 35,000
Cash withheld for remaining liabilities 75,000
Total 110,000
30. The financial position of ABCD Partnership is as follows:

Land 910,000 A, capital 560,000
Building 840,000 B, capital 210,000
C, capital 420,000
D, capital 630,000
Total 2,030,000 Total 2,030,000
Assume the profit and loss ratio of is 1:3:4:2 to A, B, C, and D, respectively. The partners
decided to liquidate the partnership how much money received from the realization of land
and building to assure that all partners receives cash?
A. More than P700,000
B. More than P350,000
C. More than P1,750,000
D. More than P1,050,000
31. HETEROZYGOUS is entering into liquidation and you are given the following account
balances:
Assets Liabilities and Capital
Noncash assets 1,350,000 Loan from A 30,000
J, capital (20%) 255,000
C, Capital (20%) 325,000
A, Capital (60%) 675,000
Total 1,505,000 Total 1,505,000
During September, noncash assets with a book value of P375,000 were sold for P320,000.
HETEROZYGOUS paid P35,000 for the liquidation expenses it incurred, and it also paid half
of its liabilities to outside creditors. Creditors whose balances amount to P30,000 decided to
condone HETEROZYGOUS’ liabilities and ¾ of the cash received from the sale of noncash
assets were distributed to the partners.
How much is (1) J’s share in the maximum possible loss? (2) A’s capital after the first cash
distribution?
A. P197,000; P621,000
B. P197,000; P591,000
C. P195,000; P591,000
D. P195,000; P561,000
Solution:
Beginning cash 155,000
Cash realized 320,000
Payment of liquidation expense 35,000
Payment of liability 110,000
Cash w/held for liability 80,000
Cash w/held for possible losses 10,000
Payment to partners (320K x 3/4) 240,000
Remaining NCA [1,350K – 375K] 975,000

Cash w/held for possible losses 10,000
Total possible loss 985,000

x interest of J 20%
Share of J in total possible loss 197,000
Total interest of A (675K + 30K) 705,000

Payment to A (78,000)
Gain on condonation (30k x 60%) 18,000
Loss on realization (320K – 375K) x 60% (33,000)
Liquidation expenses (35K x 60%) (21,000)
Total capital of A 591,000
CORPORATE LIQUIDATION
Problems
32. The following data were taken from the statement of realization and liquidation of Mendoza
Corp. for the quarter ended September 30, 2021.
Liabilities to be liquidated 285,000

Supplementary charges 169,100
Liabilities not liquidated 210,000
Supplementary credits 192,500
Assets acquired 136,000
Liabilities liquidated 158,000
Assets to be liquidated 107,500
Assets realized 175,000
Liabilities assumed 83,000
The beginning capital balances of ordinary shares and retained earnings are P102,000 and
P29,600 respectively. A net income of P87,400 for the period.
How much is the (1) beginning balance of cash? (2) ending balance of cash?
A. P293,000; P293,000
B. P209,100; P296,500
C. P241,600; P209,100
D. P309,100; P296,500
Solution:
Gain (Loss)
Assets to be realized 107,500 175,000 Assets realized
Assets acquired 136,000 132,500 Assets not realized
Liabilities liquidated 158,000 285,000 Liabilities to be
liquidated
Liabilities not 210,000 83,000 Liabilities assumed
liquidated
Supplementary 169,100 192,500 Supplementary
charges credits
87,400 Gain on real. and liq.
Beginning Capital (102K + 29.6K) 131,600

Add: Liabilities to be liquidated 285,000
Less: Assets to be realized 107,500
Beginning balance of cash 309,100
Beginning Capital (102K + 29.K) 131,600

Net income for the period 87,400
Total ending capital 219,000
Liabilities not liquidated 210,000
Total assets, end 429,000
Less: assets not realized 132,500
Ending cash 296,500
33. Kitty Corp. is insolvent and its statement of affairs shows the following information:
Estimated gain on realization of assets 1,440,000
Estimated losses on realization of assets 2,000,000
Additional assets 1,280,000
Additional labilities 960,000
Ordinary Shares 2,000,000
Deficit 1,200,000
The estimated amount to be recovered by shareholders is:

A. P0.57
B. P0.30
C. P0.70
D. P0.43
Solution:
Additional assets 1,280,000
Est. gain on real. 1,440,000
Est. loss on real (2,000,000)
Additional liabilities (960,000)
Est. net gain(loss) (240,000)
SHE (2M – 1.2M) 800,000
Est. amount recovered 560,000
Divide by TSHE 800,000
Total P0.70
34. A revie of the assets and liabilities of Atlantis Corporation in bankruptcy on Nov. 30, 2021,
discloses the following:
• A mortgage payable of P77,000, is secured by building valued at P14,000 more than
its book value of P68,000
• Notes payable of P39,000 is secured by furniture and equipment with book value of
P46,000 that is estimated to be 4/5 realizable.
• Assets other than those referred to have estimated value of P25,000, an amount that
is P6,000 above its book value.
• Liabilities other than those referred to total P31,000, which excluded claims with
priority of P8,000
Which of the following statements is true?

A. Actual recovery percentage is 66.27%
B. Total free assets is P22,000
C. Estimated deficiency to unsecured creditors is P11,200
D. Payment to partially secured creditors amount to P36,800
Choice A is incorrect, it should be estimated

Choice B is incorrect, it should be Net Free Assets, Tot. Free Assets is P30,000
Choice D is incorrect, it should be P38,258
35. The statement affairs of RAM Corp. has the following data:
Unsecured liabilities without priority 90,000
Unsecured liabilities with priority 60,000
Full secured liabilities 80,000
Partially secured liabilities 50,000
Assets pledged to partially secured liabilities 40,000
Assets pledged to fully secured liabilities 100,000
Free assets 120,000
How much is the estimated recovery percentage of partially secured creditors?

A. 90%
B. 96%
C. 80%
D. 87.50%
Solution:
FA UL & Non-prio claims
FS (80K – 100K) 200,000 10,000 PS(50K – 40K)
Free assets 120,000 90,000 Unsecured w/o prio

Total Free assets 140,000 100,000
Less: with priority (60,000)
Net free assets 80,000
Divide by 100,000
Est. Recovery % of UC 80%
Partially secured:
Pledged assets 40,000
Unsecured portion [10K x 80%] 8,000
Total recovery of partial secured liabilities 48,000
Divide by total partially secured liabilities 50,000
Est. Recovery % of PSC 96%
HOME OFFICE, BRANCH AND AGENCY

Problems
36. The following transactions were entered in the branch current account of the IRVIN Head
office for the year 2021.
Branch Current - Irvin

Beg Balance 1/1/21 2,296,290 166,500 Collection of AR 9/12/21
Shipments to branch 4/1/23 1,062,000
Cash forwarded 6/1/23. 75,000
OPEX charged to
branch 12/31/21 14,400
• Shipments to the branch during the year were made at 20% above cost.
• The balance of the Allowance for Overvaluation of Branch Inventory account was
P106,500 at the beginning, and the allowance was written down to P74,500 at year-
end.
• On December 10, 2021, the home office purchased a piece equipment amounting to
P180,000 for its branch in IVONNE. The said equipment has a useful life of five years
and will be carried in the books of the branch, but the home office recorded the
purchase by debiting Equipment.
• The branch recoded the depreciation of the equipment by debiting the Home Office
Current account and crediting Accumulated Depreciation.
• Debit memo regarding the allocation of operating expenses to the IVONNE branch
was received by the branch on January 1, 2022.
• The IVONNE branch reported net income of P988,650
• It also remitted cash to the home office on December 31, 2021 amounting to 165,000,
which the home office received and recorded on January 2, 2022.
• The interoffice accounts were in agreement at the beginning of the year.
How much is the net income of IVONNE branch that will be reported in the combined income
statement of The IRVIN Company?
A. P971,250
B. P1,195,650
C. P1,181,250
D. P1,044,750
Solution:
Allowance for overvaluation of BI 106,500
Allowance for overvaluation from HO [1,062K x 20/120] 177,000
Allowance for overvaluation of EI (73,500)
Realized Gross Profit (Overstated COGS) 210,000
Add: Net income reported by the branch 988,650
Less: Depreciation of equipment (erroneous entry) (3,000)
Less: OPEX (next year pa so deduct muna) (14,400)
Net income of branch in combined income statement 1,181,250
37. During the year 2021 goods billed at P840,000 were shipped to the branch at 125% of cost.
The account Loading in Branch Inventory has a balance of P242,000 before adjustment. The
beginning inventory of the branch from the home office at cost is P370,000; the beginning
inventory of the branch from outsiders is P35,000; purchases from outsiders is P220,000. How
much is the cost of goods available for sale of the branch?
A. P1,297,000
B. P1,465,000
C. P1,539,000
D. P1,767,500
Solution:
Beginning inventory of branch [35K + 444K] 479,000
Net purchases from outsider 220,000
Shipments from home office 840,000
Total cost of goods available for sale 1,539,000
38. The home office shipped merchandise costing P21,960 to Manila branch and paid for the
freight charges of P3,960. Manila branch was subsequently instructed to transfer the
merchandise to Caloocan wherein Caloocan branch paid for P1,250 freight. If the shipment
was made directly from Home Office to Caloocan, the freight cost would have been P5,050.
How much is the amount of branch current to be debited in the books of the home office as a
result of the inter-branch transfer of merchandise?
A. P160
B. P25,920
C. P51,680
D. P25,760
Solution: Journal Entry:

Freight paid (1,250) Investment in Caloocan 25,760
Cost of MI shipped 21,960 Excess freight 160
Should be Freight 5,050 Investment in Manila 25,920
Total 25,760
**Magiiba lang kung sino sasalo ng freight charge. Branch 1 paid – add mo sa HO account;
Branch 2 paid – deduct sa HO account; Net effect is zero as if nag offset lang. Inverse ang
effect kasi si branch 1 naglabas ng goods, while si branch 2 naman nagpasok ng goods kaya
baligtad yung effect.
IFRS 15 – REVENUE FROM CONTRACTS FROM CUSTOMERS with LONG TERM

CONSTRUCTION CONTRACTS
PROBLEMS
1. Bumblebee Inc. received 120 car tires on consignment from the Autobots Company. The
tires cost P450.00 each to manufacture and P120.00 each to ship to Bumblebee.
Bumblebee paid the cost of freight, although the contract says that it should be paid by
Autobots. Bumblebee sold 60 car tires at P820.00 each and received 30% commission.
Bumblebee paid Autobots in full. How much should Bumblebee pay Autobots?
a. P 22,200
b. P 20,040
c. P 54,000
d. P 37,800
Solution:
Units Sold (60 x P820) 49,200
Commission – 30% (14,760)
Freight paid (120 x P 120) (14,400)
Payment of Bumblebee to Autobots 20,040
2. The sales account submitted by the Dreams Inc. to Snore Corp. on its consignment
transactions during October 2020 is presented below:
Sales (35 bottles @ P 5,500.00) 192,500.00
Less:
Advances to Consignor 30,000.00
Selling Expenses 8,500.00
Commissions 19,250.00 (57,750.00)
Net proceeds remitted 134,750.00
The consignment consisted of 60 bottles which cost P 252,000.00 in total, excluding the
freight cost amounting to P 1,500 which was paid by Dreams Inc.
What is the net profit from the sale of consigned goods?

a. P 16,250.00
b. P 13,750.00
c. (P 13,125.00)
d. P 16,875.00
Solutions:
Sales (35 x P 5,500) 192,500
Cost of Goods Sold
Cost of units sold (252,000 x 35/60) 147,000
Freight cost of sold units (1,500 x 35/60) 875 (147,875)
Gross Profit 44,625
Operating Expense
Selling expense 8,500
Commission expense 19,250 (27,750)
Net Income P 16,875
3. On April 30, 2020, Kageyama provides a license to Hinata. Under the agreement, Hinata
pays a non-refundable upfront fee of P300,000.00. The license provides Hinata the right
to access the license for six (6) years.
How much should Kageyama recognize as revenue in the first year of contract on
December 31, 2020?
a. P 33,333.33
b. P 50,000.00
c. P 75,000.00
d. No revenue should be recognized
Solution:
P 300,000.00 / 6 years = P 50,000 x 8/12 = P 33,333.33
4. BES Construction Company recognized a gross profit of P 131,250.00 on its long-term

peoject which has accumulated costs of P 675,000.00. To finish the said project, BES
estimates that it has to incur additional costs amounting to P 1,125,000.00. What is the
contract price of the said project?
a. P 325,000
b. P 1,800,000
c. P 2,150,000
d. P 1,931,250
Solution:
Total Contract Cost = 675,000 + 1,125,000 = 1,800,000
Percentage of Completion = 675,000 / 1,800,000 = 37.5%
Gross Profit = 131,250 / 0.375 = 350,000

Contract price = 1,800,000 + 350,000 = 2,150,000
5. During 2021, Deeghoung Inc. started a contract with a P 4,500,000 fixed price. Any cost
incurred are expected to be recoverable. The accounting records disclosed the following
data for the year ended December 31, 2021:
Cost incurred P 1,395,000.00

Estimated cost to complete P 3,255,000.00
Progress billing P 1,650,000.00
Collections P 1,050,000.00
How much loss should Deeghoung Inc. must recognize in 2021?

Percentage of Completion Zero Profit
a. 150,000 150,000
b. 150,000 0
c. 0 150,000
d. 0 0
Solution:
Contract Price P 4,500,000
Less
Cost Incurred Current P 1,395,000
Cost Incurred Prior P 0
TOTAL Incurred P 1,395,000
Add
Estimated Cost to
Complete P 3,255,000 P 4,650,000
ESTIMATED GROSS LOSS (P 150,000)

AFAR

Uploaded by

Document Informationclick to expand document information

Copyright:

Available Formats

AFAR

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

AFAR

Uploaded by

Copyright:

Available Formats

PUP BES- HNS Honors Society

College of Accountancy and Finance

1. Cost and management accounting

3. It is a cost accounting system that focuses on an organization’s activities and collects

4. Activity-based costing is appropriate in an organization that

1. Partner’s interest in a partnership is generally equal to:

Which of the following statements is/are correct?

Which of the following statements is/are incorrect?

IV. A partnership may be dissolved by the insolvency of an existing partner.

Which of the following statements are correct?

Which of the following statements are correct?

8. In installment liquidation of a partnership, each installment of cash is distributed:

IV. Partially secured creditors

IFRS 15 – REVENUE FROM CONTRACTS FROM CUSTOMERS with LONG TERM

Total Estimated Total Contract Income Previously

5. The role of the agent in a principal-agent relationship is to:

a. As an asset in the balance sheet of the consignee

HOME OFFICE, BRANCH AND AGENCY

Units required for production per year 53,125 units

Month Machine Hours Overhead Costs

Fixed Cost = 6,275 - (3,500 x 0.45)

Overhead Cost = 4,700 + (3,200 x 0.45)

Conversion Cost P 110,000

Raw materials issued in production P 320,000.00

Cost of Goods Available for Sale 755,000.00

Raw Materials Inventory

The Raw Materials Purchased for the period amounted to:

(2) Direct Materials Issued (squeezed)

Monthly budgeted overhead = P 500,000 + (130% of DL Cost)

Actual overhead for the month is P 825,000

The budgeted factory overhead for the year is

For no. 6-7, refer to the problem below:

No. of Employees Machine Hours

For no. 9-10, please refer to the problem below:

Service Departments Production Departments

9. The service departments cost allocation to Control Department is:

Accounts Abad Quinto

Quezon’s capital interest [Antipolo cap of 812K x 120%] 974,400

The partners agreed on the following adjustments:

Eden’s capital interest equal to Gary 408,600

Nov. 1 [607,500 x 2/12] 101,250

26. Annual drawings in excess of P20,000 is considered to be a direct reduction of capital.

What is the average capital of Ivan?

Aug. 1 [140,000 x 1] 140,000

Solution: Anthony Paz Total

Cinnamon Basil Garlic Total

Assets Liabilities and Capital

Liquidation Cash NCA Liability David Adam

Realization 346,000 (466,000) (30,000) (90,000)

Schedule to Payment to Partners Total David Adam

30. The financial position of ABCD Partnership is as follows:

Remaining NCA [1,350K – 375K] 975,000

Total possible loss 985,000

Total interest of A (675K + 30K) 705,000

Liabilities to be liquidated 285,000

Beginning Capital (102K + 29.6K) 131,600

Beginning Capital (102K + 29.K) 131,600

The estimated amount to be recovered by shareholders is:

Which of the following statements is true?