First Pre Board Examination AFAR Batch 2 PDF

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Lipa City, Batangas, Philippines Mobile : 0927 283 8234 Telephone : (043) 723 8412 Gmail : icarecpareview@gmail If the partners agreed as to the distribution of profit but not losses, losses will be allocated: A. losses are allocated equally because the partners are equally to be blamed for the loss...

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No. 125 Brgy. San Sebastian Lipa City, Batangas, Philippines Mobile

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

1. If the partners agreed as to the distribution of profit but not losses, losses will be allocated: A. losses are allocated equally because the partners are equally to be blamed for the losses B. losses are allocated based on the original capital contribution ratio C. losses are not allocated and recorded in a separate capital account to be offset against future profits D. losses are allocated in the same ratio as profit allocation 2. In preparing a schedule of safe payments and that no future expenses are expected, the maximum possible loss will be measured at: A. the book value of the remaining non-cash assets of the partnership B. the fair value of the remaining non-cash assets of the partnership C. the estimated net realizable value of the remaining non-cash assets of the partnership D. the agreed value of the remaining non-cash assets of the partnership 3. Which of the following is not a liability that has priority in corporate liquidation? A. Taxes due to the government B. Salaries payable to employees C. Administrative expenses incurred in the liquidation D. Advertising expense incurred before bankruptcy 4. Statement 1: If the expected costs of fulfilling a construction contract is higher than the contract price, the contract shall be accounted for as an onerous contract under PAS 37, Provisions, Contingent Liabilities and Contingent Assets. Statement 2: All construction contracts with customers are to be recognized as revenue over time. Which of the statements is/are true? A. Only statement 1 B. Only statement 2 C. Both statements D. Neither statements 5. Which of the following would indicate that the entity is an agent, rather than a principal under PFRS 15, Revenue from Contracts with Customers? A. The entity has inventory risk before the specified goods has been transferred to a customer. B. The entity is responsible for the acceptability of the goods. C. The entity has discretion in establishing the price of the goods. D. The entity arranges for the provision of the goods to the customer.

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RFERRER/RL ACO/TANG/DEJESUS

No. 125 Brgy. San Sebastian Lipa City, Batangas, Philippines Mobile

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

Use the following information for the next two questions. A, B and C decided to form ABC Partnership. The partners agreed that A will contribute his equipment which was originally purchased for P1,600,000 for use in his sole proprietorship. The equipment has a net book value of P500,000 immediately prior to formation of the partnership. A believes that the equipment can be sold for P750,000. A day after the partnership formation, the equipment was sold for P600,000 in an orderly transaction between the partnership and another market participant. B will contribute his real property with historical cost of P2,700,000 but was appraised by an expert at a value of P3,000,000. The property is subject to a mortgage payable amounting to P600,000 which is to be assumed by the partnership. The partners agreed that B will have a 60% interest in the partnership and that A and C will have an interest equivalent to their corresponding capital contribution. C will contribute cash. 6. How much is the agreed capitalization of the partnership? A. P4,000,000 B. P5,000,000 C. P4,500,000 D. P3,500,000 7. How much should be contributed by C to the partnership? A. P900,000 B. P1,000,000 C. P850,000 D. P800,000 X and Y have capital balances of P150,000 and P180,000, respectively in the adjusted trial balance. Z is to invest P60,000 for 15% in the partnership interest and also in the profit and loss. There is an undistributed net income in the amount of P80,000. Partners X and Y share profit and loss 65:35. 8. How much is the capital credit of Z upon his admission? A. P49,500 B. P60,000 C. P58,500 D. P70,500

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RFERRER/RL ACO/TANG/DEJESUS

No. 125 Brgy. San Sebastian Lipa City, Batangas, Philippines Mobile

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

Use the following information for the next two questions. On December 31, 2020, the statement of financial position of RPA Partnership shows the following data with profit or loss sharing ratio of 2:3:5: Cash P15,000,000 Liabilities to others P20,000,000 Other non-cash asset 40,000,000 R, Capital 15,000,000 P, Capital 12,500,000 A, Capital 7,500,000 On January 1, 2021, the partners decided to wind up the partnership affairs. During the winding up, liquidation expenses amounted to P2,000,000 were paid. 70% of the non-cash assets were sold during January while 30% of total liabilities were paid. The partners expect to incur an additional P3,000,000 costs to fully liquidate the partnership. On January 31, 2021, partner R received P10,000,000. 9. How much was received by partner P on January 31, 2021? A. P5,000,000 B. P0 C. P9,500,000 D. P12,500,000 10. How much is the amount of cash received from the sale of the noncash assets during January? A. P37,000,000 B. P23,000,000 C. P39,000,000 D. P25,000,000 Use the following information for the next two questions. Green Company recently petitioned for bankruptcy and is now in the process of preparing a statement of affairs. The carrying values and realizable values of Green's assets on this date are as follows: Carrying Realizable Value Value Cash P 50,000 P 50,000 Receivables 75,000 40,000 Inventories 60,000 40,000 Land 200,000 170,000 Building, net 175,000 100,000 Equipment, net 75,000 70,000 The liabilities section of Green’s trial balance on this date is composed of the following: Accounts payable P200,000 Salaries payable 10,000 Taxes payable 9,350 Notes payable (secured by receivables and inventories) 120,000 Interest on notes payable 5,000 Mortgage payable (secured by land and building) 150,000 Interest on mortgage payable 7,500 11. In the Statement of Affairs, how much is the net free assets? A. P100,650 B. P120,000 C. P213,150 D. P232,500 12. What is the estimated recovery percentage? A. 100% B. 87% C. 95%

D. 41%

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RFERRER/RL ACO/TANG/DEJESUS

No. 125 Brgy. San Sebastian Lipa City, Batangas, Philippines Mobile

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

Emerald Corporation has entered into a contract on January 2021 with a customer to construct a building on the customer’s land. The contract price is P5 million. Emerald expects to incur P4 million in satisfying its performance obligation under the contract. Emerald has properly assessed that the performance obligation is satisfied over time and will use the input method to measure the progress towards complete satisfaction of the performance obligation. Details related to the project are as follows: 2021 2022 Total contract costs incurred to date P 980,000 P2,040,000 Estimated costs to complete 3,020,000 1,960,000 Under the contract, Emerald bills the customer 20% at the end of each calendar year. Outstanding accounts receivable as of 2021 and 2022 are P350,000 and P75,000. 13. How much should be reported as revenue for 2021 in accordance with the requirements of PFRS 15, Revenue from Contracts with Customers? A. P245,000 B. P265,000 C. P1,325,000 D. P1,225,000 Spider Inc. consigned ten electric bikes costing P30,000 per bike to Web Company. Spider incurred freight of P100 per bike. Web will sell the bikes for P50,000 and will be entitled to a 15% commission on such sale. Web incurs expenses in relation to selling seven bikes to customers amounting to P5,000 which was reimbursable under the consignment agreement. 14. How much is the net profit of Spider related to the seven bikes sold? A. P81,500 B. P86,800 C. P81,800 D. P86,500

15. Which of the following is not part of the profits to be distributed to partners a. Salary to those partners working in the partnership b. Bonus allowance c. Remainder which shall be divided using the profit or loss ratio d. Interest on loans to partners 16. If the partnership agreement does not specify how profit is to be distributed to the partners, it shall be allocated: a. Equally b. In accordance with their capital contribution c. Based on the weighted average capital invested by each partners d. Using loss ratio 17. A, B and C are partners of ABC Furniture. On January 1, 2020, they decided to liquidate the partnership because of the pandemic cause by COVID-19. The following are data in the statement of financial prior to liquidation. Cash 32,000 Liabilities 300,000 Non Cash Assets 868,000 A, capital 160,000 B, capital 180,000 C, capital 260,000 Total 900,000 900,000 A, B and C share profits and losses in a ratio of 3:2:5. Liquidation expenses paid amounted to P24,000. If the non-cash assets were sold for P468,000, what amount of loss have been allocated to partner B? a. P84,800 c. P86,200

b. P96,000

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d. P80,000

RFERRER/RL ACO/TANG/DEJESUS

No. 125 Brgy. San Sebastian Lipa City, Batangas, Philippines Mobile

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

18. What is the amount of settlement to partner C? a. P60,000 c. P80,000 b. P100,000 d. P200,000

19. XYZ partnership formed its partnership on June 1, 20x1 with the following capital balances: A, capital B, capital C, capital

60,000 80,000 100,000

The partners agreed that profits and losses be distributed as follows:  Each partner is allocated an interest of 10% based on beginning capital  Salary allowance to B of P20,000 per year.  Any remaining profits and losses are allocated on a 3:3:4 ratio, respectively  Each partner withdraw P5,000 Assuming the net income is P50,000. What is the capital balance of C at the end of the year? a. P110,567 c. P104,700 b. P106,200 d. P105,433 20. Assets realized is placed on which side of the statement of realization and liquidation? a. Credit side, measured at estimated net realizable value b. Credit side, measured at actual net proceeds from sale c. Credit side, measured at book value d. Debit side, measured at book value 21. Liabilities liquidated is placed on which side of the statement of realization and liquidation? a. Debit side, measured at book value b. Debit side, measured at actual cash settlement c. Credit side, measured at actual cash settlement d. Credit side, measured at book value 22. Sinaksak mo Puso ko Company is under liquidation and a trustee is appointed to liquidate the company. The following data were provided in relation to the liquidation: Assets at book value Assets at net realizable value Liabilities at book value: Fully secured Unsecured Unrecorded liabilities: Accrued interest Administrative expenses What is the estimated deficiency? a. 20,000 b. 27,200

P200,000 150,000 80,000 90,000 620 6,580

c. P12,000 d. P37,200

23. The following amounts were taken from the statement of affairs for Aray Company: Unsecured liabilities with priority Stockholders’ equity Estimated liquidation expenses that have not been entered in the accounting records Unsecured liabilities without priority Loss on realization of assets What is the amount of total free assets? a. 401,625 b. 408,675

c. P425,250 d. P454,125

P 52,500 189,000 23,625 472,500 236,250

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RFERRER/RL ACO/TANG/DEJESUS

No. 125 Brgy. San Sebastian Lipa City, Batangas, Philippines Mobile

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

24. Ayaw ko na has been undergoing liquidation since April 1, 2020. As of May 31, its condensed statement of realization and liquidation is presented below: Assets acquired Liabilities liquidated Supplementary credits Assets to be realized Liabilities assumed Supplementary charges Assets realized Liabilities not liquidated Liabilities to be liquidated Assets not realized

750,000 1,875,000 2,800,000 1,375,000 1,625,000 3,125,000 1,200,000 1,700,000 1,700,000 1,375,000

The net gain (loss) on realization and liquidation: a. P425,000 c. P750,000 b. P250,000 d. P(325,000) 25. On January 1, 2020, Boknoy entered into a long-term construction contract to be completed on June 30, 2020 at an original contract price of P4,000,000. Due to the change in structural design as requested by the customer, the contract price increased by P6,000,000 for the year ended December 31, 2021. The project was completed on September 30, 2022 which resulted to penalty of P2,000,000 for delayed construction. The following data were provided by the cost accountant of the entity:

Cost incurred during the year Estimated remaining cost to complete at the end of the year

2020 P 600,000 P2,400,000

2021 P5,640,000 P4,160,000

2022 P760,000 -

What is the realized gross loss to be recognized by the entity for the year ended December 31, 2021 under percentage of completion method? a. P(400,000) c. P(600,000) b. P(440,000) d. P(480,000) 26. What is the realized gross profit to be recognized by the entity for the year ended December 31, 2022 under cost recovery method? a. P3,400,000 c. P400,000 b. P1,000,000 d. P1,400,000 27. The construction cost for the current year to be recorded for the 2022 under percentage of completion method a. P6,240,000 c. P5,800,000 b. P5,640,000 d. P6,400,000 28. A contract does not exist if: a. It was not executed by the parties in writing b. The parties have reached unanimous consent regarding the termination of the contract. c. The contract has no fixed term and can be terminated by either party at anytime d. Each party has the unilateral enforceable right to terminate a wholly unperformed contract without compensating the other party. 29. If the entity has unconditional right to payment for performance obligation satisfied it shall be: a. Recorded as Receivable in the balance sheet b. Recorded as Contract Asset in the balance sheet c. Recorded as Contract Liability in the balance sheet d. Not recognized...