Icare AFAR First Preboard Examinations Batch 3 PDF

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Lipa City, Batangas, Philippines Mobile : 0927 283 8234 Telephone : (043) 723 8412 Gmail : icarecpareview@gmailADVANCED FINANCIAL ACCOUNTING & REPORTINGiCARE Accountancy Review 1 st Open Preboard Examination, Batch 3INSTRUCTIONS: Choose the best answer among the given choices. Policies on academ...

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

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

ADVANCED FINANCIAL ACCOUNTING & REPORTING iCARE Accountancy Review st 1 Open Preboard Examination, Batch 3 INSTRUCTIONS: Choose the best answer among the given choices. Policies on academic honesty are strictly enforced. 1. A summary of balance sheet for ABC Co. appears below. Partners A, B and C share profits and losses in the ratio of 2:3:5, respectively. Assets Cash Inventory marketable Securities Land Building-net Total Assets

100,000 125,000 200,000 100,000 500,000 1,025,000

Liabilities and Capital A, capital 425,000 B, capital 400,000 C, capital 200,000

Total

1,025,000

The partners agree to admit D for a 1/5 interest. The fair value of partnership land is appraised at P200,000 and the fair value of inventory is P175,000. The assets are to be revalued prior to the admission of D and there is a decrease of P30,000 in the capital interest of the new partner after his admission. The increase (decrease) in the capital interest of C after admission of D. a. P60,000 c. P75,000 b. P90,000 d. P36,000 2. The amount of cash investment of D to acquire 1/5 interest in the partnership? a. P301,250 c. P226,250 b. P256,250 d. P331,250 3. Which of the following statement is correct? Statement 1: In partnership, each partner has his own owner’s capital account. Statement 2: A debit to partner’s capital account is made whenever the partner borrowed substantial amount from the partnership. a. I only c. Both statements are correct b. II only d. Both statements are incorrect 4. On January 1, 20x1, A and B formed a partnership the AB partnership. A and B share profits and losses in a 40:60 ratio, respectively. The following are information available on the date of formation: A B Cash 100,000 25,000 Inventory 300,000 Land 500,000 Building 300,000 Accounts payable 50,000

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RFERRER/RL ACO/ AT ANG/PDEJESUS

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

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

The accounts payable of A will be paid by partner A using his personal assets. The land contributed by B has a mortgage liability of P150,000 which was assumed by the partnership. How much is the capital interest of A and B after formation? a. P450,000 and 675,000 c. P430,000 and 645,000 b. P400,000 and 675,000 d. P615,000 and P410,000 5. Assuming the partners agree to revalue the assets, so that their capital interest will agree to their profit and loss sharing ratio, which of the following statements is incorrect? a. The capital interest of A after formation is P450,000 b. The capital interest of B after formation is P675,000 c. The amount of revaluation is P50,000 d. The total capital contribution of the partners are P1,125,000 6. Which of the following statement is correct? Statement 1: The balance of partner’s capital account represents his share in the net of the partnership. Statement 2: Temporary withdrawals of cash from the partnership are charged to the partner’s drawings account, when these are made in anticipation of profit to be earned by the partnership. a. I only c. Both statements are correct b. II only d. Both statements are incorrect 7. Which of the following statement is correct? Statement 1: As a rule, the industrial partner should share in the partnership’s net loss. Statement 2: In the absence of a specific agreement regarding division of losses, the existing division of profit agreement is to be followed. a. I only c. Both statements are correct b. II only d. Both statements are incorrect 8. M, N and O are partners in the MNO Co. Their capital contributed were: M P100,000; N P220,000 and O P100,000.  Partner O is to receive a bonus of 10% of net income after bonus  Interest of 10% shall be paid on that portion of capital beginning in excess of P200,000.  Salaries of P20,000 and P24,000 shall be paid to partners M and O, respectively. Assuming the net income of the partnership is P88,000, the total profit share of O is: a. P38,800 c. P40,095 b. P32,000 d. P43,333 9. Which of the following statement is correct? Statement 1: Funds extended by the partners to the partnership as a loan shall be accounted for by crediting the partner’s capital account. Statement 2: When industry is contributed into the partnership, a memorandum entry is prepared. a. I only c. Both statements are correct b. II only d. Both statements are incorrect

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RFERRER/RL ACO/ AT ANG/PDEJESUS

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

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

10. Which of the following statement is correct? Statement 1: Drawing accounts are included in the computation of the ending capital balances regardless whether the drawing account is a temporary or a permanent withdrawals. Statement 2: The admission of a new partner either by purchase of an existing partner’s interest or by the investment in the partnership will result in the increase of the total partnership assets. a. I only c. Both statements are correct b. II only d. Both statements are incorrect 11. A and B formed a partnership on March 1 , 20x1. A invested P250,000 and B 150,000. It was agreed that A, will be appointed as the managing partner and he will receive a salary of P60,000 per year and also 10% bonus on the net profit after the adjustment for the salary; the balance of the profit was to be shared in a 62.5:37.5 ratio to A and B, respectively. On December 31, 20x1, the following accounts are available:

Cash Accounts Receivable Furniture and Fixtures Purchases Sales Return and Allowances Operating expenses

Accounts 140,000 Payable 134,000 Sales 90,000 A, capital 392,000 B, capital

120,000 466,000 250,000 150,000

10,000 120,000

(40,000) (60,000)

A, drawings B, drawings

On December 31, 20x1 the inventories on hand were P146,000; unused supplies P5,000; prepaid insurance were P1,900 (the entity uses the expense method). The accrued liabilities totaled P3,100 and the depreciation of furniture’s is 20% per year which are not yet included in the operating expenses. The share of A in the net income is: a. P70,580 c. P69,080 b. P64,768 d. P67,205 12. Which of the following statement is correct? Statement 1: The personal creditors of the general partner have priority of claim over the creditors of the partnership pertaining to the partner’s personal assets.

Statement 2: Admission of new partner by investment in the partnership will increase the partnership capital even under the bonus method. a. I only c. Both statements are correct b. II only d. Both statements are incorrect 13. A and B are partners with a profit and loss of 75:25 and capital balances of P200,000 and P100,000, respectively. C is to be admitted into the partnership by purchasing a 20% interest in the capital, profits and losses for P120,000. The partners agree to revalue the assets before admitting C as a new partner. Which of the following statements is incorrect? a. The capital interest sold by A is P85,000 b. The total increase in capital of B after admission of C is P75,000

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RFERRER/RL ACO/ AT ANG/PDEJESUS

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

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

c. The share of A in the revaluation of asset is P225,000 d. The total amount of revaluation is P300,000 14. A and B are partners having capital balances of P300,000 and P360,000, respectively. They agree to share profits and losses in the ratio of 50:50. They admit C as a new partner to a 1/3 interest in capital and profits with an investment of P390,000. If the partners agree to revalue the assets before admitting C into the partnership. a. Revaluation amount is P90,000 b. C capital will be P350,000 c. Total capital will be P1,050,000 d. B capital will be P420,000 15. A, B and C agree to liquidate the partnership. On December 31, 20x2, the following data are available: A B C Capital 200,000 160,000 600,000 Drawing 120,000 80,000 40,000 The partnership was unable to collect on trade receivables and was forced to liquidate. Operating profit in the year 20x2 amounted to P144,000 which was all exhausted including the partnership assets. Unsettled creditor’s claim at December 31, 20x2 totaled P168,000. B and C have substantial private resources by A has no personal assets. The partners share profits and losses equally. How much is the loss on liquidation? a. P1,032,000 c. P720,000 b. P960,000 d. P868,000 16. The final distribution to C was: a. P324,000 c. P156,000 b. P168,000 d. P216,000

17. Which of the following statement is correct? Statement 1: There is always loss on realization when noncash assets are converted into cash during liquidation process.

Statement 2: In the liquidation process, the noncash assets are sold only to outside parties but never to any of the partners. a. I only c. Both statements are correct b. II only d. Both statements are incorrect

18. A, B and C decided to liquidate the partnership. Their capital balance and profit and loss ratio are as follows: Capital P%L A 100,000 40% B 120,000 30% C 40,000 30% The net income on that year amounted to P88,000. Also, on this date, cash and liabilities are P80,000 and P180,000, respectively.

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RFERRER/RL ACO/ AT ANG/PDEJESUS

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

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

How much is the cash realized from the sale of noncash assets in order for A to receive P110,400. a. P374,000 c. P354,000 b. P392,000 d. P386,000

19. The joint operation account reflects the transactions of the joint arrangement as recorded by B: Year 20x1 JONT OPERATION Oct. 1 Merchandise - C 85,000 204,000 Nov. 10 Cash sales - A 10 Merchandise - B 70,000 42,000 Dec. 1 Cash Sales - A 15 Freight paid - A 2,000 12,100 Dec. 5 Merchandise - C Nov. 20 Advertising - A 1,500 30 Purchases - A 35,000 Dec. 10 Selling expenses - A 4,000 The operators agree to share profits and losses to A , B and C in the ratio of 5:3:2, respectively. The total profit from joint operation amounted to: a. P121,200 c. P246,000 b. P181,800 d. P60,600 20. The final settlement to C will be: a. P97,120 c. P76,080 b. P85,020 d. P60,600

21. Which of the following scenarios indicates that the arrangement is a consignment arrangement? A. The entity is able to request for the return of the product subject to approval of the other party. B. The other party has an unconditional obligation to pay for the product. C. The product is controlled by the entity until a specified event occurs. D. All of the above indicates a consignment arrangement. 22.

If there are significant changes in the entity’s expected timing of transfer to the customer of goods or services, the amortization of costs to fulfill a contract shall be: A. accounted for as a correction of a prior period error B. accounted for as a change in accounting policy C. accounted for as a change in accounting estimate D. ignored

23.

In case the partnership assets are insufficient to settle outstanding partnership claims, A. the partnership must continue operating until such a time that the partnership assets will be enough to cover all outstanding partnership claims B. all unsecured creditors will receive a pro-rata settlement

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RFERRER/RL ACO/ AT ANG/PDEJESUS

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

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

C. the individual partners shall contribute additional assets to cover their respective capital deficiencies, notwithstanding their individual financial condition D. the individual partners shall contribute additional assets to cover their respective capital deficiencies, to the extent that their personal assets exceed their personal liabilities 24.

Which of the following is not a liability that has priority in corporate liquidation? A. salaries payable to employees B. taxes due to the government C. preference dividends in arrears D. liquidation and administrative related costs

25.

A license such as a franchise is considered not distinct from other promised goods or services in the contract if: A. it is a license that forms a component of tangible good and that is integral to the functionality of the good B. it is a license that the customer can benefit on its own C. both A and B D. neither A nor B

Amounts related to the statement of affairs of Resigning Company as of April 30, 2021 follow: Assets pledged for fully secured liabilities P 80,000 Assets pledged for partially secured liabilities 50,000 Free assets 272,000 Fully secured liabilities 60,000 Partially secured liabilities 80,000 Unsecured liabilities with priority 40,000 Unsecured liabilities without priority 330,000 26.

What is the expected amount recoverable by partially secured creditors in the event of liquidation? A. P56,000 B. P70,400 C. P80,000 D. P71,000

27.

How much is the estimated estate deficit? A. P98,000 B. P58,000 C. P108,000 D. P88,000

United Co. recognizes construction revenue and expenses using the percentage-ofcompletion method. During 2020, a single long-term project was begun, which continued through 2021. Information on the project follows: 2020 2021 Accounts receivable from construction contract P200,000 P600,000 Construction expenses 210,000 384,000 Construction in progress 244,000 728,000

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RFERRER/RL ACO/ AT ANG/PDEJESUS

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

Partial billings on contract to date

200,000

: 0927 283 8234

Telephone

: (043) 723 8412

Gmail

: [email protected]

840,000

28.

How much is the profit from the long-term construction contract in 2021? A. P314,000 B. P100,000 C. P30,000 D. P484,000

29.

How much is the contract asset or contract liability to be reported as of December 31, 2021? A. P68,000 contract asset B. P68,000 contract liability C. P112,000 contract asset D. P112,000 contract liability

30.

How much is the cash collected during 2021 from the project? A. P0 B. P240,000 C. P40,000 D. P128,000

ROMINA and MAUREEN are partners engaged in a manufacturing business. Transactions affecting the partners’ capital accounts in 2021 are as follows: ROMINA MAUREEN Debit Credit Debit Credit Beg. Balance P250,000 P350,000 April 1 150,000 100,000 June 30 125,000 250,000 September 1 225,000 300,000 October 1 350,000 200,000 The income summary has a debit balance of P225,000. Agreement between ROMINA and MAUREEN are as follows:  Interest on average capital at 8%.  Salaries of P125,000 and P175,000 are given to ROMINA and MAUREEN, respectively.  Bonus to MAUREEN at 25% of net income after deducting interest and salaries but before deducting bonus.  Balance is to be divided equally. 31.

How much is the share of Romina in the partnership profit or loss? A. P143,000 loss B. P143,000 gain C. P99,000 loss D. P99,000 gain

32.

How much is the net increase (decrease) in Maureen’s capital account during 2021? A. P143,000 decrease...