INTEGRATED ACCOUNTING REVIEW II

PARTNERSHIP LIQUIDATION

1. On January 1, year 1, the partners of Cobb, Davis, and Eddy, who share profits and losses in the ratio
of 5:3:2, respectively, decided to liquidate their partnership. On this date the partnership condensed
balance sheet was as follows:
Assets Liabilities and Capital
Cash P 50,000 Liabilities P 60,000
Other assets 250,000 Cobb, capital 80,000
Davis, capital 90,000
Eddy, capital 70,000
Total assets P300,000 Total Liabilities and Capital P300,000
On January 15, year 1, the first cash sale of other assets with a carrying amount of P150,000 realized
P120,000. Safe installment payments to the partners were made the same date. How much cash
should be distributed to each partner?
Cobb Davis Eddy Cobb Davis Eddy
a. P15,000 P51,000 P44,000 c. P55,000 P33,000 P22,000
b. P40,000 P45,000 P35,000 d. P60,000 P36,000 P24,000
The balance sheet of Kate, Tim and Mar partnership shows the following information as of December 31,
2015:
Cash P4,000 Liabilities P10,000
Other assets 56,000 Kate, loan 5,000
Kate, capital 25,000
Tim, capital 14,000
Mar, capital 6,000
Total 60,000 Total 60,000
Profit and loss ratio is 3:2:1 for Tim, Kate and Mar respectively. Other assets were realized as follows:
Date Cash received Book value
January 2016 P12,000 P18,000
February 2016 7,000 15,400
March 2016 25,000 22,600
Cash is distributed as assets are realized
2. The total loss to Kate is
a. P6,000 b. P2,000 c. P2,000 d. None
3. The total cash received by Tim is
a. P4,000 b. Zero c. P10,000 d. P3,000
4. Cash received by Mar in January 2016 is:
a. P400 b. P2,000 c. P1,000 d. Zero

Franchise Accounting

Frozen Delight Inc. charges an initial franchise fee of P75,000 for the right to operate as a franchisee of Frozen
Delight. Of this amount P25,000 is collected immediately. The remainder is collected in four equal annual
instalments of P12,500 each. These instalments have a present value of P41,402. As part of the total franchise
fee. Frozen Delight also provides training (with a fair value of P2,000) to help franchisees get the store ready

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to open. The franchise agreement is signed on April 1, 20x5, training is completed, and the store opens on
July 1, 20x5.

1. The amount of revenue from training and franchise on April 1, 20x5 is

a. Zero b. P64,402 c. P66,402 d. P75,000
2. The amount of revenue from training and franchise on July 1, 20x5 is
a. Zero b. P64,402 c. P66,402 d. P75,000

Pacific Crossburgers inc. charges an initial fee of P70,000. Upon signing of the agreement (which covers 3
years), a payment of P28,000 is due. Thereafter, three annual payments of P14,000 are required. The credit
rating of the franchisee is such that it would have to pay interest at 10% to borrow money. The franchisee
agreement signed on May 1, 20x5 and the franchise commences operation on July 1, 20x5.
3. The amount of franchise revenue on May 1, 20x5 assuming no future services are required by the
franchisor once the franchise start operations:
a. Zero b. P28,000 c. P62,816 d. P70,000
4. In relation to No 3, the amount of franchise revenue on July 1, 20x5:
a. Zero b. P28,000 c. P62,816 d. P70,000
5. The amount of franchise revenue on May 1, 20x5, assuming that the franchisor has substantial
services to perform, once the franchise begins operations, to maintain the value of the franchise
a. Zero b. P28,000 c. P62,816 d. P70,000
6. In relation to No 5, the amount of franchise revenue on December 31, 20x5
a. Zero b. P13,959 c. P62,816 d. P70,000
7. The amount of franchise revenue on May 1, 20x5 assuming that the total franchise fee includes
training services (with value of P2,400) for the period leading up to the franchise opening and for two
(2) months following opening:
a. Zero b. P60,416 c. P62,816 d. P70,000
8. In relation to No 7, the amount of franchise revenue on July 1, 20x5:
a. Zero b. P60,416 c. P61,616 d. P63,616
9. In relation to No 7 and 8, the amount of service revenue on September 1, 20x5
a. Zero b. P1,200 c. P2,400 d. P70,000