AFAR 1st monthly assessment

1. Which of the following is not a characteristic of most partnership?

a. Limited liability c. Limited life
b. Mutual agency d. Ease of formation
2. On September 30, Bad admits Company for an interest in his business. On this date, Bad’s capital
account shows a balance of ₱158,400. The following were agreed upon before the formation of the
partnership:
• Prepaid expenses of ₱17,500 and accrued expenses of ₱5,000 are to be recognized.
• 5% of the outstanding accounts receivable of Bad amounting to ₱100,000 is to be recognized
as uncollectible.
• Company is to be credited with a one-third interest in the partnership and is to invest cash aside
from the ₱50,000 worth of merchandise. The partners agreed to divide profits and losses in the
ratio of 70:30, respectively.
How much cash is to be invested by Company?
a. ₱32,950 b. ₱82,950 c. ₱55,300 d. ₱281,800
3. Partner Raymund and Becky agreed to form a partnership by contributing the assets of their
separate businesses. The partners agreed to an equal capital credit on the total contributed capital.
Cash settlements will be made among them to even out the difference. The abridged statement of
financial positions of Raymund and Becky is are follows:
Raymund Becky
Total assets ₱ 120,000 ₱ 80,000
Total liabilities 40,000 20,000
The partnership formation results in
a. ₱10,000 bonus to Becky c. ₱10,000 cash settlement to Becky.
b. ₱10,000 goodwill to Becky d. ₱10,000 cash settlement from Becky.
4. The fact that salaries paid to partners are not a component of partnership income is indicative of
a. A departure from generally accepted accounting principles
b. Being characteristic of the entity theory
c. Being characteristic of the proprietary theory
d. Why partnerships are characterized by unlimited liability
5. A, B and C are partners. A and B contributed ₱100,000 and ₱200,000, respectively while C
contributes his industry. It was agreed that profit shall be divided 40:40:20, respectively. During
the first year of operation, the partnership incurred a loss of ₱30,000. C’s share in the loss is?
a. ₱0 since C is an industrial partner
b. ₱6,000, since there is no stipulation exempting C from losses
c. ₱6,000, equal to his profit sharing
d. ₱7,500, equal to the share of the capitalist partner with the least profit sharing
6. The partnership of Alec and Boy reported profits of ₱1,200,000 in 2020 and divided the same to
their profit-sharing ratio of 40:60, respectively. An examination conducted on the books revealed
the following:
• An equipment costing ₱300,000 which should have depreciated for 4 years was expensed on
January 2, 2020.
• Supplies of ₱50,000 was omitted on the records.
• An inventory costing ₱150,000 was omitted from the records. The purchase was not recorded
because the invoice was in transit as of the end of reporting period.
What is the net adjustment to the Capital account of Alec?
a. ₱110,000 increase c. ₱170,000 increase
b. ₱110,000 decrease d. ₱170,000 decrease
7. Munda and Rexy are partners sharing profits as follows:
a) ₱100,000 and ₱200,000 salaries to Munda and Rexy, respectively. The salary provision shall be
increased by 50% each when profit exceeds ₱500,000.
b) Residual profit is shared equally.
Munda received ₱150,000 profit sharing. What is the partnership profit?
a. ₱450,000 b. ₱400,000 c. ₱500,000 d. ₱300,000
8. A, B, and C are partners with average capital balances during 2020 of ₱472,500, ₱238,650, and
₱162,350, respectively. In 2020, the partnership had a net loss of ₱125,624 before the interest and
salaries to partners.
Partners A, B and C agreed to share profits in the following order of distribution:
a) 10% interest on their average capital balances
b) Salaries of ₱122,325 to A and ₱82,625 to C
c) Residual profits or loss is divided equally.
By what amount should A’s and C’s capital account change – increase (decrease)?
A C A C
a. ₱ 30,267 (₱40,448) c.(₱ 40,844) ₱31,325
b. ₱ 29,476 ₱ 17,536 d. (₱41,875) (₱41,875)
9. Chris and Watts are partners in merchandising business. During 2020, the withdrew their salary
allowances of ₱40,000 and ₱60,000, respectively. Profits and losses are shared in the ratio of 3:2.
The income summary account has a credit balance of ₱120,000 before any income allocation. Their
capital accounts reflect the following:
Chris Watts
Beginning balance………………………………………. ₱50,000 ₱30,000
Additional investments………………………………….. ₱30,000 ₱40,000
Withdrawals other than for salary allowances……... (₱10,000) (₱15,000)
Ending Capital……………………………………………. ₱70,000 ₱55,000
The capital balance of each partner on December 31, 2020 after closing the income summary and
withdrawals accounts.
a. Chris, ₱82,000; Watts, ₱63,000 c. Chris, ₱70,000; Watts, ₱55,000
b. Chris, ₱122,000; Watts, ₱123,000 d. Chris, ₱82,000; Watts, ₱123,000
10. Darrel, Noh and Asuncion are partners. The partners agreed to share profit 40:30:20. Darrel sold
½ of his interest to Noh for ₱100,000. Subsequently, the partnership admitted Pawerr for a 10%
interest. What is Noh’s profit sharing after Pawerr’ admission?
a. 27% b. 45% c. 50% d. 54%
11. MacDo will invest in the partnership of Jabili and Pitsa Hat for a 40% interest. Jabili and Pitsa Hat
have capital of ₱400,000 and ₱300,000 and shares profit 60:40, respectively. MacDo is to invest
₱200,000 into the partnership and to purchase 1/2 of Jabili’s interest for ₱300,000. Compute the
capital interest of MacDo, Jabili and Pitsa Hat, respectively, under the bonus method.
a. ₱500,000, ₱200,000; ₱200,000 c. ₱400,000, ₱200,000; ₱200,000
b. ₱360,000, ₱224,000; ₱316,000 d. ₱200,000, ₱200,000; ₱200,000
12. The capital accounts of the partnership of Newton, Sharman and Jackson on June 1 are presented,
along with their profit and loss ratios:
Newton ₱ 139,200 1/2
Sharman 208,800 1/3
Jackson 96,000 1/6
On that date, Sidney was admitted to the partnership when he purchased for ₱132,000, a
proportionate interest from Newton and Sharman in the net assets and profits of the partnership.
As a result of this transaction, Sidney acquired a one-fifth interest in the net assets and profits of
the firm.
Assuming that implied goodwill is not to be recorded, what is the combined gain realized by Newton
and Sharman upon the sale of a portion of their interest in the partnership to Sidney?
a. ₱0 b. ₱43,200 c. ₱62,400 d. ₱82,000
13. S. Lebron and L. James are partners who have capitals of ₱600,000 and ₱480,000 sharing profits in
the ratio of 3:2. J. Harden is admitted as a partner upon investing ₱500,000 for a 25% interest in
the firm, profits to be shared equally. Given the choice between goodwill and bonus methods, Harden
will
a. Prefer bonus method due to Harden’s gain of ₱35,000
b. Prefer bonus method due to Harden’s gain of ₱140,000
c. Prefer goodwill method due to Harden’s gain of ₱140,000
d. Be indifferent because the goodwill and bonus methods are the same
14. The statement of financial position as of September 30, 2020, for the partnership of Darrella,
Estoque and Francine shows the following information:

Assets ₱180,000 Darrella, loan ₱ 10,000

Darrella, capital 41,500
Estoque, capital 38,500
. Francine, capital 90,000
Total ₱180,000 Total ₱180,000

It was agreed among the partners that Darrella retires from the partnership, and it was also further
agreed that the assets should be adjusted to their fair value of ₱172,500 as of September 30, 2020.
Net loss prior to the retirement of Darrella amounted to ₱35,000. The partnership is to pay Darrella
₱31,000 cash for Darrella’s partnership interest, which would include the payment of her loan. No
goodwill is to be recorded. Darrella, Estoque and Francine share profit 40%, 15% and 45%,
respectively. After Darrella’s retirement, how much would Francine’s capital balance be?
a. ₱33,000 b. ₱73,500 c. ₱68,250 d. ₱92,625
15. The final cash distribution to the partners in a partnership in liquidation should be made in
accordance with
a. Balances of the partners’ capital accounts.
b. Partners’ profit and loss sharing ratio.
c. Ratio of capital contributions made by the partners.
d. Ratio of capital contributions less withdrawals made by the partners.
16. As of December 31, the books Ton Partnership showed capital balances of: T, ₱400,000; O,
₱250,000; N, ₱50,000. The partners’ profit and loss ratio was 3:2:1, respectively. The partners
decided to liquidate and they sold all non-cash assets for ₱370,000. After settlement of all liabilities
amounting ₱120,000, they still have cash of ₱280,000 left for distribution. Assuming that any capital
debit balance is uncollectible, the share of T in the distribution of the ₱280,000 cash would be:
a. ₱178,000 b. ₱180,000 c. ₱ 190,000 d. ₱170,000
17. On August 16, 2020, Tyron, Dana and Ira form a partnership investing cash of ₱105,000, ₱94,500
and ₱29,400, respectively. The partners share profits 3:2:2 and on October 29, 2020, they have
cash of ₱7,000, and other assets of ₱332,500; liabilities are ₱179,200. On this date they decided to
go out of business and sell all the assets for ₱210,000. Ira has personal assets of ₱10,500 that may,
if necessary, be used to meet partnership obligations.
How much should be distributed to Dana upon liquidation of the partnership?
a. ₱34,020 b. ₱28,000 c. ₱14,280 d. Zero
18. The following statement of financial position summary, together with residual profit-sharing ratios,
was developed on April 1, 2020 when the AAA, BBB and CCC partnership began its liquidation:
Cash ₱140,000 Liabilities ₱ 60,000
Accounts receivable 60,000 Loan from BBB 20,000
Inventories 85,000 AAA capital (20%) 75,000
Plant assets-net 200,000 BBB capital (40%) 200,000
Loan to AAA 25,000 CCC capital (40%) 155,000
₱510,000 ₱510,000

If available cash except for a ₱5,000 contingency fund is distributed immediately, AAA, BBB, and
CCC, respectively, should receive:
a. ₱-0-, ₱80,000, and ₱15,000 c. ₱-0-, ₱70,000, and ₱5,000
b. ₱16,000, ₱32,000, and ₱32,000 d. ₱-0-, ₱72,500 and ₱7,500
19. The partnership agreement of X, Y and Z provides for the division of net income as follows:
(1) Y, who manages the partnership, is to receive a salary of ₱16,500 monthly.
(2) Each partner is to be allowed interest at 15% on ending capital.
(3) Balance is to be divided 25:30:45.
During 2020, X invested an additional ₱96,000 in the partnership. Y made an additional investment
of ₱60,000 and withdrew ₱90,000, and Z withdrew ₱70,000. No other investments or withdrawals
were made during 2020. On January 1, 2020, the capital balances were X, ₱280,000; Y, ₱300,000;
and Z, ₱170,000. Total capital at year-end was ₱975,000.
 Compute the share of each partner in the net income at year-end:
X Y Z
a. ₱ 36,175 ₱214,230 ₱ 21,405
b. ₱ 57,250 ₱ 68,700 ₱103,050
c. ₱ 36,175 ₱214,230 (₱21,405)
d. ₱36,175 ₱ 54,230 ₱148,595
20. Partners PG, PD and CG share profits and losses in the ratio of 5:3:2. At the end of a very
unprofitable year, they decided to liquidate the firm. The partner’s capital account balances at this
time are as follows:
PG ₱330,000
PD 373,500
CG 225,000
The liabilities accumulate to ₱450,000, including a loan of ₱150,000 from PG. The cash balance is
₱90,000. All the partners are personally solvent. The partners plan to sell the assets in installment.
If PD received ₱54,000 from the first distribution of cash, how much did CG receive at that time?
a. Nil b. ₱12,000 c. ₱18,000 d. ₱33,000
21. The payment to general unsecured creditors is often termed:
a. A "preference payment." c. A "dividend."
b. A "write-off." d. A "bonus."
22. In a statement of realization and liquidation, unusual revenue items are reported under:
a. Assets. c. Extraordinary items.
b. Supplementary items. d. These are never reported.
23. A review of the assets and liabilities of G Company in bankruptcy on June 30 discloses the following:
a. A mortgage payable of ₱118,000, is secured by building valued at ₱39,000 less than its book
value of ₱172,000.
b. Notes payable of ₱57,000 is secured by furniture and equipment with a book value of ₱76,000
that is 3/5 realizable.
c. Assets other than those referred to have an estimated value of ₱44,000, an amount that is 75%
of z
d. Liabilities other than those referred to total ₱91,000, which include claims with priority of
₱23,000.
How much was paid to the partially secured creditors?
a. ₱52,340 b. ₱48,260 c. ₱49,380 d. ₱50,769
24. The following were taken from the Statement of Affairs of Interlink Corporation:
Assets pledged with fully secured creditors (current fair value is ₱166,000) ₱ 208,000
Assets pledged with partially secured creditors (current fair value is ₱112,000) 144,000
Free assets (current fair value is ₱104,000) 124,000
Liabilities with priority 26,000
Fully secured creditors 76,000
Partially secured creditors 136,000
Unsecured creditors 276,000
The actual percentage of recovery of partially secured creditors:
a. 100% c. 56%
b. 92.94% d. Cannot be determined
25. The following statement of realization and liquidation is presented to you:
Assets:
Assets to be realized ₱ 1,375,000
Assets acquired 750,000
Assets realized 1,200,000
Assets not realized 1,375,000
Liabilities:
Liabilities liquidated ₱ 1,875,000
Liabilities not liquidated 1,700,000
Liabilities to be liquidated 2,250,000
 Liabilities assumed 1,625,000
Revenues and Expenses:
Supplementary charges ₱ 3,125,000
Supplementary credits 2,800,000
The net gain (loss) is:
a. ₱250,000 b. (₱325,000) c. ₱425,000 d. ₱750,000
26. If the branch receives credit memo from the home office, the branch shall record in its separate
statement of financial position by
a. Increasing the home office account c. Crediting the home office account
b. Debiting the home office account d. Disclosure
27. The Jake Branch of Charice Company submitted the following trial balances as of December 31,
2020 after its first year of operations:
Debit Credit
Cash ₱ 10,400
Accounts Receivable 63,200
Shipments from home office 168,000
Expenses 10,800
Sales ₱ 134,400
Home office current . 118,000
Totals ₱252,400 ₱252,400
Additional information:
Merchandise inventory, ₱50,400
Shipments to the branch are billed at 140% of cost.
The overstatement of the branch inventory at December 31, 2020 was:
a. ₱ -0- b. ₱6,000 c. ₱14,400 d. ₱33,600
28. The REO Corporation is maintaining a branch in Baguio. During the year, the home office shipped
goods to the branch at a cost of ₱120,000.
The branch submitted to the home office the following report summarizing its operations for the
period ended December 31, 2020.
Sales (30% on account) ₱196,000
Expenses (50% of which still unpaid) 50,000
Purchases 25,000
Shipments from Home Office 150,000
Inventory, 1/1/2020 (30% from outsiders) 30,000
Inventory, 12/31/2020 (60% from Home Office) 90,000
Remittance to Home Office 60,000
The branch Cost of Sales and Net Income/Loss in as far as the home office is concerned are:
a. ₱88,000 / ₱58,000 c. ₱88,000 / ₱54,000
b. ₱91,600 / ₱54,400 d. ₱115,000 / ₱58,000
29. The Mahiyain Manufacturing Co. of Quezon City opened a branch at Davao City on January 1, 1988,
to expand the market of its product. Merchandise shipped during 1988 to the Davao branch totalled
₱104,000, and this included a profit of 25% based on cost. At the end of the year, the inventory
was ₱12,500, at billed price. The branch extends credit, makes collections and pay expenses from
cash received. The company applied the periodic inventory method. Other transactions affecting
the branch are as follows: Sales on account ₱117,000; expenses ₱20,000, of which ₱1,300 were
unpaid on December 31, 1988; cash received from customers' accounts, ₱84,000, after allowing
cash discounts of ₱1,480; cash remitted to the home office during the year ₱65,000. [May 1989]
In so far as the home office is concern, the true income or loss of the branch operation was:
a. ₱24,300 b. ₱22,320 c. (₱18,300) d. ₱24,320
30. Darrell Company has two merchandise outlets, its main store and its Center Mall branch. All
purchases are made by the main store and shipped to the Center Mall branch at cost plus 10%. On
January 1, 2020, the main store and Center Mall inventories were ₱170,000 and ₱49,500,
respectively. During 2020, the main store purchased merchandise costing ₱50,000 and shipped 40%
of it to Center Mall. At December 31, 2020, Center Mall made the following closing entry:
 Sales ₱400,000
Inventory, end 60,500
Inventory, beg. ₱ 49,500
Shipments from main store 220,000
Expenses 131,000
Main store 60,000
If the main store inventory at December 31, 2020 is ₱140,000, the combined main store and branch
inventory that should appear in Darrell Company’s December 31, 2019 statement of financial
position is:
a. ₱189,500 b. ₱195,000 c. ₱182,270 d. ₱215,000
31. On December 31, 2020, the home office account on the branch books shows a balance of ₱9,735.
The following reconciling data are determined in accounting for the difference.
a. Merchandise billed at ₱615 shipped by the home office to the branch on December 28 is still in
transit.
b. The branch collected a home office accounts receivable of ₱2,500 but failed to notify the home
office of this collection.
c. The home office recorded the branch net income for November at ₱1,125. This was in error, as
the branch reported net income was ₱1,215.
d. The home office was charged ₱640 when the branch returned merchandise to the home office
on December 31. The merchandise is in transit.
The unadjusted balance of Branch account is
a. ₱8,040 b. ₱10,990 c. ₱10,350 d. ₱8,400
32. Hirap na Hirap na Company consigned 5 dozens of stainless chairs to Kinakaya Pa Rin Firm on April
1, 2021. Each chair cost ₱120 and the consignor paid ₱600 for the shipment to the consignee. On
August 15, 2021, 36 chairs were already sold and the consignee rendered an account sales and
remittance the balance due the consignor in the amount of ₱5,580 after deducting the following:
Commission, at 15% of the selling price
Selling Expenses ₱ 360
Delivery and Installation 180
How much is the profit on consignment?
a. ₱900 b. ₱1,260 c. ₱600 d. ₱1,000
33. Gerald Inc. of Session opens a sales agency in Julia and a working fund of ₱100,000 is established
on imprest basis. The first payment from the fund is ₱5,000 for rent of the store space. What is the
entry in the books of the home office to record the payment of rent by the agency?
Debit Credit
a. Rent Expense – Julia ₱ 5,000
Cash ₱ 5,000
b. Julia Agency 5,000
Cash 5,000
c. Rent Expense – Julia 5,000
Working Fund 5,000
d. No Entry
34. On February 14, 2020, Gerald Company established a sales agency in Secret Place. Upon
establishment of the sales agency, the home office sent samples costing ₱8,000 and a working fund
of ₱3,000 to be maintained on the imprest basis. During the six months period, the sales agency
reported to the home office sales orders. These were billed at ₱70,000 of which of ₱40,000 was
collected. The sales agency paid expenses of ₱5,800 but was reimbursed by the home office.
On August 15, 2020, the sales agency samples were valued at ₱2,000. It was estimated that the
gross profit on goods shipped to fill sales order averaged 40% of cost.
The cost of sales of the sales agency for the six months period is
a. ₱20,000 b. ₱48,000 c. ₱44,000 d. ₱50,000
35. After all noncash assets have been converted into cash in the liquidation of the Guiron and Horacio
Partnership, the ledger contains the following accounts:
 Cash ₱1,410,000
Accounts payable 960,000
Loan payable to Guiron 450,000
Guiron, capital 210,000
Horacio, capital 210,000
Available cash should be distributed with ₱960,000 going to accounts payable and
a. ₱405,000 to the loan payable to Guiron.
b. ₱225,000 each to Guiron and Horacio.
c. ₱240,000 to Guiron and ₱210,000 to Horacio.
d. ₱210,000 to Guiron and ₱240,000 to Horacio.
36. D. Alarcon, F. Barredo, G. Coronel, partners, are in textile distribution business sharing profits and
losses equally. On Dec. 31, 2020, the partnership capital and partners’ drawings are as follows:
Alarcon Barredo Coronel Total
Capital ₱100,000 ₱80,000 ₱300,000 ₱480,000
Drawings 60,000 40,000 20,000 120,000
The partnership was unable to collect on trade receivables and was forced to liquidate. Operating
profit in the year 2020 amounted to ₱72,000 which was all exhausted including the partnership
assets. Unsettled creditors’ claim at Dec. 31, 2020 totaled ₱84,000. Barredo and Coronel have
substantial private resources, but Alarcon has no personal assets.
Loss on liquidation was
a. ₱484,000 b. ₱480,000 c. ₱432,000 d. ₱516,000
37. A partnership is currently holding ₱400,000 in asset and ₱234,000 in liabilities. The partnership is
to be liquidated and ₱20,000 is the best estimation of the expenses that will be incurred during this
process. The four partners share profit and losses as shown, Capital balances at the start of the
liquidation are as follows;
Kevin, capital (40%) ₱ 59,000
Michael, capital (30%) 39,000
Brendo, capital (20%) 34,000
John, capital (10%) 34,000
The partners realize that John will be the first partner to start receiving cash. How much cash will
John receive before the other partner collect any cash?
a. ₱12,250 b. ₱14,750 c. ₱17,000 d. ₱170,000
38. Don, Hon, and Jon, who share profits in the ratio of 4:1:5, respectively, have the following capital
balances, respectively: ₱50,000; ₱50,000; and ₱150,000. On this date the partnership has liabilities
of ₱40,000. The partners decided to liquidate. If Jon gets ₱87,500 upon final liquidation, the
realization loss is:
a. ₱115,000 b. ₱62,500 c. ₱142,500 d. ₱125,000
39. Partners R. Romero, S. Segundo, and T. Tenorio, who share income and loss in the ratio of 3:5:2,
respectively, have decided to liquidate their partnership. At the time of liquidation, the statement of
financial position of the partnership consisted of the following:
Assets Liabilities and Capital
Cash ₱120,000 Accounts payable ₱ 93,000
Other assets 360,000 Loan from Segundo 30,000
R, Romero, capital 108,000
S. Segundo, capital 120,000
. T. Tenorio, capital 129,000
Total assets ₱480,000 Total liabilities and capital ₱ 480,000
The partners desire to prepare an installment distribution schedule showing how cash would be
distributed to partners as assets are realized.
In the schedule of maximum absorbable loss, the maximum absorbable loss for each partner would
be
a. Romero ₱360,000; Segundo, ₱240,000; Tenorio, ₱645,000
 b. Romero ₱300,000; Segundo, ₱600,000; Tenorio, ₱225,000
c. Romero ₱450,000; Segundo, ₱525,000; Tenorio, ₱375,000
d. Romero ₱360,000; Segundo, ₱300,000; Tenorio, ₱645,000
40. The assets and equities of the NOP Partnership at the end of its fiscal year on October 31 are as
follows:
Cash ₱ 150,000 Liabilities ₱ 500,000
Receivables- net 200,000 Loan from M. Perez 100,000
Inventory 400,000 E. Nera, capital (30%) 450,000
Plant assets- net 700,000 R. Oropesa, capital (50%) 300,000
Loan to F. Oropesa 50,000 M. Perez, capital (20%) 150,000
₱1,500,000 ₱1,500,000
The partners decide to liquidate the partnership. They estimate that the noncash assets other than
the loan to Oropesa can be converted into ₱1,000,000 cash over the two- month period ending
December 31. Cash is to be distributed to the appropriate parties as it becomes available during the
liquidation process.
The partner most vulnerable to partnership losses on liquidation is
a. E. Nera c. E. Nera and R. Oropesa equally
b. R. Oropesa d. M. Perez