DMC College Foundation, Inc.

Bachelor of Science in Accountancy

Final Mock CPALE

ADVANCED FINANCIAL REPORTING AND REPORTING

SET A

NAME:_____________________________________ DATE:____________________

INSTRUCTION: Read the questions carefully. Shade your best choice in the
separate answer sheet that is provided. Use pencil only in shading.

1. Consolidated financial statements are designed to provide

a. informative information to all shareholders.
b. the results of operations, cash flow, and the balance sheet in an
understandable and informative manner for creditors.
c. the results of operations, cash flow, and the balance sheet as if
the parent and subsidiary were a single entity.
d. subsidiary information for the subsidiary shareholders.

2. Pasig Garment Company operates a branch in Cabanatuan City. At the end

of the year, the Branch account in the books of the home office at
Manila shows a balance of P150,000. The following information are
ascertained:
1. The home office has billed the branch the amount of P37,500 for the
merchandise, which was in transit on December 31.
2. A home office accounts receivable for P10,500 was collected by the
branch. Said collection was not reported to the home office by the
branch.
3. Supplies of P4,500 was returned by the branch to the home office
but the home office has not yet reflected in its records the receipt
of the supplies.
4. The branch made profit of P10,100 for the month of December but the
home office erroneously recorded it as P11,180.
5. The branch has not received the cash in the amount of P25,000 sent
by home office on December 31. This was charged to General Expense
account.
All transactions are presumed to have been properly recorded.
What is the balance of the Home Office account on the books of the
branch as of December 31, before adjustments?
a. P121,920 b. P123,000 c. P117,420 d. P106,920

3. Using the same information in the preceding number, what is the

adjusted balance of the reciprocal accounts?
a. P96,420 b. P106,920 c. P117,420 d. P179,920

4. The Carly Company owns 75% of the Halley Company. The following
figures are their separate financial statements:
Carly: Trade receivables P1,040,000, including P30,000 due from Halley
Halley: Trade receivables P215,000, including P40,000 due from Carly
According to PAS 27 Consolidated and separate financial statements,
what figure should appear for trade receivables in Carly’s
consolidated statement of financial position?
a. P1,215,000 b. P1,225,000 c. P1,255,000 d. P1,185,000

5. Consolidated financial statements are appropriate even without a

majority ownership if which of the following exists?
a. The subsidiary has the right to appoint members of the parent
company’s board of directors.

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 b. The parent company has the right to appoint a majority of the
members of the subsidiary’s board of directors through a large
minority voting interest.
c. The subsidiary owns a large minority voting interest in the
parent company.
d. The parent company has an ability to assume the role of general
partner in a limited partnership with the approval of the
subsidiary’s board of directors.

6. The White Company acquired 80% interest in the Pulley Company when
Pulley’s equity comprised share capital of P100,000 and retained
earnings of P500,000. Pulley’s current statement of financial position
shows share capital of P100,000, a revaluation reserve of P400,000 and
retained earnings of P1,400,000.
Under PAS 27 Consolidated and separate financial statements, what
figure in respect of Pulley’s retained earnings should be included in
the consolidated statement of financial position?
a. P720,000 b. P1,440,000 c. P1,040,000 d. P1,520,000

7. Bonifacio Contractors had a 3-year construction contract in 2018 for

P900,000. The company uses the percentage-of-completion method for
financial statement purposes. Income to be recognized each year is
based on the ratio of cost incurred to total estimated cost to
complete the contract. Data on this contract follows:
Accounts receivable – construction contract billings P30,000
Construction in progress P93,750
Less: Amounts billed 84,375 9,375
10% retention 9,375
Net income recognized in 2018 (before tax) 15,000
Bonifacio Contractors maintains a separate bank account for each
construction contract. Bank deposits to this contract amounted to
P50,000. What was the estimated total income before tax on this
contract?
a. P45,000 b. P94,000 c. P135,000 d. P144,000

8. A controlling interest in a company implies that the parent company

a. owns all of the subsidiary’s stock.
b. has acquired a majority of the subsidiary’s common stock.
c. has paid cash for a majority of the subsidiary’s stock.
d. has transferred common stock for a majority of the subsidiary’s
outstanding bonds and debentures.

9. Gianne Co., sold a computer on instalment basis on October 1, 2018.

The unit cost to the company was P86,400, but the instalment selling
price was set at P122,400. Terms of payment included the acceptance of
a used computer with a trade-in allowance of P43,200. Cash of P7,200
was paid in addition to the trade-in computer with the balance to be
paid in ten monthly instalments due at the end of each month
commencing the month of sale.
It would require P1,800 to recondition the used computer so that it
could be resold for P36,000. A 15% gross profit was usual from the
sale of used computer. The realized gross profit from the 2018
collections amounted to
a. P5,760 b. P14,100 c. P11,520 d. P48,960

10. Which of the following is not an example of one of the major

categories of funds for a college or university?
a. current funds c. plant funds
b. proprietary funds d. trust and agency funds
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 11. Comely Company manufactures three products, R, S, and T, in a
joint process. For every 10 kilos of raw material input, the output is
5 kilos of R, 3 kilos of S and 2 kilos of T. During August, 50,000
kilos of raw materials costing P120,000 were processed and completed,
with joint conversion costs of P200,000. Conversion costs shall be
allocated to the production on the basis of market values.
To make the product salable, however, further procession which does
not require additional material was done at the following costs: R,
P30,000; S, P20,000; and T, P30,000. Unit selling prices are R, P10;
S, P12; and T, P15. The unit cost of product R is
a. P7.12 b. P8.00 c. P10.00 d. P25.32

12. Which of the following statements is correct regarding partner’s

debit capital balances?
a. The partner should make contributions to reduce the debit balance
to whatever extent possible.
b. If contributions are not possible, the other partners with credit
capital balances will be allocated a portion of debit balance
based on their proportionate profit-and-loss sharing percentages.
c. Partners who absorb another’s debit capital balance have a legal
claim against the deficient partner.
d. All of the statements are correct.

13. The following information summarizes the standard cost for

producing one metal tennis racket. In addition, the variances for one
month’s production are given. Assume that all inventory accounts have
zero balances at the beginning of the month:
Standard Cost/unit Standard Monthly Costs
Materials P4.00 P8,400
Direct labor 2 hrs @P2.6 5.20 10,920
Factory overhead:
Variable 1.80 3,780
Fixed 5.00 10,500
Variances:
Materials price, P244,75 unfavorable
Materials quantity, P500 unfavorable
Labor rate, P520 unfavorable
Labor efficiency, P2,080 unfavorable
What were the actual direct labor hours worked during the month?
a. 5,000 b. 4,800 c. 4,000 d. 3,400

14. Using the same information in the preceding number, what were
actual quantities of materials used during the month?
a. 2,156 b. 2,100 c. 2,225 d. 1,975

15. On December 31, 2018, PP Inc. signed an agreement authorizing ZZ

Company to operate as a franchisee for an initial franchise fee of
P50,000. Of this amount, P20,000 was received upon signing of the
agreement and the balance is due in three annual payments of P10,000
each beginning December 31, 2019. The agreement further provides that
the down payment is not refundable and no substantial future services
are required to be performed. ZZ Company’s credit rating is such that
the collection of the note is reasonably assured. The present value at
December 31, 2018 of three annual payments discounted at 14%(the
implicit rate for a loan of this type) is P23,220. On December 31,
2018, PP, Inc. should record unearned franchise fee of
a. P0 b. P23,220 c. P30,000 d. 43,220

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 16. If a partnership has only non-cash assets, all liabilities have
been properly disbursed, and no additional liquidation expenses are
expected, the maximum potential loss to the partnership in the
liquidation process is
a. the fair market value of the noncash asset.
b. the book value of the noncash asset.
c. the estimated proceeds from the sale of the assets less the book
value of the noncash assets.
d. none of the above

17. Manila Sales Company established a branch in Baguio City early

last year to which it shipped merchandise before the branch opening
with a billing price of P300,000. During the year, the home office
billed the branch a total of P120,000 for additional shipments of
merchandise. Some defective merchandise were shipped back by the
branch and was given credit for P7,500 on the return. The branch also
made purchases of merchandise totalling P72,500 from outside
suppliers. At the end of the year, a physical count disclosed a branch
ending inventory of P185,000 which included P20,000 of merchandise
acquired from outside suppliers. If merchandise shipments from the
home office were billed at 20% above cost, what was the total cost of
merchandise available for sale, net of returns, at the branch during
the year?
a. P300,000 b. P800,000 c. P690,000 d. P680,000

18. The following information is available for K Co. for June:

Started this month 80,000 units
Beginning WIP (40% complete) 7,500 units
Normal spoilage (discrete) 1,100 units
Abnormal spoilage 900 units
Ending WIP (70% complete) 13,000 units
Transferred out 72,500 units
Beginning WIP costs:
Material P10,400
Conversion 13,800
Current costs:
Material P120,000
Conversion 350,000
All materials are added at the start of production and the
inspection point is at the end of the process.
What is the cost assigned to ending inventory using FIFO?
a. p75, 920 b. P58,994 c. P56,420 d. P53, 144

19. Using the same information in the preceding number, what is the
cost assigned to normal spoilage and how is it classified using
weighted average?
a. P6,193 allocated between WIP and transferred out
b. P6,424 assigned to units transferred out
c. P6,193 assigned to loss account
d. P6,424 assigned to loss account

20. X, Y and Z, a partnership formed on January 1, 2017 had the

following initial investment: X, P100,000; Y, P150,000; and Z,
P225,000. The partnership agreement states that the profits and losses
are to be shared equally by the partners after consideration is made
for the following:
- Salaries allowed to partners: P60,000 for X, P48,000 for Y, and
P36,000 for Z.

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 - Average partner’s capital balances during the year shall be allowed
10%.
Additional information:
- On June 30, 2017, X invested an additional P60,000.
- Z withdrew P70,000 from the partnership on September 30, 2017.
- Share of the remaining partnership profit was P5,000 for each
partner.
Interest on average capital balances of the partners totalled
a. P48,750 b. P53,750 c. P57,625 d. P60,625

21. Using the same information in the preceding problem, partnership

net profit at December 31, 2017 before salaries, interests and
partner’s share on the remainder was
a. P199,750 b. P207,750 c. P211,625 d. P222,750

22. If a bonus is traceable to the previous partners rather than an

incoming partner, it is allocated among the partners according to the
a. profit-sharing percentages of the previous partnership.
b. profit-sharing percentages of the new partnership.
c. capital percentages of the previous partners.
d. capital percentages of the new partnership.

23. In a construction contract, the term “variation” means

a. the initial amount of revenue agreed in the contract.
b. an additional amount paid to the contractor if specified
performance standards are met or exceeded.
c. an instruction by the customer for a change in the scope of work
to be performed under the construction contract.
d. an amount that the contractor seeks to collect from the customer
as reimbursement for cost not included in the construction
contract.

24. Arthur, Baker, and Carter are partners in textile distribution

business, sharing profits and losses equally. On December 31, 2018,
the partnership capital and partners drawings were equal as follows:
Arthur Baker Carter TOTAL
Capital P100,000 P80,000 P300,000 P480,000
Drawing 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 2018 amounted to P72,000
which was all exhausted including the partnership assets. Unsettled
creditors’ claims at December 31, 2018 totalled P84,000. Baker and
Carter have substantial private resources but Arthur has no personal
assets.
Loss on liquidation was
a. P360,000 b. P432,000 c. P480,000 d. P516,000

25. Final cash distribution to Carter was

a. P78,000 b. P84,000 c. P108,000 d. P162,000

26. A partnership agreement calls for allocation of profits and

losses by salary allocations, a bonus allocation, interest on capital,
with any remainder to be allocated by present ratios. If a partnership
has a loss to allocate, generally
a. any loss would be allocated equally to all partners.
b. any salary allocation criteria would not be used.
c. the bonus criteria would not be used.
d. the loss would be allocated using the profit and loss ratios,
only.
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 27. The underlying amount of a derivative instrument is
a. related to the number of units specified in the derivative and
the price that relates to the asset or liability underlying the
derivative.
b. the change in the price or rate that relates to the asset or
liability underlying the derivative.
c. the price or rate that relates to the asset or liability
underlying the derivative.
d. the number of units that is specified in the derivative
instrument.

28. The separate incomes (which do not include investment income) of

Pell Corporation and Sell Corporation, its 80% owned subsidiary, for
2018 were determined as follows:
Pell Sell
Sales -------------- P400,000 P100,000
Cost of Sales ------ 200,000 60,000
Gross Profit ------- 200,000 40,000
Operating Expenses -- 100,000 30,000
Separate Incomes ---- 100,000 10,000
During 2018, Pell sold merchandise that cost P20,000 to Sell for
P40,000, and at December 31, 2018, half of these inventory items
remained unsold by Sell. The consolidated sales for 2018 is
a. P500,000 b. P480,000 c. P460,000 d. P400,000

29. Using the same information in the preceding number, the

consolidated cost of sales for 2018 is
a. P230,000 b. P248,000 c. P270,000 d. P300,000

30. Which of the following statements is true?

a. The ability to settle an option contract by actually buying or
selling the related asset is referred to as net settlement.
b. An embedded derivative has economic risks that are closely
related to the host instrument.
c. A derivative instrument derives its value from a related asset or
liability.
d. Usually, a derivative contract requires little or no initial
investment.

31. Zero Na Corp. has been undergoing liquidation since January 1. As

of March 31, its condensed statement of realization and liquidation is
presented below:
Assets:
Assets to be realized P1,375,000
Assets acquired 750,000
Assets realized 1,200,000
Assets not realized 1,375,000
Liabilities:
Liabilities liquidated P1,875,000
Liabilities not liquidated 1,700,000
Liabilities to be liquidated 2,250,000
Liabilities assumed 1,625,000
Revenues and Expenses:
Supplementary charges/debits P3,125,000
Supplementary credits 2,800,000
The net gain (loss) for the three-month period ending March 31 is
a. P250,000 b. (325,000) c. P425,000 d. P750,000

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 32. AJD Company recognize construction revenue and expenses using the
percentage of completion method. During 2018, a single long-term
project was begun which continued through 2019. Information on the
project were as follows:
2018 2019
Accounts receivable from construction con. P200,000 P600,000
Construction expenses 210,000 384,000
Construction in progress 244,000 728,000
Partial billings on contract 200,000 840,000
The profit recognized from the long-term construction contract should
amount to
2018 2019 2018 2019
a. P44,000 P456,000 c. P34,000 P256,000
b. 44,000 200,000 d. 34,000 100,000

33. The condensed balance sheet of the partnership of China and Japan
as of December 31, 2018 showed the following:
Total assets ------------ P200,000
Total liabilities ------- 40,000
China, capital ---------- 80,000
Japan, capital ---------- 80,000
On this date, the partnership was dissolved and its net assets
were transferred to a newly-formed corporation. The fair value of the assets
was P24,000 more than the carrying value on the firm’s books. Each of the
partners was issued 10,000 shares of the corporation’s P1 par common stock.
Immediately after affecting the transfer of the net assets, and the issuance
of stocks, the corporation’s additional paid-in capital account would be
credited for
a. P136,000 b. P140,000 c. P154,000 d. P164,000

34. Agency 007 received a request for replenishment of petty cash

fund for the following expenses:
Office supplies P500
Transportation fares 100
Repair of aircon 200
JRS mail 160
The entry for this transaction would be
a. no entry
b. memorandum entry to the RAOMO
c. Office supplies expense 500
Traveling expenses 100
Repairs & maintenance 200
Other maintenance & opex 160
Cash – National Treasury, MDS 960
d. Office supplies expense 500
Traveling expense 100
Repairs & maintenance 200
Other maintenance & opex 160
Petty Cash Fund 960

35. On January 1, 2018, DMC Corporation purchased 80% of the

outstanding shares of Caceres Company for a consideration of
P19,000,000. Including in the price paid is control premium in the
amount of P500,000. The acquisition-related costs amount to P45,000.
At that date, Caceres had P16,000,000 of ordinary shares outstanding
and retained earnings of P6,400,000.
Caceres’ equipment with a remaining life of 5 years had a book value
of P9,000,000 and a fair value of P10,520,000. Caceres’ remaining
assets had book values equal to their fair values. All intangibles
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 except goodwill are expected to have remaining lives of 8 years. The
income and dividend figures for both DMC and Caceres are as follows:
net income for DMC in 2018 is P3,600,000; 2019 is P4,400,000. Net
income for Caceres in 2018 is P1,360,000; 2019 is P2,040,000.
Dividends declared by DMC in 2018 is P880,000; 2019 is P1,560,000.
Dividends declared by Caceres in 2018 is P280,000; 2019 is P520,000.
DMC’s retained earnings balance at the date of acquisition was
P13,800,000.
What is the consolidated retained earnings attributable to controlling
interest in 2019?
a. P20,953,600 c. P21,089,600
b. P20,929,600 d. P21,332,800
36. Using the same information, what is the consolidated profit in
2019?
a. P5,720,000 c. P5,372,800
b. P5,856,000 d. P5,752,000
37. Using the same information, what is the non-controlling interest
in net assets in 2019?
a. P5,000,000 c. P5,158,000
b. P5,209,600 d. P5,182,400
38. Using the same information, what is the non-controlling interest
in net income in 2018?
a. P211,200 b. P238,400 c. P272,000 d. P347,200

39. On January 1, 2018, Leni Company purchased 80% of the outstanding

shares of Momo Corporation at book value. The stockholder’s equity of
Momo Corporation on this date showed: Ordinary shares – P4,560,000 and
Retained earnings – P3,920,000. On April 30, 2018, Leni Company
acquired a used machinery for P672,000 from Momo Corp. that was being
carried in the latter’s books at P840,000. The asset still has a
remaining useful life of 5 years. On the other hand, on August 31,
2018, Momo Corp. purchased equipment that was already 20% depreciated
from Leni Co. for P2,760,000. The original cost of this equipment was
P3,000,000 and had a remaining life of 8 years. Net income of Leni Co.
and Momo Corp. for 2018 amounted to P2,880,000 and P1,240,000.
Dividends paid totalled to P920,000 and P420,000 for Leni Co. and Momo
Corp., respectively.
What is the net income in the consolidated financial statements in
2018?
a. P3,920,000 c. P3,584,600
b. 3,775,000 d. 3,307,480
40. Using the same information, what is the net income attributable
to parent’s shareholder’s equity in the consolidated financial
statements in 2018?
a. P3,336,600 c. P3,643,480
b. 3,307,480 d. 3,584,600
41. Using the same information, what is the non-controlling interest
in net assets in the consolidated financial statements in 2018?
a. P1,696,000 c. P1,820,120
b. 1,860,000 d. 1,889,120

42. Which of the following consolidation items will affect only the
Consolidated Net Income Attributable to the Parent’s Shareholders but
not the Non Controlling Interest in Net Income?
a. amortization of difference between the fair value over book value
of the assets or liabilities of the subsidiary
b. impairment loss of the total goodwill arising form business
combination
c. gain on bargain purchase arising from business combination
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 d. unrealized or realized gain/loss on upstream transactions
43. Which of the following business combination transactions will
affect the goodwill or gain on bargain purchase arising from business
combination?
a. payment for legal, audit and broker’s fees directly connected
with the business combination
b. incurring costs related to the issuance of ordinary shares given
as consideration for the acquisition of the 51-100% of ordinary
shares of subsidiary corporation
c. measurement adjustments during measurement period which shall
note exceed 12 months form the date of acquisition
d. payment costs directly related to issuance of bonds payable given
as consideration for the acquisition of the net assets of the
acquired corporation

44. Mariablanca, Inc. which began operations on January 2, 2011,

appropriately uses the instalment method of accounting. The following
information pertains to Mariablanca’s operations for the 2011:

Instalment sales P1,000,000

Regular sales 600,000
Cost of instalment sales 500,000
Cost of regular sales 300,000
Operating expenses 100,000
Collections on instalment sales 200,000

In its December 31, 2011, what amount should Mariablanca, Inc. report
as deferred gross profit?
a. 500,000 b. 400,000 c. 320,000 d. 150,000

45. On March 1, 2018, John and Kenny decides to combine their

business to form a partnership. Statement of financial position on
March 1 before the formation, showed the following:
John Kenny
Cash P9,000 P3,750
Accounts Receivable 18,500 13,500
Inventories 30,000 19,500
Furniture & Fixtures 30,000 9,000
Office Equipment (net) 11,500 2,750
Prepaid Expenses 6,375 3,000
Total P105,375 P51,500
Accounts Payable 45,750 18,000
Capital 59,625 33,500
They agreed to the following adjustments before the formation:
A. Provide 2% allowance for doubtful accounts.
B. John’s furniture should be valued at P31,000, while Kenny’s office
equipment is under-depreciated by P250.
C. Rent expense incurred previously by John was not yet recorded
amounting to P1,000, while salary expense incurred by Kenny was not
also recorded amounting to P800.
D. The fair value of inventories amounted to P29,500 for John and
P21,000 for Kenny.
The net (debit) credit adjustment to partner’s capital accounts are:
John Kenny John Kenny
a. (2,870) (2,820) c. 870 (180)
b. 1,870 2,820 d. (870) 180

46. Roy and Sam was organized and began operations on March 1, 2018.
On that date, Roy invested P150,000 and Sam invested computer
equipment with current fair value of P180,000. Because of shortage of
cash, on November 1, 2018, Sam invested additional cash of P60,000 in
the partnership. The partnership contract includes the following
remuneration plan:
Roy Sam
Monthly salary (recognized as expense) P10,000 P20,000

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 Annual interests on beginning capital 12% 12%
Bonus on the net profit before salaries
and interest but after bonus 20% -
Balance equally
The salary was to be withdrawn by each partner in monthly instalments.
The partnership net profit for 2018 is P120,000. What are the capital
balances of the partners on December 31, 2018?
Roy Sam Roy Sam
a. P243,500 P266,500 c. P86,000 P154,000
b. 136,000 350,000 d. 87,000 155,000

47. The following data were ascertained during the year:

January 1 December 31
Work in process P130,000 P352,000
Finished goods 89,000 231,250
Raw materials used was P504,950 and the direct labor rate was P15.
Actual overhead was P156,500 of which P76,550 was indirect labor and the
rest were indirect materials. Budgeted overhead cost and direct labor hours
was P250,000 and 31,250 respectively. At the end of the year, the overhead
control account has a credit balance of P18,500. It was the company’s policy
to consider any difference from the actual and applied overhead less than
P50,000 immaterial. What is the prime cost during the year?
a. P833,075 b. P973,700 c. P753,125 d. P893,750
48. Using the same information, what is the cost of goods
manufactured at the end of the year?
a. P786,075 b. P687,625 c. P871,700 d. P706,125
49. Using the same information, what is the total goods available for
sale?
a. P795,125 b. P875,075 c. P776,625 d. P960,700
50. Using the same information, what is the adjusted cost of sales at
the end of the year?
a. P625,325 b. P526,875 c. P545,375 d. P710,950

51. The accountant of Honey Company under liquidation provided the

following data:
Assets at book value P100,000
Assets at net realizable value 75,000
Liabilities at book value:
Fully secured mortgage 40,000
Unsecured accounts and notes pay.45,000
Unrecorded liabilities:
Interest on bank notes 250
Est. administrative expenses 4,000
A trustee is appointed to liquidate the company. The entry made by the
trustee to record the assets and liabilities should include estate
equity of:
a. P14,250 b. P14,000 c. P10,250 d. P10,520

52. The Labrador Sales Co. which began the appliance business on
January 1, 2015 reports gross profit on the instalment basis. The
following information relative to the instalment sales are available:
2015 2016 2017
Installment Sales P360,000 P375,000 P450,000
Cost of instalment sales 270,000 271,875 324,000
Gross Profit 90,000 103,125 126,000

Collections:
2015 instalment contracts 67,500 112,500 108,750 -
2016 instalment contracts 71,250 120,000 -
2017 instalment contracts 93,750 -
Defaults:
Unpaid balance of 2015 I/C 18,750 22,500
Value assigned to repo merchandise 9,750 9,000
Unpaid balance of 2016 I/C 24,000

AFAR set A Page 10

 Value assigned to repo merchandise 13,500

How much is the realized gross profit from the collections during
2017?
a. P80,625 b. P86,437.50 c. P88,687.50 d. P90,300
53. In the preceding problem, the loss on repossession during the
year 2017 amounted to
a. P11,775 b. P12,225 c. P34,275 d. P46,500

54. When will the average process costing method produce the same
cost of goods manufactured as the first in first out process costing
method?
a. when materials are added 100% at the end of the process
b. when materials are added 100% at the beginning of the process
c. when the beginning work in process inventory and ending work in
process inventory are equal
d. when there is no beginning work in process inventory.
55. Which of the following costs shall be considered as both prime
costs and conversion costs?
a. supervisory salaries for a manufacturing plant
b. property taxes on a manufacturing plant
c. costs of direct materials used in the production
d. employee benefits earned by machine operators in producing the
firm’s product
56. An advantage of the partnership as a form of business
organization would be
a. partners do not pay income taxes on their share in partnership
income.
b. a partnership is bound by the act of the partners.
c. a partnership is created by mere agreements of the partners.
d. a partnership may be terminated by the death or withdrawal of a
partner.

57. Which of the following is not a component of the formula used to

distribute income?
a. salary allocation to those partners working
b. after all other allocation, the remainder divided according to
the profit or loss sharing ratio
c. interest on the average capital investments
d. interest on notes to partners
58. Which of the following is not a legitimate expense of a
partnership?
a. interest paid to partners based on the amount of invested capital
b. depreciation on assets contributed to the partnership by partners
c. salaries for management hired to run the business
d. supplies used in the partners’ offices
59. Which of the following will result to recognition of revenue at a
point in time?
a. The customer simultaneously receives and consumes the benefits
provided by the entity’s performance as the entity performs.
b. The customer obtains absolute control, legal right and possession
of the promised asset at a specific date.
c. The entity’s performance enhances or creates an asset that the
customer controls as the asset is created or enhanced.
d. The entity’s performance does not create an asset with an
alternative use to the entity and the entity has enforceable
right to performance completed to date.
60. Under IAS 11 construction contracts, contract costs that shall be
capitalized as part of construction in progress will include the
following, except
a. depreciation of idle plant and equipment that is not used in a
particular construction contract.

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 b. cost of moving plant, equipment and material to and from the
contract site.
c. construction overhead such as preparation and processing of
construction personnel payroll.
d. site labor costs, including site preparation and costs of
materials used in the construction.
61. Under IAS 18 revenue recognition, how shall revenue be generally
measured by an entity?
a. fair value of the consideration received or receivable minus
rebates and volume discount
b. book value of the consideration received or receivable plus
rebates and volume discount
c. face value of the non-interest bearing note received or
receiveable minus rebates and volume discount
d. cost of the consideration received or receivable minus rebates
and volume discount
62. Which of the following recognition of income and expense accounts
related to instalment sales is incorrect?
a. If the collection of the instalment receivable is not reasonably
assured, gross profit on instalments sales is recognized
proportionately on the basis of collection.
b. If the long-term instalment receivable is non-interest bearing,
interest revenue shall be recognized based on passage of time
using the effective interest method.
c. The cost of instalment sales shall be recognized proportionately
throughout the term of the instalment contract based on the
proportion of collection.
d. Loss on repossession shall be recognized on the date of default
of collection of instalment due and repossession of the item sold
computed as the difference between the fair value of repossessed
item and the unrecovered costs of the instalment receivable.
63. In case of liquidation of the partnership, which of the following
statements is inaccurate?
a. If the partnership’s assets are not sufficient to cover the
partnership’s liabilities to third person, the general partners
are liable solidarily up to the extent of their separate assets.
b. The liabilities of the partnership to third persons shall be
settled first using the partnership’s assets before the claims of
the partners against the partnership shall be satisfied.
c. The claims of the partners against the partnership other than
capital and profit shall be settled first before the partner’s
share in the capitalization of the partnership be distributed to
them.
d. The personal assets of the partners are reserved for the payment
of the personal debts of the partners and may be used to pay
partnership’s creditors in case there will be excess of partner’s
personal assets over partner’s personal debts.
64. During corporate liquidation, which of the following types of
creditors will always receive full settlements of his claims?
a. unsecured creditors with priority
b. unsecured creditors without priority
c. partially secured creditors
d. fully secured creditors
65. A limited partnership consist of the following features except
a. must be at least one general partner.
b. limited partners may invest cash or other assets.
c. limited partners are responsible for unpaid liabilities.
d. surname of a limited partner may not appear in name of
partnership.

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 66. In the liquidation of a partnership, it is necessary to:
I. distribute cash to partners;
II. sell non-cash assets;
III. allocate any gain or loss on realization to the partners; and
IV. pay liabilities.
These steps should be performed in the following order:
a. II, III, IV, I c. III, II, I, IV
b. II, III, I, IV d. III, II, IV, I
67. When is a partnership legally insolvent?
a. When the partnership assets are insufficient to meet partnership
liabilities.
b. When the partnership assets are insufficient to meet partnership
liabilities and at least one partner is personally insolvent.
c. When all the partners are personally insolvent.
d. When the assets of the partnership plus the assets of all the
partners are insufficient to meet partnership liabilities plus
the individual partners’ liabilities.

68. In partnership liquidation, the realization losses result in a

debit balance in one partner’s capital account. If this partner fails
to contribute personal assets to makeup this deficit, how should the
debit handled by the partners?
a. It should be written off against partnership profits like any
other bad debts.
b. It should be allocated to all the partners in their profit and
loss ratio.
c. It should be allocated to the remaining partners in their
remaining profit or loss ratio.
d. It should be set up a receivable and turned over to a collection
agency.
69. In the books of the venturers, investment in joint venture is
recorded using the
a. cost method c. purchase method
b. equity method d. pooling of interest method
70. At time of repossession, repossessed merchandise is debited at
its
a. original cost. c. fair value after reconditioning cost.
b. unrecovered cost. d. fair value before reconditioning cost.

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