Professional Documents
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AFAR 1st Monhtly Assessment
AFAR 1st Monhtly Assessment
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● 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.
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How much cash is to be invested by Company?
a. ₱32,950 b. ₱82,950 c. ₱55,300 d. ₱281,800
4. The fact that salaries paid to partners are not a component of partnership income is indicative of
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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.
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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?
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₱400,000, respectively. At the end of 20X1, the capital balance of Jobava is reported at ₱320,000. The profit or
loss agreement of the partners is as follows:
a) 10% interest on original capital contribution of the partners.
b) Quarterly salary of ₱40,000 and ₱10,000 for Harikrishna and Ivanchuk, respectively.
c) Bonus to Harikrishna equivalent to 20% of Net Income after interest and salary to all partners.
d) Remainder is to be distributed equally among the partners.
What is the partnership profit for the year ended December 31, 20X1?
a. ₱900,000
b. ₱1,020,000
c. ₱1,050,000
d. ₱960,000
8. Chris and Watts are partners in merchandising business. During 20X1, 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:
AFAR 1st Monthly Assessment
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, 20X1 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
9. 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
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10. 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
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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
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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
11.
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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
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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, 20X1. 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?
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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
16. 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.
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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
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year-end was ₱975,000.
Compute the share of each partner in the net income at year-end:
X Y Z
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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
17. Partners PG, PD and CG share profits and losses in the ratio of 5:3:2. At the end of a very unprofitable year,
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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
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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
18. The payment to general unsecured creditors is often termed:
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20. 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
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claim at Dec. 31, 20X1 totaled ₱84,000. Barredo and Coronel have substantial private resources, but Alarcon
has no personal assets.
Loss on liquidation was
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a. ₱484,000 b. ₱480,000 c. ₱432,000 d. ₱516,000
23. 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
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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
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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
24. Partners R. Romero, S. Segundo, and T. Tenorio, who share income and loss in the ratio of 3:5:2, respectively,
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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
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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
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b. ₱7,500,000
c. ₱5,000,000
d. ₱3,000,000
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28. The following statements are based on corporate liquidation:
Statement I: Unsecured liabilities without priority have no legal priority nor a security interest in specific
property.
Statement II: In corporate liquidation, notes payable is always classified as unsecured non-priority liabilities.
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a. Only statement I is true
b. Only statement II is true
c. Both statements are true
d. Both statements are false
29.
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Bancarotc Inc. is under court-supervised liquidation due to its insolvency. The court appointed liquidator has
provided the following data after conducting an inventory of Bancarote’s assets and liabilities:
• The total assets which are not used as security for any liability amounted to ₱5M while the total unsecured
liabilities amounted to ₱20M.
• The total assets which are used as collateral or security for corporate obligations amounted to ₱10M. ¾ of
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these assets secure a mortgage payable with book value of ₱2M including interest while the remainder
secure a note payable with book value of ₱3.5M including interest.
• Salaries payable amounted to ₱2M while taxes due government amounted to ₱1M.
What is the estimated recovery percentage of unsecured creditors without priority?
a. 25%
b. 37.5%
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c. 41.67%
d. 52.5%
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