COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE(1ST2019)

ADVANCED FINANCIAL ACCOUNTING & REPORTING JULY 21, 2019

Problem 1
BELL, LIVINGSTON, and JEREBKO, a partnership formed on January 1, 2016 had the following initial investment:
BELL 500,000
LIVINGSTON 750,000
JEREBKO 1,125,000
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: P 300,000 for BELL, P 240,000 for LIVINGSTON, and P 180,000 for JEREBKO
• Average partner’s capital balances during the year shall be allowed 10%
• On June 30, 2016, BELL invested additional P 300,000
• JEREBKO withdrew P 350,000 from the partnership on September 30, 2016
• Share on the remaining partnership profit was P 25,000 for each partner
1. What is the total interest on average capital balances of the partners?
a. P 243,750 b. P 268,750 c. P 288,125 d. P 303,125

2. What is the partnership net profit at December 31, 2016 before salaries, interests and partner’s share on the remainder?
a. P 998,750 b. P 1,038,750 c. P 1,058,125 d. P 1,113,750

BELL LIVINGSTON JEREBKO Total Average Capital (P 650,000 + P 750,000 + P 1,037,500) P 2,437,500
500,000 x 12/12 500,000 750,000 x 12/12 1,125,000 x 12/12 1,125,000 Total Interest on Average Capital (P 2,437,500 x 10%) P 243,750
300,000 x 6/12 150,000 750,000 350,000 x 3/12 (87,500) Salaries allowed to Partners (P 300,000 + P 240,000 + P 180,000) P 720,000
650,000 1,037,500 Interest on Average Capital Balances 243,750
Share of each partner in the remaining profit (P 25,000 x 3) 75,000
Total Net Income P 1,038,750

Problem 2
APL and NKN’s capital are P 600,000 and P 480,000 respectively. Profit Share Ratio 7:3. PLI directly purchased a 1/3 interest by paying APL
P 195,000 and NKN P 225,000. The land account is increased by P 180,000 before PLI is accepted
3. What is the capital of APL after admitting PLI?
a. P 300,000 b. P 356,000 c. P 420,000 d. P 484,000

4. What is the capital of NKN after admitting PLI?

a. P 300,000 b. P 356,000 c. P 420,000 d. P 484,000

5. What is the capital of PLI after admitting PLI?

a. P 300,000 b. P 356,000 c. P 420,000 d. P 484,000
APL NKN PLI TOTAL
Beginning 600,000 480,000 - 1,080,000
Revaluation 126,000 54,000 180,000
Updated 726,000 534,000 1,260,000
Bonus to New (242,000) (178,000) 420,000 -
Updated 484,000 356,000 420,000 1,260,000

Problem 3
MAGIC, DOMINIQUE, and JULIUS are partners with capital balances of P 448,000, P 1,560,000 and P 680,000 respectively, sharing profit and
losses of 6:4:2. JULIUS is admitted as a new partner bringing with him expertise and is to invest cash for a 25% interest in the partnership,
which includes a credit of P 420,000 bonus upon his admission.
6. How much cash should JULIUS contribute?
a. P 336,000 b. P 420,000 c. P 756,000 d. P 3,024,000

7. How much should be the credited to JULIUS capital?

a. P 336,000 b. P 420,000 c. P 756,000 d. P 3,024,000
MAGIC DOMINIQUE JULIUS JULIUS TOTAL
Cash Contribution 448,000 1,560,000 680,000 336,000 3,024,000
Bonus (210,000) (140,000) (70,000) 420,000
Agreed Capital 238,000 1,420,000 610,000 756,000 3,024,000

Problem 4
KLAY, KYRIE, and KEVIN are partners who share profits and losses in the ratio of 40:30:30, respectively. On January 1, 2017, they decided to
liquidate the partnership and the statement of financial position was prepared as follows:
ASSETS LIABILITIES & CAPITAL
Cash 20,000 Liabilities 40,000
Non-Cash Assets 65,000 KYRIE, Loan 5,000
KEVIN, Loan 7,500
KLAY, Capital 10,000
KYRIE, Capital 10,000
KEVIN, Capital 12,500
Total Assets 85,000 Total Liab. and Capital 85,000
In January, non-cash assets with book value of P 35,000 was sold for P 30,000 to a Mr. Thompson; liquidation expense of P 5,000 was paid
and only 40% of the outstanding liabilities were paid in January. The partnership withholds cash of P 2,500 for next month’s liquidation expenses.
In February, non-cash assets with book value of P 15,000 was sold to Mr. James but a loss on realization of P 3,000 was recognized. Liquidation
expense of P 2,750 was paid and only P 10,000 recorded liabilities were paid during the month. The partnership withholds cash of P 2,000 for
next month’s liquidation expenses and P 2,750 in anticipation for future unrecorded liability.
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In March, the remaining non-cash assets were sold to Ms. Smith for P 12,500. A liquidation expense of P 5,500 was paid. The remaining
recorded liabilities including P 2,000 unrecorded liabilities were paid during the month to end the liquidation process.
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COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE(1ST2019)
ADVANCED FINANCIAL ACCOUNTING & REPORTING JULY 21, 2019
8. How much is the amount of cash available for distribution in the month of January?
a. P 2,500 b. P 7,000 c. P 9,750 d. P 26,500

9. How much is the amount of cash available for distribution in the month of March?
a. P 7,500 b. P 9,750 c. P 11,750 d. P 13,750
CASH WITHHELD JANUARY FEBRUARY MARCH JANUARY FEBRUARY MARCH

Outstanding recorded liabilities 40,000 24,000 14,000 Cash Beginning 20,000 26,500 18,750
Payment of liability (16,000) (10,000) (14,000) Proceeds 30,000 12,000 12,500
Unpaid Recorded Liability for the current month 24,000 14,000 - Liabilities Paid (16,000) (10,000) (16,000)
Add: Cash withheld in anticipation of unrecorded liability - 2,750 Liquidation Expenses (5,000) (2,750) (5,500)
Add: Cash withheld for future liquidation expenses 2,500 2,000 Cash Withheld (26,500) (18,750) -
Cash withheld for the current month 26,500 18,750 Cash Available 2,500 7,000 9,750
10. How much should KYRIE and KEVIN receive in the month of January?
a. P 0 and P 0 b. P 2,600 and P 14,450 c. P 0 and P 2,500 d. P 2,500 and P 2,600
JANUARY KLAY (40%) KYRIE (30%) KEVIN (30%) TOTAL ADJUSTMENT
Capital 10,000 10,000 12,500 KLAY 42,500 x 40% 17,000
Loans 0 5,000 7,500 KYRIE 42,500 x 30% 12,750
Total Interest 10,000 15,000 20,000 45,000 KEVIN 42,500 x 30% 12,750
+/- ADJUSTMENT (17,000) (12,750) (12,750) (42,500)
Cash Available (7,000) 2,250 7,250
Absorption 7,000 (3,500) (3,500)
0 (1,250) 3,750
Absorption 0 1,250 (1,250)
0 1,250 2,500
11. *How should KLAY and KYRIE receive on February?
a. P 0 and P 0 b. P 2,250 and P 4,750 c. P 0 and P 4,750 d. P 2,250 and P 4,750
FEBRUARY KLAY KYRIE KEVIN TOTAL ADJUSTMENT
January Interest 10,000 15,000 20,000 45,000 KLAY 35,500 x 40% 14,200
Payment January - - (2,500) (2,500) KYRIE 35,500 x 30% 10,650
Total Interest Beg. 10,000 15,000 17,500 42,500 KEVIN 35,500 x 30% 10,650
+/- ADJUSTMENT (14,200) (10,650) (10,650) (35,500)
Cash Available (4,200) 4,350 6,850 7,000
Absorption 4,200 (2,100) (2,100)
Cash Distributed 0 2,250 4,750 7,000
12. How much should KLAY, KYRIE, and KEVIN receive in the month of March?
a. P 3,800,P 2,925,and P 2,925 b. P 0, P 4,875, and P 4,875 c. P 2,925,P 3,900,and P 2,925 d. P 4,875,P 0,and P 4,875
MARCH KLAY KYRIE KEVIN TOTAL ADJUSTMENT
January Interest 10,000 15,000 17,500 42,500 KLAY 25,750 x 40% 10,300
Payment January 0 (2,250) (4,750) (7,000) KYRIE 25,750 x 30% 7,725
Total interest beg. 10,000 12,750 12,750 35,500 KEVIN 25,750 x 30% 7,725
+/- ADJUSTMENT (10,300) (7,725) (7,725) (25,750)
Cash Available (300) 5,025 5,025 9,750
Absorption 300 (150) (150)
Cash Distributed 0 4,875 4,875 7,000

Problem 5
In January 1, 2016, THOMAS and FRIENDS corporation jointly purchased a bullet train for P 20,000,000. The contractual arrangement to
operate such for public transport is for 20 years which is the expected life of the said bullet train. There is no residual value after such life
expectancy. During 2016, the operators incurred maintenance cost paid to FIX IT FELIX corporation amounting to P 500,000. The revenue
earned for the year as reported by the management of the joint operation amounted to P 2,000,000.
13. What is the entry in the book of THOMAS corporation on January 1,2016 to account its interest or investment?
a. Cash in Joint Operation 20,000,000 c. Equipment in Joint Operation 10,000,000
Cash 20,000,000 Cash in Joint Operation 10,000,000
b. Cash in Joint Operation 10,000,000 d. Equipment in Joint Operation 20,000,000
Equipment in Joint Operation 10,000,000 Cash 20,000,000
Cash 20,000,000

14. How much is the share of FRIENDS corporation in the net income of the operation?
a. P 250,000 b. P 750,000 c. P 1,000,000 d. P 1,500,000
Revenue 2,500,000
Expenses
Maintenance (500,000)
Depreciation (1,000,000)
Net Profit 500,000
Share in Profit (P 500,000 x 50%) 250,000

Problem 6
LJ, AD, and KL formed a joint operation. They agreed to make initial contributions of P 50,000 each. Profit or loss shall be divided equally. The
following data relate to the joint operation’s transactions:
Joint Operation Expenses from JO Cash Inventory Taken
LJ 40,000 credit 25,000 25,000
AD 50,000 credit 10,000 30,000
KL 60,000 credit 15,000 20,000
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15. How much is the balance of joint operations account before distribution of profit or loss?
a. P 75,000 b. P 150,000 c. P 225,000 d. P 350,000
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COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE(1ST2019)
ADVANCED FINANCIAL ACCOUNTING & REPORTING JULY 21, 2019
16. How much is the joint operation’s sales during the period?
a. P 75,000 b. P 150,000 c. P 225,000 d. P 350,000

17. How much is the joint operation’s profit or loss during the period?
a. P 75,000 b. P 150,000 c. P 225,000 d. P 350,000
Joint Operation
Merchandise Contribution 150,000 350,000 Sales and other items of income
Expenses 50,000
150,000
75,000 Unsold merchandise
225,000 Net Profit
18. How much is the cash settlement – receipt (payment) by LJ?
a. P 50,000 b. P 75,000 c. P 95,000 d. P 100,000

19. How much is the cash settlement – receipt (payment) by AD?

a. P 50,000 b. P 75,000 c. P 95,000 d. P 100,000
Initial contribution 50,000 Initial contribution 50,000
Share in Net Income 75,000 Share in Net Income 75,000
Merchandise Taken (25,000) Merchandise Taken (30,000)
Cash Settlement 100,000 Cash Settlement 95,000

Problem 7
NOLA owns 20% in a joint venture and uses the equity method to account for its interest in the joint venture. NOLA has joint control over the
joint venture. In 2016, the joint venture sold inventory to NOLA for P 100,000 with a 50% gross profit on the transaction. The inventory remains
unsold during 2016 and was only sold by NOLA to external parties only in 2017. NOLA’s income tax rate is 30%. *Assuming Joint Venture
reports profit of P 1,200,000 and P 1,800,000 on December 31, 2016 and 2017, respectively: *
20. *What is the share in the profit of joint venture before adjustment for 2016 and 2017?
a. P 240,000 and P 360,000 b. P 223,000 and P 367,000 c. P 240,000 and P 367,000 d. P 223,000 and P 360,000

21. How much is the unrealized profit from upstream sale net of tax for 2016 and 2017?
a. P 0 an P 7,000 P 7,000 and P 35,000 c. P 7,000 and P 0 d. P 35,000 and P 7,000
Ending Inventory 100,000
Gross Profit Rate 50%
Unrealized Profit 50,000
Net of Tax 70%
Unrealized Profit, Net Of Tax 35,000
Interest share 20%
7,000
22. *How much is the adjusted share in profit of the joint venture in 2016 and 2017?
a. P 240,000 and P 360,000 b. P 223,000 and P 367,000 c. P 240,000 and P 367,000 d. P 223,000 and P 360,000

Problem 8
CARMELO Appliance Company operates a branch in Quezon City. The following are transactions between the home office and branch for the
current year:
• The home office sends P 200,000 cash to the branch
• Shipments to branch are billed at cost of P 78,750
• The Home Office pays branch expense of P 3,500
• Home Office expense of P 3,375 are paid by the branch
• The branch returned merchandise costing P 10,000 to the home office
• Home office acquires branch furniture for P 20,500 cash. The said fixed asset is carried on Branch Books
• The annual depreciation on the branch furniture is 5%
• The branch sends a P 15,000 cash remittance to home office
23. What is the adjusted balance of Branch Current account in the Home Office Books?
a. P 0 b. P 185,375 c. P 187,125 d. P 274,375

24. What is the adjusted Home Office Current account in the Home Office Books?
a. P 0 b. P 185,375 c. P 187,125 d. P 274,375
HOME OFFICE BOOK BRANCH BOOK
Branch Current 200,000 Cash 200,000
Cash 200,000 Home Office Current 200,000
Branch Current 78,750 Shipment from Home Office 78,750
Shipment to BR 78,750 Home Office Current 78,750
Branch Current 3,500 Expense 3,500
Cash 3,500 Home Office Current 3,500
Expense 3,375 Home Office Current 3,375
Branch Current 3,375 Cash 3,375
Shipment to Branch 10,000 Home Office Current 10,000
Branch Current 10,000 Shipment from HO 10,000
Branch Current 20,500 Furniture 20,500
Cash 20,500 Home Office Current 20,500
No entry Depreciation Expense 1,050
Accum. Depreciation 1,050
Cash 15,000 Home Office Current 15,000
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Branch source was downloaded by 100000797548469
15,000 from CourseHero.com on 03-01-2022
Cash 08:58:40 GMT -06:00 15,000

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 COLLEGE OF ACCOUNTING EDUCATION COMPETENCY APPRAISAL COURSE(1ST2019)
ADVANCED FINANCIAL ACCOUNTING & REPORTING JULY 21, 2019
Problem 9
BOOGIE company maintains branches that market the products it produces. Merchandise is billed to the branches at cost, with the branches
paying the freight charges from the Home Office to the branch. On May 27, LA branch ships a portion of its merchandise to NOLA branch upon
authorization by Home Office. Originally, LA branch had been billed for this merchandise at P 25,000 and paid freight charges of P 3,125 on the
shipments from Home Office. NOLA branch, upon receiving the merchandise, pays freight charges of P 1,875 on the shipment from LA branch.
If the shipment had been made from the Home Office directly to NOLA branch, the freight cost to NOLA branch would have been P 4,000.
25. How much is the excess freight cost to be credited in the books of Home Office?
a. P 0 b. P 1,000 c. P 2,000 d. P 2,750

26. How much is the NOLA branch current in the books of the Home Office?
a. P 25,000 b. P 26,875 c. P 27,125 d. P 28,125

27. Upon receipt of shipment by NOLA branch, freight-in is debited in the amount of?
a. P 1,000 b. P 1,875 c. P 2,125 d. P 4,000

28. Home Office current is debited by LA branch by how much?

a. P 25,000 b. P 26,875 c. P 27,125 d. P 28,125
LA NOLA
(25,000) 25,000
(3,125) 4,000
0 (1,875)
(28,125) 27,125

Problem 10
KYLE KORVER opens an agency in Cabantian, Davao City. The following transactions for the month of May 1, 2017:
• Home office sends a check for P 55,000 to the agency as working fund shipped to the agency: Samples – P 200,000 and advertising
materials – P 20,000
• The home office fills up sales orders sent by the agency for P 1,500,000 worth of merchandise
• The cost of merchandise shipped is P 800,000. The agency collected P 833,000, net of 2% discount.
• The working fund is replenished for the delivery expense, maintenance and store supplies amounting to P 5,500; P 3,500; and P 6,000,
respectively.
• The agency exhausted 50% of the samples while 60% of the advertising materials were still unused
29. How much is the net income (loss) of the agency for the month ended May 31, 2017?
a. P 170,000 b. P 460,000 c. P 560,000 d. P 570,000
Sales 1,500,000
Cash Discount (17,000)
Net Sales 1,483,000
Cost of Goods Sold (800,000)
Gross Profit 683,000
Operating Expenses
Delivery 5,500
Maintenance 3,500
Store Supplies 6,000
Used Samples 100,000
Used Adv. Mats. 8,000 123,000
Net Income 560,000

Problem 11
TARIK BLACK Inc. opened an agency in Matina. The following are transactions for July 2017. Samples worth P 10,000, advertising materials
of P 5,000 and checks for P 50,000 were sent to the agency. Agency sales amounted to P 220,000 (cost P 150,000). The collection for agency
amounted to P 176,400 net of 2% discount. The agency’s working fund was replenished for the following expenses incurred; rent for 2 months
P 10,000, delivery expenses P 2,500 and miscellaneous expenses of P 2,000. Home office charges the following to agency, after analysis of
accounts recorded in the books; salaries and wages P 15,000 and commission which is 5% of sales. The agency sample inventory at the end
of July is 25% of the quantity shipped. The agency has used 20% of the advertising materials sent by the home office.
30. What is the amount of agency net income for the month of July?
a. P 17,400 b. P 21,000 c. P 22,400 d. P 66,400
Sales 220,000
Cash Discount (3,600)
Net Sales 216,400
Cost of Goods Sold (150,000)
Gross Profit 66,400
Operating Expenses
Delivery 5,500
Miscellaneous 2,000
Rent Expense 5,000
Salaries and Wages 15,000
Sales Commissions 11,000
Used samples 7,500
Used Adv. Materials 1,000 (44,000)
22,400

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