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Icare Batch 6 Joshua 1 Preboard AFAR
Icare Batch 6 Joshua 1 Preboard AFAR
San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com
1. Partner A and B share profits and losses equally after each has been credited in all
circumstances with annual salary allowances of P750,000 and P600,000,
respectively. Under this arrangement, in which of the following circumstances will A
benefit by P150,000 more than B?
a. Only if the partnership has earnings of at least P150,000 for the year
b. Only if the partnership does not incur a loss for the year
c. Only if the partnership has earnings of P1,350,000 or more for the year
d. In all earnings or loss situations
2. Partners A and B share profits and losses 50:25 ratio, respectively. Each partner
received an annual salary allowance of P P1,440,000. If salaries are recorded in the
accounts of the partnership as an expense rather than treated as an allocation of profit,
the total amount allocated to each partner for salaries and net profit would be
3. The following balance sheet was prepared for the ABC Company on August 1, 2020:
Assets Liabilities and Capital
Cash 50,000 Liabilities 104,000
Other 360,000 A, Cap (40%) 80,000
Assets
B, Cap (40%) 130,000
C, Cap (20%) 96,000
The partnership is being liquidated by the sale of assets in installments. The first sale
of non-cash assets having a book value of P180,000 realizes P100,000. Assume that
each partner properly received some cash after the second sale of assets. The cash
to be distributed amount to P28,000 from the third sale of assets, and unsold assets
with a P12,000 book value remain. How should the P28,000 be distributed to A, B and
C, respectively.
a. 0; 22,400; 5,600
b. 11,200; 11,200; 5,600
c. 11,200; 13,000; 3,800
d. 10,000; 10,000; 8,000
4. A, B, C and D are partners, sharing earnings in the ratio of 3:4:6:8. The balance of
their capital accounts on December 21, 2020 are as follows: A – P 25,000; B-
P625,000; C – P625,000 and D – P225,000. The partners decided to liquidate, and
they accordingly convert the non-cash assets into P580,000 of cash. After paying
the liabilities amounting to P75,000, they have P555,000 cash available for payment
to partners. Assume that a debit balance in any of partner’s capital account is
uncollectible. The book value of non-cash assets amounted to:
a. P1,525,000
b. 1,575,000
c. 637,500
d. P1,135,000
5. A, B and C are partners. On January 2, 2020, their capital balances and profit and
loss ratio are as follows:
Capital P&L ratio
A P625,000 60%
B 1,250,000 25%
C 1,500,000 15%
C withdrew P250,000 during the year. Net loss on December 31, 2020 totaled
P500,000. Hence, the partners decided to liquidate the partnership. It is uncertain how
much of the assets will ultimately yield but favorable realization is expected. It is
therefore, agreed to distribute cash as it become available. There are unpaid liabilities
of P125,000 and cash of P17,500.
a. 2,625,000
b. 2,607,500
c. 2,750,000
d. 2,732,500
6. ABC transfer merchandise inventory from its home office to its branch at an amount
above cost. The average gross margin on the transfer is 40%. At the beginning of the
year, the branch held merchandise purchased from the home office in the amount of
P35,000. During the year, the home office made three shipments of inventory to the
branch at transfer prices of P30,000; P64,000 and P50,000. At the end of the year,
the branch had on hand inventory purchased from the home office of P40,000.
What entry should the home office record on the realized intercompany profit during
the year?
The entry to record the recognized profit in 20x8 includes credit to:
a. CIP 1,380,000
b. CIP 50,400,000
c. Contract revenue 10,080,000
9. During 2020, goods were shipped to the branch at 120% above cost. The reciprocal
account in the income statement of the home office amounted to P237,500. The
balance of the contra branch current account reports a balance of P375,000 before
adjustment. The beginning inventory of the branch from the home office at cost is
P360,000 and from outsiders, P93,000. The branch purchased goods from outsiders
during the year amounting to P125,200. If the ending inventory of the branch as
reported in the combined statement of financial position is P345,000, 20% of which
are purchased from outside suppliers, how much is the cost of goods sold to be
reported in the branch’s income statement for the year ended December 31, 2020?
10. Paul Trading Co. has a branch in Quezon City. On December 31, 2029, Quezon City
Branch account in the home office books showed a balance of P338,655. The
interoffice accounts were the same at the beginning of the year. For purposes of
reconciling the reciprocal accounts, the following facts were ascertained:
a. The home office inadvertently recorded a remittance for P4,800 from its Bacolod
branch as a remittance from its Quezon City branch.
b. The branch failed to take up a P850 debit memo from the home office representing
the share of the branch in marketing expense.
c. Home office credit memo representing a discount on merchandise for P1,200 was
not recorded by the branch.
d. Advertising expense of P1,225 charged by the home office was taken up twice by
the branch.
e. Freight charge on merchandise made by the home office for P1,125 was recorded
in the branch books as P1,215.
f. An equipment costing the home office P2,500 was picked up by the branch as
P250.
11. Mike and November were partners before they admitted Oscar. The share profits and
losses 7:3. Oscar was admitted into the partnership by contributing cash for 35%
interest in the partnership and 15% share in the profits and losses. The capital
balances of Mike and November combined was P390,000 after admission of Oscar.
Upon admission, Oscar had a capital credit in the amount of P60,000 in addition to his
contribution.
a. 128,824
b. 270,000
c. 150,000
d. 196,500
12. The partnership of Cruz, Amistoso, and Galicia decided to liquidate their partnership
on May 31, 2016. Before liquidating and sharing of net income, their capital balances
are as follows: Cruz (30%) P875,000, Amistoso (30%) P630,000, and Galicia (40%)
P770,000. Net income from January 1 to May 31 is P420,000. Liabilities of the
partnership amounted to P735,000 and its total assets include cash amounting to
P245,000.
Unsettled liabilities are P385,000. Cruz invested additional cash enough to settle their
partnership’s indebtedness. Amistoso is personally solvent, Galicia is personally
insolvent, and Cruz becomes insolvent after investing the cash needed by the
partnership.
a. 315,000
b. 168,000
c. 294,000
d. 70,000
13. Which of the following statements concerning the dissolution of partnership business
is correct?
a. If a new partner is admitted through his investment to the existing partnership, the
capital contributed by the new partner will be higher than the amount credited to him
in the new partnership by the amount of the impairment loss of existing assets.
b. If a new partner is admitted through his investment to the exiting partnership, the
capital credited to the old partners in the new partnership will be lower than the amount
contributed by them if there is positive asset revaluation without any bonus.
c. If a new partner is admitted through his investment to the existing partnership, the
contributed capital of the new partner will be different to the amount of capital credited
to him if there is bonus and asset revaluation at the time of his admission.
d. If a new partner is admitted by purchasing a portion of an existing partner’s capital,
the total capital of old partnership will be higher than the total capital of new
partnership by the amount of selling price.
14. In accounting for corporate liquidation, which of the following statements is incorrect?
a. Fully secured creditors no longer share in the remaining free assets after payment
of unsecured liabilities without priority.
b. Unsecured credits with priority such as liabilities to employees and taxes due to
government can always be fully recovered by the said creditors in every corporate
liquidation.
c. Assets used as security for partially secured liabilities are offsetted to their secured
debts and can no longer be used to pay unsecured liabilities.
d. The unsecured portion of the liabilities to partially secured creditors are added to
unsecured credits without priority in the computation of recovery percentage of the
unsecured creditors without priority.
15. Jemuel, Eric and Jayson formed a partnership on January 1, 20x5,. The following are
their capital contribution: Jemuel P500,000; Eric P300,000 and Jayson P200,000.
They agreed on a capital ratio of P40:30:30 and profit and loss ratio of P55:35:10,
respectively to Jemuel, Eric and Jayson.
17. Which of the following is a criterion for recognizing revenue over time in accordance
with IFRS 15, Revenue from Contracts with Customers?
a. The customer simultaneously receives and consumes all of the benefits provided
by the entity as the entity performs.
b. The entity’s performance creates or enhances an asset that the entity controls as
the asset is created.
c. The entity’s performance does not create an asset with an alternative use to the
entity and the entity has does not have an enforceable right to payment for
performance completed to date.
d. The customer has the significant risks and rewards related to the ownership of the
asset particularly upon transfer of title or ownership.
19. A branch journal entry debiting Home Office and crediting Cash may be prepared for
a. P96,150
b. P105,250
c. P22,350
d. P26,250
a. P96,150
b. P105,250
c. P22,350
d. P26,250
The trial balance of Waku Waku Company as of December 31, 2023, the date when the
company filed for bankruptcy, is provided the following:
Additional information:
The loans payable is secured by inventories.
Administrative and liquidation expenses are estimated by management to be
at P55,000.
a. 100%
b. 188%
c. 200%
d. 0%
25. How much is the estimated amount to be paid to the bank as repayment of loans
payable?
a. P451,200
b. P240,000
c. P480,000
d. P0
Administrative (55,000.00)
846,850.00 451,050.00 1.88
ABC Co. entered into a long-term construction contract for 3 years. Contract price agreed
was P8,300,000. The outcome of the contract was estimated reliably. The following data
were ascertained for the contract:
2021 2022
Percentage of completion 30% 82.5%
Estimated costs to complete P 3,920,000 P 1,680,000
a. P8,957,500
b. P7,920,000
c. P6,240,000
d. P6,467,500
a. P4,940,000
b. P6,620,000
c. P4,130,000
d. P6,847,500
2021 2022
Contract price 8,300,000.00 8,300,000.00
TEC 5,600,000.00 9,600,000.00
TEGP 2,700,000.00 (1,300,000.00)
% 0.30 1.00
CGP 810,000.00 (1,300,000.00)
PY (810,000.00)
RGP 810,000.00 (2,110,000.00)
The Home Office had two branches, Cebu and Davao. At the end of the year, December
31, 2022, the reciprocal account in Cebu Branch was P256,600. However, there were
transactions discovered to have errors.
The home office shipped merchandise costing P87,000 to Cebu branch, but was
record by the branch in the amount of P78,000.
Cebu collected Davao’s customer accounts worth P25,000, but Davao charged its
reciprocal account in the amount of P52,000 and the home office recorded the
correct transaction.
28. How much is the net adjustment in the Home Office Current account of Cebu branch?
a. P8,900 debit
b. P35,900 debit
c. P17,900 debit
d. P9,000 credit
29. In the liquidation of a partnership it is necessary to (1.) distribute cash to the partners;
(2.) sell non-cash assets; (3.) allocate any gain or loss on realization to the partners;
and (4.) pay liabilities. These steps should be performed in the following order:
30. On a statement of realization and liquidation covering the six months ended in August
31:
31. The theoretical support for using the percentage – of – completion method of
recognizing revenue from long – term construction contracts is that it
33. In accounting for sales on consignment, sales revenue and the related cost of goods
sold should be recognized by the:
d. Prepares an “account report” for the consignor which shows sales, expenses, and
cash receipts.
36. What is the classification of the joint arrangement when the assets and liabilities
relating to the arrangement are held by a separate vehicle or when the arrangement
is established with a separate vehicle?
37. A, B, and C are partners with a profit and loss ratio of 50%, 25%, and 25%
respectively. They have the capital balances of P500,000, P250,000, and P250,000
respectively.
Assume that C retires and sells his interest to A and B P250,000, how much is the
capital balance of A after the transaction?
a. P650,000
b. P666,667
c. P583,333
d. P600,000
38. The AAA Company has decided to seek liquidation after previous restructuring and
quasi - organization attempts failed. The company has the following condensed
balance sheet as of May 1, 2025:
The equipment loan payable is secured by a specific plant asset having a book value of
P600,000 and a realizable value of P700,000. Of the accounts payable, P80,000 is
secured by inventory which has a cost of P80,000 and liquidation value of P88,000. The
balance of the inventory has a realizable value of P64,000, Receivables with a book value
and market value of P200,000 and P160,000, respectively have been pledged as
collateral to business loan payable. The balance of the receivables has a realizable value
of P300,000.
The total realizable value of free assets to unsecured creditors before unsecured creditors
before unsecured creditors with priority is:
a. P1,256,000
b. P464,000
c. P440,000
d. P396,000
39. AAA Construction enters into a contract with a customer to build a warehouse for
1,700,000 on March 30, 20x5 with a performance bonus of 100,000 if the building is
completed by July 31, 20x5. The bonus is reduced by 20,000 each week that the
completion is delayed. AAA commonly includes these completion bonuses in its
contracts and based on the prior experiences estimates the following completion
outcomes:
Completed by Probability
July 31, 20x5 65%
August 7, 20x5 25%
August 14, 20x5 5%
August 21, 20x5 5%
a. P1,790,000
b. P1,700,000
c. P1,170,000
d. P1,105,000
40. The company signed a 1,600,000 contract to build an environmentally friendly access
trail to Pedro Gil, Manila. The project was expected to take approximately 3 years.
The following information was collected for each year of the project- year 1, year 2,
and year 3:
Cost Expected Support Additiona Trail feet Additional trail
expended additional timbers l support constructed feet to be
during the cost to laid timbers during the constructed
year completion during to be laid year
the year
Year 1 200,000 900,000 300 1,700 6,000 30,400
Year 2 300,000 560,000 600 1,040 15,000 16,400
Year 3 500,000 -- 1,000 -- 16,000 --
Compute the amount of revenue to be recognized in year 3, assume that the company
employs the effort expended method of estimating percentage of completion and the
company measures its progress by the number of support timbers laid in trail
a. P857,732
b. P845,280
c. P700,000
d. Cannot be determined
41. On August 1, 20x6, AAA, Inc. consigned to BBB store 10 ladies’ handbags costing
P6,000 each, paying freight charge of P6,000. At the end of the month, BBB store
reported sales of 6 handbags at P12,000 each and expenses incurred of P5,000, and
remitted the net proceeds due to AAA after deducting a 20% commission. How much
net income did AAA realize in August on the consignment?
42. On June 1, AAA Company shipped 25 TV sets to BBB, Inc., on consignment. The sets
are to be sold at an advertised price of P40,000. The cost of each set to the consignor
was P20,000. The cost of shipment paid by the consignor was P15,000. The consignor
agreed to absorb the consignee's expenditure for freight and also to allow the
consignee P2,000 for delivery and installation of each set. Commission is to be 25%
of the sales price. On June 30, BBB submitted the following summary of consignment
sales:
Sets received 25
Set sold 8
Sets returned to consignee (defective) 2 (10)
Sets on hand 15
a. P300,000
b. P306,000
c. P309,000
d. P315,000
43. On January 1, 20x5, entity AA together with another joint operator, set up a separate
vehicle to undertake a joint operation. The arrangement provides for both parties to
have a joint control over the separate vehicle. For its capital contribution, entity AA
has recorded its interest in the joint operation at P600,000, being the amount of cash
contribution upfront. Apart from recording its assets and liabilities in the joint operation
directly, entity AA has its rights to a 60% share in the property, plant, and equipment
of the separate vehicle, a 50% share in the current assets, and 75% on the Liabilities
incurred. Its share of the revenue from the sale of the output produced by the separate
vehicle is 55% while its share of the expenses incurred jointly us 60%.
Extracts of the financial statements of the separate vehicle for the first year of
operation is as follows:
Revenue P2,000,000
Expenses 1,200,000
Net income P800,000
PPE 2,000,000
Total Assets P3,200,000
Liabilities P1,600,000
Capital 800,000
Net income 800,000
Total Liabilities and Capital P3,200,000
44. The admission of a new partner effected through purchase of interest in the
partnership is
45. In all cases of dissolution, the partnership assets and liabilities at date of dissolution
may need to be revalued to their values. Any revaluation increase or decrease is
46. It is the change in the relation of the partners caused by any partner ceasing to be
associated in the carrying on of the business
a. Dissolution
b. Liquidation
c. Incorporation
d. Break-up
a. The realizable value of the assets pledged plus the excess amount multiplied by
the estimated recovery percentage
b. The realizable value of the assets pledged
c. The realizable value of the assets pledged minus the excess amount multiplied by
the estimated recovery percentage
d. Their claims multiplied by the estimated recovery percentage
50. H and I formed a partnership agreeing to share profits equally. H contributed P10,000
cash and P400,000 newly purchased equipment. I contributed P15,000 cash and a
parcel of land acquired 5 years ago for P100,000. Three hours after formation, the
land was sold for P200,000.
a. P215,000
b. P115,000
c. P150,000
d. P165,000
51. The following transactions and agreements relate to the formation of the ABC
Partnership:
Andrea contributed a delivery truck which costs her P300,000 but now has
a second-hand value half of its cost.
Brenda has P500,000 personal assets but she contributed only P80,000
cash.
Carlene contributed P150,000 cash. P120,000 of these were borrowed
money from Brenda.
The partners agreed to share in profit equally despite differences in capital
contribution.
What should be the correct capital balances of partners Andrea, Brenda and Carlene?
52. If the partners agreed to adjust their capital by cash re-investment, which is true?
53. If the partners agreed to adjust their capital by cash withdrawal, which is true?
a. Bitz shall withdraw P15,000.
b. Bob shall withdraw P15,000.
c. Bob shall withdraw P40,000.
d. Bitz shall withdraw P40,000.
54. The December 31, 2018 balance sheet of Reynante’s proprietorship business showed
the following:
Cash P 20,000
Accounts receivable 35,000
Inventory 40,000
Equipment, net (10 year-useful life) 36,000
Accounts payable 42,000
An audit was required in pursuant to the partnership agreement before the admission of
Herbo and Primo. The audit disclosed the following:
The cash include equity investments with a fair value in excess of its recorded
cost by P3,000.
The receivable includes P5,000 uncollectible items.
A P1,000 prepayments and P8,000 accrued expense was omitted from the
records.
Per agreement:
The equipment was depreciated for 2 years but is to be depreciated by
additional two years.
Herbo and Primo shall contribute cash for their ¼ and 1/5 interest respectively.
a. P58,091
b. P65,455
c. P63,900
d. P72,667
55. Cabrera, Mateo and Ampil agreed to the following profit sharing:
Salary of P20,000 and P30,000 to Mateo and Ampil, respectively.
Residual profit sharing of 50:30:20 to Cabrera, Mateo and Ampil, respectively.
Guaranteed minimum profit sharing of P40,000 to Cabrera and P30,000 to Mateo,
respectively.
a. P115,000
b. P135,000
c. P120,000
d. P100,000
56. On January 1, 2018, the partnership of D, E and F started with an initial contribution
from the partners of P100,000, P200,000 and P300,000, respectively. The partners
stipulated that in case of death of any partner, the parties will compute profits up to
the nearest month and to provide for 20% annual interest for the deceased partner
interest prior to its settlement.
On July 1, 2018, D was heart-attacked and instantly died. The newly hired accountant
of the partnership prepared the following entries during the year:
a. P332,657; P399,493
b. P301,367; P452,050
c. P302,333; P453,500
d. P298,666; P440,500
57. Partners A, B and C 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 partners capital account
balances at this time are as follows:
The liabilities accumulate to P168,000, including a loan of P56,000 from A. The cash
balance is P33,600. All the partners are personally solvent. The partners plan to sell
the assets in installment.
If B received P20,160 from the first distribution of cash, how much did C receive at
that time?
a. P4,480
b. P11,200
c. P6,720
d. P -0-
58. The following were taken from the Statement of Affairs of Gael Corporation:
Assets pledged with fully secured creditors (current fair value is P 208,000
P166,000)
Assets pledged with partially secured creditors (current fair value is 144,000
P112,000)
Free assets (current fair value is P104,000) 124,000
Liabilities with priority 26,000
Fully secured creditors 76,000
Partially secured creditors 136,000
Unsecured creditors without priority 276,000
a. P125,440
b. P112,000
c. P136,000
d. P144,000
59. On January 1, 2019, 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
Cash P 50,000
Other assets 250,000
P 300,000
On January 15, 2019, 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?
60. Q, R and S are partners with capital balances on December 31, 2018 of P300,000,
P300,000 and P200,000, respectively. Profits are shared equally. S wished to
withdraw and it is agreed that she is to take certain furniture and fixture with second
hand value of P50,000 and note for the balance of his interest. The furniture and
fixtures are carried in the books at P65,000. Brand new, the furniture and fixtures may
cost P80,000. S acquisition of the second-hand furniture will result to