POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

COLLEGE OF ACCOUNTANCY AND FINANCE

Sta. Mesa, Manila
ACCO 3053 – Advanced Financial Accounting & Reporting, Part 1 (AFAR)
Final Departmental Examination
October 11, 2017

INSTRUCTION: Choose your best answer and shade the letter of your choice in the answer sheet provided. Erasures
are not allowed. Show all supporting computations in the worksheet provided. Always observe HONESTY during the
examination.

TEST I: Theories; 1 – 30 (1 Point Each)

1. Which of the following is CORRECT in installment liquidation of a partnership?

a. The loss absorption capacity of a particular partner is calculated by adding the capital and the share
in restricted interest.
b. Anticipated liquidation expenses are treated as current period loss and deducted in the partners’
capital account in determining the ending capital balance.
c. Payment to partners can be made only if all the noncash assets were sold or already disposed.
d. The partner with lowest loss absorption capacity is normally a partner with debit balance before
liquidation.
e. None of the above is correct.

2. The following journal entry is entered in the books of the branch:

Home Office Current Account ……………………………...XXXXX
Accounts Receivable ………………………………………. XXXXX

Which of the following is the probable reason for the above journal entry?
a. The branch purchased fixed assets which carried in its own book of accounts.
b. The home office purchased merchandise on account and was wrongfully delivered to the branch.
c. Shipment of erroneous delivery was returned by branch to the home office.
d. Home office maintain the records of branch PPE and the branch purchased one on account.
e. Customer of the branch settle its obligation to the home office.

3. All of the following are ways of determining the stage of completion of a particular construction contract
EXCEPT:
a. Surveys of work performed.
b. The proportion that contract cost incurred for work performed to date bear to the estimated total
contract costs.
c. Completion of physical proportion of the contract work.
d. The amount of cash collected from the customer in relation to the total contract price.
e. None of the above is incorrect.

4. Which of the following is the main objective of IFRS 15: Revenue from Contracts with Customers?
a. To establish principles that an entity will apply in the design of accounting policy and accounting
principles that will be used in the business.
b. To establish principles that an entity shall apply to report useful information to the users of financial
statements about the nature, amount, timing, and uncertainty of revenue and cash flows.
c. To specify how to measure or separate one or more parts of the contract and allocate the contract
price on different performance obligations.
d. To have a revenue model that will apply in all kinds of contract with the customers such as but not
limited to leases, and insurance contracts.
e. All of the above are the main objectives of IFRS 15.

5. IFRS 15: Revenue from Contracts with Customers, supersedes: (choose the incorrect response)
a. IAS 18: Revenue c. IAS 11: Construction Contracts
b. IFRIC 13: Customer Loyalty Programs d. IAS 17: Leases

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6. An entity, a software developer, enters into a contract with customer to transfer the following: Software
license; Installation service (includes changing the web screen for each user); Software updates; and
Technical support for 2 years.
The entity sells the above separately. The installation service is routinely performed by other entities and
does not significantly modify the software. The software remains functional without the updates and the
technical support. How many performance obligations are there in the contract?
a. Four (4) b. Three (3) c. Two (2) d. One (1)

7. Where contract has many performance obligations, an entity shall allocate the transaction price to the
performance obligations in the contract by reference to their relative stand-alone selling prices. If stand-
alone selling price is not directly observable, an entity will need to estimate it. IFRS 15 suggest the following
methods that may be used to estimate the stand-alone selling price, EXCEPT:
a. Adjusted market assessment approach c. Residual approach
b. Discounted value approach d. Expected cost plus margin approach

8. An entity recognizes revenue “over time” if one of the following criteria are met: (choose the incorrect
response)
a. The entity’s performance creates or enhances an asset that the customer controls as the asset is
created or enhanced.
b. The customer simultaneously receives and consumes the benefit provided by the entity as the entity
delivers.
c. The entity’s performance does not create an asset with alternative use to the entity and the entity
has an enforceable right to payment for the performance completed to date.
d. The customer’s acceptance of an asset and has obtained the ability to direct the use of and obtain
substantially all of the remaining benefits from the asset.

9. Under what circumstances can the closing of Income Summary account results in a debit to one partner’s
capital account and credits to the other partners’ capital accounts?
a. The results of operations are divided in a profit and loss ratio and the partnership sustained a loss for
the period.
b. The partnership agreement provided for interest on capital and salary allowances and net income is
less than the sum of the interest and salary allowances.
c. The results of operations are allocated in a profit and loss ratio and the partnership’s net income was
very low.
d. The results of operations are divided in the average capital ratio and one partner had a low capital
balance.

10. If A is the total capital of the partnership before the admission of a new partner, B is the total capital of the
partnership after the investment of a new partner, C is the amount of the new partner’s investment, and D is
the amount of capital credit to the new partner, then there is:
a. A bonus to the new partner if B = A + C and D<C.
b. A bonus to the old partner if B = A + C and D>C.
c. Both a and b are correct.
d. Both a and b are incorrect.

11. If there is an agreement for the division of profits but none for losses, it is concluded that:
a. Losses should be divided according to partner’s original capital ratio.
b. Losses should be divided equally.
c. Losses should be divided according to partner’s average capital ratio.
d. Losses should be divided in the same way as profits.

12. Franchise revenue is considered recognized once (select the best answer)
a. The franchisor has signed the franchise agreement.
b. The initial franchise fee is paid in full.
c. The initial services were already satisfied.
d. The probability of collectivity of the franchise fee is not doubtful.

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13. On June 1, 2017, Planet Shakers, Inc. established a branch in San Juan City. All fixed assets of the branch are
carried in the branch books. On August 31, 2017, the home office purchased a specialized equipment worth
P500,000 on account under the following terms: 5/30; n/60. It is expected that the equipment will be paid
beyond the discount period. The equipment is expected to have a useful life of 5 years from the time of
purchased. Which of the following is/are TRUE?
a. On August 31, the home office will debit the equipment account for P475,000.
b. Depreciation as of December 31, will have credit in branch book for accumulated depreciation in the
amount of P31,667.
c. If the branch will pay the invoice on October 25, the branch will debit the Home Office Current
Account for the gross amount of the invoice.
d. If the home office settles the account within the discount period, there will be no journal entry in the
book of the branch to recognize such payment.
e. All of the above.

14. An amount withdrawn by the partner in excess of the agreed amount that can be withdrawn is
a. Debited to a loan account c. Considered an expense
b. Debited to capital account d. Debited to drawing account

15. The date when revenue from consignment sales must be properly recognized (and dated) by the consignor is
when: (select the best answer)
a. Remittance was made by the consignee to the consignor.
b. Notification about sales of consigned goods was received by the consignor.
c. Merchandise was shipped to the consignee by the consignor and the same was acknowledged by the
former.
d. When the control over the item sold was effectively transferred to the buyer (3rd party).
e. If the consignee already disposes all the consigned goods to the 3rd party.

16. C is admitted in the partnership of A and B, C invest P12,000 for interest equal to P14,000. This transaction
would result to: (select the best answer)
a. Decrease in capital balances of A and B.
b. Increase of P2,000 in the total partnership assets.
c. Increase in the capital balance of A and B.
d. Decrease of P2,000 in the total partnership assets.
e. Recognition of revaluation by the partnership.

17. Which of the following statements is/are TRUE? When a retiring partner accepted a fully depreciated
equipment as partial settlement of his interest in the partnership:
a. There will be a bonus to the retiring partner.
b. There will be a bonus to the remaining partners.
c. The capital of the remaining partners will be revalued.
d. The capital of all the partners will be revalued.
e. None of the above.

18. These accounts must always be kept in agreement all the time when the home office ships merchandise to its
branch at a profit.
a. Investment in Branch and Equity in Home Office
b. Shipment to Branch and Shipment from Home Office
c. a only
d. Both a and b
e. b only

19. The account “Allowance for Overstatement of Branch Inventory” in the home office book is debited when:
a. Shipments from home office becomes part of branch cost of goods sold.
b. The home office ships merchandise to its branch at cost.
c. The branch returned an equipment erroneously shipped by the home office.
d. There is an excess freight on the inter-branch transfer of merchandise.
e. The home office ships merchandise to its branch above cost.

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20. The Home Office Current account in the book of the branch is comparable to:
a. Liability account b. Contra account c. Asset account d. Equity account

21. IFRS 15: Revenue from Contracts with Customers applies to all contracts with customers except for:
a. IFRS 11: Joint Arrangement
b. IFRS 10: Consolidated Financial Statements
c. IFRS 4: Insurance Contracts
d. IAS 28: Interest in Associates
e. All of the above

22. It is a good or service (or bundle of goods/services) that is distinct; or a series of distinct goods or services
that are substantially the same and that have the same pattern of transfer to the customer.
a. Contractual Obligation c. Performance Obligation
b. Transaction Price d. Contract with Customer

23. Generally, under IFRS 15, revenue is recognized as control is passed and the customer is obtaining benefits
from the asset. Below are the indications that the customer obtained benefit directly or indirectly, EXCEPT:
a. Using the asset to produce goods or provide services.
b. Pledging the asset to secure a loan.
c. Holding the asset.
d. Using the asset to enhance the value of other assets.
e. Inspecting the asset for a possible acquisition.

24. If an entity does not satisfy its performance obligation over time, it satisfies it at a point in time. Revenue will
therefore be recognized when control is passed at a certain point in time. Factors that may indicate the point
in time at which control passes include, but are not limited to:
a. The entity has a present right to payment for the asset.
b. The customer has accepted the asset.
c. The entity has transferred physical possession of the asset.
d. The customer has the significant risks and rewards related to the ownership of the asset.
e. All of the above.

25. The appropriate presentation of the contract with customer in the Financial Statement where a customer has
paid an amount of consideration prior to the entity performing by transferring the related good or service to
the customer.
a. Contract Asset c. Contract Revenue
b. Contract Liability d. Contract Costs

26. IFRS 15: Revenue from Contracts with Customers, should be applied in an entity’s IFRS financial statements
for annual reporting periods beginning on or after:
a. January 1, 2017 b. January 1, 2018 c. January 1, 2019 d. January 1, 2020

27. When merchandise was shipped by the consignor to the consignee and freight on shipment was paid by the
latter, then:
a. The total cost of the merchandise will increase.
b. Freight in is properly recognized by the consignee.
c. Sale is properly recognized by the consignor.
d. The risk and reward over the merchandise is transferred to the recipient of goods.
e. The consignee, upon receipt of goods, is already entitled for commissions’ income.

28. Partners C and D admits D in the partnership C and D. Before admission, it is determined that some of the
inventories in the books are obsolete. If D is to contribute cash for one-fifth interest in the new partnership,
how should the inventory write-down be determined? Assume that the implied capital of C and D after
revaluation is lower than the old capital before admission.
a. Absolute of Cash contribution divided by 20% less old partners’ capital less cash from D
b. Absolute of Cash contribution divided by 20% less old partners’ capital
c. Old partners’ capital less the quotient of cash contribution and 1/5
d. Old partners’ capital multiply by 20% less cash form D
e. Not determinable given limited data

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 29. Revenue from Long Term Construction Contract is calculated or recognized
a. By multiplying the contract price by the ratio of cost over the contract price.
b. By multiplying the contract price by the percentage of completion using the expert estimates.
c. Dividing the contract price by the number of years of construction.
d. In reference to the billings made to the customer.
e. After the facility was constructed and delivered to the customer because construction will qualify as
revenue recognized “point in time” per IFRS 15.

30. Initial services were considered wholly performed by the franchisor when:
a. The franchise agreement was signed.
b. Construction of the facility already started.
c. Initial payment was already made by the franchise.
d. The franchise outlet is already open.

TEST II: Problem Solving; 31 – 65 (2 Points Each)

31. Renz, Eddie and Haven have decided to liquidate their partnership on June 1, 2017. At this time, the
partnership has total recorded assets of P2.2M and substantial liabilities. Prior to liquidation, cash balance in
the company’s bank account is P300,000. The partners’ capital balances, loan balances and profit and loss
ratio are as follows:
Renz Eddie Haven
Capital 500,000 380,000 250,000
Loan (debit) - (44,000) 6,000
PnL ratio 40% 28% 32%

The assets of the partnership are liquidated as follows:

June July August
Proceeds from realization 954,000 352,000 30,000
Payment of liabilities 620,000 250,000 194,000
Liquidation expenses paid 36,000 12,000 14,000
Payment to partners 122,000 328,000 all cash

Book value of non-cash assets were realized as follows: June – 60%; July – 25%; August – 15%.
How much is the total restricted interest in the first month of liquidation (June 2017)?
a. P476,000 b. P774,400 c. P804,800 d. P784,600

32. Using the information in number 3, how much is the total cash received by Eddie as of the end of 2nd month?
a. P156,240 b. P114,240 c. P126,000 d. P243,200

33. Home office EE shipped merchandise costing P94,200 to XX branch and EE paid for the freight charges of
P15,000. XX branch was subsequently instructed to transfer the merchandise to YY branch wherein XX branch
paid P12,000 freight. If the shipment was made directly from EE to YY, the freight cost would have been
P22,500. Which of the following is incorrect?
a. Upon transfer of merchandise by XX to YY, XX debits Home office account by P121,200.
b. Upon transfer of merchandise by EE to XX, EE debits Investment in Branch XX account by P109,200.
c. Upon transfer of merchandise by XX to YY, EE debits Investment in Branch XX account by P116,700.
d. Upon receipt of merchandise by YY from XX, YY credits Home office account by P116,700.

34. On April 1, 2017, the AA Company established an agency in Binangonan, sending its merchandise samples
(subject to depreciation) costing P82,500 and a working fund of P65,000 to be maintained on the imprest
basis. During the month of April, the agency transmitted to the home office sales orders that cost at
P468,750. However, the home office was able to fill-up only 80% of the orders. Total cash of P250,000 was
collected from the customers. A home office disbursement chargeable to the sales agency includes the
acquisition of equipment for Binangonan, P180,000 to be depreciated at 10% per annum. The agency paid
expenses of P43,700 and received replenishment thereof from the home office. The agency samples are
good until February 28, 2018. It was estimated that the gross profit on goods shipped to bill agency sales
orders averages 25%. Net income (loss) for the month ended April 30, 2016 is
a. (P19,200) b. P72,300 c. (2,700) d. P55,800

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35. BG corporation maintains a branch in Pampanga. Selected account balances taken from the books of the
Home office and its branch as of December 31, 2017 are as follows:
Home Office Pampanga branch
Sales P1,200,000 P540,000
Inventory, January 1 350,000 157,500
Purchases 500,000
Shipments to branch 315,000
Shipments from Home Office 346,500
Inventory, December 31 80,000 122,100
Expenses 113,000 89,000

In 2016, the Home office billed its branch at 120% of cost which was higher by 5% than the previous year. All
of the units in the beginning inventory of the branch were acquired from the home office in 2007. The
combined net income of the Home office and the branch is
a. P732,793 b. P747,750 c. P743,750 d. P738,500

36. EFG Corporation’s shipments to and from its Quezon City branch are billed at 125% of cost. On December 31,
2017, QC branch reported the following data at billed price: Inventory January 1, P56,250; shipments
received from home office, P1,156,250; shipments returned P156,250; and Inventory December 31,
P306,250. What is the balance of the allowance for over- valuation of branch inventory on December 31
before adjustments?
a. P150,000 b. P211,250 c. P231,250 d. P242,500

37. Savior Co. established an agency in Quezon City. For May 2017, the first month of operation, agency
transactions were summarized as follows:
Cash receipts from sales P 350,000
Cash disbursements for:
Purchases 400,000
Rent 20,000
Advertising supplies 10,000
Salaries and commissions 70,000
Other expenses 5,000

At the end of May 2017, the agency had P100,000 of receivables and P50,000 of payables. Also, there were
P90,000 of unsold merchandise and P6,000 of unused advertising supplies on hand.
The agency’s operations resulted to an income (loss) of:
a. P25,000 b. (P9,000) c. (P109,000) d. (P69,000)

38. On January 5, 2017, Perfume Company signed an agreement to operate as franchisee of Scent, Inc. The
contract calls for an initial franchise fee of P2,000,000 for a period of 10 years. Cash of P750,000 was paid by
Perfume at the date the contract was signed. The balance was agreed to be payable in five equal annual
installments beginning December 31, 2017, covered by a non-interest-bearing note
By November 17, 2017, the initial services required were substantially performed and Perfume has started
operations on December 11, 2017. Perfume’s credit rating indicates it can borrow money at 20% for loan of
this type.
Assume the notes are reasonably assured of collection. Calculate revenue from franchise fee to be reported
on December 31, 2017.
a. P1,749,650 b. P1,947,650 c. P1,697,450 d. P1,497,650

39. The Pioneer branch of Rise Heart Corporation is billed for merchandise by the home office at 25% above cost.
the branch in turn prices merchandise for sales purposes at 20% above billed price. On August 14, all of the
branch merchandise is destroyed by flood. No insurance was maintained. Branch account shows the following
information:
Merchandise Inventory, January 1 (at billed price) 26,400
Shipment from Home Office 20,000
Sales 15,000
Sales Allowances 1,500

The home office cost of branch’s merchandise destroyed by flood is

a. P28,128 b. P26,320 c. P29,667 d. P27,120

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40. Great Dane, Inc., franchisor, entered into a franchise agreement with Pitbull Company on July 1, 2017. The
total franchise fees agreed upon if P750,000, of which P150,000 is payable upon signing and the balance is
covered by a note payable in four equal annual payments. The direct franchise cost incurred was P255,422.
Indirect expenses of P42,500 was also paid. The market rate of interest is 11% and the note is reasonably
assured of collection. The franchise outlet commenced its operations on December 2, 2017 with total sales
during the month of P250,000. The parties have further agreed that the franchisor will charge 5% on the
franchisee’s gross sales for continuing services rendered by the former. Assuming the note receivable is non-
interest-bearing, how much is the net income reported in 2017?
a. P355,540 b. P329,945 c. P363,790 d. P381,135

41. When Aguirre and Bautista, partners who share earnings equally, were incapacitated in a car accident, an
administrator was appointed to wind up the business. The accounts showed Cash, P70,000; Other Assets,
P220,000; Liabilities, P40,000; Aguirre, Capital, P142,000 and Bautista, Capital, P108,000. Because of highly
specialized nature of noncash assets, the liquidator anticipated that considerable time would be required to
dispose them. The expenses of liquidating the business (advertising, rent, travel, etc.) are estimated at
P20,000.
How much must be realized from the total other assets for Bautista to receive 50% more of his capital
balance?
a. P348,000 b. P358,000 c. P328,000 d. P274,000

42. On January 2, 2017, Kyrie Co. sold merchandise to Ace, Inc. for P1,500,000. The cost of items to Kyrie was
P1,000,000. Ace gave Kyrie P300,000 cash and P1,200,000 note payable in 4 annual installments of P300,000
plus 12% interest. Ace made the 1st principal and interest payment on December 31, 2017. How much is the
installment sales?
a. P1,500,000 b. P1,211,100 c. P911,100 d. P1,000,000

43. Ariel, JC and Eugene are partners share profits on a 5:3:2 ratio. On January 1, 2017, Betty is admitted into the
partnership with a 10% share in profits. The old partners continue to participate in profits in their original
ratio. For the year 2017, the net income of the partnership was reported at P250,000. However, it was
discovered that the following items were omitted in the partnership’s books:

Unrecorded at year-end 2016 2017

Prepaid expense P 16,000
Accrued expense P 12,000
Unearned income 14,000
Accrued income 10,000

What is the share of Eugene in the 2017 net income?

a. P44,280 b. P45,720 c. P49,200 d. P44,640

44. On August 1, 2017, Gem Corp. obtained a contract to construct a building for Nicole Company. The building
was estimated to be built at a total of P17.5 million and is scheduled for completion on October 2019. The
construct contains a penalty clause to the effect that the other party was to deduct P35,000 from the
contract price each week of delay. Completion was delayed for 5 weeks. Below are the data pertaining to the
construction period:
2017 2018 2019
Costs incurred P1,750,000 P 6,440,000 P 1,085,000
Estimated cost to complete 7,000,000 910,000 0
Progress Billings 1,400,000 15,225,000 4,200,000

Using percentage of completion method, what is the realized gross profit (loss) for the year 2019?
a. (P 35,000) b. (P 122,500) c. P 822,500 d. P 840,000

45. The Handyman Co.’s home office bills Makati branch at 20% above cost during 2016 and 125% of cost during
2017. In 2017, goods billed at P355,600 were shipped to the branch. Also, during the year, the branch
returned P119,050 worth of defective merchandise to the home office. The account unrealized intra-
company inventory profit has a balance of P18,240 at the end of last year. The branch started to acquire
merchandise from outsiders during the year in the amount of P54,000 and returned defective merchandise to
the vendor amounting to P19,570. How much is the cost of goods available for sale, at cost?
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 a. P314,870 b. P311,222 c. P189,308 d. 300,420

46. The following pertains to Miguel Inc. home office and its branch:
Home Office Books Branch Books
Inventory, January 1- From outside purchases P480,000 P32,000
Inventory, January 1- From home office, at 110% of cost 132,000
Purchases from outsiders 1,200,000 320,000
Shipments to Branch 360,000
Shipments from home office 372,000
Inventory, December31- From outside purchases 300,000 160,000
Inventory, December31- From home office, at 110% of
cost 130,000

What is the combined cost of sales for the year?

a. P 532,000 b. P1,020,000 c. P1,552,000 d. P2,084,000

47. Kent, Renzo and Peter have capital balances of P504,000, P840,000 and P302,400, respectively and they
share profits in the respective ratio of 4:2:1. Renzo received P436,800 as a result of the liquidation of the
partnership. Loss on assets realization is:
a. P1,209,600 b. P1,108,800 c. P1,411,200 d. P991,200

48. For Your Purpose Corp. enters into a contract with Beautiful Love Co. to construct a 10-storey building for
P8,000,000. The following data were taken from the company’s files:

2017 2018
Cost incurred - 3,136,418
Percentage of completion - 60%
Estimated cost to complete 6,004,024 3,091,616
Income recognized to date 98,994 ?

What is the percentage of completion in 2017 of this construction contract?

a. 20% b. 35% c. 25% d. 40%

49. On July 1, 2017, Radical Love Construction contracted to build an office building for Worship Corporation for
a total price of P975,000

2017 2018 2019

Construction cost to date 75,000 600,000 1,050,000
Estimated cost to complete 675,000 400,000 -
Billings to Laugh Corp. 150,000 550,000 275,000

How much is the Construction In Progress (CIP) account balance at December 31, 2018 using the percentage
of completion method?
a. P900,000 b. P575,000 c. P825,000 d. P350,000

50. King, franchiser, entered into a franchise agreement with Queen, franchisee, on March 31, 2017. The total
franchise fee is P500,000 of which P100,000 is payable upon signing and the balance is four equal annual
installments. The down payment is refundable in the event the franchisor fails to render services and none
thus far has been rendered. When King prepares its Fiscal Year Financial Statements on June 30, 2017, the
earned franchise revenue to be reported is
a. P500,000 b. P100,000 c. 400,000 d. P-0-

51. If the Home Office of Every Nation Company does not maintain accounting records of plant assets of its
branch, and the home office acquired equipment for P80,000, the appropriate journal entry for the branch is
a. Debit - Home Office account and Credit – Plant asset for P80,000
b. Debit - Home Office account and Credit – Cash for P80,000
c. Debit – Plant asset and Credit – Home Office account for P80,000

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 d. Debit – Cash and Credit – Home Office account for P80,000
e. No journal entry is necessary

52. In connection to question #51, if the plant assets acquired was depreciated at year end, the entry to record
the depreciation in Home Office books is
a. Debit – Depreciation expense and Credit – Accumulated depreciation
b. Debit – Investment in Branch and Credit – Accumulated depreciation
c. Debit – Depreciation expense and Credit – Investment in Branch
d. Debit – Investment in Branch and Credit – Plant assets
e. No journal entry is necessary

53. During the year 2017 goods billed at P840,000 were shipped to the branch at 125% of cost. The account
Allowance in Branch Inventory has a balance of P242,000 before adjustment. The beginning inventory of the
branch from home office at cost is P370,000; the beginning inventory of the branch from outsider is P35,000;
purchases from outsider is P220,000.

The branch will report “cost of goods available for sale” in the amount of:
a. P1,297,000 b. P1,465,000 c. P1,539,000 d. P1,767,500

54. The Home Office in Makati shipped merchandise costing P80,000 to Manila branch and paid for freight
charges of P600. The home office bills the branch at 125% of cost. Manila branch was subsequently instructed
to transfer one-half (1/2) of the merchandise to Quezon City branch wherein Quezon City branch paid for
P200 freight. If the shipment was made directly from Makati to Quezon City, the freight cost would have been
P400. By how much will Manila branch charge the Home Office account?
a. P50,300 b. P50,600 c. P51,300 d. P50,500

55. The partnership of X, Y and Z provides for the division of net income as follows:

A. Y, who manages the partnership is to receive a salary of P16,500 monthly

B. Each partner is to be allowed interest at 15% on ending capital
C. Balance – 25:30:45 to X, Y and Z respectively

During 2017, X invested an additional P96,00 in the partnership. Y made an additional investment of P60,000
and withdrew P90,000. Z withdrew P72,000. No other investments or withdrawals were made during 2017.
On January 1, 2012, the capital balances were X – P280,00; Y – P300,000 and Z – P170,000. Total capital at
year-end was P975,000.
How much is the capital balance of each partner, X, Y and Z at December 31, 2017?
a. P412,750; P484,920; P77,330 c. P398,750; P412,500; P87,250
b. P36,750; P214,920; (P20,670) d. P316,750; P514,920; P149,330

56. Paul, Inc., agrees to transfer television sets to Walker Bros. on a consignment basis. The consignee is to sell a
set at 40% above cost exclusive of freight and is to receive a 10% commission on sales price. The consignor
agrees to reimburse the consignee for all expenses related to the consignment. The agreement also calls for
an advance payment by the consignee of 30% per set based on selling price; the said advance is to be
deducted as settlement is made for each set sold. The consignee is to provide an account sale quarterly and is
to make cash remittance for the amount owed at that time. The following consignment sales activities
occurred during the October 1 to December 31 of current year:

Sets shipped – 100; Unit cost each set – P 10,000; Freight charges on the shipment paid by the consignor – P
75,000; The consignee made advance payments on the sets received; Advertising cost paid by the consignee
– P 50,000

The consignee sold 80 sets for cash; expenses of delivery and installation were P 25,000. After notifying the
consignor with the total sets sold for the period, the consignee returned 10 sets representing a model that
could not be sold and paid freight charges of P 8,000 on the return.
Net income by the consignor as a result of the above transactions.
a. P 57,500 b. P 73,000 c. P 125,000 d. P 133,000

57. Refer to #56: The amount remitted by the consignee.

a. P 933,000 b. P 709,000 c. P 701,000 d. P 547,000

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58. GEL Company consigned 10 refrigerators to MARK Sales Company. Each refrigerator cost P12,000. The freight
on the shipment amounting to P500 each was paid by GEL. Western Sales Company returned 1 unit to GEL in
good condition (wrong unit delivered). MARK Sales Company paid P200 for the shipment of the returned unit.
MARK Sales Company reported that only 8 units were sold at a price that yield 25% gross profit rate. MARK
Sales Company remitted the amount due to GEL Company after deducting 20% commission and freight of the
returned units.
The net income reported by the consignor is:
a. P 1,700 b. P 1,500 c. P 2,200 d. P 2,300

59. Carrier Marketing operates a branch in Makati. On October 31, 2017, the Branch Current account had a
balance of P300,000. In the process of reconciling the reciprocal current accounts, the items that follow were
noted:
a. The home office had billed the branch P75,000 for merchandise shipment still in transit
as of October 31.
b. A home office customer’s account for P21,000 collected by the branch on October 26
has not been reported to the home office.
c. The branch has failed to recognize its P5,000 share of advertising expense paid for by
the home office.
d. The branch reported a net income of P43,500 during the fiscal period then ended; this
was erroneously taken up as P45,500 by the home office.

Assuming that all other transactions related to the home office and its branch are correctly recorded, the
unadjusted balance of the home office current account as of October 31, 2017 is:
a. P239,000 b. P323,000 c. P243,000 d. P319,000

60. Karl Company recognizes construction revenue and expenses using the percentage-of-completion method.
During 2017, a single long-term project was begun, which continued through 2018. Information on the
project follows:
2017 2018
Accounts receivable from
Construction contract P100,000 P300,000
Construction expenses 105,000 192,000
Construction in progress 122,000 364,000
Partial billings on contract 100,000 420,000

Profit recognized from the long-term construction contract in 2018 should be:
a. P67,000 b. P50,000 c. P128,000 d. P108,000

61. The home office sent merchandise costing P300,000 to Branch 1 at a gross profit of 20%. Freight on shipment
paid by the home office is 2% of the billed price. After two days, Branch 2 encountered inventory shortage
and the Branch 1 was instructed to shipped to Branch 2 the 60% of the inventory sent by the home office.
Shipment to Branch 2 resulted to a transportation cost of P5,000 paid by Branch 1. The freight if the shipment
will come directly from home office to Branch 2 is P8,000. The freight cost is assumed to be incurred on per
unit basis. Which of the following entry is/are CORRECT regarding the above transactions?
a. There will be an excess freight recognized in the book of the home office amounting to P4,500.
b. Branch 1 will debit the Home Office account for P234,500.
c. Branch 2 will debit the Home Office account for P224,000.
d. The Home Office will debit Branch 2 for P235,500.
e. None of the above.

62. On July 1, 2017, Jerry Corporation, franchisor, received P200,000 from Ana Company representing down
payment on the franchise agreement signed that day. Ana gave Jerry a non-interest bearing promissory note
for the balance of P1,000,000, payable in four equal semi-annual installments. Franchise services was
substantially completed by Jerry on November 15 at a cost of P500,000. On December 31, 2017, the first
semi-annual installment became due and was accordingly paid by Ana. The market rate of interest is 16%.
How much is the net income of the franchisor in its 2017 Income Statement?
a. P780,000 b. P455,460 c. P528,000 d. P594,240

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63. On October 2, 2017, Keating Company established a branch in Annalise District with initial working fund of
P225,350. Below are the transactions for the month of October 2017
A. Shipment to branch costing P500,000 shipped at 40% above cost. 20% is in transit to
branch as of October 31.
B. Home office send equipment to branch, P35,000.
C. Branch purchase from the outsider, P322,000.
D. Branch sales for the period, P1,580,000 (all cash, no discount); at a uniform rate of 60%
gross profit.
E. Allocated expenses from the home office not recognized by the branch, P25,000.
F. Branch recorded expenses, P492,000.
G. Branch insurance premium for the month of November paid by the home office not yet
recognize by the branch, P5,000.
H. The branch collected home office accounts receivable amounting to P35,000. Notification is
not yet made.
I. Remittance from Annalise District Branch amounting to P65,200, erroneously credited by
the home office to Bonnie District Branch.
J. Ending inventory (October 31) in the branch book per physical count:
1. From Outsider: P82,000
2. From the Home Office: ?

How much is the branch net income as of October 31, 2017 as far as the home office is concerned?
a. P571,000 b. P538,000 c. P503,000 d. P543,000

64. Refer to #63, how much is the adjusted balance of reciprocal accounts as of October 31, 2017?
a. P960,150 b. P1,503,150 c. P1,391,150 d. P1,498,150

65. On January 1, 2017, Bea Construction contracted to build an office building for Monica Corp. for a period of 3
years. The project immediately started in 2017 and completed by the last quarter of 2019. Final billing was sent to
Laugh by Smile two weeks before the end of 2019.

December 31 2017 2018 2019

Construction cost to date 240,000 800,000 1,500,000
Estimated total cost to complete 2,400,000 2,000,000 -
Billings to Laugh Corp. 250,000 750,000 800,000

Assuming the zero-profit method is used by the company to account the project, how much is the realized
gross profit (loss) as of the end of 2018?
a. P400,000 b. (P200,000) c. (P600,000) d. Zero

 END OF EXAMINATION 
Heaven Bless!

Submit the following to your proctor: (1) Answer Sheet; (2) Work Sheet; and (3) Test Questionnaire.

“We are pressed on every side by troubles, but we are not crushed.
We are perplexed, but not driven to despair”
(2 Corinthians 4:8)

/jbinaluyoOctober2017

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KEY
ANSWER
Final Examination Examination
ACCO 3053: Advanced Accounting Problems, P-1
October 11, 2017

THEORY (1 Point) PROBLEM (2 Points)

1 E 31 B 61 B
2 E 32 A 62 D
3 D 33 C 63 D
4 B 34 B 64 C
5 D 35 BONUS 65 A
6 A 36 B
7 B 37 B
8 D 38 D
9 B 39 D
10 D 40 A
11 D 41 A
12 C 42 A
13 E 43 A
14 B 44 C
15 D 45 A
16 A 46 C
17 D 47 B
18 A 48 A
19 A 49 B
20 D 50 D
21 E 51 C
22 C 52 E
23 E 53 B
24 E 54 A
25 B 55 A
26 B 56 A
27 A 57 D
28 A 58 A
29 B 59 A
30 D 60 B

Point System: By:

Test I (30 X 1) 30
Test II (34 X 2) 68
Bonus (1 X 2) 2 JONALD P. BINALUYO
Total 100 Examiner

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