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1.

On May 1, 2012, Green Construction Company entered into a fixed-price contract to construct an apartment building for P3,000,000.
Green appropriately accounts for this contract under the percentage-of-completion method. Information relating to the contract is as
follows:
At December 31:
Percentage of completion ........
Estimated costs at completion ...
Income recognized (cumulative) ..

2012
20%
P2,250,000
P 150,000

2013
60%
P2,400,000
P 360,000

What is the amount of contract costs incurred during the year ended December 31, 2013?
a. P600,000
b. P960,000
c. P990,000
d. P1,440,000
2.

On January 2, 2015, RST Company signed an agreement to operate as a franchisee of UVW Products, inc., for an initial franchise fee of
P2,500,000 for 10 years. Of this amount, P500,000 was paid when the agreement was signed and the balance payable in four annual
payments beginning on December 30, 2015. RST signed a non-interest bearing note for the balance. RSTs rating indicates that he can
borrow money at 24% for the loan of this type. Present value of an annuity of 1 for 4 periods at 24% is 2.40. Assume that substantial
services amounting to P255,000 had already been rendered by UVW Products and that additional indirect franchise cost of P68,000 was
also incurred. If the collection of the note is not reasonably assured, the realized gross profit for the year ended December 31, 2014 is
a. P605,200
b. P1,445,000
c. P537,200
d. P1,377,000

3.

C & J Construction, Inc. has consistently used the percentage-of-completion method of recognizing income. Last year C & J started
work on a P4,500,000 construction contract, which was completed this year. The accounting records disclosed the following data for last
year:
Progress billings .....................................
Costs incurred ........................................
Collections ...........................................
Estimated cost to complete ............................
How much income should C & J have recognized on this contract last year?
a. P105,000
b. P150,000
c. P300,000

4.

d. P350,000

AX Company sold goods on installment. For the year just ended, the following were reported:
Installment sales
P600,000 Account defaulted
P53,600
Cost of installment sales
405,000 Fair value of repossessed
Reconditioning cost
4,400 merchandise
30,400
What is the amount of loss on repossession?
a. P 5,870
b. P10,180

5.

P1,650,000
1,350,000
1,050,000
2,700,000

c. P5,780

d. P9,820

Jessup Construction, Inc. has consistently used the percentage-of-completion method of recognizing income. During 2012, Jessup
started work on a P1,500,000 fixed-price construction contract. The accounting records disclosed the following data for the year ended
December 31, 2012:
Costs incurred ........................................
Estimated cost to complete ............................
Progress billings .....................................
Collections ...........................................
How much loss should Jessup have recognized in 2012?
a. P15,000
b. P35,000

P 465,000
1,085,000
550,000
350,000
c. P50,000

d. P115,000

6.

LL Incorporated which began operating on January 2015 appropriately uses the installment method of accounting. The following
information pertains to LLs operations in 2015.
Installment sales
P600,000
Regular sales
800,000
Cost of Installment sales
270,000
Cost of Regular sales
440,000
Operating expenses
200,000
Collections on installment sales
150,000
Collections on regular sales
200,000
How much is the Realized Gross Profit in 2015?
a. P690,000
b. P242,500
c. P82,500
d. P442,500

7.

Paral Company began operations on January 2, 2012, and appropriately used the installment sales method of accounting. The following
data are available for 2012 and 2013:
2012
2013
Installment sales ..........................
P3,000,000
P3,600,000
Gross profit on sales ......................
30%
40%
Cash collections from:
2012 sales ...............................
P1,000,000
P1,200,000
2013 sales ...............................
-P1,400,000
The realized gross profit for 2013 is
a. P1,440,000.
b. P1,040,000.

8.

c. P920,000.

d. P780,000.

T restaurant sold a fast-food restaurant franchise to I. The sale agreement, signed on January 2015 called for a P100,000 down payment
plus two P50,000 annual payments representing the value of initial franchise services rendered by T restaurant. In addition, the
agreement required the franchisee to pay 8% of its gross revenues to the franchisor. The restaurant opened early in 2015 and its sales
for the year amounted to P750,000. Assuming a 12% interest rate is appropriate, Ts 2015 total revenue will be (PV of annuity of P1 at
12% for two periods is 1.6901)
a. P84,505
b. P244,505
c. P254,646
d. P266,646

9.

Wedtec Enterprises, which began operations on January 1, appropriately uses the installment method of accounting. The following
information is available for its first year:
Gross profit on sales .................................
Deferred gross profit at December 31 ..................
Cash collected, including down payments ...............
What is the total amount of Wedtec's installment sales for the first year?
a.
P300,000
b. P345,000
c. P425,000

40%
P120,000
P225,000
d. P525,000

10. J, K and L formed a joint venture in 2015 and agreed to divide profits equally. K is designated to act as the manager. The venture is
terminated on December 31, 2015 even though there is still unsold merchandise. On this date, Ks trial balance shows the following
account balances before profit or loss distribution.
Debit
Credit
Joint venture cash
P45,000
Joint venture
P9,000
J, capital
8,000
L, capital
9,000
K receives P7,000 for his share in the venture profit. Furthermore, he agrees to be charged for the unsold merchandise as of
December 31, 2015. Determine which of the following is correct
a. Cost of unsold merchandise charged to K is P7,000
c. Amount due to K in the final settlement is P14,000
b. Net profit of the venture is P9,000
d. Total income earned by J is P15,000
11. Leno Distributing, which began operating on January 1, appropriately uses the installment method of accounting. The following
information pertains to Leno's operations for the first year:
Installment sales ......................................
Cost of installment sales ..............................
General and administrative expenses ....................
Collections on installment sales .......................
a.
12.

The balance in the deferred gross profit account at December 31 should be


P400,000.
b. P320,000.
c. P240,000.

P1,000,000
600,000
100,000
200,000
d. P200,000.

During the year 2015, I has been the manager of a joint venture with G and H. It was agreed that on the completion of the joint
venture, I will receive a fee of 12% of the venture gain after the deduction of the fee as an expense. The venture is terminated on
November 30, 2015. On this date, Is trial balance contains the following account balances.
Debit
Credit
Joint venture
P8,400
G, capital
2,900
H, capital
P700
The net profit after the deduction of the fee has been agreed to be divided as follows: 25% to G, 40% to H and 35% to I. Which of the
following is not correct?
a. The net profit of the venture after the fee to I is P7,500
c. Total income earned by H is P2,300
b. The fee of I is P900
d. Cash settlement received by G is P4,775

13. On January 3, 2012, Lincoln Services, Inc., signed an agreement authorizing Lisa Company to operate as a franchisee over a 20-year
period for an initial franchise fee of P100,000 received when the agreement was signed. Lisa commenced operations on July 1, 2012, at
which date all of the initial services required of Lincoln had been performed. The agreement also provides that Lisa must pay a
continuing franchise fee equal to 5% of the revenue from the franchise annually to Lincoln. Lisa's franchise revenue for 2012 was
P800,000. For the year ended December 31, 2012, how much should Lincoln record as revenue from franchise fees in respect of the Lisa
franchise?
a. P140,000
b. P90,000
c. P45,000
d. P42,500
14. D, E and F formed a joint venture. F is to act as a manager and is designated to record the joint venture transactions in his books. As a
manager, he is allowed a salary of P17,000. Remaining profit (loss) is to be divided equally.
The following balances appear the end of 2015 before adjustment for venture inventory and profit.
Debit
Credit
Joint venture cash
P50,000
D, capital
P30,000
E, capital
4,000
The venture is to terminate on December 31, 2015 with unsold merchandise costing P14,100.
Assuming the joint venture loss is P7,200, what is the balance of the joint venture account before distribution of profit?
a. P6,900 (debit)
b. P21,300 (debit)
c. P38,300 (debit)
d. P6,900 (credit)
15. Assume the Randall Corporation sold P30,000 worth of merchandise on the installment basis. The cost of the merchandise was P24,000,
and collectibility of the receivable is uncertain. Collection in the current year on the account is P8,000. How much gross profit should be
reported as realized?
a. P1,600
b. P2,000
c. P6,000
d. P8,000
16. The following data were taken from the Statement of Affairs of ABC Company:
Assets pledged for fully secured liabilities
P125,000
Assets pledged for partially secured liabilities
90,000
Free assets
87,000
Fully secured liabilities
100,000
Partially secured liabilities
110,000
Unsecured liabilities without priority
90,000
Unsecured liabilities with priority
13,000
Which of the following is correct?

Types of Liabilities
a. Fully secured liabilities
b. Partially secured liabilities
c. Unsecured liabilities with priority
d. Unsecured liabilities without priority

Estimated amount to be paid


P125,000
110,000
11,700
81,000

17. The following data relate to a construction job started by Worthington Co. during 2012:
Total contract price ..................................
Actual costs incurred during 2012 .....................
Estimated remaining costs .............................
Billed to customer during 2012 ........................
Received from customer during 2012 ....................

P300,000
60,000
120,000
90,000
30,000

Under the percentage-of-completion method, how much should Worthington recognize as gross profit for 2012?
a. P0
b. P40,000
c. P80,000
d. P100,000
18. Casey Corp. entered into a troubled debt restructuring agreement with First State Bank. First State agreed to accept land with a
carrying amount of P85,000 and a fair value of P120,000 in exchange for a note with a carrying of P185,000. what amount should Casey
report as a gain from extinguishment of debt in its income statement?
a. P0
b. P35,000
c. P65,000
d. P100,000
19. Rainbow Construction Company uses the percentage-of-completion method for long-term construction contracts. The company started
a project with a contract price of P2,750 in 2012. Given the following data, what is the balance in Construction in Progress for this
contract at the end of 2012?
2012
2013
Costs incurred this year
P 400
P 500
Total estimated costs remaining at end of year
1,600
1,000
a. P150
b. P400
c. P550
d. P1,750
20. On December 31, 2012, marsh Company entered into a debt restructuring agreement with Saxe Co., which was experiencing financial
difficulties. Marsh restructured a P100,000 note receivable as follows:
Reduced the principal obligation to P70,000
Forgave P12,000 of accrued interest.
Extended the maturity date from December 31, 2012 to December 31, 2014.
Reduced the interest rat from 12% to 8%. interest is payable annually on December 31, 2013 and 2014.
Present value factors:
Single sum. two years @ 8%
Single sum, two years @12%
Ordinary annuity, two years @ 8%
Ordinary annuity, two years @12%

.85734
.79719
1.78326
1.69006

In accordance with the agreement, Saxe payments to Marsh on December 31, 2013 and 2014. Marsh does not elect the fair value
option for reporting the modification of debt. How much interest income should Marsh report for the year ended December 31, 2014?
a. P0
b. P5,600
c. P8,100
d. P11,200
21. As part of the initial investment, a partner contributes equipment that had originally cost P100,000 and on which accumulated
depreciation of P75,000 has been recorded. If similar equipment would cost P150,000 to replace and the partners agree on a valuation
of P40,000 for the contributed equipment, what amount should be debited to the equipment account?
a. P40,000
b. P150,000
c. P100,000
d. P75,000
22. Grey Co. holds an overdue note receivable of P800,000 plus recorded accrued interest of P64,000. The effective interest rate is 8%. As
the results of a court-imposed settlement on December 31, 2014, Grey agreed to the following restructuring arrangement:
Interest of P80,000 for 2014, due December 31, 2014, was made payable December 31,2015.
Interest for 2015 was waived.
The principal amount was reduced to P700,000.
Assume colt does not elect the fair value option for reporting the debt modification. How much should Colt report as a gain in its
income statement for the year ended December 31, 2014?
a. P0
b. P100,000
c. P60,000
d. P120,000
23. As part of the initial investment, Oswald contributes accounts receivable that had a balance of P25,000 in the accounts of a sole
proprietorship. Of this amount, P1,250 is completely worthless. For the remaining accounts, the partnership will establish a provision
for possible future uncollectible accounts of P750. The amount debited to Accounts Receivable for the new partnership is
a. P23,000
b. P25,000
c. P24,250
d. P23,750

24. Colt Inc. is indebted to Kent under an P800,000, 10%, four-year note dated December 31, 2011. Annual interest of P80,000 was paid on
December 31, 2012 and 2013. During 2014, Colt experienced financial difficulties and is likely to default unless concessions are made.
On December 31, 2014, Kent agreed to restructure the debt as follows:
Interest of P80,000 for 2014, due December 31, 2014, was made payable December 31,2015.
Interest for 2015 was waived.
The principal amount was reduced to P700,000.
Assume colt does not elect the fair value option for reporting the debt modification. How much should Colt report as a gain in its income
statement for the year ended December 31, 2014?
a. P0
b. P100,000
c. P60,000
d. P120,000
25. Jack and Jill share income and losses in a 2:1 ratio after allowing for salaries to Jack of P24,000 and P30,000 to Jill. Net income for the
partnership is P48,000. Income should be divided as follows:
a.
Jack, P24,000; Jill, P24,000
c. Jack, P32,000; Jill, P16,000

b.

Jack, P21,000; Jill, P27,000

d. Jack, P20,000; Jill, P28,000

26. The following information pertains to the transfer of real estate pursuant to a troubled debt restructuring by Knob Co. to Mene Corp.
in full liquidation of Knobs liability to Mene:
Carrying amount of liability liquidated
Carrying amount of real estate transferred
Fair value of real estate transferred
What amount should Knob report as a gain (loss) on restructuring payables?
a. P(10,000)
b. P0
c. P50,000

150,000
100,000
90,000
d. P60,000

27. Fred and Ethel share income equally. During the current year the partnership net income was P40,000. Fred made withdrawals of
P12,000 and Ethel made withdrawals of P17,000. At the beginning of the year, the capital account balances were: Fred capital, P42,000;
Ethel capital, P58,000. Fred's capital account balance at the end of the year is
a. P76,500
b. P64,500
c. P62,000
d. P50,000
28. X, Y, and Z are partners, sharing income 1:2:3. After selling all of the assets for cash, dividing losses on realization, and paying
liabilities, the balances in the capital accounts are as follows: X, P50,000 Cr.; Y, P20,000 Cr.; and Z, P30,000 Dr. Assume that after the
available cash is distributed to the partners, Z pays P15,000 of the deficiency to the firm. How much of the P15,000 should be
distributed to X?
a. P15,000
b. P0
c. P5,000
d. P10,000
29. X and Y have original investments of P50,000 and P100,000 respectively in a partnership. The articles of partnership include the
following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of P27,000 and
P18,000 respectively, and the remainder equally. How much of the net income of P90,000 is allocated to X?
a. P60,000
b. P43,000
c. P45,000
d. P47,000
30. X, Y, and Z are partners, sharing income 1:2:3. After selling all of the assets for cash, dividing losses on realization, and paying
liabilities, the balances in the capital accounts are as follows: X, P50,000 Cr.; Y, P40,000 Dr.; and Z, P30,000 Cr. How much cash should
be distributed to X assuming that Y pays the deficiency?
a. P50,000
b. P20,000
c. P30,000
d. P40,000
31. X and Y have original investments of P50,000 and P100,000 respectively in a partnership. The articles of partnership include the
following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of P27,000 and
P18,000 respectively, and the remainder equally. How much of the net income of P50,000 is allocated to X?
a. P33,333
b. P23,000
c. P25,000
d. P27,000
32. X, Y, and Z are partners, sharing income 1:2:3. After selling all of the assets for cash, dividing losses on realization, and paying
liabilities, the balances in the capital accounts are as follows: X, P50,000 Cr.; Y, P40,000 Dr.; and Z, P30,000 Cr. How much cash is
available for distribution to the partners?
a. P120,000
b. P30,000
c. P40,000
d. P90,000
33. X and Y have original investments of P50,000 and P100,000 respectively in a partnership. The articles of partnership include the
following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of P27,000 and
P18,000 respectively, and the remainder equally. How much of the net loss of P10,000 is allocated to X?
a. P10,000
b. P3,000
c. P5,000
d. P7,000
34. Jimmy, Jerry and Johnny decide to liquidate their partnership. All assets are sold and the liabilities are paid. Following these
transactions, the capital balances and profit and loss percentages are as follows: Jimmy, P27,000 and 30%; Jerry, P(12,000) and 40%;
Johnny, P43,000 and 30%. Jerry is unable to contribute any assets to reduce the deficit. How much cash will Jimmy receive as a results
of the partnership liquidation?
a. P27,000
b. P21,000
c. P23,400
d. P15,000
35. The articles of partnership for A B Partnership provide for a salary allowance of P5,000 per month for partner B, with the balance of
net income to be divided equally. If B made an additional investment of P10,000 during the year and withdrew P4,000 per month, and
net income for the year was P90,000, by what amount did B's capital increase during the year?
a. P85,000
b. P10,000
c. P37,000
d. P60,000
36. Tim, Don, and Hans are partners with capital balances of P20,000, P30,000, and P50,000 respectively. They share income in the ratio of
3:2:1. Income Summary with a debit balance of P30,000 is closed to the capital accounts. Don withdraws from the partnership. How
much cash does he get upon withdrawal?
a. P30,000
b. P20,000
c. P40,000
d. P24,000
37. Jan Barnes contributed equipment, inventory, and P42,000 cash to the partnership. The equipment had a book value of P25,000 and
market value of P28,000. The inventory has a book value of P50,000, but only had a market value of P15,000. due to obsolescence. The
partnership also assumed a P12,000 note payable owed by Jan that was originally used to purchase the equipment. What amount should
Jans capital account be recorded?
a. P85,000
b. P73,000
c. P117,000
d. P105,000
38. A and B are partners who share income in the ratio of 1:2 and have capital balances of P40,000 and P70,000 at the time they decide to
terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of P80,000. What amount
of loss on realization should be allocated to A?
a. P80,000
b. P10,000
c. P20,000
d. P30,000
39. Tom Barnes contributed equipment, inventory, and P44,000 cash to the partnership. The equipment had a book value of P35,000 and
market value of P28,000. The inventory has a book value of P25,000, but only had a market value of P12,000. due to obsolescence. The
partnership also assumed a P15,000 note payable owed by Tom that was originally used to purchase the equipment. What amount
should Toms capital account be recorded?
a. P104,000
b. P89,000
c. P69,000
d. P84,000

40. Immediately prior to the admission of A, the XY Partnership assets had been adjusted to current market prices, and the capital
balances of X and Y were P40,000 and P60,000 respectively. If the parties agree that the business is worth P150,000, what is the amount
of bonus that should be recognized in the accounts at the admission of A?
a. P100,000
b. P0
c. P40,000
d. P50,000

1.

11.

21.

31.

2.

12.

22.

32.

3.

13.

23.

33.

4.

14.

24.

34.

5.

15.

25.

35.

6.

16.

26.

36.

7.

17.

27.

37.

8.

18.

28.

38.

9.

19.

29.

39.

10.

20.

30.

40.

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