COMPREHENSIVE EXAMINATION TWO

Preweek Kenneth Bryan T. Tegio

THEORY I
1. The Revised Uniform Partnership Act defines a partnership as
a. Any association of two or more persons or entities.
b. An association of two or more persons to carry on as co-owners a business for profit.
c. A separate legal entity for most legal purposes.
d. An entity created by following statutory requirements.
2. The partnership agreement is an express contract among the partners (the owners of the
business). Such an agreement generally does not include
a. A limitation on a partner’s liability to creditors.
b. The rights and duties of the partners.
c. The allocation of income between the partners.
d. The rights and duties of the partners in the event of partnership dissolution.
3. A partnership records a partner’s investment of assets in the business at
a. The market value of the assets invested.
b. A special value set by the partners.
c. The partner’s book value of the assets invested.
d. Any of the above, depending upon the partnership agreement.
4. When property other than cash is invested in a partnership, at what amount should the
noncash property be credited to the contributing partner’s capital account?
a. Fair value at the date of recognition.
b. Contributing partner’s original cost.
c. Assessed valuation for property tax purposes.
d. Contributing partner’s tax basis.
5. When property other than cash is invested in a partnership, at what amount should the
noncash property be credited to the contributing partner’s capital account?
a. Fair value at the date of contribution.
b. Contributing partner’s original cost.
c. Assessed valuation for property tax purposes.
d. Contributing partner’s tax basis.
6. Four individuals who were previously sole proprietors form a partnership. Each partner
contributes inventory and equipment for use by the partnership. What basis should the
partnership use to record the contributed assets?
a. Inventory at the lower of FIFO cost or market.
b. Inventory at the lower of weighted-average cost or market.
c. Equipment at each proprietor’s carrying amount.
d. Equipment at fair value.
7. Hayes and Jenkins formed a partnership, each contributing assets to the business. Hayes
contributed inventory with a current market value in excess of its carrying amount. Jenkins
contributed real estate with a carrying amount in excess of its current market value. At
what amount should the partnership record each of the following assets?
Inventory Real estate
a Market value Market value
.
b Market value Carrying amount
.
c Carrying amount Market value
.
d Carrying amount Carrying amount
.

8. Partnership capital and drawing accounts are similar to the corporate

a. Paid-in capital, retained earnings, and dividend accounts.
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 b. Retained earnings account.
c. Paid-in capital and retained earnings accounts.
d. Preferred and common stock accounts.
9. The goodwill and bonus methods are two means of adjusting for differences between the net
book value and the fair value of partnerships when new partners are admitted. Which of
the following statement about these methods is correct?
a. The bonus method does not revalue assets to market values.
b. The bonus method revalues assets to market values.
c. Both methods result in the same balances in partner capital accounts.
d. Both methods result in the same total value of partner capital accounts, but the
individual capital accounts vary.
10. Assume that C has a P50,000 equity in the partnership of “A, B, and C.” Partner C arranges
to sell his entire interest to D for P80,000 Cash. Partners A and B agree to the admission of
D. At what amount will the equity of the incoming partner, D, be shown in the balance
sheet?
a. at P50,000.
b. at P50,000 and the P30,000 will be divided equally among the original partners.
c. at P80,000
d. at P80,000 and the P30,000 will represent Goodwill which will be apportioned between
the existing equities of A and B.
11. In the Adel-Brick partnership, Adel and Brick had a capital ratio of 3:1 and a profit and loss
ratio of 2:1, respectively. The bonus method was used to record Colter’s admittance as a
new partner. What ratio would be used to allocate, to Adel and Brick, the excess of Colter’s
contribution over the amount credited to Colter’s capital account?
a. Adel and Brick’s new relative capital ratio.
b. Adel and Brick’s new relative profit and loss ratio.
c. Adel and Brick’s old capital ratio.
d. Adel and Brick’s old profit and loss ratio.
12. If the partnership agreement does not specify how income is to be allocated, profits should
be allocated
a. Equally.
b. In proportion to the weighted-average of capital invested during the period.
c. Equitably so that partners are compensated for the time and effort expended on behalf
of the partnership
d. In accordance with an established ratio.
13. During 1994, Young and Zinc maintained average capital balances in their partnership of
P160,000 and P100,000 respectively. The partners receive 10% interest on average capital
balances, and residual profit or loss is divided equally. Partnership profit before interest was
P4,000. By what amount should Zinc’s capital account change for the year?
a. P1,000 decrease. c. P11,000 decrease.
b. P2,000 increase. d. P12,000 increase.
14. The Oxide and Ferris partnership agreement provides for Oxide to receive a 20% bonus on
profits before the bonus. Remaining profits and losses are divided between Oxide and Ferris
in the ratio of 2 to 3, respectively. Which partner has a greater advantage when the
partnership has a profit or when it has a loss?
a. b. c. d.
Profit Oxide Oxide Ferris Ferris
Loss Ferris Oxide Oxide Ferris

15. Before the withdrawal of Alice from their partnership, the partners agreed to adjust assets
to their fair values. Accordingly, the appraisal increase was credited to (M)
a. Income Summary. c. Appraisal Capital.
b. Deferred Credit. d. Partners’ Capital Accounts.
16. Aimee Allen retires from the partnership of Allen, Beck, and Chale. Allen’s cash settlement
from the partnership was based on new goodwill determined at the date of retirement plus
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 the carrying amount of the other net assets. As a consequence of the settlement, the
capital accounts of Beck and Chale were decreased. In accounting for Allen’s withdrawal,
the partnership could have used the
AICPA, adapted a. b. c. d.
Bonus method No No Yes Yes
Goodwill method Yes No Yes No

17. When Mill retired from the partnership of Mill, Yale, and Lear, the final settlement of Mill’s
interest exceeded Mill’s capital balance. Under the bonus method, the excess
a. Was recorded as goodwill.
b. Was recorded as an expense.
c. Reduced the capital balances of Yale and Lear.
d. Had no effect on the capital balances of Yale and Lear.
18. When NANA retired from the partnership of NANA, NINA, and NONA, the final settlement of
NANA’s interest exceeded her capital balance. Under the bonus method, the excess is

a. Recorded as goodwill.

b. Recorded as an expense.

c. Of no effect to the capital accounts of Nina and Nona.

d. Deducted from the capital account balances of Nina and None.

THEORY II

1. Franchise fees are properly recognized as revenue

A. When received in cash.
B. When a contractual agreement has been signed.
C. After the franchise business has begun operations.
D. After the franchiser has substantially performed its service.

2. A franchise agreement grants the franchisor an option to purchase the franchisee's business.
It is probable that the option will be exercised. When recording the initial franchise fee, the
franchisor should
A. Record the entire initial franchise fee as a deferred credit which will reduce the
franchisor's investment in the purchased outlet when the option is exercised.
B. Record the entire initial franchise fee as unearned revenue which will reduce the
amount of cash paid when the option is exercised.
C. Record the portion of the initial franchise fee which is attributable to the bargain
purchase option as a reduction of the future amounts receivable from the franchisee.
D. None of these.

3. Continuing franchise fees should be recorded by the franchisor

A. As revenue when earned and receivable from the franchisee.
B. As revenue when received.
C. In accordance with the accounting procedures specified in the franchise agreement.
D. As revenue only after the balance of the initial franchise fee has been collected.

4. The rationale for adoption of the percentage-of-completion method is that:

A. Results are more conservative.
B. It provides a measure of periodic accomplishment.
C. It is a better match with legal ownership.
D. It results in a lower income tax.

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5. The percentage-of-completion method of inventory valuation of long-term contracts
A. Recognizes income upon completion of work.
B. Recognizes income based on collected billings.
C. Recognizes income based on the progress of work.
D. Does not recognize income at the balance sheet date.

6. When work to be done and costs to be incurred on a long-term contract can be estimated
dependably, which of the following methods of revenue recognition is preferable?
A. Installment method
B. Percentage-of-completion method
C. Completed-contract method
D. None of these

7. In selecting an accounting method for a newly contracted long-term construction project,

the principal factor to be considered should be
A. The terms of payment in the contract.
B. The degree to which a reliable estimate of the costs to complete and extent of progress
toward completion is practicable.
C. The method commonly used by the contractor to account for other long-term
construction contracts.
D. The inherent nature of the contractor’s technical facilities used in construction.

8. In arriving at the gross profit during the first year using the percentage of completion
method of accounting for a long-term construction contract, the estimated total gross profit
from the contract is multiplied by
A. The percentage of the costs incurred during the year to the total contract price.
B. The percentage of the costs incurred during the year to the total estimated cost.
C. The percentage of the costs incurred during the year to the total costs incurred to date.
D. The percentage of the costs incurred during the year to the unbilled portion of the total
contract price.

9. If the percentage-of-completion method is used, what is the basis for determining the gross
profit to be recognized in the second year of a three-year contract?
A. Cumulative actual costs incurred only.
B. Incremental cost for the second year only.
C. Cumulative actual costs and estimated costs to complete.
D. No gross profit would be recognized in year 2.

10. In accounting for a long-term construction-type contract using the percentage-of-

completion method, the gross profit recognized during the first year would be the estimated
total gross profit from the contract, multiplied by the percentage of the costs incurred
during the year to the
A. Total costs incurred to date.
B. Total estimated cost.
C. Unbilled portion of the contract price.
D. Total contract price.

11. Which statement is correct in describing the rank order of payments as specified by
the Uniform Partnership Act?
a. Payments to partners with loans to the partnership are ranked equally with
payments to other creditors.
b. Payments to partners with loans to the partnership are ranked ahead of
payments to partners without loans to the partnership.
c. Payments to other creditors are ranked ahead of payments to partners with
loans to the partnership.
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 d. After payments are made to other creditors and partners with loans to the
partnership, payment can be made to partners with capital interests.

12. Which of the following procedures is acceptable when accounting for a deficit
balance in a partner’s capital account during partnership liquidation?
a. A partner with a negative capital balance must contribute personal assets to the
partnership that are sufficient to bring the capital account to zero.
b. If a partner with a negative capital balance is personally insolvent, the negative
capital balance may be absorbed by those partners having a positive capital
balance according to the residual profit and loss sharing ratios that apply to all
the partners.
c. If a partner with a negative capital balance is personally insolvent, the negative
capital balance may be absorbed by those partners having a positive capital
balance according to the residual profit and loss sharing ratios that apply to
those partners having positive balances.
d. All the above procedures are acceptable.

13. A partnership dissolution differs from a liquidation in that

a. payments are made to creditors before partners receive value.
b. periodic payments to partners are made when cash becomes available.
c. a partner withdraws from the business and the enterprise continues to
function.
d. full payment is made to all outside creditors before remaining cash is
distributed to partners in a final lump sum payment.

14. A partnership in liquidation has converted all assets into cash and paid all liabilities.
According to the Uniform Partnership Act, the order of payment
a. will have amounts due to partners with respect to their capital accounts take
precedence over amounts owed by partners other than for capital and profits.
b. will be according to the partners’ residual profit and loss sharing ratios.
c. will have amounts owed by partners other than for capital and profits take
precedence over amounts due to partners with respect to their capital
accounts.
d. Will be by any manner that is both reasonable and rational for the partnership.

15. In partnership liquidation, how are partner salary allocations treated?

a. Salary allocations take precedence over creditor payments.
b. Salary allocations take precedence over amounts due to partners with respect
to their capital interests, but not profits.
c. Salary allocations take precedence over amounts due to partners with respect
to their capital profits, but not capital interests.
d. Salary allocations are disregarded.

16. A simple partnership liquidation requires

a. periodic payments to creditors and partners determined by a safe payments
schedule.
b. partnership assets to be converted into cash with full payment made to all
outside creditors before remaining cash is distributed to partners in a lump sum
payment.
c. only creditors to be paid in an orderly manner.
d. periodic payments to partners as cash becomes available.

17. In a simple partnership liquidation, the last remaining cash distribution should be
made according to the ratio of
a. the individual partner’s profit and loss agreement.
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 b. the individual partner's capital accounts, increased by partner loans to the
partnership.
c. the individual partner’s capital accounts, increased by partnership loans to the
partners and decreased by partner loans to the partnership.
d. the individual partner’s capital accounts, decreased by partnership loans to the
partners and increased by partner loans to the partnership.

18. If conditions produce a debit balance in a partner’s capital account when liquidation
losses are allocated
a. the partner receives further allocations of liquidation losses, but not gains.
b. the partner receives no further allocation of liquidation losses and gains.
c. the partner is no longer obligated to partnership creditors.
d. the partner has an obligation of personal net assets to the other partners.

19. Under the rule of offset, what is the proper disposition of a partnership loan that was
made from a partner who has a debit balance?
a. The loan is first paid to the debtor partner before cash payments are made to
partners.
b. The loan is written off as a partnership loss if the partner does not have the
cash to cover the debit balance.
c. The loan is charged off to the capital accounts of all the partners in their profit
and loss sharing ratios.
d. The loan is charged off to the capital account of the debtor partner.

20. In partnership liquidations, what are safe payments?

a. The amounts of distributions that can be made to the partners, after all
creditors have been paid in full.
b. The amounts of distributions that can be made to the partners with assurance
that such amounts will not have to be returned to the partnership.
c. The amounts of distributions that can be made to the partners, after all non-
cash assets have been adjusted to fair market value.
d. All the above are examples of the safe payments concept.

21. If all partners are included in the first installment of an installment liquidation, then in
future installments
a. cash will be distributed according to the residual profit and loss sharing ratio.
b. cash should not be distributed until all non-cash assets are converted into cash.
c. a safe payments schedule must be prepared before each cash distribution to
avoid excessive payments to partners.
d. a cash distribution plan must be prepared so that partners will know when they
will be included in cash distributions.

22. In a schedule of assumed loss absorptions

a. the partner with lowest loss absorption is eliminated last.
b. it is necessary to have a cash distribution plan first.
c. the least vulnerable partner is eliminated first.
d. the most vulnerable partner is eliminated first.

23. Which partner is considered the most vulnerable as a result of a computation of

vulnerability rankings?
a. The partner with the lowest vulnerability ranking, who also has the lowest loss
absorption potential.
b. The partner with the lowest vulnerability ranking, who also has the highest loss
absorption potential.
c. The partner with the highest vulnerability ratio, who also has the lowest loss
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 absorption potential.
d. The partner with the highest vulnerability ranking, who also has the highest loss
absorption potential.

24. The rank order is for claims against a bankrupt partner of

I. Those owing to partners by way of contribution
II.Those owing to separate creditors
III.Those owing to partnership creditors
a. II first; I second and III third.
b. III first; II second and I third.
c. I first; III second and II third.
d. II first; III second and I third.

PROBLEMS

1. On September 30, 2012 Heaven & Egg entered into franchise agreement with Mang Kanor.
The agreements required an initial franchise fee of P175,000 plus four P75,000 payments
due every three months, the first payment due December 31, 2012. The interest rate is 12%.
The initial deposit is no longer refundable if services performed have been 25% completed.
The following table describes the agreement.

Franchisee Probability of Services performed by Total cost

collection Franchisor at 12/31/12 incurred as of
12/31/2012

Mang Kanor Likely Substantially P35,000

The present value factors at 3% for four periods were as follows:

Present value of P1 - .0885
Present value of an annuity of P1 – 3.7171

The net total revenue to be recognized by Heaven & Egg in 2012 is:
a. P464,933 c. P462,146
b. P429,934 d. P458,132

2. In 2012, Eva Builders successfully bidded on a fixed price contract to a factory building for
P26M. Eva uses the percentage of completion method and the following data are obtained
on the project:
Percentage of completion
At December 31, 2012 20%
At December 31, 2013 60%

Estimated total cost at completion

At December 31, 2012 P19,500,000
At December 31, 2013 P24,000,000

Profit recognized to date

At December 31, 2012 P1,300,000
At December 31, 2013 P1,200,000

The estimated costs to complete the building at 12/31/12 is:

a. P3,900,000 c. P19,500,000
b. P15,600,000 d. P20,800,000
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3. The total cost incurred in 2013 is
a. P20,100,000 c. P14,400,000
b. P15,600,000 d. P10,500,000

4. Tacloban Builders, Inc. uses the percentage of completion method of accounting. During
2011, Tacloban Builders contracted to build a low-rise building for GOTO Company for P20M.
The initial estimate of the project costs is P16M. In 2011, Tacloban Builders incurred P4M
and billed the customer an amount corresponding to the project’s percentage of completion.

In 2012, due to increasing prices of construction materials resulting to increase in the

estimated costs to complete the project, the parties agreed to increase the contract price by
P1M. Tacloban builders incurred P10,250,000 alone in 2012 with an estimated cost to
complete the project to be P4,750,000.

The Construction in Progress Account to appear in the Balance Sheet as of December 31,
2011 is
a. P4M c. P5M
b. P1M d.P0

5. In 2012, the amount to be reported as Contract Revenue, Contract Costs and Profit is
a. P15,750,000, P14,250,000, P1,500,000
b. P5,000,000, P4,000,000, P1,000,000
c. P10,750,000, P10,250,000, P500,000
d. Not Given

6. Automatic Company sells home appliances and furniture sets on charge and installment
basis. Data on the installment sales operations of the company for the two years ending
2011 and 2012 were as follows:
2011 2012
Installment sales P4M P5M
Cost ratio 60% 70%
Total collections:
2011 account P2.1M P1.5M
2012 account P3M
Additional information:
The newly hired bookkeeper of Automatic Company records collections on installment sales
as: Debit cash and credit Installment Receivable for collection on principal and interest. The
interests included in the collections above are:

2011 collections – P120,000

2012 collections:
2011 accounts – P60,000
2012 accounts – P180,000
The required balance of the deferred gross profit account at December 31, 2012 is:
2011 Account 2012 Account
a. P232,000 P600,000
b. P184,000 P600,000
c. P160,000 P654,000
d. P232,000 P654,000

7. On January 1, 2012, Paul George Company sold real estate that cost P110,000 to Carl
Winston for P120,000. Carl Winston agreed to pay for the account over 3 years by making
three end-of-year equal payments of P52,557 that included 15%.

2nd semester AY 2016-2017 Page 8 of 13 KTTegio

 If the cost recovery method is used, the unrecovered cost after the 1 st annual installment is
received is:
a. P75,443 c. P57,443
b. P85,443 d. P67,443

8. Mami D Imports Inc. was involved in two default and repossession cases during the year:
 A Packaging machine was sold to Marlene Whiteney for P90,000, including a 35%
markup on selling price. Whiteney made a down payment of 20%, four of the
remaining 16 equal payments, and then defaulted on further payments. The
packaging machine, at which time, the fair value was determined to be P35,000.

 Another equipment that cost P60,000 was sold to Banjo Bailey for P80,000 on the
installment basis. Bailey made a down payment of P12,000 and paid P4,000 a month
for six months, after which he defaulted. The equipment was repossessed and the
estimated value at tome of repossession was determined to be P32,500.

The total deferred gross profit canceled upon repossession is

a. P31,500 c. P51,500
b. P29,900 d. P30,950

9. The total gain or loss on repossession is

a. P500 gain c. P500 loss
b. P5,500 gain d. P600 loss

10. A Statement of Realization and Liquidation has been prepared for the LUGENA Company. The
totals are given below:
Assets to be realized P60,000 Liabilities assumed P50,000
Assets acquired 40,000 Liabilities not liquidated 65,000
Assets Realized 55,000 Supplementary credits 110,000
Liabilities to be liquidated 80,000

Retained earnings decreased by P12,000. The ending balance of Capital Stock and Retained
Earnings are P100,000 and (P85,000), respectively.

The beginning balance of cash is:

a. P47,000 c. P20,000
b. P35,000 d. Not given

11. The trust of POP Inc. prepares a Statement of Affairs which shows that unsecured creditors
whose claims total P600,000 may expect to receive approximately P360,000 if assets are sold
for the benefit of the creditors. Other pertinent information follows:
 Tatang Almenario, the accountant, is owed P7,500 for salaries.
 Meling holds a note for P10,000 on which interest of P500 is accrued; nothing has
been pledged for the note.
 Con-con holds a note of P60,000 on which interest of P3,000 is accrued; Trading
securities with a book value of P65,000 and a market value of P55,000 are pledged on
the note.
 Dante holds a note for P25,000 in which interest of P1,500 is accrued; property with a
book value if P20,00 and a market value of P22,000 is pledged on the note.

The total amount expected to be received by the unsecured creditors mentioned above is:
a. P23,000 c. P10,500
b. P77,000 d. P6,300

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12. On December 31, 2012, the GAR Partnership of Garry, Aubrey and Rolly have the following
accounts with their balances:
Garry Capital, 50% P297,000
Aubrey Capital, 30% 222,000
Rolly Capital, 20% 195,000
Loans payable-Aubrey 72,000
Accounts receivable – Garry 36,000
Rolly Drawing 36,000

Because of unsuccessful operation for the last 2 years, the partners decided to liquidate after
closing the books on December 31, 2012. On this date, total assets amounted to P1,056,000
including cash of P321,000. During the liquidation process, all the noncash assets were taken
by its competitor. Liabilities were settled, liquidation expenses of P15,000 were paid and the
balance was distributed to the partners. Ultimately, Rolly received P125,000 in the final
settlement.

The amount realized from the sale of non-cash assets is:

a. P529,000 c. P565,000
b. P580,000 d. P544,000

13. Selected balances from Palo Company’s Branch E are as follows:

Accounts receivable, January 1, 2009 P82,500
Accounts receivable, December 31, 2009 105,000
Merchandise from home office 91,500
Cash collections 127,500
Operating expenses paid 31,500
Inventory, December 31, 2009 28,500

All sales, collections, expenses are handled at the branch. All cash received from sales and
collections are sent directly to the Home office. Expenses are paid by the branch from the
imprest fund and immediately reimbursed by the Home office and credited to the Home
office account. The net increase in the home office account is P19,500. All expenses paid by
the branch are recorded in the books of the branch. How much is the beginning balance of
inventory.
a. P24,000 c. P31,500
b. P 3,000 d. P -0-

14. On January 1, 2010, Mr. Irvin entered into a franchise agreement with TOY Inc. to sell their
products. The agreement provides for an initial franchise fee of P3,000,000 which is payable
as follows: P1,000,000 cash to be paid upon signing the contract, and the balance in four
equal annual instalments every December 31, starting December 31, 2010. Mr. Irvin signs a
non-interest bearing note for the balance. The credit rating of the franchisee indicates that
the money can be borrowed at 10%. The agreement further provides that the franchisee
must pay a continuing franchise fee equal to 5% of its monthly gross sales. TOY incurred
direct cost of P930,564 and indirect cost of P167,400. The franchisee started business
operations on July 1, 2010 and was able to generate sales of P1,240,000 as of the end of
2010. The first instalment payment was made in due date.

Assuming that the collectibility of the note is not reasonably assured, how much is the net
income of the franchisor for the year ended December 31, 2010?
a. 753,166 c. 849,656
b. 911,656 d. 854,600

15. Sorsogon and Negros are partners. They are in the process of choosing the provision for their
agreement in the distribution of profit or loss. Sorsogon is to receive a salary of P40,000
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 while Negros is to receive a salary of P25,000 plus a 10% bonus computed on Net Income.
Residual income or loss will be divided 3:2. At what amount of Net loss will the share of
Sorsogon and Negros be Equal?
a. P10,000 b. P45,000 c. P140,000 d. P150,000

16. The following information is available concerning HP, Inc. on the date the company entered
into bankruptcy proceedings:

ACCOUNT BALANCE
Cash P8,580
Accounts Receivable 156,780
Inventory 84,000
Prepaid expenses 1,290
Buildings, net 177,000
Equipment, net 16,800
Goodwill 16,950
Wages payable (7,500)
Taxes payable (5,430)
Accounts payable (237,000)
Notes payable (45,450)
Common Stock (216,000)
Deficit 49,980

Inventory with a book value of P60,000 is a security for notes of P30,300. The other notes are
secured by the equipment.
Expected realizable values of the assets are:
Accounts Receivable P132,300
Inventory 55,500
Buildings 66,000
Equipment 6,000

What is the estimated deficiency to unsecured creditors?

a. P237,000 c.P217,500
b. P196,500 d. P27,000

17. On December 31, 2010, the home office current account on the books of Pawing Branch has
a balance of P2,275,000. In analyzing the activity in each of these accounts for December,
the accountant found the following differences:
a. An P84,000 branch remittance to the home office initiated on December 21, 2010 was
recorded twice by the home office on December 26 and 28.

b. The home office incurred P126,000 of advertising expenses and allocated 1/3 of this
amount to the branch on December 20. The branch recorded this transaction on
December22 amounting to P63,000.

c. Inventory costing P853,300 was sent to the branch by the home office on December
15. The billing was at cost, but the branch recorded the transaction at P903,700.

d. The home office erroneously recorded the branch net income at P243,075. The branch
reported net income of P261,975.

The adjusted balance as of December 31, 2010?

a. 2,100,700 c. 2,254,000
b. 2,203,600 d. 2,222,500

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18. Gross profit rates of Jul Kris Corp were 30%, 25% and 20% of cost for 2008, 2009 and 2010,
respectively. The following account balances are available at the end of 2010.

Year of sales Installment Accounts Receivable Deferred Gross Profit

(before adjustments)
2008 6,000 7,230
2009 61,500 60,750
2010 195,000 120,150

How much was the total collections for the year?

a. 605,350 c. 1,315,370
b. 793,480 d. 107,235

19. Sharon Company uses the installment sales method in accounting for its installment sales.
On January 1, 2007, Sharon Company had an installment account receivable from Rowena
with a balance of P18,000. During 2007,P4,000 was collected from Rowena. When no further
collection could be made, the merchandise sold to Rowena was repossessed. The
merchandise had a fair market value of P6,500 after the company spent for P600 for
reconditioning of the merchandise. The merchandise was originally sold with a gross profit
rate of 40%. Determine the gain or loss on repossession and Cost of Repossessed
Merchandise to be presented in the Income Statement, respectively:
a. P2,500 loss; P6,500 c. P2,500 gain; P5,900
b. P2,100 loss; P6,500 d. P2,100 gain; P5,900

20. The partnership of Monte and Carlo has the following provisions:
1. Monte, who is primarily responsible for obtaining new clients, is to receive a 30%
bonus on revenue in excess of P200,000.
2. Carlo, who is primarily responsible for administration, is to receive a 30% bonus
on profits in excess of 50% of revenues, as reflected in the general ledger.
3. All remaining profits or losses are to be divided equally.
Revenue for the year P290,000
Operating expenses 120,000

The share of partner Monte in the net income should be:

a. P92,000 c. P71,000
b. P89,000 d. P57,000

21. A partnership begins its first year of operations with the following capital balances:

Winston, capital................................................................. P110,000

Durham, capital.................................................................. 80,000
Salem, capital..................................................................... 110,000

According to the articles of partnership, all profits will be assigned as follows:

 Winston will be awarded an annual salary of P20,000 with P10,000 assigned to
Salem.
 The partners will be attributed interest equal to 10% of the capital balance as of
the first day of the year.
 The remainder will be assigned on 5:2:3 basis, respectively.
 Each partner is allowed to withdraw up to P10,000 per year.

Assume that the net loss for the first year of operations is 20,000 and that the net income
for the subsequent year is P40,000. Assume also that each partner withdraws the
maximum amount from the business each period. What is the balance in Winston’s capital
account at the end of the second year?
2nd semester AY 2016-2017 Page 12 of 13 KTTegio
 a. P102,600 c. P108,600
b. P104,400 d. P109,200

2nd semester AY 2016-2017 Page 13 of 13 KTTegio