Dynamic Society of Accounting Students

Monthly Examinations - 001

Practical Accounting 2

General Instructions: Please write your answer in a CLEAN and PRESENTABLE manner.
Erasures are not allowed. If you have question or clarification, it must be addressed to the
test bank committee or officer-in-charge, whoever is available. Each answer must be
supported with a solution, otherwise, such answer is invalid. Failure to follow these
instructions shall be given corresponding deduction.

1. Liza, Marie and Nena formed a joint venture. Liza is to act as manager and is designated to record
the joint venture transactions in his books. As manager, she is allowed a management fee of
P336,000. Profits and losses are to be divided equally. The following balances appear at the end of
2008 before adjustments for venture inventory and distribution of profits and losses:
Debit Credit
Joint venture cash P1,344,000
Marie, capital 84,000
Nena, capital P756,000

The venture is terminated on December 31, 2008 with unsold merchandise costing P291,200. (a)
Assuming that the joint venture profit is P140,000. What is the balance of the joint venture account
before the distribution of profit? (b) Assuming that the joint venture incurs a loss of P28,000, what is
the balance of the joint venture account before the distribution of loss?
a. P431,200 Dr; P319,200 Cr c. P151,200 Cr; P263,200 Dr
b. P151,200 Dr; P319,200 Cr d. P151,200 Dr; P319,200 Dr

2. Ana, Bea and Carina formed a joint venture. The contractual arrangement provides that Ana is to
manage the venture and is to receive a fee of 20% of the profit after deduction of the fee as an
expense of the venture. The net profit after the fee has been agreed to be divided as follows: Ana,
30%; Bea, 50% and Carina, 20%. After three months, the joint venture is terminated. The trial
balance prepared by Ana show the following balances:
Dr Cr
Joint venture P324,000
Bea, capital P18,000
Carina, capital 72,000

The venture has still some unsold merchandise worth P90,000. Ana agreed to purchase such at cost.
The fee of Ana has not yet been taken up. What is the total income earned by Ana? Before the cash
settlement is made, the balance of the investment in joint venture account in the books of Bea and
Carina are:
a. P172,500; (Bea) P154,500; (Carina) P141,000
b. P103,500; (Bea) P154,500; (Carina) P141,000
c. P97,500; (Bea) P172,500; (Carina) P69,000
d. P172,500; (Bea) P172,500; (Carina) P69,000

3. Xena Company filed a voluntary bankruptcy petition on April 30, 2009 and the statement of affairs
reflects the following amounts:
Book value Current value
Assets pledged with fully secured creditors P 910,000 P1,080,625
Assets pledged with partially secured creditors 511,875 341,250
Free assets 1,137,500 796,250
Liabilities with priority 113,750
Fully secured creditors 739,375
Partially secured creditors 568,750
Unsecured creditors 1,478,750
Assume that the assets are converted into cash at the estimated current values and the business is
liquidated. What total amount of cash should partially secured creditors receive?
a. P477,750 b. P511,875 c. P341,250 d. P568,750

4. Alma and Becca have just formed a partnership. Alma contributed cash of P176,400 and office
equipment that cost P75,600. The equipment had been used in his sole proprietorship and had been
70% depreciated, the current value of the equipment is P50,400. Alma also contributed a note
payable of P16,800 to be assumed by the partnership. Alma is to have a 30% interest in the
partnership. Becca contributed P256,000 land at fair market value. Becca should make additional
investment of:
a. P234,000 b. P490,000 c. P256,000 d. P210,000
5. On September 21, 2008, Tina, Donna and Gina formed a partnership investing cash of P189,000,
P170,100 and P52,920, respectively. The partners share profits 3:2:2 and on October 17, 2008, they
have cash of P12,600, and other assets of P598,500; liabilities are P322,560. On this date they
decided to go out of business and sell all the assets for P378,000. Gina has personal assets of
P18,900 that may, if necessary, be used to meet partnership obligations. How much should be
distributed to Donna upon liquidation of the partnership?
a. P25,704 b. P61,236 c. P0 d. P50,400

6. A balance sheet for the partnership of Susan, Myrna and May, who share profits in the ratio of
50:25:25, shows the following balance just before liquidation:
Cash P162,000 Susan, capital P297,000
Other assets 803,250 Myrna, capital 209,250
Liabilities 270,000 May, capital 189,000

On the first month of liquidation, certain assets are sold for P432,000. Liquidation expenses of
P13,500 are paid, and additional liquidation expenses are anticipated. Liabilities are paid amounting
to P72,900 and sufficient cash is retained to insure the payment to creditors before making payments
to partners. On the first payment to partners, Susan receives P84,375. The amount of cash withheld
for anticipated liquidation expenses is:
a. P0 b. P237,600 c. P197,100 d. P40,500

7. The partnership agreement of Paul, Simon and Peter provides for the division of net income as
follows:
 Simon, who manages the partnership is to receive an annual salary of P120,000.
 Each partner is to be allowed interest at 10% on ending capital.
 Balance is to be divided 40:25:35.

During 2008, Paul invested an additional P90,000 in the partnership. Simon made an additional
investment of P75,000 and withdrew P110,000 and Peter withdrew P60,000. No other investments
or withdrawals were made during 2008. On January 1, 2008, the capital balances were Paul,
P300,000; Simon, P410,000; and Peter, P220,000. Total capital at year-end was P600,000. Compute
the capital balance of each partner at year-end:
Paul Simon Peter
a. (P176,000) P948,125 (P172,125)
b. 214,000 410,250 24,250
c. 214,000 398,125 ( 12,125)
d. 390,000 375,000 ( 165,000)

8. The balance sheet as of September 30, 2008, for the partnership of Diana, Elma and Flora shows the
following information:
Assets P180,000 Diana, loan P 10,000
Diana, capital 41,500
Elma, capital 38,500
Flora, capital 90,000
Total P180,000 Total P180,000

It was agreed among the partners that Diana retires from the partnership, and it was also further
agreed that the assets should be adjusted to their fair value of P172,500 as of September 30, 2008.
Net loss prior to the retirement of Diana amounted to P35,000. The partnership is to pay Diana
P31,000 cash for Diana’s partnership interest, which would include the payment of her loan. No
goodwill is to be recorded. Diana, Elma and Flora share profit 40%, 15% and 45%, respectively.
After Diana’s retirement, how much would Flora’s capital balance be?
a. P33,000 b. P73,500 c. P68,250 d. P92,625

9. Lanie and Pam partners who share profits and losses in the ratio of 8:2, respectively. Their
respective capital accounts are as follows:
Lanie P105,000 Pam P90,000

They agreed to admit Jane as a partner with a one-third interest in the capital and profits and losses,
upon an investment of P75,000. The new partnership will begin with a total capital of P300,000.
Immediately after Jane’s admission, what are the capital balances of Lanie, Pam and Jane,
respectively?
a. P105,000; P90,000; P75,000 c. P109,000; P91,000; P100,000
b. P101,000; P89,000; P100,000 d. P109,000; P91,000; P75,000
10. Partners Sasha, Haly and Jane share profits and losses in the ratio of 5:3:2. At the end of a very
unprofitable year, they decided to liquidate the firm. The partners’ capital account balances at this
time are as follows:
Sasha P123,300 Jane P44,000
Haly 139,440

The liabilities accumulate to P168,000, including a loan of P56,000 from Sasha. The cash balance is
P33,600. All the partners are personally solvent. The partners plan to sell the assets in installment.
If Haly received P20,160 from the first distribution of cash, how much did Sasha receive at that time?
a. P11,200 b. P4,480 c. P6,720 d. P0

11. On March 1, 2009, Mr. Seco signed a franchise agreement with Lovely Face. Lovely Face, charged an
initial franchise fee of P255,000 from Mr. Seco. When the agreement was signed, Mr. Seco paid
P95,000 and signed a non-interest bearing note for the balance. The note is to be paid in four equal
annual installments each beginning March 1, 2010. Mr. Seco’s normal borrowing rate is 12%. The
down payment is nonrefundable, collection of the note is reasonably assured and the franchisor has
performed substantially all of the services required by the initial franchise fee. Present and future
value factors are as follows:
Present value of P1 at 12% for 4 periods 0.6355
Future value of P1 of 12% for 4 periods 4.7793
Present value of an ordinary annuity of P1 at 12% for 4 periods 3.0374

How much revenue from franchise fee will be reported by Lovely Face on its December 31, 2009
income statement?
a. P255,000 b. P121,496 c. P216,496 d. P196,680

12. Sin Construction Co. has used the cost-to-cost percentage of completion method of recognizing
revenue, Marc Sin assumed the presidency of the company after the death of his father, Vincent. In
reviewing the records, Marc finds the following information regarding a recently completed building
project for which the total contract was P2,000,000.
2006 2007 2008
Gross profit (loss) P40,000 P140,000 (P20,000)
Cost incurred each year 360,000 ? 820,000
Marc wants to know how effectively the company operated during the three years on this project
and, since the information is not complete, has asked for answers to the following questions:

13. How much cost was incurred in 2007?

a. P660,000 b. P600,000 c. P560,000 d. P500,000

14. What percentage of the project was completed by the end of 2007?
a. 65% b. 60% c. 55% d. 79%

15. What was the total estimated gross profit on the project by the end of 2007?
a. P300,000 b. P180,000 c. P250,000 d. P350,000

16. What was the estimated cost to complete the project at the end of 2007?
a. P660,000 b. P500,000 c. P650,000 d. P680,000

17. Products at Leo Manufacturing are sent through two production departments: Fabricating and
Finishing. Overhead is applied to products in the Fabricating Department based on 150 percent of
direct labor cost and P18 per machine hour in Finishing. The following information is available about
Job #100:
Fabricating Finishing
Direct material P1,590 P580
Direct labor cost ? 48
Direct labor hours 22 6
Machine hours 5 15
Overhead applied 429 ?

What is the total cost of Job #100?

a. P2,647 b. P3,005 c. P3,093 d. P3,203
18. At the end of the last fiscal year, Johns Company had the following account balances:
Overapplied overhead P 6,000
Cost of goods sold 980,000
Work in process inventory 38,000
Finished goods inventory 82,000

If the most common treatment of assigning overapplied overhead were used, the final balance in cost
of goods sold is:
a. P974,000 b. P974,660 c. P985,340 d. P986,000

19. What determines substantial performance for purposes of recognizing the initial franchise fee?
a. When the franchisee actually commence operation
b. When the franchisee pays the initial franchise fee in full
c. When the franchisee pays a cash downpayment
d. When the franchisee signs the actual contract

20. In the books of the venturers, investment in joint venture is recorded using the
a. Cost method c. Purchase method
b. Equity method d. Pooling of interest method