PRACTICAL ACCOUNTING 2 3.

At the beginning of 2008, S Video established

a QC Branch and a MC Branch in order to
1. Roel, Jekell and Mike, CPAs, decide to form a provide wider distribution of its merchandise.
partnership and agree to distribute profits in Merchandise is transferred to the branches at
the ratio 5:3:2. It is agreed, however, that Roel a pricd 30% above cost. All branch
and Jekell shall guarantee fees from their own merchandise is acquired from the home office.
clients of P600,000 and P500,000 respectively, At the end of 2008, the QC Branch and the
that any deficiency is to be charged directly MC Branch reported net income and ending
against the account of the partner failing to inventory balances as follows:
meet the guarantee, and that any excess is to
be credited directly to the account of the Net income Ending inventory
partner with fees exceeding the guarantee. QC Branch
Fees earned during 20x4 are classified as P45,500 P65,000
follows: MC Branch
From clients of Roel 52,000 78,000
P1,000,000 The year-end balances in the home office
From clients of Jekell account’s allowance for unrealized gross
400,000 margin in branch inventory are P 48,750 for
From clients of Mike the QC Branch and P58,500 for the MC
100,000 branch.
Operating expenses for 20x4 are P200,000. The income from Branch, home office
Determine the share of Roel on the operating should record is:
results for the year 20x4. a. P171,750 b. P97,500
a. P900,000 b. P500,000 c. P130,500 d. P74,250
c. P200,000 d. P300,000
4. On January 1, 2008, Ashley Corp. purchased
2. Caine, Osman, and Roberts formed a 75% of the common stock of Racks Corp.
partnership on January 1, 20x4, agreeing to Separate balance sheet data for the
distribute profits and losses in the ratio of companies at the combination date are given
original capitals. Original investments were below:
P625,000, P250,000 and P125,000 respectively. Ashley Racks
Earnings of the firm and drawings by each Cash P 84,000 P
partner for the period 20x4-20x6 follows: 721,000
Trade
Drawings . Receivable 504,000 91,000
Net income (loss) Merchandise
Caine Osman Roberts Inventory 462,000 133,000
20x4 P440,000 Land
P150,000 P78,000 P52,000 273,000 112,000
20x5 185,000 Plant Assets
150,000 78,000 52,000 2,450,000 1,050,000
20x6 ( 105,000) Accumulate
100,000 52,000 52,000 d (840,000) (210,000)
At the beginning of 20x7, Caine and Depreciation
Osman agreed to permit Roberts to withdraw Investment in
from the firm. Since the books for the firm had Racks 1,372,000
never been audited, the partners agreed to Total Assets P4,305,00 P1,897,00
an audit in arriving at the settlement amount. 0 0
In withdrawing, Roberts was allowed to take
certain furniture and was charged P15,000, Accounts P P
although the book value was P45,000; the Payable 721,000 497,000
balance of Roberts’ interest was paid in cash. Capital Stock
The following items were revealed 2,800,000 1,050,000
in the course of the audit. Retained
Earnings 784,000 350,000
End of 20x4 End of 20x5 End of 20x6 Total EquitiesP4,305,00 P
Understatement of accrued expenses 0 1,897,000
P 4,000 P 5,000 P 6,500 At the date of combination the book values
Understatement of accrued revenue of Racks net assets was equal to the fair
2,500 1,000 1,500 value of the net assets except for Rack’s
Overstatement of inventories inventory which has a fair value of P210,000.
15,000 20,000 20,000
Understatement of depreciation expense On the date of acquisition in the
On assets still held consolidated balance sheet:
1,500 3,500 2,000 How much is the total assets?
How much must Roberts received from the a. P 3,533,250 b. P4,984,000
partnership? c. P 6,543,250 d. P 5,171,250
a. P511,250 b. P156,500
c. P15,250 d. P11,250
5. The following data pertained to Pogi value of P 58,500 and a realizable
Company’s construction jobs, which amount of P45,000 is pledged on
commenced during 2008: the note.
d. Nick Corp. holds a note for P9,000
PROJECT 1 PROJECT 2 on which interest of P500 is
Contract Price accrued, nothing has been
P420,000 P300,000 pledged for the note.
Cost incurred during 2008 How much may each of the following
240,000 280,000 creditors receive? Danielle Corp; Randolph
Estimated cost to complete Corp; Baltimore Corp.; Nick Corp.,
120,000 40,000 respectively.
Billed to customers during 2008 a. P 27,000 ; P5,063; P53,775 ; P 0
150,000 270,000 c. P27,000 ; P6,750; P56,700 ; P 0
Received from customers during 2008 b. P 23,850; P 6,750; P56,700; P7,125
90,000 250,000 d, P23,850; P6,750; P53,775 ; P 7,125
If Pogi company used the percentage of
completion method, what amount of profit (loss) 8. The following information was taken from H
would Pogi Company report in its 2008 income Company’s accounting records for the year
statement? December 31, 2008:
a. P(20,000) c. P22,500 Increase in raw materials inventory P 15,000
b. P20,000 d. P40,000 Decrease in finished goods inventory 35,000
Raw materials purchased 430,000
6. On April 1, 2008, Ringo Corp. entered into Direct labor cost 200,000
franchise agreement with Quart Corp. to sell Factory overhead control 260,000
their products. The agreement provides for an Freight-in 45,000
initial franchise fee of P4,218,750 payable as There was no work in process inventory at the
follows: P1,181,250 cash to be paid upon beginning or end of the year. H’s 2008 cost of
signing of the contract and the balance in five goods sold is if FOH is applied at 140% of labor
equal annual payment every December 31, costs:
starting at the end of 2008. Ringo signs 12% a. b. c. d.
interest learning note for the balance. The P950,000 P965,000 P975,000 P995,000
agreement further provides that the franchise
must pay a continuing franchise fee equal to 9. C Company has underapplied factory
5% of its monthly gross sales. On August 30 the overhead of P45,000 for the year ended
franchisor completed the initial services December 31, 2008. Before disposition of the
required n the contract at a cost of P1,350,000 underapplied overhead, selected December
and incurred indirect costs of P232,500. The 31, 2008, balances from C’s accounting
franchise commenced business operations on records are as follows:
September 3, 2008. The gross sales reported to Sales P1,200,000
the franchisor are September sales, P110,000; Cost of goods sold 720,000
October sales, P125,000; November sales
P138,000; and December sales, P159,000. The Inventories:
first installment payment was made on due Direct materials 36,000
date. Work in process 54,000
Finished goods 90,000
Assume the collectivity of the note is Under C’s cost accounting system, over – or
reasonably assured. In its income statement for underapplied overhead is allocated to
the year ended December 31, 2008 how much appropriate inventories and cost of goods sold
is the realized gross profit? based on year – end balances. In its 2008
a. P2,868,750 b. P2,936,225 income statement, C should report cost of
c. P2,895,350 d. P3,168,725 goods sold of
a. b. c. d.
P682,500 P684,000 P756,000 P757,500
7. The trustee for John Corp. prepares a
statement of affairs which shows that
unsecured creditors whose claims total P
540,000 may expect to receive approximately
P 405,000 if assets are sold for the benefit of
creditors.
a. Danielle Corp. holds a note for
P22,500 on which interest of P1,350
is accrued, property with a book
value of P18,000 and a realizable
amount of P 27,000 is pledged on
the note.
b. Randolph, an employee is owed
P6,750 for his salary.
c. Baltimore Corp. holds a note of
P54,000 on which interest of P2,700
is accrued, securities with a book