AST Finals
AST Finals
AST Finals
The following data were taken from the Statement of Affairs of ABC Company:
The trustee for Palubog Corporation prepares a statement of affairs which shows that unsecured
creditors whose claims total P540,000 may expect to received approximately P405,000 if assets are sold
for the benefit of creditors. The following information is available:
Jaka Corporation holds a note for P22,500 on which interest of P1,350 is accrued,
property with a book value of P18,000 and a NRV of P27,000 is pledged on the note.
Martin, an employee, is owed P6,750 for his salary
Leviste Corporation holds a note of P54,000 on which interest of P2,700 is accrued,
securities with a book value of P58,500 and a realizable value of P45,000 is pledged on
the note.
Pinay Corporation holds a note for P9,000 on which interest of P500 is accrued, nothing
has been pledged for the note.
2. How much may each of the following creditors received? Kjaka, Martin Corporation, Leviste
Corporation and Pinay Corporation, respectively?
a. P27,000; P5,063; P53,775; P0
b. P23,850; P6,750; P56,700; P7,125
c. P27,000; P6,750; P56,700; P0
d. P23,850; P6,750; P53,775; P7,125
The following data were taken from the Statement of Affairs of ABC Company:
The following data were taken from the Statement of Affairs of Ken Lee Company:
The following information were taken from the Statement of Affairs or Orbit Company:
Losing Company filed a voluntary bankruptcy petition on June 25 of the current year, and the statement
of affairs reflected the following amounts:
9. Assume that the assets are converted into cash at the estimated net realizable values, and the
business is liquidated, how much will be available to unsecured liabilities?
a. P180,000
b. P405,000
c. P215,000
d. P175,000
10. Using the same data above, how much is the estimated deficiency to unsecured non-priority
credits
a. P 180,000
b. P 130,000
c. P 310,000
d. P 95,000
Additional information:
The Warehouse Building is pledged to First National Bank for P1,000,000 Mortgage
Payable with P150,000 as accrued interest.
The Marketable Securities is pledged with Second National Bank for a note signed 5
years ago in the amount of P3,000,000 with accrued interest of P75,000.
The Inventories is pledged with Third National Bank for a note of P2,000,000 with
accrued interest of P50,000.
The rest are free assets
11. In the statement of affairs, the Inventories should be shown as:
a. Asset pledged with fully secured creditors, leaving a balance of P850,000 to unsecured
creditors
b. Asset pledged with fully secured creditors, leaving a balance of P1,150,000 to unsecured
creditors
c. Asset pledged with partially secured creditors; unsecured liabilities for P800,000
d. Asset pledged with partially secured creditors; unsecured liabilities for P850,000
12. What amount is available to unsecured creditors?
a. P 850,000
b. P1,500,000
c. P2,350,000
d. P 425,000
Below is the summary of accounts appearing in the statement of Realization & Liquidation of Aristotle
Company:
A trustee provided the following information about Justin Corporation’s financial affairs on February 28
of the current year:
A review of the assets and liabilities of ABC Company, a bankrupt Company, disclose the following:
Precious Flakes Corporation is being liquidated. All assets have been converted into cash and P1,872,500
cash is available to pay the following claims:
21. The total amount of profit cancelled in 2016 due to repossession amounted to:
a. P 16,080
b. P 8,400
c. P 4,800
d. P 2,880
On January 2, 2016, Sanyo Co. sold equipment costing P74,400 for P120,000. Old similar equipment was
accepted as a down payment, with the balance payable in 4 semi-annual installments commencing June
30, 2016. The old equipment was allowed an allowance of P36,000 but has an estimated market value of
P36,000 after reconditioning the same for P4,000. The company normally makes a 10% gross profit on
the sale of old equipment.
After paying two installments, the customer defaulted in the payment. The equipment was repossessed
and assessed to have an estimated sales price of P40,000 after reconditioning it for P5,000.
The data presented below were taken from the records of Mr. Lim Appliances Center before the
accounts are closed for the year 2016. The company sells exclusively on credit and uses the installment
sales method of recognizing profit.
2014 2015 2016
Installment sales P 800,000 P 880,000 P
840,000 Cost of Installment sales 480,000 545,600
512,400 Balance as of Dec 31
Installment Receivable-2014 440,000
220,000 56,000 Installment Receivable-2015
500,000 184,000 Installment Receivable-2016
476,000 Deferred Gross Profit-2014
176,000 88,000 ? Deferred Gross Profit-2015
190,000 ? Deferred Gross Profit-
2016 ?
During 2016, the following repossession were recorded by Mr. Lim Appliances Center as:
Repossessions 16,000
Loss on Repossessions 19,000
Installment Receivable
35,000
24. At the beginning of 2016, the total deferred gross profit amounted to:
a. P 277,960
b. P 107,400
c. P 69,920
d. P 185,640
25. The total cash collections made on installment contracts in 2016 amounted to:
a. P824,000
b. P789,000
c. P364,000
d. P425,000
Presented below are the financial data taken from the books of Union Corp.
26. The balance of the Deferred Gross Profit-2014 accounts on December 31, 2016 is
a. P 7,800
b. P 21,600
c. P 0
d. P 8,000
27. The realized profit on December 31, 2016 is
a. P184,000
b. P192,300
c. P179,050
d. P188,800
28. The total gain or loss on repossession on December 31, 2016 is
a. P6,100 loss
b. P7,000 loss
c. P5,500 loss
d. P2,750 loss
Madison Company had the following sales and gross profit percentage for the years 2013-2016.
Historically 40% of sales are collected in the year of the sale, 40% in the following year, 20% in
the third year. Madison Company uses the installment method to account for installment sales.
30. The collections on 2015 accounts in the year 2016 amounted to:
a. P57,810.00
b. P141,000
c. P164,100
d. P46,368.60
Mabuhay Motors sells locally manufactured jeeps on installments. Information presented below relates
to Mabuhay’s operation for the last three calendar years.
31. How much is the (1) total realized gross profit, and (2) the total deferred gross profit at
December 31, 2016:
a. P3,753,750; P4,020,500
b. P3,044,250; P4,125,000
c. P6,993,250; P3,113,000
d. P3,044,110; P4,020,500
Huge Company, which began operations on January 2, 2014 appropriately, uses the installment sales
method of accounting. The following information is available for 2016:
Dolce Company, which began operations on January 1, 2015, appropriately uses the installment method
of accounting for installment sales. The following information is available for the years ended December
31, 2015 and 2016:
2015 2016
Sales P1,000,000
P2,000,000 Gross profit realized on sales made in:
2015
150,000 90,000 2016
200,000 Gross profit percentage
30% 40%
33. What amount of installment accounts receivable should Dolce report in its December 31, 2016
balance sheet?
a. P1,225,000
b. P1,700,000
c. P1,200,000
d. P1,775,000
The following data were taken from the records of Sommerset Company, before the accounts are closed
for the year 2016. The Company sells exclusively on the installment basis and uses the installment
method of recognizing profit.
During 2016 because the customer can no longer be located, the company wrote off P9,000 of the 2014
accounts and P2,800 of the 2015 accounts as uncollectible, and the entry made was:
Uncollectible account expense 11,800
Installment Receivable-2014 9,000
Installment Receivable-2015
2,800
Also during 2016, a customer defaulted and the company repossessed merchandise appraised at P4,000
after costs of reconditioning estimated at P400. The merchandise had been purchased in 2014 by a
customer who still owed P5,000 at the date of repossession. The entry was made:
34. The realized profit on installment sales for the year 2016
a. P 157,156
b. P 86,176
c. P 70,980
d. P 163,820
35. The net income at December 31, 2016 amounted to:
a. P53,156
b. P40,756
c. P52,556
d. P45,420
Automatic Company sells home appliances and furniture sells on charge and installment basis. Data on
the installment sales operations of the company for the tow years ending 2015 and 2016 were as
follows:
2015 2016
Installment sales P4M P5M
Cost ratio 60% 70%
Total Collections:
2015 accounts P2.1M
P1.5M 2016 accounts
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 interest included in
the collections above are:
36. The required balance of the deferred gross profit account at December 31, 2016 is:
Michael Johnson Imports Inc. had two customers who defaulted in their accounts:
1) A packaging machine was sold to Marlene Whitney for P90,000, including a 35% mark up on
selling price. Whitney 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.
2) 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 time of
repossession was determined to be P32,500.
37. The total deferred gross profit cancelled upon repossession is
a. P31,500
b. P29,900
c. P51,500
d. P30,950
38. The total gain or loss on repossession is
a. P500 gain
b. P5,500 gain
c. P500 loss
d. P600 loss
Taguig Motor House, a dealer of motorcycle sells on cash and installment basis. One of its valued
customers, Roman, bought 5 units of motorcycles, 3 units was paid in cash and 2 units by installments.
The cost of each motorcycle was P30,000 per unit. The selling price of each motorcycle was made at
25% gross profit rate for cash basis and at 40% gross profit rate for installment basis. Roman paid 20%
initial payment for the two units bought on installment and the balance is payable in 12 monthly
installments starting the end of August. Roman defaulted on the subsequent payments after paying 4
monthly installments. The two motorcycles were repossessed and has an appraised value equal to 75%
of the unpaid balance.
39. The total amount that Taguig Motor House recognized as realized profit on the 5 units of
motorcycles amounted to:
a. P18,667
b. P48,667
c. P70,000
d. P30,000
40. The amount of profit cancelled cue to the repossession of the two units of motorcycles
amounted to
a. P16,000
b. P32,000
c. P21,333
d. P48,667
Concepcion Industries sells merchandise on a consignment basis to dealers. Shipping costs are
chargeable to Concepcion, although in some cases the dealer pays them while advertising costs are
reimbursable from the consignor. The selling price of the merchandise averages 40% above cost of
merchandise exclusive of freight. The dealer is paid a 10% commission on the sales price for all sales
made. All dealer sales are made on cash basis. The following consignment sales activities occurred
during the current year.
At the end of a month, the consignor receives a notification from the consignee that 80 units were sold
and that the amount due consignor is enclosed.
In 2016, Free shops Wholesalers transferred goods to a retailer on consignment. The goods cost
P450,000 and normally are sold at a 50% markup. Free shop paid P5,000 for the cost of shipment while
the retailer paid P3,800 for advertising and P2,800 for the cost of freight out. The parties agreed that
Free shop Wholesalers would reimburse the cost of advertising and freight paid by the retailer. In 2016,
the retailer at the normal markup sold 60% of the merchandise, and the balance of the merchandise was
returned to Free shop. The retailer withheld a 15% commission from payment plus the amount
reimbursable by the consignor.
IBM Makati consigned 1,000 units of ordinary printer, costing P700 each, to SN Company to be sold at
P1,200 per unit. The agreement calls for 20% commission on units sold and any expenses paid by SN
Company like advertising cost is reimbursable by the consignor. The consignor paid P25,000 freight and
insurance of P10,000 for the shipment. At the end of the month, SN Company reported that 190 units
are still on hand. It remitted P743,000 after deducting commission of P192,000 and advertising cost of
P25,000.
47. Th number of units sold and the net income recognized by the consignor is:
a. 810 units P147,650
b. 800 units P154,650
c. 810 units P141,000
d. 800 units P154,650
In December, the Wenceslao Publishing Company ships 20 sets of books to a book dealer on
consignment. The consignor maintains a cost accounting system and perpetual inventories; the cost
manufacturing each set is P3,000.00. At the end of December, the dealer reports the sale of 6 sets at
P5,000.00 each and remits sales proceeds less 15% representing commissions and P1,500 for freight
paid by the consignee on the receipt of the sets. Delivery and installation expense was P1,200.
On July 1, 2015, All Home Store shipped 150 La Germania Oven, costing P9,000 each on consignment
basis to SM Aura to be sold at P15,000 each. The consignee is to be allowed a commission of 15%. All
Home Store incurred P15,000 in shipping the 150 units. The agreement requires that SM Aura will
advance 50% of the cost of the oven, to be applied to periodic remittances in proportion to the units
sold. Any expenses related to the consigned units incurred by SM Aura are also deductible from the
remittance.
On October 31, 2015, SM Aura rendered an account sale that includes the following deductions:
Advertising costs of P15,000, delivery expenses to customers of P350 per unit; commission of P146,250.
50. How much was the remittance received by ALL HOME STORE at October 31, 2015?
a. P483,500
b. P520,900
c. P303,500
d. P498,500
FRANCHISING
On January 1, 2015, Evie Company signed an agreement to operate as a franchisee of St. Mark Café for
an initial franchise fee of P937,500 for 7 years of this amount, P175,000 was paid when the agreement
was signed and the balance payable in four annual payments beginning on December 31, 2015. Evie
signed a non-interest bearing note for the balance. Evie’s rating indicates that she can borrow money at
16% for the loan of this type. Assume that substantial services amounting to P283,500 had already been
rendered by St. Mark Café and that additional indirect franchise cost of P25,500 was also incurred.
(Round PV factor to 2 decimal places).
51. If the collection of the note is not reasonably assured, the net income for the year ended
December 31, 2015 is
a. P168,135
b. P228,035
c. P253,535
d. P313,435
On December 31, 2015, Mack Do authorized to grant Michael & Company to operate as a franchisee for
an initial fee of P150,000. Of this amount, P60,000 was received upon signing the agreement and the
balance, represented by a note, is due in three annual payments of P30,000 each beginning December
31, 2016. The present value on December 31, 2015 of the three annual payments appropriately
discounted is P72,000. According to the agreement, the nonrefundable down payment represents a fair
measure of the services already performed by Mack Do; however, substantial future services are
required of Mack do. Collectability of the note is reasonably certain.
52. Mack Do’s December 31, 2015 Balances Sheet, unearned franchise fees should be reported as
a. P 132,000
b. P 90,000
c. P 100,000
d. P 72,000
December 31, 2015 – The Fast Track, Inc. charges an initial franchise fee of P4,500,000 for the right to
operate as a franchise fee of Fast Track of this amount, P500,000 is collected. The balance is collectible
in four annual installments of P1,000,000 each every December 31, starting 2016. The PV of 1 for 4
periods at 10% is .6830 while the PV of an annuity of 1 for 4 periods at 10% is 3.1699.
January 2016 – The franchisor visited the proposed site and gave the go signal to start the construction
of the building.
The franchisor incurred P250,000 in relation to this franchise. Other terms of the agreement include a
continuing royalty fee equal to 5% of annual gross sales.
53. The entry to record the above activity on December 1, 2015 was:
a. Cash 500,000
Accounts Receivable 4,500,000
Deferred franchise revenue
4,500,000
b. Cash 500,000
Accounts Receivable 4,000,000
Deferred franchise revenue
3,669,900 Unearned interest revenue
830,000
c. Cash 500,000
Accounts Receivable 4,000,000
Franchise revenue
500,000 Deferred franchise revenue
3,169,900 Unearned interest revenue
830,100
d. Cash 500,000
Accounts Receivable 4,000,000
Franchise revenue
4,500,000
54. Assuming the initial down payment is not refundable and the collectability of the note is
assured, the amount of revenue recognized on December 31, 2015 is:
a. P 500,000
b. P4,500,000
c. P0
d. P3,669,000
55. The total revenue to be recognized by Fast Track, Inc on December 31, 2016 assuming the
collectability of the note is reasonably assured amounted to:
a. P3,669,900
b. P3,794,000
c. P3,294,900
d. P4,111,890
Lighthouse Company sells a franchise that requires an initial franchise fee of P70,000. A down payment
of P20,000 cash is required with the balance covered by the issuance of a P50,000, 10% notes payable
by the franchisee in five annual equal installments.
All the material services have been substantially performed by the franchisor, and the refund period has
expired, but the collectability of the note is not reasonably assured.
56. The (1) earned and (2) unearned franchise revenue at the opening of the outlet is
a. P70,000; P0
b. P0; P50,000
c. P50,000; P20,000
d. P20,000; P50,000
Henlin Food Inc. charges an initial franchise fee of P500,000 for the right to operate as a franchisee of
this amount, P100,000 is payable when the agreement was signed and the balance is a non-interest
bearing note in five annual payments of P80,000 each. In return for the initial franchise fee, the
franchisor will help locate the site, supervise the construction and training of store crews. The credit
rating of the franchisee indicates that the money can be borrowed at 8%. The present value of an
ordinary annuity of five annual receipts of P80,000 is P319,416.80. the discount represents the interest
revenue to be accrued by the franchisor over the payment period. The probability of refunding the initial
fee is extremely low, the franchisor had already performed substantial services as required by the
contract, and collectability of the note is reasonably assured.
Reyes Barbecue charges an initial franchise fee of P200,000, with P50,000 paid when the agreement was
signed on January 1, 2015 and the balance in two annual payments starting December 31, 2015. The
P50,000 is non-refundable. The present value factor of an ordinary annuity discounted at 12% for2
periods is P1.6901. Reyes Barbecue has substantially provided the services required and collectability of
the note is reasonably assured. Reyes Barbecue is also entitled to a 5% of gross sales as Royalty fee.
During 2015, the franchisee reported a total sale of P1.2M.
58. The total revenue that Reyes Barbecue should recognize at December 31, 2015 is:
a. P125,210.90
b. P236,757.50
c. P260,000
d. P251,968.40
On September 30, 2015 Heaven & Egg entered into franchise agreement with Manuel. 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, 2015, 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.
59. The net total revenue to be recognized by Heaven & Egg in 2015 is:
a. P464,933
b. P429,934
c. P462,146
d. P458,132