1. A partnership is formed by two individuals who were previously sole proprietors.

Property other than

cash which is part of the initial investment in the partnership would be recorded for financial
accounting purposes at the:
a. Proprietors’ book values or the fair value of the property at the date of the investment, whichever
is higher
b. Proprietors’ book values or the fair value of the property at the date of the investment, whichever
is lower.
c. Proprietors’ book values of the property at the date of the investment.
d. Fair value of the property at the date of the investment.

2. The most equitable basis of distributing partnership profit by way of capital contribution is
a. beginning capital c. average capital
b. ending capital d. Equally

3. The admission of a new partner under the bonus method will result in
a. bonus to the old partners only
b. bonus to the new partner only
c. bonus to either the new partner or the old partners, but not both
d. none of the above

4. Total partners’ equity will not change when a withdrawing partner

a. withdraws assets equal to his capital balance
b. sells his interest to a new or remaining partner
c. withdraws assets amounting to less than his capital balance
d. withdraws assets amounting to greater than his capital balance.

Use the following information in answering questions 10 and 11

On January 1, 2016, Mars, Len and Brie formed MLB Partnership with original contribution of P
4,000,000, 1,000,000 and P 5,000,000 respectively. The articles of co- partnership provides that profit or
loss shall be distributed under the following terms:
 Mars, Len, Brie shall be admitted to monthly salary of P 10,000, 20,000 and P 30,000
respectively.
 10% interest on the original capital contribution.
 As managing partner, Len shall receive bonus equal to 10% of net income after salaries and
interest but before bonus.
 The remainder shall be distributed on the basis of original capital contribution ratio.
During 2016, the partners regularly withdraw ¼ of their monthly salary. The December 31, 2016
Statement of Financial position of MLB Partnership shows that the capital balance of Mars is P 5,310,800.
On January 1, 2017, Brie decided to retire from the partnership and it was agreed that Brie shall receive
P 6,000,000. The retiring agreement provides that any bonus shall be distributed on the basis of capital
contribution ratio.
5. What is the net income of the partnership for the year ended December 31, 2016?
a. 3,772,000 b. 1,720,000 c. 2,872,000 d. 4,000,000
6. What is the capital balance of Len after the retirement of Brie on January 1, 2017?
a. 1,872,400 b. 1,932,400 c. 1,890,400 d. 1,854,400

7. The December 31, 2010, statement of financial position of the BB, CC and DD partnership is
summarized as follows:

Cash P 100,000 CC, Loan P 100,000

Other Asset, at cost 500,000 BB, Capital 100,000
CC, Capital 200,000
DD, Capital 200,000
Total P 600,000 P 600,000
======= =======
The partners share profits and losses as follows: BB 20%; CC 30%; and DD 50%, CC is retiring from the
partnership and the partners have agreed that “other assets” should be adjusted to their fair value of
P600,000 at December 31, 2011. They further agree that CC will receive P244,000 cash for his
partnership interest exclusive of the loan, which is to be paid in full.After CC’s retirement, the capital
balances of BB and DD, respectively, will be:
a. P 116,000; P 240,000 c. P 100,000; P 200,000
b. P 101,714; P 254,286 d. P 73,143; P 182,857

8. Partners Cammayo and Tac-an share profits and losses in the ratio of 7:3, respectively. On Feb. 01,
2011, their capital account balances were as follows: Cammayo, P70,000; Tac-an, P60,000.
Cammayo and Tac-an agreed to admit Hernandez as a partner with a one-third interest in the
partnership capital and profits or losses for an investment of P50,000. The new partnership will begin
with a total capital of P180,000. Immediately after Hernandez’s admission to the partnership, the
capital account balances of Cammayo, Tac-an, and Hernandez, respectively, are
a. P63,000; P57,000; P60,000 c. P60,000; P60,000; P60,000
b. P63,333; P56,667; P60,000 d. P70,000; P60,000; P50,000

9. The partnership of Gabriel, Carlos, Mia, and Alexa is being liquidated over the first few months of 2022.
The trial balance at January 1, 2022 is as follows:
Debits Credits
Cash P 200,000
Accounts receivable 56,000
Inventory 142,000
Equipment – net 300,000
Land 150,000
Loan to Gabriel 20,000
Accounts payable P 400,000
Gabriel, capital – 20% 170,000
Carlos, capital – 10% 80,000
Mia, capital – 50% 140,000
Alexa, capital – 20%
78,000
P 868,000 P 868,000
Additional information:
1. The partners agree to retain P 20,000 cash on hand for contingencies and distribute the rest of the
available cash at the end of each month.
2. In January, half of the receivables were collected. Inventory that cost P 75,000 was liquidated for
P 45,000. The land was sold for P 250,000.
3. The accounts payable was liquidated.

How much will partner Gabriel receive for the month of January 2022?
A . 65,333 B. P 68,000 C. P 81,000 D. P 103,000

Paul, Peter, and James are partners sharing profits on a 5:3:2 ratio. On January 1, 2023, Amanda was
admitted into the partnership with a 20% share in profits. The old partners continue to participate in
profits in their original ratios.

For the year 2023, the partnership book showed a net income of P 25,000. It was disclosed, however,
that the following errors were committed:

2022 2023
Accrued expenses not recorded at year-end P 1,200
Inventory overstated P 3,100
Purchases not recorded, for which goods have been
received and inventories 2,000
Income received in advance not adjusted 1,500
Unused supplies not taken up at year-end 900

10. The share of partner Paul in the 2023 corrected net income is:
A. 9,400 B. 10,000 C. P 11,750 D. Other amount
11. Which of the following statements is correct regarding a partner’s capital deficiency?
a. The partner should contribute to reduce the debit balance to the extent possible.
b. If contributions are not possible, the other partners with credit capital balances will be allocated a
portion of the debit balance.
c. Partners who absorb another’s capital deficiency have a legal claim against the deficient partner.
d. All of these statements are correct

12. The other partner must absorb the deficiency in a partner’s capital account on liquidation because of
a. limited life and mutual agency c. mutual agency and unlimited liability
b. limited life and co-ownership of property d. mutual agency and partnership’s taxability

13. How many of the following statements below are false?

I. A net loss reported by a branch is recorded by the home office by a debit to the
Investment in Branch ledger account.
II. If branch trade accounts receivable are carried in the home office accounting records,
doubtful accounts expense of the branch is recorded by the home office by a debit to
Branch Loss and a credit to Investment in Branch.
III. If a remittance of cash by a branch has not been recorded by the home office, the balance
of the branch’s Home Office ledger account exceeds the balance of the home office’s
Investment in Branch account.
IV. Freight costs on merchandise shipments from Cody Branch to Dana Branch in excess of
normal freight costs from the home office to Dana Branch should be recognized as
operating expenses of Dana Branch.

a. 1 b. 2 c. 3 d. 4.

14. Home office ships merchandise P50,000 with a P5,000 freight FOB Shipping Destination. The
accounting treatment for this will be
a. branch debits shipments from home office P55,000 and credits home office equity for the
same amount.
b. branch debits shipments from home office and credits home office equity for P50,000.
c. branch debits shipments for P50,000 and freight P5,000 and credits home office equity for
P50,000 and cash for P5,000.
d. branch debits shipments for P50,000 and freight P5,000 and credits the reciprocal account
for P55,000.

15. How many of the following statements below are true?

I. Both the Home Office ledger account and the Investment in Branch account are displayed
in the combined financial statements for the home office and the branch.
II. The Investment in Branch ledger account is displayed as a noncurrent asset in the
separate balance sheet of the home office, and the Home Office account is displayed as a
long-term liability in the separate balance sheet of the branch.
III. In a working paper for combined financial statements of a home office and branches, the
balance of the Shipments to Branch ledger account is eliminated against the balance of
the Home Office account.
IV. In a separate balance sheet for a home office, the balance of the Allowance for
Overvaluation of Inventories: Branch ledger account is deducted from the balance of the
Investment in Branch ledger account.

a. 1 b. 2 c. 3 d. 4
16. RICAFORT ELECTRONICS has one branch office. The home office bills its branch at 25% above its acquisition
cost of merchandise shipped later to the branch. Selected balances from the Home Office books and the
Branch books follow:
HO BOOKS BR BOOKS
Inventory, January 1 P 56,250 P 90,000
Shipment from Home Office 525,000
Purchases 1,687,500 562,500
Shipment to Branch 450,000
Deferred Profit 123,750
Sales 2,250,000 1,350,000
Operating expenses 543,750 206,250

The ending inventory of the Home Office is P281,250; the Branch Office, P135,000. The cost of
sales in the branch is P95,250 more than its actual cost. Calculate the combined net income
a. P980,000 c. P890,250
b. P982,500 d. P980,520

At December 31, 2022 the following information were ascertained by the Home Office for the
reconciliation of the reciprocal accounts of the Home Office and the Branch. The Branch's Home
Office Current account had a balance of P800,000.

a. Advertising expense of P24,000 was charged by the home office to the branch and was recorded
by the branch as P2,400 twice.
b. Freight charge of P11,660 was made by the home office for the merchandise that was shipped to
the branch, but the branch recorded the freight as P16,700.
c. Home office credit memo representing discount in the amount of P11,800 on merchandise was
recorded twice by the branch.
d. A debit memo was sent by the branch in the amount of P14,000 for merchandise return and the
home office failed to record the debit memo
e. Home office erroneously recorded a branch credit memo in the amount of P91,250. The reason
for the credit memo of the branch was that the branch collected from home office's customers in
the amount of P108,530.

17. What is the amount of the net adjustment in the Investment in Branch account?
A. 3,280 DR B. 505 DR C. 3,280 CR D. 10,920 CR

18. What is the amount of the net adjustment in the Home Office Current account?
A. 28,360 CR B. 40,160 CR C. 25,960 CR D. 25,960 DR

19. If goodwill arising from the consolidation appears among the assets on the consolidated balance
sheet of a parent company and its only subsidiary, this indicates that the subsidiary
a. Was acquired at a price that was less than the underlying book value of its tangible assets
b. Was accounted for as a pooling of interests
c. Already had goodwill on its books
d. Was acquired at a price in excess of the underlying fair value of its net assets.

20. When an investor uses the cost method to account for investments in common stock, cash dividends received
by the investor from the investee should normally be recorded as:
a. Dividend income
b. An addition to the investor's share of the investee's profit
c. A deduction from the investor's share of the investee's profit
d. A deduction from the investment account
21. When does the measurement period end for a business combination in which there was incomplete
accounting information on the date of acquisition?
A. Thirty days from the date of acquisition.
B. On the final date when all contingencies are resolved.
С. At the end of the reporting period in the year of acquisition.
D. When the acquirer receives the information or one year from the acquisition date, whichever occurs
earlier.

22. Given the following information, how is goodwill from a business combination computed under PFRS 3?
A = Consideration transferred
B = Noncontrolling interest in net assets of subsidiary
C = Previously held equity interest
D = Fair value of net identifiable assets of the subsidiary
% = Percentage of ownership acquired by the parent in the subsidiary
a. A+B+C-D
b. (A+C)- (D x %)
c. A – ( D x % )
d. (A+B)- ((D x %)-B)

On January 2, 2021, the Statement of Financial Position of Parent Company and Subsidiary Company immediately
before the combination are:
Parent Co. Subsidiary Co.
Cash P450,000 P15,000
Inventories 300,000 30,000
Property and equipment (net) 750,000 105,000
Total Assets P1,500,000 P150,000

Current Liabilities P90,000 P15,000

Ordinary shares, P100 par 150,000 15,000
Share premium 450,000 30,000
Retained earnings 810,000 90,000
Total Liabilities and Stockholders' Equity P1,500,000 P150,000

The fair value of Subsidiary Company’s equipment is P153, 000. Assume the following independent cases:

23. Assuming Parent Company acquired 80% of the outstanding shares of Subsidiary Company for P136, 800 and
non-controlling interest is measured at the proportionate share of Subsidiary Company’s identifiable net
assets, how much is the consolidated stockholder’s equity on the date of acquisition?
a. P1, 410,000 c. P1, 446,600
b. P1, 419,600 d. P1, 456,200

24. Assuming Parent Company acquired 90% of the outstanding shares of Subsidiary Company for P243, 000 and
non-controlling interest is measured at fair value, how much is the total consolidated assets on the date of
acquisition?
a. P1, 542,000 c. P1, 737,000
b. P1, 785,000 d. P1, 494,000

On January 1, 2020, Entity A acquired 70% of outstanding ordinary shares of Entity B at a price of P210,000. On the
same date, the net assets of Entity B were reported at P260,000. On January 1, 2020 Entity A reported retained
earnings of P2, 000,000 while Entity B reported retained earnings of P200, 000. All the assets and liabilities of
Entity B are fairly value except machinery which is undervalued by P80, 000 and inventory which is overvalued by
P10, 000. The said machinery has remaining useful life of four years while 40% of the said inventory remained
unsold at the end of 2020.

For the year ended December 31, 2020, Entity A reported net income of P1,000,000 and declared dividends of
P150,000 in the separate financial statements while Entity B reported net income of P150,000 and declared
dividends of P20,000 in the separate financial statements.

Entity A accounted the investment in Entity B using cost method in the separate financial statements.

25. What is the non-controlling interest in the net assets on December 31, 2020?
a. P124, 800 c. P126, 000
b. P130, 200 d. P133, 800

26. What is the consolidated net income attributable to parent shareholders for the year ended December 31,
2020?
a. P1, 102, 200 c. P1, 141,200
b. P1, 162,200 d. P1, 095,200

27. What is the amount of consolidated retained earnings on December 31, 2020?
a. P3, 012,200 c. P2, 952,200
b. P2, 991,200 d. P2, 945,200

On January 1, 2020, Entity A acquired 60% of outstanding ordinary shares of Entity B at a gain on bargain purchase
of P40, 000. For the year ended December 31, 2021, Entity A and Entity B reported sales revenue of P2,000,000
and P1,000,000 in their respective separate income statements. At the same year, Entity A and Entity B reported
cost of goods sold of P1, 200,000 and P700, 000 in their respective separate income statements.

During 2020, Entity A sold inventory to Entity B at a selling price of P280, 000 with gross profit rate of 40% based
on cost. On the other hand, Entity B sold inventory to Entity A at a selling price of P400, 000 with gross profit rate
of 30% based on sales during 2021.

On December 31, 2020, 25% of the goods coming from Entity A remained in Entity B's inventory but all were
eventually sold to third persons during 2021. As of December 31, 2021, 40% of the goods coming from Entity B
were eventually sold to third persons.

For the year ended December 31, 2021, Entity A reported net income of P560, 000 while Entity B reported net
income of P200, 000 and distributed dividends of P50, 000. Entity A accounted for its inventory in Entity B using
cost method in its separate financial statements.

28. What is the consolidated sales revenue for the year ended December 31, 2021?
a. P2, 600,000 c. P3, 000,000
b. P2, 320,000 d. P2, 720,000

29. What is the consolidated gross profit for the year ended December 31, 2021?
a. P1, 120,000 c. P1, 028,000
b. P1, 048,000 d. P1, 152,000

30. What is the non-controlling interest in net income for the year ended December 31, 2021?
a. P100, 800 c. P51, 200
b. P59, 200 d. P88, 000

31. What is the consolidated net income attributable to parent shareholders for the year ended December 31,
2021?
a. P766, 800 c. P606, 800
b. P596, 800 d. P626, 800

32. When it is probable that total contract costs will exceed total contract revenue, how shall it be accounted for?
a. The expected loss shall be recognized as expense immediately regardless of the certainty or
uncertainty of the outcome of the contract
b. The expected loss shall be recognized as expense immediately as expense only when the outcome of a
construction contract cannot be estimated reliably
 c. The expected loss shall be recognized as expense by reference to the state of completion of the
contract activity at the end of the reporting period when the outcome of a construction contract
cannot be estimated reliably
d. The expected loss shall be accounted for based on company’s policy

33. What is the core principle of IFRS 15 Revenue from contracts with customers?
a. Revenue should be recognized when an entity transfers control of goods or services to
a customer.
b. Revenue should be recognized when an entity transfers control of goods or services to
a customer at an amount to which the entity expects to be entitled.
c. Revenue should be recognized over time in a manner that depicts an entity's performance.
d. Revenue should be recognized at a point in time when control of the goods or
services is transferred to the customer.

34. When shall an entity recognize revenue from contracts with customers?
a. When it is probable that future economic benefits will flow to the entity and the revenue
can be measured reliably.
b. When or as the entity satisfies the performance obligation.
c. When the entity collected the cash from the customers.
d. When the entity and the customers sign the contracts.

35. In 2018, Cupid Construction Co. (CCC) began work on a two-year fixed price contract project. CCC
recognizes revenue over time according to percentage of completion for this contract and provides the
following information (amounts in millions):

Accounts receivable, December 31, 2018 (from construction progress billings) P37.5
Actual construction costs incurred in 2018 P135
Cash collected on project during 2018 P105
Construction in progress, December 31, 2018 P207
Estimated percentage of completion during 2018 60%
What is the fixed contract price for CCC's project?
a. P120 million b. P225 million c. P345 million d. P349.5 million

36. PURONG KILATIS FOODS, INC. charges new franchisees an initial fee of P2,500,000. Of this amount,
P1,000,000 is payable in cash when the agreement is signed, and the remainder is to be paid in four equal
annual installments through the issuance of 12% interest-bearing-notes. In consideration thereof, PURONG
KILATIS FOODS promises to assist the franchisee in locating the business site; in conducting market study to
estimate earnings potential; in supervising the construction of a building; and in the initial training of
management and employees. The agreement also includes the payment monthly by the franchisee of
continuing franchise fees calculated at 3% of the franchisee's monthly gross sales revenues.
On July 1, 2021, PURONG KILATIS FOODS entered into a franchising agreement with a known retailer,
SHELLY's SPECIALTIES. PURONG KILATIS FOODS had completed all of the initial services required at a cost of
P800,000. Indirect expenses were P18,000 in 2021. SHELLY's SPECIALTIES had started operations on
November 2, 2021 with a total sales revenue of P450,400 from its 2021 operation. It was ascertained that
collection of the notes provided by SHELLY's SPECIALTIES is reasonably assured.
Compute the net income reported by PURONG KILATIS FOODS from the SHELLY's franchise in 2021.
A. P1,578,512 C. P1,785,512
B. P1,758,512 D. P1,875,215

C Company is a manufacturer that sells its product to local retailers. Retailers sell the product to its
customers and for each product purchased by the customers, a coupon of P200 discount is given and
may be used on future purchase of the same product. Retailers are reimbursed for the discount by the
manufacturer when customers redeem their coupons. During 2021, the manufacturer sold 8,000
products to the retailers at P1,100 each product. It is expected that 75% of the coupons will be
redeemed. By December 31, 2021, the manufacturer had paid the retailers P500,000 as reimbursement.
37. What amount should ABC record as sales revenue for 2021?
a. 7,200,000 c. 8,800,000
b. 8,400,000 d. 7,744,000

38. What amount should ABC report as rebate liability on December 31, 2021?
a. 556,000
b. 1,056,000
c. 1,200,000
d. 1,600,000
 On January 1, 2021, CD Company accepted a long-term construction project for a fixed contract price of
P4,000,000 to be completed on November 30, 2023. The entity provided the following data concerning
the direct costs related to the said project for 2021 and 2022:
2021 2022
Costs incurred to date 1,200,000 3,000,000
Remaining estimated costs to complete at year-end 4,800,000 750,000
39. Under IFRS 15, what amount should CD Company report as gross profit or (loss) for the year ended December
31, 2022?
A. 200,000 B. 250,000 C. 2,200,000 D. (1,800,000)

40. At the time of corporate liquidation, the redeemable preferred stockholders received only the partial
amount of redemption value of their share of stocks. Which of the creditors of this dissolved and
liquidated corporation received the full amount of their claims?
a. Fully secured creditors only
b. Fully secured creditors and unsecured creditors with priority only
c. Partially secured creditors and unsecured creditors without priority only
d. All the creditors of the corporation

41. The ratio called “dividend to general unsecured creditors” is calculated by which of the following
formulas?
a. Estimated amount available for unsecured creditors with/without priority divided by total
claims of all unsecured creditors with/without priority
b. Estimated realizable value of all debtor assets divided by book value of debtor assets
c. Estimated gain/loss on liquidation divided by total estimated net realizable value of debtor
assets
d. Net estimated proceeds available to unsecured creditors divided by total claims of unsecured
creditors

The ELI Corporation is undergoing liquidation and its statement of financial position as of January 2, 2017
is as follows:

Assets Liabilities and Equity

Cash P 124,200 Accounts Payable P 118,500
Receivables, net 340,800 Salaries Payable 50,000
Inventory 70,000 Bank Loan Payable 222,000
Prepaid Expenses 22,500 Note Payable 80,000
Building, net 360,000 Bonds Payable 450,000
Goodwill 82,000 Ordinary Shares 120,000
Capital Deficit (41,000)
Total Assets P 999,500 Total Liabilities and P 999,500
Equity
The inventory has a realizable value of P53,000. Of the accounts payable, P60,000 is secured by 1/4 of the
receivable which is 30% not collectible. The balance in the book value of the receivables which has a
realizable value of P235,000 is used to secure the bank loan payable. The bonds payable is secured by the
building having a book value of P360,000 and a realizable value of P375,000.
Unrecognized liabilities as of Jan. 2, 2017 are as follows: accrued interest on bonds payable and taxes
amounting to P4,000 each, and trustee’s salary amounting to P9,500.

42. How much is the estimated recovery percentage to partially secured accounts payable?
a. 54% b. 56% c. 58% d. 60%

43. How much will be paid to the partially secured creditors of ELI corporation?
a. P477,595 c. P478,349
b. P479,102 d. P480,669
44. What is the best cost accumulation procedure to use when many batches, each differing as to product
specification, are produced?
a. Job order
b. Process
c. Actual
d. Standard

45. Company Q produces three products from a joint process. The products can be sold at split-off or processed
further. In deciding whether to sell at split-off or process further, management should
a. ignore the joint cost in making the decision.
b. allocate the joint cost to the products based on a physical quantity measure prior to making the decision.
c. allocate the joint cost to the products based on relative sales value prior to making the decision.
d. subtract the joint cost from the total sales value of the products before determining relative sales value and
making the decision.

46. Material is added at the beginning of a process in a process costing system. The beginning Work in Process
Inventory for the process was 30 percent complete as to conversion costs. Using the FIFO method of costing,
the number of equivalent units of material for the process during this period is equal to the
a.beginning inventory this period for the process.
b.units started this period in the process.
c. units started this period in the process plus the beginning Work in Process Inventory.
d.units started and completed this period plus the units in ending Work in Process Inventory.

Silay Company is employing process costing regarding its production cycle.

Conversion costs are added uniformly during the production process while direct materials are added
20% at the start of production process, 45% at the middle of the production process and the remainder at
the end of production process. Normal spoilage is 10% of units started during the year.

The entity is conducting inspection when the production process is at 45% of conversion cost. The entity
provided the following production data during the year:

Beginning Work in Process Inventory 20,000 units (40% incomplete as to conversion costs)
Units started during the year 80,000 units
Ending Work in Process Inventory 10,000 units (80% complete as to conversion costs)
Units completed during the period 76,000 units

47. What is the equivalent unit of production for direct material under average process costing?

A. 85,300 units B. 82,300 units C. 76,500 units D. 87,500 units

48. What is the equivalent unit of production for conversion cost under average process costing?

A. 89,300 units B. 90,300 units C. 86,500 units D. 92,300 units

49. What is the equivalent unit of production for direct material under FIFO costing?

A. 70,300 units B. 74,500 units C. 72,300 units D. 76,900 units

50. What is the equivalent unit of production for conversion cost under FIFO costing?

A. 78,300 units B 82,500 units C. 74,900 units D. 77,300 units