Accounting for Special Topics - PRELIM Examination

1st Semester, A. Y. 2020- 2021

BSA 3

Instruction: Choose the letter of your choice and submit your supporting computation. Each item is worth 2
points. Answers without supporting computation will be marked as INCORRECT.

START….

On March 31, 2019, EE, BB and RR formed the POGI Partnership to operate a CPA review center. The following is
a list of their contributions at that date:
EE BB RR
BV FV BV FV BV FV
Cash 132,000 132,000 100,000 100,000 120,000 120,000
Inventory 80,000 75,000
Land 150,000 188,000
Equipment, net 90,000 90,000
Totals P 282,000 320,000 180,000 175,000 210,000 210,000

BB has an accounts payable of P 50,000 on the inventory and RR has a mortgage payable of P 60,000 on the
equipment. The partners have agreed to assume only the mortgage payable but not the accounts payable. They
further agreed for the capital ratio to be 50%, 20% and 30% to EE, BB and RR, respectively.

The partnership starts operation on April 1, 2019 and on December 31, 2019 reported a net income of P
305,400.

The following is the profit and loss agreement among the partners
a. 10% interest to each partners beginning capital
b. salaries of P 30,000 per quarter will be given to EE and RR.
c. bonus of 10% of net income after interest, salaries and bonus will be given to EE.
d. residual profit or loss will be divided equally.

1. How much is the net asset contribution of RR?

a. P 210,000 b. P 150,000 c. P 175,000 d. P 125,000

2. What is the beginning capital of Partner BB?

a. P 352,500 b. P 211,500 c. P 129,000 d. P 141,000

3. Share of net income of Partner EE on December 31, 2019?

a. P 149,210 b. P 261, 715 c. P 148, 035 d. P 144, 531

4. The capital balance of Partner RR on December 31, 2019?

a. P 344, 495 c. P 485, 983 c. P 343, 120 d. P 321, 353

5. The admission of new partner under the bonus method will result in a bonus to
a. The old partners only
b. Either the old partners or the new partner

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 c. The new partner only
d. None is given

Claire, Daisy and Elsie formed the CDE Partnership on August 1, 2014. With the following assets, measure at fair
market values, contributed by each partner:
Claire Daisy Elsie
Cash P 324,000 108,000 129,600
Accounts Receivable 73,080 91,800
PPE 1,620,000 340,200
A part of Claire’s cash contribution, P 216,000 comes from personal borrowings. Also, the PPE of Claire and Daisy
are mortgaged with the bank for P 972,000 and P 72,000, respectively. The partnership to assume responsibility
for these PPE mortgages. The partners have agreed to share profits and losses on a 5:2:3 ratio, to Claire, Daisy
and Elsie, respectively.

6. What is the capital balance for each partner at the opening of business on August 1, 2014?
a. Claire, P 1,045,080; Daisy, P 376,200; and Elsie, P 221,400
b. Claire, P 1,161,200; Daisy, P 418,000; and Elsie, P 246,000
c. Claire, P 1,987,500; Daisy, P 189,000; and Elsie, P 217,500
d. Claire, P 1,095,120; Daisy, P 547,560; and Elsie, P 182,520

7. What is the capital balance for each partner at August 1, 2014, instead, if the interest ratio is given at
5:3:2 to Claire, Daisy and Elsie, respectively?
a. Claire, P 730,080; Daisy, P 730,080; and Elsie, P 365,040
b. Claire, P 985,608; Daisy, P 492,804; and Elsie, P 164,268
c. Claire, P 1,987,500; Daisy, P 189,000; and Elsie, P 217,500
d. Claire, P 821,340; Daisy, P 492,804; and Elsie, P 328,536

8. Any bonus arising from the agreement in reconciling differences between contributions and capital
credits will be disposed as (charges)/credits to partners as follows:
Claire Daisy Elsie
a. P (66,080) 129,560 (63,480)
b. P 66,080 (129,560) 63,480
c. P (59,472) 116,604 (57,132)
d. P (223,740) 116,604 107,136

On January 1, 2014, Frida and Glace formed a partnership by contributing cash of P 405,000 and P 270,000,
respectively. On February 1, 2014, Partner Frida contributed an additional P 135,000 cash to the partnership and
on August 1, 2014 Partner Frida made a permanent withdrawal of P 67,500. On May 1, 2014, Partner Glace
contributed machinery with a fair market value of P 90,000 and net book value of P 75,000 when contributed
when contributed. On November 1, 2014 Partner Glace contributed an additional p 45,000 cash to the
partnership. Both partners withdrew one- fourth of their salary allowances in 2014.
The partners reported a net income of P 257,400 in 2014 and the profit and loss agreement are as follows:
a. Interest at 6% is allowed on average capital balances;
b. Salaries of P 2,700 per month to each partner;
c. Bonus to Frida of 10% of net income after interest, salaries and bonus; and
d. Balance to be divided in the ratio of 6:4 to Frida and Glace, respectively.

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9. Determine how the net income will be allocated to the partners:
a. Frida, P 160,000 and Glace, P 126,000
b. Frida, P 180,000 and Glace, P 106,000
c. Frida, P 170,000 and Glace, P 116,000
d. Frida, P 153,000 and Glace, P 104,400

10. Determine the capital balances of the partners at December 31, 2014:
a. Frida, P 617,400 and Glace, P 501,300
b. Frida, P 551,000 and Glace, P 686,000
c. Frida, P 688,000 and Glace, P 449,000
d. Frida, P 683,000 and Glace, P 554,000

11. Assume the partners’ have decided instead to report partners’ interest and salaries as operating expenses
modified its P&L agreement as follows: (a) bonus to Frida of 10% of net income after bonus and (b) balance to
be divided in the ratio of 6:4 to Frida and Glace, respectively. Determine the capital balances of the partners at
December 3, 2014.

a. Frida, P 680,000 and Glace, P 557,000

b. Frida, P 617,400 and Glace, P 501,300
c. Frida, P 683,000 and Glace, P 554,000
d. Frida, P 688,000 and Glace, P 449,000

Haydee and Yssa are partners sharing profits and losses in the ration of 60% and 40%, respectively. The
partnership balance sheet at August 30, 2014 follows:

Cash P 12, 150 Accounts payable P 13,500

Other assets P 119,700 Haydee, Loan P 5,850
Yssa, Loan P 9,000 Haydee Capital P 81,000
Yssa Capital P 40,500
Total P 140,850 Total P 140,850

At this date, Jose was admitted as a partner for consideration of P 43,875 cash for 40% interest in capital and in
profits.

12. Assume Jose is admitted by purchase of 40% each of the original partners’ interest, determine how the P
43,875 will be apportioned to Haydee and Yssa.
a. Haydee, P 32,850 and Yssa, P 15,900
b. Haydee, P 32,450 and Yssa, P 16,300
c. Haydee, P 29, 565 and Yssa, P 14,310
d. Haydee, P 32,950 and Yssa, P 15,800

13. Assume Jose is admitted by investing the P 43,875 to the partnership, determine the effects of any
bonus over the capital balances of the original partners:
a. Haydee, P (9,900) and Yssa, P (14,850)
b. Haydee, P 9,000 and Yssa, P 14,850
c. Haydee, P (14,850) and Yssa, P (9,900)
d. Haydee, P (13,365) and Yssa, P (8,910)

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The following balances as at October 31, 2014 for the Partnership of Carlo, Loro and Mine were as follows:
Cash P 50,000 Liabilities P 15,000
Loro, Loan P 15,000 Carlo, Loan P 22,500
Non-cash Carlo, Cap P 105,000
Assets P 400,000 Loro, Cap P 97,500
Mine, Cap P 225,000
Total P 465,000 Total P 465,000

Carlo has decided to retire from the partnership on October 31. Partners agreed to adjust the non- cash assets
to their fair market value of P 490,000. The estimated profit to October 31 is P 100,000. Carlo will be paid P
173,000 for his partnership interest inclusive of his loan which is repaid I full. Their profit and loss ratio is 3:3:4 to
Carlo, Loro and Mine, respectively.
14. What will be the balance of Loro’s capital account after the retirement of Carlo?

a. P 129,444 b. P 144,429 c. P 124,449 d. P 149,424

The accounts of the partnership of NOP at December 31, 2014 are as follows:
Cash P 74,250 Liabilities P 56,250
Non- cash Loan from O P 18,000
Assets P 655,875 N, capital P 185,625
Loan to N P 13,500 O, capital P 329,625
P, capital P 154,125
Total P 743,625 Total P 743,625
They divide profits and losses 3:5:2 to N, O and P, respectively. They have decided to liquidate the partnership at
this date.

15. Determine the total amount distributable to the other partners before the least prioritized could
participate in the partnership distribution upon liquidation.
a. P 100,125 b. P 121,520 c. P 111,250 d. P 112,510

16. Determine the amount payable to Partner P if cash is paid just before the start of liquidation on
December 31, 2014.
a. P 16,750 b. P 15, 911 c. P 17,679 d. P 17,560

17. Determine the amount of Partner N and Partner O would have received by the time Partner P would
have received a cumulative amount of P 40,500.
a. N, P 1, 785 and O, P 72,650
b. N, P 1,578 and O, P 70,265
c. N, P 1,875 and O, P 70,625
d. N, P 1,688 and O, P 63,562

18. The following condensed balance sheet is prepared for Q and R, who share profits and losses in the ratio
of 60:40, respectively:
Other assets P 405,000 Accounts payable P 108,000
Q, Loan P 18,000 Q, Capital P 175,500
R, Capital P 139,500

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 Total P 423,000 Total P 423,000
The partners have decided to liquidate the partnership. If the other assets are sold for P 346,500, what
amount of the available cash should be distributed to Q?
a. P 136,000 b. P 156,000 c. P 122,400 d. P 195,000

19. On January 1, 2014, the partners S, T and U, who share profits and losses in the ratio of 5:3:2,
respectively, decided to liquidate their partnership. On this date, the partnership condensed balance
sheet was as follows:
Cash P 45,000 Liabilities P 54,000
Other assets P 225,000 S, Capital P 72,000
T, Capital P 81,000
U, Capital P 63,000
Total P 270,000 Total P 270,000
On January 15, 2014, the first cash sale of other assets with a carrying amount of P 135,000 realized P
108,000. Safe installment payments were made on the same date. How much cash should be distributed
to each partner?
a. S, P 15,000; T, P 51,000 and U, P 44,000
b. S, P 40,000; T, P 45,000 and U, P 35,000
c. S, P 55,000; T, P 33,000 and U, P 22,000
d. S, P 13,000; T, P 45,900 and U, P 39,600

20. Venus and Wilma partnership’s balance sheet at December 31, 2013, reported the following:
Total assets P 100,000
Total liabilities P 20,000
Venus, Capital P 40,000
Wilma, Capital P 40,000

On January 2, 2014, Venus and Wilma dissolved their partnership and transferred all assets and liabilities
to a newly formed corporation. At the date of incorporation, the fair value of the net assets was P
12,000 more than the carrying on the partnership’s books. Of which, P 7,000 was assigned to tangible
assets and P 5,000 was assigned to patent. Venus and Wilma were each issued 5,000 shares of the
corporation’s P 1 par common stock. Immediately following incorporation, additional paid- in capital in
excess of par should be credited for

a. P 68,000 b. P 70,000 c. P 77,000 d. P 82,000

On January 1, 2014, H, I and J (all are corporations) establish a joint undertaking to manufacture a product they
agree to share equally. Each will contribute P 200,000 into the operation; H and I are to contribute cash while J is
to contribute equipment with a cost of P 185,000. The equipment has a remaining life of 10 years when
contributed.

21. Determine the amount J will show the Equipment in JO account in its balance sheet at January 1, 2014.
a. P 61,667 b. P 50,000 c. P 66,667 d. P 65,000

22. Determine the net amount J will show the Equipment in JO account in its balance sheet at December 31,
2014.

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 a. P 45,000 b. P 55,500 c. P 60,000 d. P 58,500

23. Determine the net amount of H will show the Equipment in JO account in its balance sheet at December
31, 2014.
a. P 45,000 b. P 55,500 c. P 60,000 d. P 58,500

24. Now assume the book carrying value of the equipment contributed by J is P 215,000 and the fair value
is P 200,000. What amount will each of the operators show the Equipment in JO in its (1) January 2014
and in its (2) December 31, 2014 balance sheets?
a. (1) P 61,667 and (2) P 55,500
b. (1) P 66,667 and (2) P 62,167
c. (1) P 66,667 and (2) P 60,000
d. (1) P 65,000 and (2) P 55,500

Teresa and Bea in a joint venture, contributed P 30,000 each in order to purchase merchandise which were sold
in lots at a closing sale. They agreed to divide their profits equally and each shall record her purchases, sales, and
expenses in her own books. After almost merchandise had been sold, they wind up their venture. The following
are venture transactions
Teresa Bea
Purchases of merchandise P 30,000 30,000
Expenses paid from JO- cash 3,000 3,900
Joint Venture credit balances (24,000) (21,000)
Undisposed merchandise upon
Termination of JV 900 1,400

All transactions for the joint venture are in cash. The venturers are to take over the unsold merchandise at cost.

25. Calculate the net profit of the joint venture undertaking.

a. P 47,300 b. P 54,900 c. P 24,900 d. P 30,000

26. Determine the amount of cash Bea would receive/(pay) from/to Teresa upon final cash settlement by
the venturers.
a. P (1,250) b. P 2, 150 c. P (2,150) d. P 1,250

A and B agreed on a joint operation to purchase and sell car accessories. They agreed to contribute P 25,000
each to be used in purchasing the merchandise, share equally in any gain or loss, and record their joint
operation transactions in their individual books. After one year, they decided to terminate the joint operation,
and data from their records were:
A B
Joint Operation 18,000 Cr 20,200 Cr
Expenses paid from JO Cash 1,850 2,600
Value of inventory taken 1,000 1,800

27. How much is the joint operation sales?

a. P 84,670 b. P 88,450 c. P 92,650 d. P 93, 350

28. How much is the joint operation profit?

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 a. P 32, 880 b. P 34,650 c. P 41,000 d. P 42,750

On January 1, 2020, X Company signed an agreement with Z Corporation to form a new corporation (XZ) for the
production of special gadgets. They contributed P 1,000,000 each and will share in equity and profits equally.
During 2020 XZ Corporation reported a net profit of P 92,000 and declared dividends of P 30,000 at year- end.
On the other hand X Company reported a net profit of P 1,216,000 for year 2020. At January 1, 2020, its share
capital and retained earnings were P 2,400,000 and P 736,000, respectively. Before adjustments for its share of
XZ’s profit and the recognition of dividend receivable, the balance sheet draft of X Company shows a total assets
of P 5,024,000.

29. Determine the balance of the Investment in JV account to be reported by X Company in its balance
sheet at December 31, 2020.
a. P 1,030,000 b. P 1,040,320 c. P 1,046,000 d. P 1,000,000

30. Determine the amount of retained earnings X Company will report in its balance sheet at December 31,
2020.
a. P 736,000 b. P 782,000 c. P 4,398,000 d. P 1,998,000

31. How much total assets will be reported in X Company’s balance sheet at December 31, 2020?
a. P 5,024,000 b. P 5,070,000 c. P 5,055,000 d. P 5,550,000

32. Three parties establish a separate legal entity (Entity X) in which the three participants have different
shares of voting rights, as follows: Entity A, 50%; Entity B, 25%; and Entity C, 25%. Entity X’s activities
constitute a business. A contractual agreement entered by the three parties specifies that at least 75%
of the voting rights required to make decisions about entity X’s relevant activities. Which statement is
true?
a. Anyone of the entities has control over company policy.
b. Only Entity A has acquired control in Entity X.
c. Combination of Entity B and C acquired control in Entity X
d. None of the participating entities acquired control in Entity X.

33. Which of the following would be least likely to be used as a means of allocating profits among partners
who are active in the management of the partnership?
a. Salaries
b. Bonus as a percentage of net income before the bonus
c. Bonus as a percentage of sales in excess of targeted amount
d. Interest on average capital balances.

34. When an investment of a new partner exceeds the new partners’ initial capital balance and goodwill is
not recorded, who will receive the bonus?
a. The new partner
b. The old partners in their old profit and loss ratio
c. The old partners in the new profit and loss ratio
d. The old and the new partners in their new profit and loss ratio

35. In the cash distribution program, which partner gets the first cash distribution?

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 a. The partner with the largest loan balance
b. The partner with the largest loss absorption potential
c. The partner with the largest capital balance
d. The partner with the largest profit and loss ratio

36. Determine the true statement under PFRS 11

a. Joint arrangement is either a joint operation or a joint venture
b. Joint operation is either a joint arrangement or a joint venture
c. Joint venture is either a joint arrangement or a joint operation
d. Joint arrangement, joint venture, and a joint operation are one and the same.

37. Which of the following statement is true with regard to a withdrawing partner?
a. A bonus must be paid to the retiring partner.
b. A bonus may be paid to the retiring partner.
c. A bonus must be paid to the retiring partner or to the remaining partner
d. Recognizing bonus is not appropriate when a partner retires.

38. Ganda, Herron and Morse is considering possible liquidation because Morse is insolvent. The partners
have the following capital balances: P 60,000, P 70,000 and P 40,000, respectively and share profits and
losses 30%, 45% and 25% respectively. The partnership has P 200,000 in assets that can be sold for P
150,000. What is the minimum that Morse’s creditors would receive if they have filed a claim for P
50,000?

a. -0- b. P 27,500 c. P 45,000 d. P 47,500

39. Handy, Jones and Sandy is in the process of liquidating and the partners have the following capital
balance: P 20,000, P 22,000, and P (10,000) respectively. The partners share all profits and losses 50%,
35% and 15% respectively. Sandy has indicated that the P (10,000) deficit will be covered with a
forthcoming contribution. The remaining partners have requested to receive P 18, 382 in cash that is
available. How should this cash be distributed?
a. Handy P7, 500; Jones P 18,882 b. Handy P 10, 813; Jones P 7, 569
c. Handy P8, 000; Jones P 18,382 d. Handy P6, 107; Jones P 12, 275

40. Cornbits Partnership had a net income of P 8,000 for the month ended September 30, 2014. Sunshine
purchased an interest in Cornbits Partnership of Richie and Moby by paying Richie P 32,000 for half of
her capital and half of her 50% profit- sharing interest on October 1, 2014. At this time, Richie’s capital
balance was P 24,000 and Moby’s capital balance was P 56,000. Sunshine should receive a credit to her
capital balance of

a. P 12,000 b. P 16,000 c. P 20,000 d. P 26, 667

GOODLUCK 

Prepared by:

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 JASON B. CERCADO, CPA, MBA