BAFINAR – ADVANCED FINANCIAL ACCOUNTING AND REPORTING (MIDTERM)

1. What is the valuation if a partner contributes a noncash property to the partnership?

a. Book value of the property c. Actual amount of the property
b. Acquisition cost of the property d. Fair value of the property
2. Temporary withdrawals made by the partner is posted in ledger as
a. Partner’s drawing, debit c. Partner’s capital, debit
b. Partner’s drawing, credit d. Partner’s capital, credit
3. A partnership is formed by two individuals who were previously sole proprietors. Property other than cash
that is part of the initial investment in the partnership would be recorded for financial reporting purposes at
the
a. Proprietor’s book values or the fair value of the property at the date of investment, whichever is higher
b. Proprietor’s book values or the fair value of the property at the date of investment, whichever is lower
c. Proprietor’s book values of the property at the date of investment
d. Fair value of the property at the date of investment
4. How does partnership accounting differ from corporation accounting?
a. The matching principle is not considered appropriate for partnership accounting
b. Revenues are recognized at a different time by a partnership that is appropriate for a corporation
c. Individual capital accounts replace the contributed capital and retained earnings balances found in
corporate accounting
d. Partnerships report all assets at fair value as of the latest balance sheet date
5. Which of the following best describes the articles of partnership agreement?
a. The purpose of the partnership and partners’ rights and responsibilities are required elements of the
articles of the partnership
b. The articles of the partnership are a legal covenant and must be expressed in writing to be valid
c. The articles of the partnership are an agreement that limits partners’ liability to partnership assets
d. None of the above
6. Partnership drawings are
a. Always maintained in a separate account from the partner’s capital account
b. Equal to partners’ salaries
c. Usually maintained in a separate drawing account with any excess draws being deducted directly to
the capital account
d. Not discussed in the specific contract provisions of the partnership
7. Under the entity theory, a partnership is
a. Viewed through the eyes of the partners
b. Viewed as having its own existence apart from the partners
c. A separate legal and tax entity
d. Unable to enter into contracts in its own name
8. A partnership agreement calls for allocation of profits and losses by salary allocations, a bonus allocation,
interest on capital, with any remainder to be allocated by present ratios. If a partnership has a loss to
allocate, generally which of the following procedures would be applied?
a. Any loss would be allocated equally to all partners
b. Any salary allocation criteria would not be used
c. The bonus criteria would not be used
d. The loss would be allocated using the profit and loss ratios only
9. The Red and black partnership agreement provides for Red to receive a 20% bonus on profits before the
bonus. Remaining profits and losses are divided between Red and black in the ratio of 2:3, respectively.
Which partner has a greater advantage when the partnership has a profit or when it has a loss?
Profit Loss Profit Loss
a. Red Black c. Black Red
b. Red Red d. Black Black

1
10. WW and MM drafted a partnership agreement that lists the following assets contributed at the partnership’s
formation:
Contributions by: WW MM
Cash P20,000 P30,000
Inventory P15,000
Building P40,000
Furniture & equipment 15,000
The building is subject to a mortgage of P10,000, which the partnership has assumed. The partnership
agreement also specifies that profits and losses are to be distributed evenly. What amounts should be
recorded as capital for WW and MM at the formation of the partnership
WW MM WW MM
a. P35,000 P85,000 c. P55,000 P55,000
b. P35,000 P75,000 d. P60,000 P60,000
11. Anne, Iris and Alfred formed a partnership on April 30, with the following assets, measured at their fair
market value, contributed by each partner:
Particulars Anne Iris Alfred
Cash P200,000 P240,000 P600,000
Automobile 170,000
Delivery Trucks 560,000
Computer and printer 102,000
Office furniture 70,000 50,000
Land and Building 3,000,000
Totals P3,370,000 P972,000 P650,000
Although Alfred has contributed the most cash to the partnership, he did not have the full amount of
P600,000 available and was forced to borrow P400,000. The land and building contributed by Anne has a
mortgage of P1,800,000 and the partnership is to assume responsibility of the loan. If the profit and loss
sharing agreement is 40 percent, 40 percent, and 20 percent respectively, for Anne, Iris and Alfred, what is
the total capital investment of all the partners at the opening of the business on April 30?
a. P4,992,000 b. P3,192,000 c. P2,792,000 d. P3,328,000
12. Paul admits Timothy as a partner in business. Accounts in the ledger for Paul on November 30, 2016, just
before the admission of Timothy, shows the following balances:
Cash P52,000 Accounts payable P124,000
Accounts receivable 140,000 Paul, capital 528,000
Merchandise inventory 360,000
It is agreed that for the purposes of establishing Paul’s interest the following adjustments should be made:
a. An allowance for doubtful accounts of 2% of accounts receivable is to be established.
b. The merchandise inventory is to be valued at P404,000
c. Prepaid expenses of P13,000 and accrued liabilities of P8,000 are to be established.

Timothy is to invest sufficient funds in order to to receive a 1/3 interest in the partnership. How much must
Timothy contribute?
a. P264,000 b. P286,100 c. P190,720 d. P176,000
13. Mahal admits Mora as a partner in the business. Balance sheet accounts of Mahal on September 30, just
before admission of Mora show:
Cash P31,200 Accounts payable P74,400
Accounts receivable 144,000 Mahal, capital 316,800
Merchandise inventory 216,000
It is agreed that for purpose of establishing Mahal’s interest, the following adjustments shall be made:
• An allowance for doubtful accounts of 2% is to be established
• Merchandise inventory is to be valued at P242,400
• Prepaid expense of P4,200 and accrued expenses of P4,800 are to be recognized

2
 Mora is to invest sufficient cash to obtain a 1/3 interest in the partnership. How much is Mora’s investment
to the partnership?
a. P169,860 b. P211,200 c. P171,660 d. P95,040

On March 1, 20x4, CC and FF formed a partnership with each contributing the following assets:
Accounts CC FF
Cash P30,000 P70,000
Machinery 25,000 75,000
Building -- 225,000
Furniture and Fixtures 10,000 --
The building is subject to a mortgage loan of P90,000, which is to be assumed by the partnership. The agreement
provides that CC and FF share profits and losses 30% and 70%, respectively
14. On March 1, 20x4 the capital account of FF would show a balance of
a. P280,000 b. P305,000 c. P314,000 d. P370,000
15. Assuming that the partners agreed to bring their respective capital in proportion to their respective profit
and loss ratio, and using FF’s capital as the base, how much cash is to be invested by CC?
a. P19,000 b. P30,000 c. P40,000 d. P55,000
CC admits DD as a partner in business. Accounts in the ledger for CC on November 30, 20x4, just before the
admission of DD, show the following balances:
Cash P6,800
Accounts receivable 14,200
Merchandise inventory 20,000
Accounts payable 8,000
CC, capital 33,000
It is agreed that for purpose of establishing CC’s interest the following adjustments shall be made:
An allowance for doubtful accounts of 3% of accounts receivable is to be established
The merchandise inventory is to be valued at P23,000
Prepaid salary expense of P600 and accrued rent expense of P800 are to be recognized
16. DD is to invest sufficient cash to obtain a 1/3 interest in the partnership. CC’s adjusted capital before the
admission of CC
a. P28,174 b. P35,347 c. P35,374 d. P36,374
17. The amount of cash investment by DD
a. P11,971 b. P14,087 c. P17,687 d. P18,487
18. In 2011, Jessie and Anne agreed to contribute equal amounts into a new partnership for a 50% interest in
profit (loss) and in capital to each of them. Their respective contributions will come from old proprietorships
they owned and will both be dissolved. Jessie contributed the following items and amounts:
Cash P585,000
Machineries (at book value per her proprietorship records) P400,000
Anne contributed the following items at their carrying amounts in the proprietorship records:
Accounts receivable P75,000
Inventory 210,000
Furniture and fixtures 402,000
Intangibles 172,500
All non cash contributions are not property valued. The two partners have agreed that (a) P6,000 of the
accounts receivable are uncollectible; (b) the inventories are overstated by P15,000; (c) the furniture and
fixtures are understated by P9,000; and the intangibles includes a patent with a carrying value of P10,500,
which must now be derecognized due to the result of unsuccessful litigation promulgated by the court just
before the partnership formation.
What is the fair value of the machineries invested by Jessie into the partnership?
a. P336,000 b. P252,000 c. P390,000 d. P350,000

3
19. I and Q formed a partnership on January 2, 2016, and agreed to share income 90%, 10%, respectively. I
contributed a capital of P12,500. Q contributed no capital but has a specialized expertise and manages the
firm full-time. There were no withdrawals during the year. The partnership agreement provides for the
following:
a. Capital accounts are to be credited annually with interest at 5% of beginning capital
b. Q is to be paid a salary of P500 a month
c. Q is to receive a bonus of 20% of income calculated before deducting his bonus, his salary and interest
on both capital accounts
d. Bonus, interest, and Q’s salary are to be considered partnership expenses
The partnership’s 2016 income statement follows:
Revenues P48,225
Expenses 24,850
Net income P23,375
How much is the total share of Q on the 2016 partnership net income?
a. P15,837.50 b. P14,325 c. P16,194 d. P14,169
20. R and J, partners, divide profits and losses on the basis of average capitals. Capital accounts for the year
ended December 31, 2016, are shown below. The net profit for 2016 is P135,000. (Changes in capitals during
the first half of the month are the regarded as effective as the beginning of the month; changes during the
second half of a month are regarded as effective as of the beginning of the following month.)
Particulars R, Capital J, Capital
Dr Cr Dr Cr
January 1 P300,000 P330,000
March 9 P50,000
April 14 150,000
July 1 100,000
Sept 4 P40,000
Sept 22 100,000
October 26 75,000
The share of R on the 2016 profit is:
a. P57,250 b. P77,250 c. P57,750 d. P62,630
21. Efren and Frenz operate The Gourmet Restaurant as a partnership. Their partnership agreement has the
following provisions for sharing profits and losses:
A. Income is distributed only as far as it is available
B. Available income is to be distributed in the following sequence:
1. Efren, who is the chef, gets a salary of P25,000 a year; Frenz, who is still learning, gets a salary of
P10,000
2. Interest is imputed on the average capital balances at 15 percent
3. Any remaining profits and losses are to be shared equally

The average capital balances during the year were P270,000 for Efren and P50,000 for Frenz. If the
partnership income for the year is P17,500, it should be distributed to the partners as follows:
a. Efren P8,000; Frenz P9,500 c. Efren P12,500; Frenz P5,000
b. Efren P8,750; Frenz P8,750 d. Efren P14,000; Frenz P3,500
22. Partner Alta had a capital balance on January 1, 20x4 of P45,000 and made additional capital contributions
during 20x4 totaling P50,000. During the year 20x4, Alta withdrew P8,000 per month. Alta’s post-closing trial
balance on December 31, 20x4 is P30,000. Alta’s share of 20x4 partnership income is:
a. P96,000 b. P50,000 c. P31,000 d. P8,000
23. Partners A and B have a profit and loss agreement with the following provisions: salaries of P20,000 and
P25,000 for A and B respectively; a bonus to A of 10% of net income after bonus; and interest of 20% on
average capital balances of P40,000 and P50,000 for A and B, respectively. Any remainder is to be split
equally. If the partnership had net income of P88,000, how much should be allocated to Partner A
a. P36,000 b. P44,500 c. P50,000 d. P43,500

4
X, Y and Z, a partnership formed on January 1, 20x4 had the following initial investment:
X P100,000
Y P150,000
Z P225,000
The partnership agreement states that the profits and losses are to be shared equally by the partners after
consideration is made for the following:
• Salaries allowed to partners: P60,000 for X, P48,000 for Y, and P36,000 for Z
• Average partners’ capital balances during the year shall be allowed10%
• Additional information:
• On June 30, 20x4, X invested an additional P60,000
• Z withdrew P70,000 from the partnership on September 30, 20x4
• Share the remaining partnership profit was P5,000 for each partner
24. Partnership net profit of December 31, 20x4 before salaries, interests and partner’s share on the remainder
was
a. P199,750 b. P207,750 c. P211,625 d. P222,750

25. The dissolution of a partnership occurs

a. Only when the partnership sells its assets and permanently closes its books
b. Only when a partner leaves the partnership
c. Only when a new partner is admitted to the partnership
d. When there is any change in the individuals who make up the partnership
26. The process of terminating the business, selling the assets, paying the liabilities and disbursing the remaining
cash to the partners is called
a. Dissolution c. Liquidation
b. Formation of a partnership d. Withdrawal
27. The selling of noncash assets for cash in partnership liquidation, any difference between book value and the
cash proceeds is called
a. Net profit or loss on sale c. Capital gain or loss
b. Gain or loss on realization d. Sales differential value
28. The main characteristic of a lump sum liquidation done in one transaction is that all the
a. Assets are sold in one transaction
b. Liabilities are paid on one transaction
c. Cash available to partners is distributed to them in one transaction
d. Assets are sold in one transaction and all the available cash is distributed to creditors and partners in
one transaction.
29. The cash available for distribution to partners in an installment liquidation is equal to the
a. Cash available after a sale of noncash assets is made
b. Cash available after payment to creditors are made
c. Cash available after payment to creditors are made and after reserve for future liquidation is set aside
d. All of the above
30. When advance cash distribution plan is prepared, a partner’s loan payable to partnership is
a. Added to other liabilities
b. Added to the credit balance in the partner’s capital account
c. Subtracted from the credit balance in the partner’s capital account
d. Omitted from the calculation
31. Capital balance and profit and loss sharing ratios of the partners in the ABC partnership are as follows:
A, capital (40%) P168,000
B, capital (40%) 192,000
C, capital (20%) 120,000
Total P480,000

5
 A needs money and agrees to assign one-fourth of his interest in the partnership to D for P45,000 cash. D
pays P45,000 directly to A. Compute the (1) capital balance of D, and (2) the total capital of the ABC
Partnership immediately after the assignment of the interest to D?
a. (1) P42,000; (2) P547,200 c. (1) P42,000; (2) P480,000
b. (1) P67,200; (2) P480,000 d. (1) P67,200; (2) P547,200
32. A partnership has the following capital balances:
Elgin (40% of gains and losses) P100,000
Jethro (30%) 200,000
Foy (30%) 300,000
Oscar is going to pay a total of P200,000 to these three partners to acquire a 25 percent ownership interest
from each. Goodwill (or revaluation of asset) is to be recorded. What is Jethro’s capital balance after the
transaction?
a. P150,000 b. P175,000 c. P195,000 d. P200,000
33. Partners Allen, Baker and Coe share profits and losses 5:3:2, respectively. The balance sheet as of April 30,
2014 follows:
Assets Liabilities and Capital
Cash P40,000 Accounts payable P100,000
Other assets 360,000 Allen, Capital 74,000
Baker, Capital 130,000
Coe, Capital 96,000
The assets and liabilities are recorded and presented at their respective fair values. Jones is to be admitted
as a new partner with a 20% capital interest and a 20% share in the profits and losses in exchange for a cash
contribution. No goodwill or bonus is to be recorded. How much cash should Jones contribute?
a. P60,000 b. P72,000 c. P75,000 d. P80,000
The partners in the Kim, Gerald and Maja partnership have capital balances as follows:
Kim, capital P17,500
Gerald, capital P17,500
Maja, capital P20,000
Profits and losses are shared 30%, 30% and 40% respectively. On this date, Maja withdraws and the partners agree
to pay him P22,500 out of partnership cash (Tangible assets are already stated at values approximating their fair
market values).
34. Using bonus method, how much must be the ending capital of Kim immediately after Maja’s withdrawal?
a. P17,500 b. P16,250 c. P16,750 d. P19,375
35. Using partial goodwill method, how much must be the ending capital of Kim immediately after Maja’s
withdrawal?
a. P17,500 b. P16,250 c. P16,750 d. P19,375
36. Using full goodwill method, how much must be the ending capital of Kim immediately after Maja’s
withdrawal?
a. P17,500 b. P16,250 c. P16,750 d. P19,375
37. Elton and Don are partners who share profits and losses in the ratio of 7:3, respectively. On November 5,
20x4, their respective capital accounts were as follows:
Elton P70,000
Don 60,000
On that date they agreed to admit Kravitz as a partner with a one-third interest in the capital and profits and
losses upon his investment of P50,000. The new partnership will began with a total capital of P180,000.
Immediately after Kravitz’s admission, what are the capital balances of Elton, Don and Kravitz, respectively?
a. P60,000; P60,000; P60,000 c. P63,333; P56,667; P60,000
b. P63,000; P57,000; P60,000 d. P70,000; P60,000; P50,000
38. Kris and Mark are partners who share profits and losses 70:30. They have capital account balances of
P170,000 and P260,000, respectively at the date they admit Frank into the partnership. Frank invests

6
 P120,000 in the partnership for a 25 percent equity interest and the bonus method is applied. What is the
peso amount of bonus recognized in Frank’s capital account at the date of admission?
a. P70,000 b. P52,500 c. P23,333 d. P17,500
39. On December 31, 20x4, AN and DE are partners with capital balances of P80,000 and P40,000 and they share
profits and losses in the ratio of 2:1, respectively. On this date, ST invests P36,000 cash for a one-fifth
interest in the capital and profit of the new partnership. The partners agree that the implied partnership
goodwill (total revaluation of assets) is to be recorded simultaneously with the admission of ST. The total
implied goodwill of the firm is
a. P4,800 b. P6,000 c. P24,000 d. P30,000
40. Bishop has a capital balance of P120,000 in a local partnership, and Cotton has a P90,000 balance. These two
partners share profits and losses by a ratio of 60 percent to Bishop and 40 percent to Cotton. Lovett invests
P60,000 in cash in the partnership for a 20 percent ownership. The goodwill (or revaluation of asset) method
will be used. What is Cotton’s capital balance after this new investment?
a. P99,600 b. P102,000 c. P112,000 d. P126,000
41. On June 30, 20x4, the balance sheet for the partnership of William, Brown and Lowe, together with their
respective profit and loss ratios, is summarized as follows:
Assets, at cost P300,000 Williams, loan P15,000
Williams, capital 70,000
Brown, capital 65,000
Lowe, capital 150,000
Williams has decided to retire from the partnership, and by mutual agreement the assets are to be adjusted
to their fair value of P360,000 at June 30, 20x4. It is agreed that the partnership will pay Williams P102,000
cash for his partnership interest exclusive of his loan, which is to be repaid in full. Goodwill is to be
recognized in this transaction, as implied (total) by the excess payment to Williams. After Williams’
retirement, what are the capital balances of Brown and Lowe, respectively?
a. P65,000 and P150,000 c. P73,000 and P174,000
b. P97,000 and P246,000 d. P77,000 and P186,000
42. Prior to liquidation, the liabilities and partners’ capital account are reported with the following balances:
Partner’s Capitals Profit ratio
Alaska P160,000 1/3
Beermen P290,000 2/3
Totals P450,000
The total liabilities of the partnership amount to P150,000, and all assets available are non-cash assets which
were realized at P540,000. The cash distribution to partners upon liquidation would be
Alaska Beermen Alaska Beermen
a. P135,000 P270,000 c. P140,000 P250,000
b. P130,000 P260,000 d. P190,000 P350,000
43. X, Y, and Z have capital balances of P40,000, P50,000 and P18,000, respectively and a profit sharing ratio of
4:2:1, respectively. If X received P8,000 upon liquidation, the total amount received by all partners was
a. P108,000 b. P56,000 c. P24,000 d. P52,000
44. Based on #43 above, except the X received P26,000 as a result of liquidation, Z received as part of the
liquidation
a. P26,000 b. P18,000 c. P14,500 d. P14,000
45. The statement of financial position of the firm A, B, C and D, just prior to liquidation shows the following: A,
loan, P1,000, A, capital, P5,500, B, capital, P5,150, C, capital, P6,850, D, capital, P4,500.
A, B, C and D share profits 4:3:2:1 respectively. Certain assets are sold for P6,000 and this is distributed to
partners. How much cash should C receive?
a. P3,283 b. P 0 c. P2,717 d. P6,000
46. On January 1, year 1, the partners of Cobb, Davis, and Eddy, 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:

7
 Assets Liabilities and Capital
Cash P 50,000 Liabilities P 60,000
Other assets 250,000 Cobb, capital 80,000
Davis, capital 90,000
Eddy, capital 70,000
Total assets P300,000 Total Liabilities and Capital P300,000
On January 15, year 1, the first cash sale of other assets with a carrying amount of P150,000 realized
P120,000. Safe installment payments to the partners were made the same date. How much cash should be
distributed to each partner?
Cobb Davis Eddy Cobb Davis Eddy
a. P15,000 P51,000 P44,000 c. P55,000 P33,000 P22,000
b. P40,000 P45,000 P35,000 d. P60,000 P36,000 P24,000
The balance sheet of Kate, Tim and Mar partnership shows the following information as of December 31, 2015:
Cash P4,000 Liabilities P10,000
Other assets 56,000 Kate, loan 5,000
Kate, capital 25,000
Tim, capital 14,000
Mar, capital 6,000
Total 60,000 Total 60,000
Profit and loss ratio is 3:2:1 for Tim, Kate and Mar respectively. Other assets were realized as follows:
Date Cash received Book value
January 2016 P12,000 P18,000
February 2016 7,000 15,400
March 2016 25,000 22,600
Cash is distributed as assets are realized
47. The total loss to Kate is
a. P6,000 b. P2,000 c. P2,000 d. None
48. The total cash received by Tim is
a. P4,000 b. Zero c. P10,000 d. P3,000
49. Cash received by Mar in January 2016 is:
a. P400 b. P2,000 c. P1,000 d. Zero
50. For financial statement purposes, the installment method of accounting may be used if the
a. Collection period extends over more than twelve months
b. Installments are due in different years
c. Ultimate amount collectible is indeterminate
d. Percentage-of-completion method is inappropriate
51. According to the installment method of accounting, gross profit on an installment sale is recognized in
income
a. On the date of sale
b. On the date the final cash collection is received
c. In proportion to the cash collection
d. After cash collections equal to the cost of sales have been received
52. Income recognized using the installment method of accounting generally equals cash collected multiplied by
the
a. Net operating profit percentage
b. Net operating profit percentage adjusted for expected uncollectible accounts
c. Gross profit percentage
d. Gross profit percentage adjusted for expected uncollectible accounts
53. At time of repossession, repossessed merchandise is debited at its
a. Original cost c. Fair value after reconditioning cost
b. Unrecovered cost d. Fair value before reconditioning cost

8
54. The realization of income on installment sales transactions involves
a. recognition of the difference between the cash collected on installment sales and the cash expenses
incurred
b. deferring the net income related to installment sales and recognizing the income as cash is collected
c. deferring gross profit while recognizing operating or financial expenses in the period incurred
d. deferring gross profit and all additional expenses related to installment sales until cash is ultimately
collected
55. Since there is no reasonable basis for estimating the degree of collectibility, Astor Co. uses the installment
method of revenue recognition for the following sales:
Year 2 Year 1
Sales P900,000 P600,000
Collections from: Year 1 sales 100,000 200,000
Year 2 sales 300,000 --
Accounts written off: Year 1 sales 150,000 50,000
Year 2 sales 50,000 --
Gross profit percentage 40% 30%
What amount should Astor report as deferred gross profit in its December 31, year 2 balance sheet for the
year 1 and year 2 sales?
a. P150,000 b. P160,000 c. P225,000 d. P250,000
56. Luge Co., which began operations on January 2, year 1, appropriately uses the installment sales method of
accounting. The following information is available for year 2:
Installment accounts receivable, December31, year 2 P800,000
Deferred gross profit, December 31, year2 (before
recognition of realized gross profit for year 2) 560,000
Gross profit on sales 40%
For the year ended December 31, year 2, cash collections and realized gross profit on sales should be
Cash collections Realized gross profit Cash collections Realized gross profit
a. P400,000 P320,000 c. P600,000 P320,000
b. P400,000 P240,000 d. P600,000 P240,000
57. Dolce Co., which began operations on January 1, year 1, appropriately uses the installment method of
accounting to record revenues. The following information is available for the years ended December 31, year
1 and year 2:
Particulars Year 1 Year 2
Sales P1,000,000 P2,000,000
Gross profit realized on sales made in:
Year 1 150,000 90,000
Year 2 -- 200,000
Gross profit percentages 30% 40%
What amount of installment accounts receivable should Dolce report in its December 31, year 2 balance
sheet?
a. P1,225,000 b. P1,300,000 c. P1,700,000 d. P1,775,000
58. In 2013, a merchandise was sold on installment basis by MB Company for P80,000 at a gross profit of 25% on
cost. During the year, a total of P42,500, including interest of P12,500 was collected on this contract. In
2013, no collection was made on this sale, and the merchandise was repossessed. The fair value of the
merchandise is P34,000 after reconditioning cost of P4,000. What is the gain (loss) on repossession?
a. (P10,000) b. (P14,000) c. P10,000 d. (P20,000)
59. ACE started operations on January 1, 2015 selling home appliances and furniture on instalment basis. For
2015 and 2016, the following represented operational details:
Particulars (Note: in thousands of pesos) 2015 2016
Installment sales 2,400 3,000
Cost of instalment sales 1,440 2,100

9
 Collections
2015 installment sales 1,260 900
2016 installment sales 1,800
On January 7, 2017 an instalment sale account in 2015 defaulted and the merchandise with a market value
of P30,000 was repossessed. The related instalment balance as of date of default and repossession was
P48,000. The balance of unrealized gross profit as of end of 2015:
a. P456,000 b. P720,000 c. P384,000 d. P550,000

60. In the reporting of a corporate liquidation, assets are shown at

a. Present value calculated using an appropriate discount rate
b. Net realizable value
c. Historical rate
d. Book value
61. In a statement of affairs, assets are classified
a. According to whether they are pledged with particular creditors
b. As current or non-current
c. As monetary or non-monetary
d. As operating or non-operating
62. What are free assets?
a. Assets for which net realizable value is greater than historical cost
b. Assets for which no market exists
c. Assets for which replacement cost is greater than historical cost
d. Assets available to be distributed for liabilities with priority and other unsecured obligations
The following was taken from the Statement of Affairs of Paradigm Company at August 30, 2018:
Assets pledged with fully secured creditors P71,000
Assets pledged with partially secured creditors 12,500
Free assets 11,000
Liabilities with priority 3,000
Fully secured liabilities 69,000
Partially secured liabilities 20,000
Liabilities without priority 18,000
63. The estimated deficiency to unsecured creditors without priority amounts is
a. P15,500 b. P15,150 c. P10,550 d. P10,050
64. The estimated amount payable to partially-secured liabilities is
a. P14,450 b. P14,045 c. P15,441 d. P14,540
65. The estimated amount payable to liabilities without priority is
a. P7,059 b. P5,790 c. P9,750 d. P9,570

The following are taken from the statement of affairs of MM Corporation (#66 to #69)
Assets pledged for fully secured liabilities (current fair value, P75,000) P90,000
Assets pledged for partially secured liabilities (current fair value, P52,000) 74,000
Free assets (current fair value, P40,000) 70,000
Unsecured liabilities with priority 7,000
Fully secured liabilities 30,000
Partially secured liabilities 60,000
Unsecured liabilities without priority 112,000
66. The amount that will be paid to creditors with priority is
a. P6,000 b. P6,200 c. P7,000 d. P7,500
67. The amount to be paid to fully secured creditors is
a. P20,000 b. P30,000 c. P32,000 d. P35,000
68. The amount to be paid to partially secured creditors is

10
 a. P52,700 b. P56,200 c. P57,000 d. P57,200
69. The amount to be paid to unsecured creditors is
a. P70,800 b. P72,000 c. P72,800 d. P78,200

70. Cebuano Company has had severe financial difficulties and considering the possibility of liquidation. At this
time, the company has the following assets (stated at net realizable value) and liabilities
Assets (pledged against debts of P70,000) P116,000
Assets (pledged against debts of P130,000) 50,000
Other assets 80,000
Liabilities with priority 42,000
Unsecured creditors 200,000
In liquidation, how much would be paid to the partially secured creditors?
a. P130,000 b. P50,000 c. P74,000 d. P200,000

11