DEPARTMENTAL (8th) EXAMINATIONS

FUNDAMENTALS OF ACCOUNTING, PART 2 (ACCTG 2A)

2nd SEMESTER, S.Y. 2016-2017
SET B
General Instructions:
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PART I – PROBLEM a) Accounts receivable of P20,000 in A's books and

P35,000 in B are uncollectible.
1-3. Partner A and B have a profit and loss agreement b) Inventories of P 5,500 and P6,700 are worthless
with the following provisions: salaries of P30,000 and in A’s and Bs respective books.
P45,000 for A and B, respectively; a bonus to A of 10% of c) Other assets of P2,000. and P3,600 in A’s and
net income after salaries and bonus; and interest of 10% B’s respective books are to be written off.
on average capital balances of P20,000 and P35,000 for The capital account of the partners after adjustments will
A and B, respectively. One-third of any remaining profits be:
are allocated to A and the balance to B. a. A, P615,942; B, P717,894
If the partnership had net income of P102,500, how b. A, P640,876; B, P683,050
much should be allocated to Partner A? c. A, P640,876; B, P712,345
a. P 44,250 c. P 41,000 d. A, P614,476; B, P683,052
b. P 47,500 d. P 41,167
10-12. The same information in Number 1, how much
4-6. Partners A, B, and C have capital balances of total assets does the partnership have after formation?
P20,000, P50,000, and P90,000, respectively, just before a. 2,337,918 c. 2,237,918
liquidation. They split profits in the ratio of 2:4:4, b. 2,265,118 d. 2,365,218
respectively.
Under a cash distribution program, one of the 13-15. A and B are partners who share losses in the ratio
partners will get the following total amount in liquidation of 60%:40% respectively. A's salary is P60,000 and
before any other partners get anything. P30,000 for B. The partners are also paid interest on their
a. P 0 c. P40,000 average capital balances. In, 2016, A received 30,000 of
b. P15,000 d. P180,000 interest and B, P12,000. The profit and loss allocation is
determined after deductions for the salary and interest
7-9. The business assets of A and B appear below: A payments. If B' share in the residual income (income after
A B deducting salaries and interest) was P 60,000 in 2016,
Cash P 11,000 P 22,354 what was the total partnership income?
Accounts Receivable 234,536 567,890 a. 192,000 c. 345,000
Inventories 120,035 260,102 b. 282,000 d. 387,000
Land 603,000 -
Building - 428,267 16-18. AB admits NORMAL as a partner in business.
Furniture & Fixtures 50,345 34,789 Accounts in the ledger for AB on January 30, 2017, just
Other Assets 2,000 3,600 before admission of NORMAL, show the following
Total P 1,020,916 P 1,317,002 balances:
Cash in Bank P 6,800
Accounts Payable P 178,940 P 243,650 Accounts Receivable 14,200
Notes Payable 200,000 345,000 Merchandise Inventory 20,000
A, Capital 641,976 - Accounts Payable 8,000
B, Capital - 728.352 AB, Capital 33,000
Total P 1,020,916 P 1,317,002
A and B agreed to form a partnership by contributing It is agreed that for purposes of establishing AB’s interest,
their respective assets and equities subject to the the following adjustments shall be made:
following adjustments:
a. An allowance for doubtful accounts of 3% of accounts PART II – THEORY
receivable is to be established.
b. The merchandise inventory is to be valued at P23,000. 31. For financial accounting purposes, assets of an
c. Prepaid salary expenses of P600 and accrued rent individual partner contributed to a partnership are
expense of P800 are to be recognized. recorded by the partnership at:
a. historical cost
NORMAL is to invest cash to obtain 1/3 interest in the b. book value
partnership. c. fair market value
Compute for: (1) AB’ adjusted capital before the d. lower of cost or market
admission of NORMAL; and (2) the amount of cash
investment by NORMAL. 32. The admission of a new partner under the bonus
a. (1)P35,347; (2) P11,971 method will result in a bonus to
b. (1) P35,347; (2) P17,674 a. the old partners only
c. (1) P36,374; (2) P18,487 b. the new partner only
d. (1) P28,174; (2) P14,087 c. either the new partner or the old partners, but not
both
19-21. A and B are partners in AB Repair Shop who d. none of the above
shared profit and loss in the ratio of 2:3. Their respective
capital balances are P30,000 and P45,000. C is admitted 33. A partnership calls for allocation of profits and losses
in the partnership by investing cash of P20,000 for a 1/5 by salary allocations, a bonus allocation, interest on
interest in the new firm. capital, with any remainder to be allocated by preset
How much is the new credit of the new partner (C)? ratios. If a partnership has a loss to allocate, generally
a. 20,000 c. 18,000 which of the following procedures would be applied?
b. 19,000 d. 21,000 a. Any loss would be allocated equally to all
partners
22-24. As of Dec. 31, 2016, the books of ABC b. Any salary avocation criteria would not be used
Partnership showed capital balances of: A, P40,000; B, c. The bonus criteria would not be used
P25,000; C, P5,000. The partner’s profit and loss ratio d. The loss would be allocated using the profit and
was 3:2:1, respectively. The partners decided to liquidate loss ratios only
and they sold all liabilities amounting to P12,000, they still
have cash of P28,000 left for distribution. Assuming that 34. Which of the following statements is true concerning
any capital deficiency is uncollectible, the share of A in the treatment of salaries in partnership accounting?
the distribution of cash would be: a. Partner salaries may be used to allocate profits
a. 17,000 c. 18,000 and losses; they are not considered expenses of
b. 17,800 d. 19,000 the partnership
b. Partner salaries are equal to the annual partner
25-27. XYZ Corporation’s records included the following draw
shareholder’s equity accounts: c. The salary of a partner is treated in the same
Preference Shares, par value P150, manner as salaries of corporate employees
authorized 20,000 shares P 2,250,000 d. Partner salaries are directly closed to the capital
Share Premium-Preference 150,000 account
Ordinary Shares, no par, P50 stated
value, 100,000 authorized shares 3,000,000 35. The following is the priority sequence in which
In the Statement of shareholder’s equity, the liquidation proceeds will be distributed for a partnership
number of issued and outstanding shares for each class a. partnership drawings, partnership liabilities,
of stock is partnership loans, partnership capital balances
Ordinary Shares Preference Shares b. partnership liabilities, partnership loans,
a. 60,000 17,000 partnership capital balances
b. 60,000 18,000 c. partnership liabilities, partnership loans,
c. 63,000 17,000 partnership drawings partnership capital
d. 63,000 18,000 balances
d. partnership liabilities, partnership capital
28-30. Villon Corp holds 10,000 shares of its P10 par balances, partnership loans
value ordinary shares as treasury shares reacquired in
2014 for P120,000. On Dec. 12,2016, Villon reissued all 36. An advance cash distribution plan is prepared
10,000 shares for P190,000. Under the cost method of a. Each time cash is distributed to partners in an
accounting for treasury shares, the issuance resulted in a installment liquidation
credit to (MAKE JOURNAL ENTRY TO PROVE): b. Each time asset is sold in an installment
a. gain on sale of P 70,000 liquidation
b. accumulated profits (losses) of P 70,000 c. To determine the order and amount of cash each
c. share premium of P70,000 partner will receive as it becomes available for
d. ordinary shares of P100,000 distribution
 d. None of these b. settled in the court of law
c. equally divided
37. Under cash priority program, when all of the priorities d. by other legal means agreeable among partners
are paid, any remaining cash distribution is
a. allocated to the partners based on their 46. Choose the situation which illustrates the minimum
respective profit or loss ratios requirement of the law to corporate formation:
b. allocated to the partners based on the balances Authorized Subscribed Paid-In
in their capital accounts after allocation of losses Capital Capital Capital
c. allocated to the partners based on their pre- a. 100,000 25,000 5,000
computed priorities b. 100,000 5,000 5,000
d. allocated to the partners based on the relative c. 50,000 12,500 3,125
values of their capital balances d. 60,000 15,000 5,000

38. A partner whose liability for partnership debts is 47. The ownership in shares of a corporation is
limited to his capital contribution is called evidenced by a document called –
a. industrial partner c. limited partner a. shares c. share certificate
b. general partner d. secret partner b. stock warrants d. none of the above

39. A partner who contributes his work, labor or industry
to the common fund of the partnership is called
a. limited partner c. industrial partner
b. capitalist partner d. managing partner
40. Which of the following results in the dissolution of a
partnership?
a. The withdrawal of a partner from a partnership
b. The receipt of share in profit by an existing
partner
c. The contribution of additional assets to the
partnership by a existing partner
d. The winding up of the partnership and the
distribution of remaining assets to the partners
48. Which of the following statement is true concerning
Accumulated Profits (Losses)?
a. it has a normal balance of a credit
b. it represents the cumulative profit (losses)
c. it decreases when dividends are declared
d. all of the above
49. Which of the following is entitled to dividends?
a. treasury shares c. total outstanding liability
b. total shares issued and outstanding d. all
50. Treasury shares are recorded at
a. fair value c. cost plus expenses
b. acquisition cost d. none of the above

41. In dividends, declaration, there are three important 51. Cash Dividends Payable when not yet paid as of
dates to remember, except- Statement of Financial Position date is presented as
a. date of declaration c. date of record a. Current Asset c. Current Liability
b. date of incurrence d. date of payment b. Non-current Liability d. Income
c.
42. The process of winding up the business activity is 52. The maximum life of a corporation to exist is –
converting non-cash assets into cash, paying its liabilities a. 30 years c. 25 years
and distribution of cash and the remaining assets to b. 55 years d. 50 years
individual partners-
a. realization c. liquidation 53. This is the portion of Accumulated Profits (Losses)
b. dissolution d. none of the above account which can be declared as dividends.
a. Appropriated b. Unappropriated
43. Partnership is said to be dissolved when a – b. Restricted c. All of the above
a. new partner is admitted in an existing
partnership 54. Share certificates are issued to subscribers upon –
b. partner dies a. full payment of subscription
c. partner retires b. c. authorization
d. any of the above c. date of subscription
d. partial payment of subscription
44. Admission of a new partner by investment will –
a. increase both the asset and capitalization of the 55. The Share Premium Account is recorded as a credit
partnership when –
b. increase the asset of the partnership only a. shares are sold higher that par value
c. increase the capitalization of the partnership only b. share are sold at par value
d. none of these c. shares are sold less than par value
d. none of these
45. Failure to stipulate on how profit and loss be divided
among partners. It should be –
a. in proportion to what has been contributed