Philippine Institute of Certified Public Accountants (PICPA)

Riyadh Chapter, Kingdom of Saudi Arabia

Advanced Financial Accounting and Reporting (AFAR)
January 11, 2018

1. On January 1, 2020, Toni, Abbie and JM entered into articles of co-partnership for
the operation of TAJ computer shop. Toni contributed investment property with
assessed value of P1, 700,000 subject to mortgage payable of P500, 000 to be
assumed by the partnership. Abbie contributed computer equipment with cost of
P600, 000 with accumulated depreciation of P200, 000. The fair market value of the
computer equipment is P300, 000. On January 2, 2020, the partnership was able to
sell the investment property for P2, 000,000. How much cash shall be contributed by
JM if the articles of co-partnership provide that Toni will have 60% interest in the
partnership?
a. P500, 000
b. P700, 000
c. P800, 000
d. P600, 000

2. On January 1, 2010, Yazzi, Angel and Nadine organized YAN partnership by

investing P5M, 2M and P3M for capital interest ratio of 4:5:1 respectively. Nadine
has been appointed as managing partner. During year 2010, YAN partnership reported
net income of P3, 000,000. Their profit/loss distribution and drawing agreement are
presented below:
i. 20% interest on beginning capital
ii. P10, 000, P20, 000 and P50, 000 monthly salary, respectively
iii. 25% bonus of net income after interest and salary to managing partner
iv. The remainder will be divided equally among the partners.
v. The partners must withdraw at the end of the year 50% of their share in net
income for the period.
What is the capital balance of Nadine on December 31, 2010?

a. P1, 410,000
b. P3, 410,000
c. P1, 610,000
d. P3, 610,000

3. On January 1, 2030, Carla, Aika and Roma organized CAR partnership wherein
Carla contributed P1M for 20% interest in the partnership. Aika contributed P3M for
a capital credit of P2.5M. After closing the accounting book, Aika and Roma made
drawings of P300, 000 and P100, 000, respectively. Their profit/loss agreement are
presented below:
i. Quarterly salary of P20, 000, P5, 000 and P60, 000 respectively
ii. The remainder will be divided in the ratio of 1:5:4
On December 31, 2030, the capital balance of Roma is P1, 600,000. What is the net
income of the partnership for the year ended December 31, 2030?

a. P340, 000
b. P300, 000
c. P240, 000
d. P440, 000

4. Using the same data in the preceding number, what is the capital balance of Aika
on December 31, 2030?

a. P2, 200,000
b. P2, 220,000
c. P2, 670,000
d. P2, 170,000

5. On December 31, 2010, the capital balance of partners Aiza, Ren and Trish of ART
Partnership are P2M, P5M and P3M, respectively with profit or loss agreement ratio
of 1:3:6, respectively. On January 1, 2011, Sally is admitted to the partnership by
acquiring 40% of Trish capital interest and profit interest at a price of P1, 500,000.
ARTS partnership reported P1M net income for year 2011. What is the capital
balance of Sally on December 31, 2011?

a. P1, 740,000
b. P1, 900,000
c. P1, 440,000
d. P1, 600,000

6. Using the same data in the preceding number, what is the capital balance of Aiza on
December 31, 2011?

a. P2, 100,000
b. P2, 130,000
c. P2, 040,000
d. P2, 070,000

7. On December 31, 2020, the capital balance of partners Cristy, Paula and Ara of
CPA Partnership are P1M, P3M and P6M, respectively with profit or loss agreement
ratio of 4:1:5. On January 1, 2021, Cristy decided to retire and received P400, 000
from the partnership. If the assets of the partnership are properly not properly valued
at the time of retirement, how much is the capital balance of Paula after the retirement
of Cristy?
a. P2, 900,000
b. P2, 850,000
c. P3, 100,000
d. P3, 150,000

8. On December 31, 2040, the capital balance of partners Brie, Alice and Rein of
BAR are P2M, P5M and P1M, respectively with profit or loss agreement ratio of
2:3:5. On January 1, 2041, Ena was admitted to BARE partnership upon investment
of P3M for 25% interest in the new partnership with new total agreed capitalization of
P16M. How much is the share of Alice in the asset revaluation?

a. P1, 200,000
b. P2, 500,000
c. P1, 500,000
d. P3, 125,000

9. Using the same data in number 8, what is the bonus received by Ena from the old
partners?

a. None
b. P1, 200,000
c. P1, 000,000
d. P1, 500,000

10. Using the same data in number 8, what is the capital balance of Rein after the
admission of Ena?

a. P3, 000,000
b. P1, 500,000
c. P3, 500,000
d. P500, 000

11. On December 31, 2000, the Statement of Financial Position of ABC Partnership
with profit or loss ratio of 4:5:1 is presented below:

Cash 1M Liability to third person 2M

Advances to A 5M Advances from B 1M
Non Cash Asset 9M Advances from C 2M
A, Capital 6M
B, Capital 3M
C, Capital 1M
On January 1, 2001, ABC partnership is liquidated wherein liquidation expenses
amounting to P400, 000 has been incurred. If partner B receives P1M, what is the
amount received by C at the time of liquidation?

a. P2, 400,000
b. P1, 000,000
c. P2, 000,000
d. None

12. Using the same data in number 11, what is the net proceeds from the sale of
noncash asset?

a. P3, 000,000
b. P4, 400,000
c. P4, 800,000
d. P4, 200,000

13. On December 31, 2010, the Statement of Financial Position of DEF with profit or
loss ratio of 4:1:5 is presented below:
Cash 2M Liability to third person 4M
Noncash asset 8M D, Capital 3.5M
E, Capital 1.5M
F, Capital 1M

On January 1, 2011, DEF partnership has been subjected to installment liquidation.

As of December 31, 2011, the following data concerning liquidation are provided:
Noncash asset with book value of P6M has been sold at a loss of P2M.
Liquidation expense amounting to P400, 000 has been incurred for the
month of January.
P600, 000 cash has been withheld for future liquidation expense.
P3M liability has been paid.

What is F’s share in the maximum possible loss on January 31, 2011?

a. P1, 300,000
b. P1, 000,000
c. P1, 500,000
d. P500, 000
14. Using the same data in number 13, what is the amount received by E on January
31, 2011?

a. P300, 000
b. P700, 000
c. P1, 000,000
d. None

15. During the liquidation, the sale of all the assets of liquidated corporation resulted
to net proceeds of P1, 000,000. Liquidation expense amounting to P60, 000 has been
paid at the start of liquidation. Before the liquidation, the following data are provided
concerning the financial position of the said financially distressed corporation:

The corporation has total assets with book value of P2, 000,000 and deficiency
amounting to (P340, 000.)
An investment property with book value of P500, 000 and realizable value of P300,
000 secured a loan payable amounting to P100, 000.
Inventory with book value of P1, 000,000 and realizable value of P100, 000
secured a note payable amounting to P200, 000.
Salaries payable and income tax payable amounted to P100, 000 and 40,000,
respectively.
What is the amount received by partially secured creditor?

a. P100, 000
b. P120, 000
c. P140, 000
d. P130, 000

16. Using the same data in number 15, what is the amount received by pure unsecured
creditors without priority?

a. P600, 000
b. P570, 000
c. P700, 000
d. P800, 000