Advanced Financial Accounting

Partnership Formation

Part I: Theory of Accounts

1. Which of the following statements concerning the formation of partnership

business is correct?
a. Philippine Financial Reporting Standards (PFRS) allows recognition of
goodwill arising from the formation of partnership.
b. The juridical personality of the partnership arises from the issuance of
certification of registration.
c. The parties may become partners only upon contribution of money or property
but not of industry or service.
d. The capital to be credited to each partner upon formation may not be the
amount actually contributed by each partner.

2. Under the generally accepted accounting principles in the Philippines, what is the
acceptable reason when the amount credited to a partner is greater than the
amount actually contributed by such partner during partnership formation?
a. Recognition of goodwill by virtue of special skills or reputation of said partner.
b. Receipt or transfer of capital from other partner by virtue of partner ’s
agreement resulting to bonus to the said partner.
c. Recognition of impairment loss on the property contributed by the said partner.
d. When there is no bonus given by said partner to the other partners.

3. He refers to a partner who contributed not only money and property but also
industry to the newly formed partnership.
a. Industrial partner
b. Nominal partner
c. Capitalist-industrial partner
d. Capitalist partner

4. It refers to a type of partnership wherein all partners are liable to the creditors
pro-rata up to the extent of personal or separate assets after the partnership ’s
asset are exhausted.
a. General partnership
b. Partnership by estoppel
c. Limited partnership
d. Particular partnership

5. Regina, Jessica and Nataly entered into a contract of partnership with a total
capital contribution of P5,000. The parties failed to register its articles of co-
partnership with the Securities and Exchange Commission. Which of the
following statement is correct?
a. The contract of partnership is void because the law provides that when the
capital contribution is at least P3,000 it must be registered with Securities and
Exchange Commission.
b. The contract of partnership will bind third persons.
c. The contract of partnership remains to be valid.
d. The partnership business does not obtain juridical personality for failure to
register with Securities and Exchange Commission.

Part II: Problem Solving

1. On January 1, 2017, Angel, Bea and Colleen formed ABC & Co., a general
professional partnership for the exercise of their common profession. Angel
contributed a building with cost of P5M and accumulated depreciation of P4M.
Based on the city assessor’s Records, the building has an assessed value of
P2M. The building has an annotated mortgage payable amount to P500,000 to
be assumed by the partnership.

On the other hand, Bea contributed 10,000 shares of stocks with par value of
P200/share and prevailing quoted price of P300/share. On January 2, 2017, the
building contributed by Angel was sold for P5.5M. If Colleen wants to have 20%
capital interest in the newly formed partnership, how much cash shall be
contributed by her?
a. P875,000
b. P1,125,000
c. P2,125,000
d. P2,000,000

2. On July 1, 2016, Anne, Bianca and Carla formed a business partnership to be

operated as an advertising agency. Anne contributed P10M cash while Bianca
shall have capital credit of P6M upon receipt of bonus of P1M from Anne based
on the provision in Articles of Co-Partnership. The terms of the agreement
provides that Anne and Bianca shall have a combined 40% capital interest in the
newly formed partnership. What is the capital contribution made by Carla to the
partnership?
a. P24,000,000
b. P22,500,000
c. P25,000,000
d. P32,000,000

3. On January 1, 2016, Regina, Jessica and Nataly formed a partnership with profit
or loss sharing agreement of 2:3:5.

Regina contributed a land with assessed value from city assessor in the amount
of P1,000,000. The land is subject to a real estate mortgage which is annotated
to the title of the land in the amount of P800,000 and will be assumed by the
partnership. The appraised value of the land is P2,400,000. Jessica contributed a
building with a cost of P2,000,000 and accumulated depreciation of P1,500,000.
The fair value of the building is P800,000, Nataly contributed investment in
trading securities with historical cost of P6,000,000. The trading securities have
quoted price in active market of P3,000,000.

The partners decided to bring their capital balances in accordance with their
profit or loss sharing agreement. The total agreed capitalization of the new
partnership is P10,000,000. Which of the following statement is correct?
a. The agreed capital of Nataly is P500,000.
b. Regina should contribute additional capital in the amount of P1,800,000.
c. Jessica should contribute additional capital in the amount of P2,200,000.
d. Nataly is entitled to withdraw in the amount of P1,000,000.

4. On January 1, 2017, Len, May and Nancy decided to form a business

partnership to operate supermarket. Len and May both owned a grocery
business with the Statement of Financial Position as of December 31, 2016:
 LEN MAY
Cash P10M P20M
Accounts receivable P20M P30M
Inventories P70M P40M
Property, Plant and Equipment P50M P10M
Accounts payable P40M P20M
Notes payable P30M (10%) P50M (5%)
Capital P80M P30M
The following additional notes are provided:
a. Len and May will contribute all its assets and liabilities to the newly formed
partnership.
b. The parties agree to provide 10% and 20% allowance for bad debts to the
accounts receivable of Len and May, respectively.
c. The inventories of Len and May are reported at historical cost and have
net realizable value of P60M and P45M, respectively.
d. The PPE of Len and May have not been depreciated and should be
depreciated by 40% and 30%, respectively.
e. The interest payable on both notes payable were unrecorded and unpaid
since the date of contract. Len’s note payable is dated April 1, 2016 while
May’s note payable is dated June 30,2016.
f. Nancy shall have 20% interest in the partnership upon contribution of
sufficient cash.

What is the amount of cash to be contributed by Nancy on January 1, 2017

a. P16,375,000
b. P17,625,000
c. P15,825,000
d. P18,475,000

Advanced Financial Accounting

Partnership Operation

Part I: Theory of Accounts

Which of the following transactions shall not affect the capital balance of a
partner?
a. Share of a partner in the partnership ’s net loss.
b. Receipt of bonus by a partner from another partner based on the agreement.
c. Advances made by the partnership to a partner.
d. Additional investment by a partner to the partnership.

In the absence of agreement as to distribution of profit, how shall the partnership

profit be distributed to the partners?
a. The industrial partner shall receive a share equivalent to the least share of a
capitalist partner while the capitalist partners shall share based on the capital
contribution ratio.
b. The industrial partner shall receive a just and equitable share and the
remainder shall be distributed to the capitalist partners on the basis of capital
contribution ratio.
c. The profit shall be distributed on the basis of loss contribution ratio which may
have been agreed upon by the partners.
d. The profit shall be distributed equally to all partners including the industrial
partner.
 In the absence of agreement as to distribution of loss, how shall the partnership
loss be distributed to the partners?
a. The loss shall be distributed equally to all partners including the industrial
partner.
b. The industrial partner shall be exempted from partnership loss while the
capitalist partners shall share equally.
c, The industrial partner shall be exempted from partnership loss while the
capitalist partners shall be distributed on the basis of capital contribution ratio.
d. The industrial partner shall be exempted from partnership loss while the
capitalist partners shall be distributed in accordance with profit agreement ratio.

Which of the following will decrease the capital balance of a partner?

a. Share in partnership profit.
b. Receipt of share in revaluation surplus from a partnership property, plant and
equipment.
c. Drawing made by a partner.
d. Advances made by a partner to the partnership.

Part II: Partnership Operation

On January 1, 2021, Angel, Bea and Colleen formed a partnership with original
capital contribution ratio of 4:5:1 for total agreed capitalization of P5,000,000.
The profit or loss ratio agreement provides that profits shall be distributed in the
ratio of 3:2:5 while loss shall be distributed in the ratio of 6:1:3.

During 2021, the partnership reported net income of P2,000,000 with Angel and
Bea withdrawing P500,000 and P300,000, respectively. During 2022, the
partnership reported net loss of P1,000,000 with Bea and Colleen withdrawing
P200,000 and P400,000 respectively.

What is the capital balance of Bea on December 31, 2022?

a. P2,600,000
b. P2,300,000
c. P2,500,000
d. P2,400,000

On January 1, 2031, Kobe, Lebron and Michael formed a partnership with

respective capital contribution of P2,000,000, P5,000,000 and P3,000,000. The
articles of co-partnership provides that profit or loss shall be distributed
accordingly:

20% interest on original capital contribution.

P30,000 monthly salary for Kobe and P50,000 monthly salary for Michael.
The remainder shall be distributed on the basis of original capital contribution
ratio.

On December 31, 2031, Kobe and Lebron made withdrawals of P500,000 and
P1,000,000, respectively. The statement of financial position of the partnership
shows that Lebron’s capital on December 31, 2031 is P6,500,000.

What is the capital balance of Kobe on December 31, 2031?

a. P3,260,000
b. P2,100,000
c. P2,360,000
d. P2,860,000
 On January 1, 2017, Klay and Steph formed Splash Brother Partnership
organized to train prospective professional basketball players on how to shoot 3-
pointer with splash. The articles of co-partnership provides that profit or loss shall
be distributed accordingly:
10% interest on average capital balance.
P50,000 and P100,000 quarterly salary for Klay and Steph, respectively.
The remainder shall be distributed in the ratio of 3:2 for Klay and Steph,
respectively.

The following transactions regarding the capital balance of the partners for year
2017 are provided:
Klay, Capital Steph, Capital
January 1, 2017 investment P1,000,000 P500,000
March 31, 2017 investment 100,000
July 1, 2017 withdrawal (200,000)
September 30, 2017 withdrawal (200,000)
October 1, 2017 investment 700,000
The chief account of the partnership reported net income of P1,000,000 for year
2017.

What is the capital balance of Klay on December 31, 2017?

a. P1,951,500
b. P1,451,500
c. P2,151,500
d. P1,251,500

On July 1, 2018, Drumond and Jordan formed Free-Throw Partnership organized

to train prospective professional basketball players on how to shoot Charity Shot
without accuracy with initial investment of P1M and P2M, respectively. Drumond
is appointed as the managing partner. The articles of co-partnership provides that
profit or loss shall be distributed accordingly:

30% interest on original capital contribution ratio.

Monthly salary of P20,000 and P10,000 respectively for Drumond and Jordan.
Drumond shall be entitled to bonus equivalent to 20% of net income after
interest, salary and bonus.
The remainder shall be distributed in ratio of 3:2 for Drumond and Jordan
respectively.

For the year ended December 31, 2018, the partnership reported net income of
P750,000.

What is the share in net income of Drumond for the year ended December 31,
2018?

a. P400,000
b. P250,000
c. P350,000
d. P500,000

Using the same data in number 4, what is the share in net income of Jordan
assuming the bonus is equivalent to 20% of net income after interest and salary
but before bonus for the year ended December 31, 2018?
a. P351,600
b. P398,400
c. P350,000
 d. P500,000

Advanced Financial Accounting

Partnership Dissolution

Part I: Theory of Accounts

Which of the following statements pertains to partnership dissolution?

a. It refers to the process of converting the non-cash assets of the partnership
and distributing the total cash to the creditors and the remainder to the partners.
b. It refers to the change in the relation of the partners caused by any partner
ceasing to be associated in the carrying on of the partnership.
c. It refers to the extinguishment of the juridical personality of the partnership.
d. It refers to the end of the life of the partnership.

Which of the following will not result to the dissolution of a partnership?

a. Insolvency of the partnership.
b. Admission of a new partner in an existing partnership.
c. Assignment of an existing partner’s interest to a third person.
d. Retirement of the partner.

Which of the following statements is correct when a new partner is admitted to an

existing partnership by purchasing a portion of a capital interest of an existing partner?
a. It will result to revaluation or impairment of existing asset of the partnership.
b. The partnership will recognize gain or loss in the transfer of capital from one
partner to another partner.
c. The partnership is not dissolved by the admission of a new partner by
purchase.
d. It will just result to credit to capital of newly admitted partner with
corresponding debit to capital of the selling partner.

In case of admission of a new partner in an existing partnership through investment to

the partnership, which of the following scenario will result to bonus to new partner and
asset revaluation?
a. The total contributed capital of all partners is equal to the total agreed capital
of new partnership while the agreed capital of new partner is higher than the
amount he has contributed.
b. The total contributed capital of all partners is more than the total agreed capital
of new partnership while the agreed capital of new partner is lower than the
amount he has contributed.
c. The total contributed capital of all partners is less than the total agreed capital
of new partnership while the agreed capital of new partner is higher than the
amount he has contributed.
d. The total contributed capital of all partners is more than the total agreed capital
of new partnership while the total agreed capital of old partners is equal to the
amount they contributed.

If a partner who retired from the partnership receives less than the capital balance
before retirement which also resulted to decrease in the capital balance of remaining
partners, which is correct?
a. The retiring partner receives bonus from remaining partners.
b. An impairment loss is recognized before the retirement.
c. Revaluation surplus is recognized before the retirement.
d. The retiring partner gives bonus to the remaining partner.
Part II: Problem Solving

On December 31, 2017, the Statement of Financial Position of CAR Partnership shows
the following data with profit or loss sharing ratio of 1:3:6:
Cash P5,000,000 Total Liabilities P10,000,000
Noncash Asset 15,000,000 Carla, Capital 5,000,000
Ara, Capital 3,000,000
Ren, Capital 2,000,000
On January 1, 2018, Ellen is admitted to the new partnership name CARE by
purchasing 20% capital interest of Carla in the amount of P1,200,000. Which of
the following statement is correct?
a. Ellen will have capital credit of P200,000 after the dissolution.
b. The old partnership will recognize gain of P200,000 resulting from Ellen ’s
admission.
c. The new partnership will have total capital of P10,200,000.
d. Carla will have P4,000,000 capital balance after the admission of Ellen.

SG, AP and TS are partners with capital balances of P784,000, P2,730,000 and
P1,190,000 respectively, sharing profit and losses in the ratio of 3:2:1. DJ is admitted as
a new partner bringing with him expertise and is to invest cash for a 25% interest in the
partnership which includes a credit of P735,000 for bonus upon his admission.

How much cash should Diaz contribute?

a. P1,323,000
b. P2,100,000
c. P1,575,000
d. P588,000

On December 31, 2020, the Statement of Financial Position of DEL Partnership shows
the following data with a profit or loss sharing of 1:3:6:
Cash P5,000,000 Total Liabilities P10,000,000
Noncash Asset 15,000,000 Diane, Capital 5,000,000
Ellen, Capital 3,000,000
Liz, Capital 2,000,000
On January 1, 2021, Ana will be admitted to the partnership named ADEL
Partnership by investing P4,000,000 for 30% capital interest in the new
partnership which has total agreed capitalization of P20,000,000.

What is the new capital balance of Liz upon admission of Ana in ADEL
Partnership?
a. P4,400,000
b. P8,400,000
c. P5,600,000
d. P3,200,000

On December 31, 2016, the Statement of Financial Position of OVE Partnership shows
the following data with a profit or loss sharing of 5:3:2:
Cash P10,000,000 Total Liabilities P20,000,000
Noncash Asset 40,000,000 Ona, Capital 10,000,000
Vina, Capital 15,000,000
Ena, Capital 5,000,000
On January 1, 2017, Lina is admitted to the new partnership named LOVE by
investing P20,000,000 for 50% capital interest in the new partnership.
 What is the new capital balance of Ena after Lina ’s admission in LOVE
Partnership?
a. P6,000,000
b. P5,000,000
c. P4,000,000
d. P3,000,000

On December 31, 2020, the unadjusted Statement of Financial Position of UFC

Partnership shows the following data with a profit or loss sharing agreement of 2:3:5:
Total Assets P100,000,000 Total Liabilities P40,000,000
Umber, Capital 10,000,000
Fritz, Capital 20,000,000
Carol, Capital 30,000,000
On December 31, 2020, Umber decided to retire from the partnership. However,
before the distribution of cash to Umber, the following data errors were
discovered during the pre-retirement audit:
During 2020, the property, plant and equipment has not be subject to revaluation
surplus by P15,000,000.
The 2020 net income is overstated by P5,000,000.

After the adjustment, Umber received retirement pay of P15,000,000 for his
capital interest.
What is the capital balance of Fritz after the retirement of Umber?
a. P23,000,000
b. P21,000,000
c. P18,875,000
d. P21,875,000

Before the retirement of Ana from ABC Partnership, Ana, Ben and Cara have capital
balance of P1M, P3M and P6M, respectively. The pre-retirement capital profit or loss
ratio of the partnership is 5:1:4, respectively. If the capital balance of Bea after Ana ’s
retirement becomes P3,120,000 and a particular partnership asset is undervalued.

How much did Ana receive at the time of her retirement?

a. P1,600,000
b. P400,000
c. P880,000
d. P520,000

Using the same data in number 6, except the fact that all the assets of the partnership
prior to retirement are properly value, how much did Ana receive at the time of her
retirement?
a. P1,600,000
b. P400,000
c. P880,000
d. P520,000

Advanced Financial Accounting

Partnership Liquidation

Part I: Theory of Accounts

It refers to the process of converting the noncash assets of the partnership and
distributing the total cash to the creditors and the remainder to the partners.
a. Dissolution
b. Termination
c. Liquidation
d. Operation

In the liquidation of general partnership, which of the following credits shall be paid first?
a. Those owing to third persons.
b. Those owing to partners other than capital and profits.
c. Those owing to general partners for their capital contribution.
d. Those owing to partners for their share in profits.

In the liquidation of limited partnership, which of the following credits shall be paid last?
a. Those owing to third persons.
b. Those owing to limited partners.
c. Those owing to general partners for their share in profits.
d. Those owing to general partners for their capital contribution.

What is the nature of liability of general partners as to partnership debts or obligations?

a. They are liable equally up to the extent of their separate assets after the
partnership assets are exhausted.
b. They are liable pro-rata up to the extent of their separate assets after the
partnership assets are exhausted.
c. They are liable pro-rata up to the extent of their capital contribution only.
d. They are liable solidarily up to the extent of their separate assets after the
partnership assets are exhausted.

What is the name of liability of limited partners as to limited partnership debts or

obligation?
a. They are liable equally up to the extent of their separate assets after the
partnership assets are exhausted.
b. They are liable pro-rata up to the extent of their separate assets after the
partnership assets are exhausted.
c. They are liable pro-rata up to the extent of their capital contribution only.
d. They are liable equally up to the extent of their capital contribution only.

Part II: Problem Solving

Du30, De5 and 3llianes are partners in 3D Partnership. On January 1, 2011, the
partners decided to liquidate the partnership. The December 31, 2010 audited
Statement of Financial Position of 3D Partnership is summarized below:
Cash P2,000,000 Other Liabilities P5,000,000
Advances to Du30 3,000,000 Advances from De5 1,000,000
Other Assets 15,000,000 Advances from 3llianes 2,000,000
Du30, Capital 4,000,000
De5, Capital 3,000,000
3llianes, Capital 5,000,000
The following additional notes are provided:
The partners share profit or loss in the ratio of 5:2:3 to Du30, De5 and 3llianes,
respectively.
All partners are legally declared personally insolvent except Du30 whose separate
assets total P5M with separate liabilities amounting to P3M.
At the time of liquidation, all other assets are sold for P8M.
Liquidation expenses amounting to P1M were paid.

What is the amount to be received by De5 at the end of liquidation process?

a. P3,200,000
b. P2,800,000
c. P2,000,000
d. P1,200,000

Dona, Ella and Frey are partners in DEF Partnership with profit or loss sharing ratio of
6:1:3. Due to disagreement, the partners decided to liquidate their business with pre-
liquidation statement of financial position presented below:
Cash P3,000,000 Liabilities P10,000,000
Noncash Assets 17,000,000 Dona, Capital 1,000,000
Ella, Capital 4,000,000
Frey, Capital 5,000,000
The following additional notes are provided:
All partners are legally declared to be personally insolvent.
All noncash assets are sold during the liquidation process.
Liquidation expenses amounting to P2M were paid.
Ella receives a total of P2,500,000 at the end of liquidation.

What is the amount received by Frey at the end of liquidation?

a. P500,000
b. P2,500,000
c. P0
d. P3,500,000

Using the same data in number 2, what is the net proceeds from the sale of all noncash
assets?
a. P14,000,000
b. P10,000,000
c. P12,000,000
d. P8,000,000

On December 31, 2020, the Statement of Financial Position of UFC Partnership shows
the following data with profit or loss sharing of 2:3:5:
Cash P15,000,000 Liabilities to others P20,000,000
Other Noncash Assets 40,000,000 U, Capital 15,000,000
F, Capital 12,500,000
C, Capital 7,500,000
On January 1, 2021, the partners decided to wind up the partnership affairs.
During the winding up, liquidation expenses amounted to P2,000,000 were paid.
Noncash assets with book value of P30,000,000 were sold during January.
40%of liabilities were also paid during January. P3,000,000 cash was withheld
during January for future liquidation expenses. On January 31, 2021, partner U
received P10,000,000.

What is the amount received by partner F on January 31, 2021?

a. P2,500,000
b. P7,500,000
c. P5,000,000
d. P3,000,000
Using the same data in number 4, what is the net proceeds from the sale of non-cash
assets during January 2021?
a. P25,000,000
b. P20,000,000
c. P22,000,000
d. P23,000,000

On December 31, 2050, the Statement of Financial Position of NBA Partnership shows
the following data with profit or loss sharing of 2:3:5:
Cash P20,000,000 Liabilities to others P50,000,000
Other Noncash Assets 80,000,000 Payable to B 5,000,000
Receivable from N 10,000,000 Payable to A 15,000,000
N, Capital 30,000,000
B, Capital 20,000,000
A, Capital (10,000,000)
On January 1, 2051, the partnership decided to wind up its affairs. For the month
ended January 31, 2051, the following transactions occurred:
Other non-cash assets with a book value of P60,000,000 at a loss of P10,000,000.
Liquidation expenses amounting to P3,000,000 were paid.
P2,000,000 cash was withheld for future liquidation expenses.
60% of liabilities to third person were paid.
For the month ended February 28, 2051, the following transactions occurred:
Remaining other non-cash assets were sold at a gain of P5,000,000.
Liquidation expenses amounting to P2,000,000 were paid.
The remaining liabilities to third persons were paid.

What is the amount received by N on January 31, 2051?

a. P7,000,000
b. P8,000,000
c. P3,000,000
d. P4,500,000

Using the same data in number 6, what is the share of A to the maximum possible loss
on January 31, 2051?
a. P11,000,000
b. P1,500,000
c. P10,000,000
d. P15,000,000

Using the same data in number 6, what is the total amount of cash withheld on January
31, 2051?
a. P20,000,000
b. P22,000,000
c. P3,000,000
d. P43,000,000

Using the same data in number 6, what is the amount received by B on February 28,
2051?
a. P10,000,000
b. P7,500,000
c. P15,000,000
d. P12,000,000
Advanced Financial Accounting
Corporate Liquidation

Part I: Theory of Accounts

It refers to the extinguishment of the juridical personality of a corporation for causes
expressly provided by law.
a. Corporate liquidation
b. Corporate dissolution
c. Corporate rehabilitation
d. Corporate termination

It refers to process of winding up the affairs of the corporation by settling its corporate
debts and distributing the remainder to the stockholders.
a. Corporate liquidation
b. Corporate dissolution
c. Corporate rehabilitation
d. Corporate termination

After the date of corporate dissolution, what is the maximum period allowed by law to a
dissolved corporation to complete its liquidation process?
a. 1 year
b. 2 years
c. 3 years
d. 4 years

What is the term used when the total stockholder’s equity has debit balance?
a. Deficit
b. Deficiency
c. Delinquency
d. Default

Which of the following unsecured debts with priority shall be paid first during corporate
liquidation?
a. Corporate liabilities to employees
b. Obligations arising from corporate crime
c. Corporate liabilities arising from taxes to government
d. Obligations arising from corporate tort or quasi-deficit

Which of the following creditors can always fully recover its claim from a dissolved
corporation during corporate liquidation?
a. Fully secured creditors
b. Partially secured creditors
c. Unsecured creditors with priority
d. Unsecured creditors without priority

Which of the following items is not being considered in the computation of recovery
percentage of unsecured creditors without priority?
a. Assets reserved for fully secured credits
b. Assets reserved for partially secured credits
c. Unsecured portion of partially secured liabilities
d. Assets not used as collateral for any liability
Part II: Problem Solving
Rauh-Welt Corporation had the following statement of financial position:
Cash 5,000 Note payable (short-term) 97,000
Marketable securities 30,000 Accounts payable 85,000
Accounts receivable 25,000 Accrued expenses 18,000
Inventory 51,000 Note payable (long-term) 208,000
Prepaid expenses 3,000 Share capital 95,000
Land 120,000 Retained earnings (deficit) (59,000)
Building 105,000
Equipment 95,000
Intangible assets 10,000
The note payable (short-term) is secured by the inventory and the note payable (long-
term) is secured by the land and building.
Marketable securities have a fair value of P35,000 and dividends of P1,000 are due
from this investment.
Only P15,000 can be collected from the accounts receivable.
Inventory can only be sold at P48,500.
Prepaid expenses include a refund of P1,000.
The intangible assets have no resale value.
Fair value of land and building P238,000 and fair value of equipment P58,000.
Administrative expenses of P31,500 are estimated as liquidation expenses.
Salaries of P12,000 and payroll taxes of P3,000 are accrued.
Interest on the long-term note payable of P8,000 has not been accrued.

How much is the estimated deficiency?

a. 38,000
b. 46,000
c. 43,000
d. 47,000

What is the estimated recovery percentage?

a. 66.30%
b. 72.16%
c. 65.57%
d. 67.79%

What is the estimated recovery for partially secured creditors?

a. 83,497.60
b. 80,301.45
c. 80,655.50
d. 81,378.15

How much is the estimated recovery for unsecured creditors without priority?
a. 63,500
b. 58,344
c. 59,655
d. 57,702

What is the amount of net free assets?

a. 98,500
b. 89,500
c. 87,500
 d. 90,500

The following information was gathered from the books of Begriff Corporation which is
currently undergoing bankruptcy proceedings:
Note payable of P97,500 is secured by furniture and equipment with a carrying amount
of P120,000 that is estimated to be 75% realizable.
A mortgage payable of P192,500 is secured by building valued at P35,000 less than
carrying amount of P230,000.
Assets not mentioned above have an estimated value of P62,500, an amount that is
P15,000 above carrying amount.
Total liabilities not mentioned above total P96,000, including claims with priority of
P18,500.

How much is the essential loss on asset realization?

a. 65,000
b. 50,000
c. 80,000
d. 60,000

How much is the estimated recovery percentage?

a. 80.65%
b. 56.77%
c. 54.71%
d. 51.76%

How much is the estimated recovery percentage for partially secured creditors?
a. 96.67%
b. 96.52%
c. 98.51%
d. 96.29%

Bancarote Inc. is under court-supervised liquidation due to its insolvency. The court
appointed liquidation has provided the following data after conducting an inventory of
Bancarote’s assets and liabilities:
The total assets which are not used as security for any liability amounted to P5M while
the total unsecured liabilities amounted to P20M.
The total assets which are used as collateral or security for corporate obligations
amounted to P10M. ¾ of these assets secure a mortgage payable with book value of
P2M including interest while the remainder secure a note payable with book value of
P3.5M including interest.
Salaries payable amounted to P2M while taxes due government amounted to P1M.

What is the estimated recovery percentage of unsecured creditors without priority?

a. 25%
b. 37.5%
c. 41.67%
d. 52.5%

Using the same data in number 1, what is the amount received by partially secured
creditors?
a. 2,750,000
b. 2,875,000
c. 2,916,700
d. 3,025,000
Liberty Corporation provided the following balances in July 1, 2017:
Cash 5,500 Accounts payable 59,500
Accounts receivable 35,000 Wages payable 25,000
Inventories 60,000 Tax payable 35,000
Notes receivable 78,000 Note payable 65,000
Equipment 256,000 Mortgage payable 175,000
Share capital 120,000
Deficit (45,000)
TOTAL 434,500 TOTAL 434,500

In the statement of realization and liquidation the following data are ascertained
for the month of July:
The note payable and mortgage payable together with their respective interest are paid.
Only 7/8 is collected from the existing accounts receivable at the beginning of the
month.
Half of the inventories were sold for P45,000.
Only P68,500 of the notes receivable are collected.
Equipment is sold for P225,000.
Administrative expenses of P13,800 are paid.
Additional credit sales amounting to P10,500 are made fro the remaining inventories.
Interests accrued for the month are note receivable P1,500, note payable P5,500 and
mortgage payable P10,500.
All existing noncash assets at the beginning of the month are sold or collected during
the month.

How much is the profit or loss in the statement of realization and liquidation?
a. (42,475)
b. 27,975
c. (77,675)
d. 75,175

How much is the estate equity at July 31, 2017?

a. (102,975)
b. 32,525
c. 150,175
d. ( 2,675)