1. Statement 1: Each partner generally has the authority to enter into contracts • Alpha Financing Co.

pha Financing Co. – loan payable of ₱3,200,000 backed by

which are binding upon the partnership. collateral security with realizable value of ₱2,000,000.
• Mr. Bombay – loan payable of ₱1,000,000 and accrued interest of
Statement 2: The property invested in a partnership by the partners becomes ₱200,000. No collateral security.
the property of the partnership.
How much is the expected recovery of Mr. Bombay?
Statement 3: In the partnership books, there are as many capital and drawing
accounts as there are partners. a. 780,000 b. 480,000 c. 288,000 d. 0

Statement 4: The managing partner is not the only one entitled to an interest 7. Total free assets in the statement of affairs can be computed as
based on his capital contribution in the distribution of net income or net loss.
a. the sum of (a) excess of realizable value of assets pledged to fully
a. All statements are true. c. Only one statement is true. b. secured creditors over the expected net settlement amount of the
All statements are false. d. Only one statement is false. fully secured liabilities and (b) total realizable value of assets not
pledged as collateral security
2. If a dividend of 80% is allocable to Class 7 unsecured creditors based on an b. Total assets measured at realizable value less the sum of (a)
accounting statement of affairs, it may correctly be concluded that unsecured creditors with priority, (b) fully secured creditors, and (c)
realizable value of asset pledged to partially secured creditors.
a. All unsecured claims will receive the same percentage of return
c. realizable value of total assets less unsecured liabilities with priority
b. All unsecured claims will be paid in full
d. all of these
c. Class 1 through 6 unsecured claims will be paid in full
d. Stockholders will receive 20% of their equity 8. Statement 1: A partner’s contribution in the form of industry will require a
debit to the account “Industry”.
3. Read Co. and Learn Co. are national distributors of textbooks. Read and Learn
enters into a contract to acquire a warehouse in a particular region. Each party Statement 2: All types of partnerships are subject to income tax.
will use the warehouse to store its own inventories. The parties agree to share
in the costs of acquiring and maintaining the warehouse. The arrangement Statement 3: A partner’s contribution in the form of non-cash asset should be
between Read and Learn is most likely a recorded at its fair market value even if there is an agreed value.

a. joint operation b. jointly controlled asset Statement 4: All partners shall be given a salary to ensure a just and equitable
distribution of net income or net loss.
c. joint venture d. none of these
a. Only one statement is true. c. All statements are false. b.
4. Which of the following statements is correct? Only one statement is false. d. All statements are true
a. Long-term construction contracts are unique from other contracts 9. Mr. Accountant accepts the proposal of Mr. Engineer for an interest in his
with customers. Therefore, PFRS 15 excludes from its scope the business to form a partnership. The statement of financial position of Mr.
accounting for long-term construction contracts. Accountant on February 14, 2023 prior to the admission of Mr. Engineer shows:
b. Long-term construction contracts are unique from other contracts
with customers. Therefore, PFRS 15 requires an entity to recognize Debit Credit
revenue from long-term construction contracts using either the
percentage of completion method or the zero-profit method. Cash ?
c. PFRS 15 does not provide a special distinction between long-term
construction contracts from other types of contracts with Accounts receivable 420,000
customers. Therefore, an entity shall apply the same principles in
Inventories 500,000
accounting for long-term construction contracts as those applied to
other types of contracts with customers. Accounts payable 375,000
d. PFRS 15 does not exclude long-term construction contracts from its
scope. However, because of the unique nature of long-term Mr. Accountant, Capital ?
construction contracts, PFRS 15 requires an entity to recognize
revenue from a long-term construction contract that is expected to It is agreed that for the purpose of establishing Mr. Accountant’s interest, the
be completed within 3 years or more using the percentage of following adjustments are to be considered:
completion method. For those that are expected to be completed
within a shorter period, revenue shall be recognized when 1) An allowance for doubtful accounts of 5% of accounts receivable is
construction is complete to be considered.
2) The inventories are to be valued at 450,000.
5. Garden Co. uses the installment sales method. Garden Co. sells a good costing 3) Prepaid expenses of 12,200 and accrued expenses of 8,100 are to
₱10,000 for an installment sale price of ₱16,000. Garden Co. accepts old be recognized. Mr. Engineer invested cash of 596,610 to give him
merchandise as down payment and gives the customer a trade-in value of one-third interest in the total capital of the firm.
₱4,000 for this merchandise. The fair value of the old merchandise is ₱4,000.
Subsequent cash collections during the period amount to ₱6,000. How much is What is (1) the capital balance of Mr. Accountant before the admission of Mr.
the realized gross profit recognized in the year of sale? Engineer and (2) the amount of cash?

a. 3,750 b. 5,966 c. 6,333 d. 6,667 a. (1) 1,193,220; (2) 648,220 c. (1) 1,101,920; (2) 715,120

6. The statement of affairs of Darrell Putix Co. indicates that unsecured creditors b. (1) 1,789,830; (2) 101,375 d. (1) 1,260,120; (2) 715,120
without priority with total claims of ₱720,000 may expect to recover only
₱288,000 after all the assets are sold. Among the creditors of Darrell Putix Co. 10. Statement 1: Unless otherwise agreed, allowance for salaries and interest
are the following: are allowed to partners whether there is a net income or a net loss; whether
the net income is sufficient or insufficient.
• Government – taxes payable of ₱400,000, inclusive of ₱80,000
assessments and surcharges. Statement 2: All partners, whether capitalist or industrial, are to share on
whatever partnership profits or losses.
• XYZ bank – loan payable of ₱4,000,000 and accrued interest of
₱200,000, backed by collateral security with realizable value of Statement 3: All partnerships, just like corporations, are subject to 30% income
₱4,800,000. tax rate.
Statement 4: Withdrawal in anticipation of his share in the net income made by 16. How much is the profit recognized in 20x2?
a partner during the year is treated as a permanent withdrawal.
a. 56,000 b. 54,800 c. 51,000 d. 51,600
a. Only one statement is false. c. All statements are false. b.
Only one statement is true. d. All statements are true.

11. On Nov. 1, 20x1, DRINK Co. entered into a franchise contract with TIPPLE Co.
The franchise agreement requires an initial franchise fee that is payable as
follows: 20% down payment at the signing of the contract, and the balance due 17. How much is the balance of the “allowance for markup” account before
in four equal annual payments starting November 1, 20x2. The license period is year-end adjustments?
4 years. The franchise contract requires DRINK Co. to undertake pre-opening
activities necessary to setup the contract and post-opening activities that would a. 86,000 c. 68,000 b. 72,000 d. 64,000 50.
further improve the intellectual property to which the franchisee has rights. All
the preopening activities are completed, and TIPPLE Co. started operations, on 18. How much is the true profit of the branch to be taken up in the home office
January 31, 20x2. How should DRINK Co. recognize revenue from the initial books?
franchise fee?
a. 8,000 c. 12,000 b. 9,000 d. 14,000
a. The sum of the cash down payment and the present value of the
deferred balance are recognized as revenue in full on January 31,
20x1.
b. The sum of the cash down payment and the present value of the
deferred balance are recognized as revenue over the license period.
c. The cash down payment is recognized in full on January 1, 20x2 but
the balance is amortized over the license period.
d. The cash down payment is recognized in full on January 31, 20x2 but
the balance is amortized over the license period.
19. How much revenue is recognized on the contract in 20x3?

a. 2,610,000 b. 2,595,000 c. 2,056,000 d. 2,022,000

12. “Step 2” of the revenue recognition principles of PFRS 15 requires an entity
to identify the performance obligations in the contract at the inception of the 20. How much profit is recognized on the contract in 20x3?
contract. Which of the following statements is not correct regarding this step?
a. 506,000 b. 595,000 c. 603,000 d. 634,000
a. An entity shall treat each promise in the contract to transfer a
distinct good or service as a separate performance obligation.
b. An entity shall treat a promise to transfer a distinct bundle of goods
or services as a separate performance obligation.
c. An entity shall treat a promise to transfer a series of distinct goods
or services that are substantially the same and have the same
pattern of transfer to the customer as a separate performance
obligation.
d. An entity shall treat all promises in a single contract as a single
performance obligation regardless of the nature of those promises, 21. How much is the profit (loss) of the joint operation?
if those promises are negotiated with the customer as a single
package. a. 200,000 b. (200,000) c. 180,000 d. (180,000)

13. Which of the following does not indicate that the nature of an entity’s 22. ABC Corporation has a branch in Location X. On December 31, 2023, the
promise to transfer a license is to provide the customer the right to access the home office showed a 1,368,000 balance in its Investment in Branch account.
entity’s intellectual property as it exists throughout the license period? The following information has been gathered during the reconciliation process:

a. The intellectual property to which the customer has rights changes 1) The branch erroneously sent a credit memo amounting to 48,000 to the
throughout the license period. home office. The home office made no entry.
b. The entity continues to be involved with its intellectual property
2) A credit memo sent by the branch to the home office amounting to 12,000
c. The contract requires, or the customer reasonably expects, that the
was recorded by the home office twice.
entity will undertake activities that significantly affect the intellectual
property to which the customer has rights and the customer is 3) A credit memo sent by the home office to the branch amounting to 24,000
exposed to any positive or negative effects of those activities. was not yet received by the branch.
d. The customer can direct the use of, and obtain substantially all of
the remaining benefits from, the license at the point in time at which 4) A credit memo sent by the home office to the branch amounting to 120,000
the license is granted. was recorded by the branch as 12,000.

5) A debit memo sent by the branch to the home office amounting to 200,000
was recorded by the home office as 2,000,000.

6) A debit memo sent by the home office to the branch amounting to 40,000
was recorded by the branch.

What was the unadjusted balance of the Home Office current account?

14. How much is the gain or loss on repossession? a. 2,976,000 c. 3,336,000 b. 3,204,000 d. 3,348,000

a. 3,200 b. 3,800 c. 4,300 d. 2,900 23. On June 1, 2024, the home office established an agency in Location Y,
sending samples costing 490,000 which are useful until the end of May 2025
15. How much is the total realized gross profit in 20x2? and have a salvage value of 10% of cost. A working fund of 398,125 is to be
maintained using the imprest basis. During 2024, the agency submitted to the
a. 56,000 b. 54,800 c. 53,200 d. 51,600 home office a sales order amounting to 4,134,375. Sales per invoice were
3,215,625 which were duly approved by the home office. Collections during the a. 2,610,000 b. 2,595,000 c. 2,056,000 d. 2,022,000
year amounted to 1,717,021.25 net of 3% sales discount. The cost of
merchandise sold during the year is equal to 75% of the gross sales. Vouchers 31. How much profit is recognized on the contract in 20x3?
for expenses amounted to 214,375. How much net income would be reported
by the agency in Location Y on December 31, 2024? a. 506,000 b. 495,000 c. 480,000 d. 472,000

a. 315,927.50 c. 279,177.50 b. 508,865.00 d. (95,427.50) 32. In a partnership liquidation, how is the final allocation of business assets
made to the partners?

a. According to the profit and loss ratio.

b. According to the balances of the partners’ loan and capital accounts.
c. According to the initial investments made by the partners.
d. Equally.

33. In case of admission of a new partner by investment in the partnership,

which of the following statements is correct?

a. If there is positive asset revaluation or asset impairment, the

difference between the total contributed capital of all partners and
the new agreed capitalization shall be distributed to all partners
24. All transactions are presumed to have been properly recorded. (1) What is including the new partner using the new profit or loss ratio
the balance of the Home Office account on the books of the branch as of agreement.
December 31, before adjustments? and (2) What is the adjusted balance of the b. If there is negative asset revaluation (asset impairment) but without
reciprocal accounts? bonus, the contributed capital of the new partner will be equal to
his agreed capitalization in the new partnership.
a. (1) 117,420; (2) 106,920 c. (1) 117,420; (2) 179,920 c. If there is positive asset revaluation with bonus, the total
contributed capital of all partners will be higher than the new agreed
b. (1) 123,000; (2) 96,420 d. (1) 92,420; (2) 179,920
capitalization.
d. If there is bonus but without asset revaluation, the total contributed
capital of all partners will be lower than the new agreed
capitalization.

34. If A is the total capital of a partnership before the admission of a new

partner, M is the total capital of the partnership after the admission of the new
25. Assuming a net profit of P44,000 for the year, the total profit share of Lando
partner, I is the amount of the new partner’s investment, and E is the amount
was:
of capital credited to the new partner, then there is
a. P7,800 b. P16,800 c. P19,400 d. P19,320
a. Goodwill to the new partner if M > (A + I) and E < I
26. In the preceding number, how much is the share of Jose after bonus, b. A bonus to the new partner if M = A + I and E > I
interest, and salaries? c. Neither bonus nor goodwill if M > (A + I) and E > I
d. Goodwill to the old partners if M = A + I and E > I
a. P7,600 b. P6,800 c. P6,640 d. P3,400
35. A partnership is liquidating and one of the partner’s capital accounts has a
27. In the preceding number, how much should be the share of Kris? a. (P1,200) deficit balance. What should happen?
b. (P200) c. P1,000 d. P0
a. The partner with the deficit should contribute enough personal
28. D and N are partners with capital balances of 60,000 and 140,000, assets to eliminate the deficit balance.
respectively. D has a 30% interest in profits and losses. At this time, the b. The deficit balance should be removed from the accounting records
partnership has decided to admit T and C as new partners. T contributes cash and the remaining partners would share in any additional profits.
of 110,000 for a 20% interest in capital and a 30% interest in profits and losses. c. The partner with the highest capital balance should allocate enough
C contributes cash of 20,000 and an equipment for a 25% interest in capital and cash to eliminate the deficit balance.
35% interest in profits and losses. If bonus amounting to 36,500 is given to the d. The other partners should contribute personal assets to eliminate
old partners, what is the value of the equipment contributed by C? the deficit balance.

a. 63.500 c. 87,500 b. 100,000 d. 100,276 36. In partnership liquidations, what are safe payments?

a. The amounts of distributions that can be made to the partners with

assurance that such amounts will not have to be returned to the
partnership.
b. The amounts of distributions that can be made to the partners, after
all creditors have been paid in full.
c. The amounts of distributions that can be made to the partners
29. How much were the sales of the joint operation? during the liquidation based on the partner’s contributed capital
return.
a. 70 c. 40 b. 60 d. 90
d. The amounts of distributions that can be made to the partners, after
all non-cash assets have been adjusted to fair market values.

37. In relation to partnership liquidation, which of the following statements

is/are correct?

I. The cash priority program can be used to distribute noncash assets,

so long as the priority is followed.
II. In an installment liquidation, the safe payment schedule will also
show the most vulnerable partner in the event of liquidation.
30. How much revenue is recognized on the contract in 20x3?
a. Both I and II. c. Neither I nor II. b. I only. d. II only.
38. Which of the following is first-ranked of the unsecured liabilities with priority 45. Which of the following is true?
in a bankruptcy liquidation?
a. Partnership at will will be dissolved upon arrival of the date agreed
a. Claims of governmental entities for various taxes or duties upon by the partners as its expiration
b. Administrative costs b. Depreciable assets contributed by the partner shall be recorded in
c. Claims for wages, salaries, and commissions, subject to limitations the partnership books at the adjusted cost based on fair value less
of amount and time accumulated depreciation
d. None of the foregoing c. Accounts receivables that are deemed worthless and can no longer
be collectible should be deducted from the total amount of accounts
39. For the purposes of equity accounting for an investment in an associate, it receivables upon recording of such contribution in the partnership
is presumed that the investor has significant influence over the other entity books
where the investor holds: d. None of the above
a. between 1% and 5% of the voting power of the investee; 46. If a dividend of 80% is allocable to Class 7 unsecured creditors based on an
b. between 5% and 10% of the voting power of the investee. accounting statement of affairs, it may correctly be concluded that
c. 20% or more of the voting power of the investee;
d. 50% or more of the voting power of the investee; a. All unsecured claims will receive the same percentage of return
b. All unsecured claims will be paid in full
40. c. Class 1 through 6 unsecured claims will be paid in full
d. Stockholders will receive 20% of their equity

a. I, II, III and IV

b. I, II and IV only
c. II, II and IV only 47. How much revenue is recognized in 20x2?
d. I, II and III only
a. 8M b. 6M c. 4M d. 0
41. Which of the following is not true about revenue recognition with respect
48. If the promise to grant a license is distinct and that the license provides the
to long-term construction contracts?
customer the “right to access” the entity’s intellectual property, how is revenue
a. Long-term construction contracts often are viewed as having a single recognized from the initial fee in the contract?
performance obligation, because goods and services fail the
a. in full upon the signing of the contract
“separately identifiable” criterion.
b. in full when the customer obtains and starts using the license
b. Long-term construction contracts often satisfy the criteria for
c. in full when the initial services to setup the contract are substantially
recognizing revenue over time.
performed
c. Long-term construction contracts require accounting for
d. deferred and amortized over the license period
construction in progress as well as billings to customers.
d. Long-term construction contracts typically include multiple 49.
performance obligations because of all the different types of goods
and services included for each project.

42. Which of the following is not true about accounting for long-term
construction contracts?
No sales of consigned goods were made through December 31, 20x1. Stone’s
a. Long-term construction contracts could show a contract asset or December 31, 20x1 balance sheet should include consigned inventory at
contract liability, depending on the relation between construction in
progress and billings. a. 12,000 b. 12,500 c. 18,000 d. 18,900
b. Billings on contracts in progress is a contra account to accounts
receivable. 50. Home office bills its branch for merchandise shipments at 30% above cost.
c. Gross profit is debited to construction in progress. The following are some of the account balances on the books of home office
d. When a customer is billed for payment due, billings on contracts in and its branch as of December 31, 2023:
progress is credited at the same time accounts receivable is debited.

43. When accounting for revenue over time for a long-term contract, the
percentage of completion used to recognize revenue in the first year usually is
determined by measuring:

a. Costs incurred in the first year, divided by estimated remaining costs

to complete the project.
b. Costs incurred in the first year, divided by estimated total costs for
the completed project.
c. Costs incurred in the first year, divided by estimated gross profit.
d. Costs incurred in the first year, divided by estimated total costs to be
incurred in the remaining years of the project. a. 118,475 c. 328,475 b. 277,725 d. 280,000
44. The following are the characteristics of a partnership except one, which is 51. Based on item 50, what is the combined net income for the year?
it?
a. 957,950 c. 891,975 b. 871,850 d. 942,725
a. Partners are co-owners of the contributed assets to the partnership
b. Partnership has a separate juridical personality separate and distinct
from that of its partners
c. Liability of partners is limited to their capital contributions
d. Any of the partners can bind the partnership