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Final Quiz

Surigao Company has filed for bankruptcy and liquidation. It had assets of $1,300,000, liabilities of $1,500,000, and a deficit of $300,000 at the start of liquidation. After paying $600,000 in liquidation expenses and $340,000 to a secured loan holder, there was $120,000 in net free assets remaining at the end of liquidation.

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73 views

Final Quiz

Surigao Company has filed for bankruptcy and liquidation. It had assets of $1,300,000, liabilities of $1,500,000, and a deficit of $300,000 at the start of liquidation. After paying $600,000 in liquidation expenses and $340,000 to a secured loan holder, there was $120,000 in net free assets remaining at the end of liquidation.

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Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Surigao Company is bankrupt and has undergone corporate liquidation.

Presented below is its


statement of financial position before the start of liquidation:

Cash 300,000 Accounts Payable 100,000


Machinery 500,000 Salaries Payable 200,000
Building 1,200,000 Income tax Payable 300,000
Loan Payable 400,000
Mortgage payable 500,000
Contributed capital 800,000
Deficit (300,000)

 Liquidation expenses amounting to P600,000 were paid.


 The loan payable is secured by the machinery with fair value of P300,000.
 The mortgage payable is secured by the building.
 At the end of liquidation, the holder of loan payable received P340,000.

What is the amount of net free assets available at the end of liquidation?
A. 80,000
B. 40,000
C. 120,000
D. 200,000

On January 1, 2019, Entity A acquired 60% of outstanding ordinary shares of Entity B at a gain
on bargain purchase of P40,000. For the year ended December 31, 2020, Entity A and Entity B
reported sales revenue of P2,000,000 and P1,000,000 in their respective separate income
statements. At the same year, Entity A and Entity B reported cost of goods sold of P1,200,000
and P700,000 in their respective separate income statements.

During 2019, Entity A sold inventory to Entity B at a selling price of P280,000 with gross profit
rate of 40% based on cost. On the other hand, Entity B sold inventory to Entity A at a selling
price of P400,000 with gross profit rate of 30% based on sales during 2020.

On December 31, 2019, 25% of the goods coming from Entity A remained in Entity B’s
inventory but all were eventually sold to third persons during 2020. As of December 31, 2020,
40% of the goods coming from Entity B were eventually sold to third persons.

For the year ended December 31, 2020, Entity A reported net income of P500,000 while Entity B
reported net income of P200,000 and distributed dividends of P50,000. Entity A accounted for its
inventory in Entity B using cost method in its separate financial statements.
What is the consolidated sales revenue for the year ended December 31, 2020?
A. 2,600,000
B. 2,320,000
C. 3,000,000
D. 2,720,000

What is the consolidated gross profit for the year ended December 31, 2020?
E. 1,120,000
F. 1,048,000
G. 1,028,000
H. 1,152,000

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