FINANCIAL ACCOUNTING AND REPORTING

DEPARTMENTAL FINAL EXAMINATION

Instruction: Click here to access the answer sheet for this examination.

D 1. A credit to Work in Process Inventory represents

a. work still in process.
b. raw material put into production.
c. the application of overhead to production.
d. the transfer of completed items to Finished Goods Inventory.

C 2. A journal entry includes a debit to Work in Process Inventory and a credit to Raw Material Inventory. The
explanation for this would be that
a. indirect material was placed into production.
b. raw material was purchased on account.
c. direct material was placed into production.
d. direct labor was used for production.

C 3. Production overhead does not include the costs of

a. factory depreciation and supplies.
b. factory employees' cafeteria departments.
c. production line labor.
d. the maintenance department for the factory.

B 4. In a perpetual inventory system, a transaction that requires two journal entries (or one compound entry) is
needed when
a. raw materials are purchased on account.
b. goods are sold for either cash or on account.
c. goods are finished and transferred out of Work in Process Inventory.
d. overhead is applied to Work in Process Inventory.

C 5. Product costs are deducted from revenue

a. as expenditures are made.
b. when production is completed.
c. as goods are sold.
d. to minimize taxable income.

D 6. Which of the following is not a product cost component?

a. rent on a factory building
b. indirect production labor wages
c. janitorial supplies used in a factory
d. commission on the sale of a product

D 7. The three primary inventory accounts in a manufacturing company are

a. Merchandise Inventory, Supplies Inventory, and Finished Goods Inventory.
b. Merchandise Inventory, Work in Process Inventory, and Finished Goods Inventory.
c. Supplies Inventory, Work in Process Inventory, and Finished Goods Inventory.
d. Raw Material Inventory, Work in Process Inventory, and Finished Goods Inventory.
Page 1 of 18 • BAFACR1X Final Examination • Prepared by Sir Orly Manalang
D 8. The indirect costs of converting raw material into finished goods are called
a. period costs.
b. prime costs.
c. overhead costs.
d. conversion costs.

D 9. Which of the following costs would be considered overhead in the production of chocolate chip cookies?
a. flour
b. chocolate chips
c. sugar
d. oven electricity

C 10. All costs related to the manufacturing function in a company are

a. prime costs.
b. direct costs.
c. product costs.
d. conversion costs.

C 11. In a perpetual inventory system, the sale of items for cash consists of two entries. One entry is a debit to Cash
and a credit to Sales. The other entry is a debit to
a. Work in Process Inventory and a credit to Finished Goods Inventory.
b. Finished Goods Inventory and a credit to Cost of Goods Sold.
c. Cost of Goods Sold and a credit to Finished Goods Inventory.
d. Finished Goods Inventory and a credit to Work in Process Inventory.

A 12. The formula to compute cost of goods manufactured is

a. beginning Work in Process Inventory plus purchases of raw material minus ending Work in Process
Inventory.
b. beginning Work in Process Inventory plus direct labor plus direct material used plus overhead incurred
minus ending Work in Process Inventory.
c. direct material used plus direct labor plus overhead incurred.
d. direct material used plus direct labor plus overhead incurred plus beginning Work in Process Inventory.

A 13. The formula for cost of goods sold for a manufacturer is

a. beginning Finished Goods Inventory plus Cost of Goods Manufactured minus ending Finished Goods
Inventory.
b. beginning Work in Process Inventory plus Cost of Goods Manufactured minus ending Work in Process
Inventory.
c. direct material plus direct labor plus applied overhead.
d. direct material plus direct labor plus overhead incurred plus beginning Work in Process Inventory.

B14. Which of the following replaces the retailing component "Purchases" in computing Cost of Goods Sold for a
manufacturing company?
a. direct material used
b. cost of goods manufactured
c. total prime cost
d. cost of goods available for sale

Refer to the following information to answer the next four questions.

The following information has been taken from the cost records of Wilson Company for the past year:

Page 2 of 18 • BAFACR1X Final Examination • Prepared by Sir Orly Manalang

 Raw material used in production ₱326
Total manufacturing costs charged to production during the year (includes direct material, 686
direct labor, and overhead equal to 60% of direct labor cost)
Cost of goods available for sale 826
Selling and Administrative expenses 25

Inventories Beginning Ending

Raw Material ₱75 ₱ 85
Work in Process 80 30
Finished Goods 90 110

B 15. The cost of raw material purchased during the year was
a. ₱316.
RawMaterialPurchased=326+85-75=336
b. ₱336.
c. ₱360.
d. ₱411.

C16. Direct labor cost charged to production during the year was
a. ₱135.
b. ₱216.
c. ₱225.
d. ₱360.

C 17. Cost of Goods Manufactured was

a. ₱636.
b. ₱716.
c. ₱736.
d. ₱766.

B 18. Cost of Goods Sold was

a. ₱691.
b. ₱716.
c. ₱736.
d. ₱801.

Refer to the following information to answer the next four questions.

Brandt Company manufactures wood file cabinets. The following information is available for June 2001:

Beginning Ending
Raw Material Inventory ₱ 6,000 ₱ 7,500
Work in Process Inventory 17,300 11,700
Finished Goods Inventory 21,000 16,300

C19. Refer to Brandt Company. Direct labor is ₱9.60 per hour and overhead for the month was ₱9,600. Compute
total manufacturing costs for June, if there were 1,500 direct labor hours and ₱21,000 of raw material was
purchased.
DirectMaterialsUsed=BeginningRawMaterialInventory+RawMaterialPurchased-EndingRawMaterialI
a. ₱58,500 nventory
b. ₱46,500
6,000+21,000-7,500=19,500
c. ₱43,500 DirectLabor=1,500×9.60=14,400
d. ₱43,100 TotalManufacturingCosts=DirectMaterialsUsed+DirectLabor+ManufacturingOverhead

TotalManufacturingCosts=19,500+14,400+9,600=43,500
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 B 20. Refer to Brandt Company. Direct labor is paid ₱9.60 per hour and overhead for the month was ₱9,600. What
are prime costs and conversion costs, respectively if there were 1,500 direct labor hours and ₱21,000 of raw
material was purchased?
a. ₱29,100 and ₱33,900
b. ₱33,900 and ₱24,000
c. ₱33,900 and ₱29,100
d. ₱24,000 and ₱33,900

A 21. Refer to Brandt Company. Direct labor is paid ₱9.60 per hour and overhead for the month was ₱9,600. If
there were 1,500 direct labor hours and ₱21,000 of raw material purchased, Cost of Goods Manufactured is:
a. ₱49,100.
b. ₱45,000.
c. ₱51,000.
d. ₱49,500.

D 22. Refer to Brandt Company. Direct labor is paid ₱9.60 per hour and overhead for the month was ₱9,600. If
there were 1,500 direct labor hours and ₱21,000 of raw material purchased, how much is Cost of Goods Sold?
a. ₱64,500.
b. ₱59,800.
c. ₱38,800.
d. ₱53,800.

A23. Davis Company manufacturers desks. The beginning balance of Raw Material Inventory was ₱4,500; raw
material purchases of ₱29,600 were made during the month. At month end, ₱7,700 of raw material was on
hand. Raw material used during the month was
a. ₱26,400.
b. ₱34,100.
c. ₱37,300.
d. ₱29,600.

C24. Urban Company manufacturers tables. If raw material used was ₱80,000 and Raw Material Inventory at the
beginning and end of the period, respectively, was ₱17,000 and ₱21,000, what was amount of raw material
was purchased?
a. ₱76,000
b. ₱118,000
c. ₱84,000
d. ₱101,000

A25. Putnam Company manufacturers computer stands. What is the beginning balance of Finished Goods
Inventory if Cost of Goods Sold is ₱107,000; the ending balance of Finished Goods Inventory is ₱20,000; and
Cost of Goods Manufactured is ₱50,000 less than Cost of Goods Sold?
a. ₱70,000
b. ₱77,000
c. ₱157,000
d. ₱127,000

B 26. Factory Overhead Control is debited, and Payroll is credited for:

a. the recording of payroll
b. the distribution of indirect labor costs
c. the distribution of direct labor costs
d. the distribution of withholding taxes

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 B27. Finished Goods is debited and Cost of Goods Sold is credited for:
a. transfer of completed goods to the customer
b. sale of a customer order
c. return of materials to the supplier
d. return of goods by the customer

A28. A company has purchased some steel to use in the production of steel railings. If this steel has NOT been put
into production, it would be classified as
a. direct materials inventory
b. factory supplies
c. work-in-process inventory
d. finished goods inventory

B 29. The manufacturing (work-in-process) account is

a. Neither a real nor a nominal account.
b. An inventory account indicating the beginning and ending inventory of goods being processed.
c. A hybrid account (both a real and a nominal account).
d. A nominal account to which overhead costs are charged as incurred and credited as these costs are
charged to production.

B 30. If the cost of goods sold is greater than the cost of goods manufactured, then
a. work in process inventory has decreased during the period.
b. finished goods inventory has increased during the period.
c. total manufacturing costs must be greater than cost of goods manufactured.
d. finished goods inventory has decreased during the period.

C 31. All of the following are true for both general and limited partnership, except
a. Both must have at least one general partner
b. All partners have the right to participate in the profits of the business
c. All partners are liable for all debts of the firm
d. Both are easily dissolved

32. When a partner invests assets other than cash into a partnership, these assets should be listed on the
partnership’s book and be reported on the Statement of Financial Position as of date of contribution at
a. their carrying (book) value
b. their original cost
c. their fair market value
d. the value the investing partner assigns to them

A 33. Partnership net income is not allocated in the same ratio as in a partnership net loss, if the partnership
agreement
a. only calls for equal salaries to each partner
b. allows unequal drawings by partner during the year
c. is silent as to distribution of profits and losses
d. has a bonus for one of the partners based on net income after bonus

D 34. If the partnership agreement does not specify how income is to be allocated, profit or loss should be
distributed
a. Equally
b. In proportion to the weighted average capital invested during the period
c. Equitable so that partners are compensated for the time and effort expended on behalf of the
partnership
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 d. In accordance with their capital contributions

A 35. Which of the following is not considered a legitimate expense of a partnership

a. Interest paid to partners based on the amount of their invested capital
b. Depreciation on assets contributed to the partnership by partners
c. Salaries for management hired to run the business
d. Supplies used in the partners’ offices

C 36. A partnership agreement calls for allocation of profits and losses by salary allocations, a bonus allocation,
interest on capital, with any remainder to be allocated by preset ratios. If a partnership has a loss to allocate,
generally which of the following procedures would be applied?
a. Any loss would be allocated equally to all partners.
b. Any salary allocation criteria would not be used.
c. The bonus criteria would not be used.
d. The loss would be allocated using the profit and loss ratios, only.

A 37. Partners that are active in a partnership business should have what share of partnership profits based on the
following
a. A combination of salaries plus interest based on average capital balances
b. A combination of salaries and percentage of net income after salaries and any other allocation basis
c. Salaries only
d. Percentage of net income after salaries is paid to inactive partners

A 38. Aaron, a partner in the Sheenaron Partnership, has 30% participation in partnership profits and losses.
Aaron’s capital account has a net decrease of ₱1,200,000 during the calendar year 2013. During 2013, Aaron
withdrew ₱2,600,000 (charged against his capital account) and contributed property valued at ₱500,000 to
the partnership. What was the net income of the Sheenaron Partnership for year 2013?
a. ₱3,000,000
b. ₱4,666,667
c. ₱7,000,000
d. ₱11,000,000

C 39. On May 1, 2013, the capital balances and profit and loss ratio of partners are: Juan, ₱139,200 (1/2); Dela,
₱208,800 (1/3), and Cruz ₱96,000 (1/6). On the same date, Pedro is admitted to the partnership when he
purchased, for ₱132,000, a proportionate interest from Juan and Dela in the net assets and profits of the
partnership. As a result, Pedro acquired one-fifth interest in the net assets and profits of the firm. Assuming
that implied goodwill is not to be recorded, what is the combined gain realized by Juan and Dela upon the
sale of a portion of their interest in the partnership to Pedro?
a. ₱82,000
b. ₱62,400
c. ₱43,200
d. ₱0

40. The balance sheet as of September 1, 2013 for the business owned by AJ shows the following:

Cash ₱ 2,500
Accounts receivable 10,000
Merchandise inventory 15,000
Furniture and fixtures 18,000
Accounts payable 6,000

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 It is estimated that 5% of the receivables may prove uncollectible. Merchandise inventory includes items
costing ₱5,000, of which ₱2,000 might still be realized. Depreciation has never been recorded. Furniture and
fixtures were acquired on September 1, 2011 and are still to be useful for the next 8 years, and would cost
₱20,000 if currently purchased. BJ is to be admitted as a partner upon his investment of ₱20,000 cash and
₱10,000 worth of merchandise. What is the total asset of the partnership after admission of BJ?
a. ₱64,000
b. ₱58,400
c. ₱67,500
d. ₱74,000

41. The condensed balance sheet of the partnership of Ken Sy and Ben Ty as of December 31, 2012 showed the
following:

Total assets ₱200,000

Ken Sy 80,000
Ben Ty 80,000

On this date, the partnership was dissolved, and its net assets were transferred to a newly-formed
corporation. The fair value of the assets was ₱24,000 more than the carrying value on the firm’s books. Each
of the partners was issued 10,000 shares of the corporation’s ₱1 par ordinary shares. Immediately after
effecting the transfer of the net assets, and the issuance of stock, the corporation’s share premium account
would be credited for
a. ₱204,000
b. ₱140,000
c. ₱154,000
d. ₱164,000

42. Sid, Raul, and Dante are partners with capital credit balances as at December 31 of ₱300,000, ₱300,000, and
₱200,000, respectively. Dante is allowed to withdraw, and it is agreed that he is to take certain furniture
items at their second-hand value of ₱12,000, plus a promissory note for the balance of his interest. The
furniture items are carried on the books as fully depreciated; brand new, however, they would cost ₱20,000.
If profits and losses are shared equally, the acquisition of the furniture items by Dante would result in
a. Increase in capital of ₱4,000 each for Sid, Raul, and Dante
b. Decrease in capital of ₱6,000 each for Sid and Raul
c. Increase in capital of ₱8,000 for Dante
d. Decrease in capital of ₱8,000 for Dante

43. Which of the following best characterizes the bonus method of recording a new partner’s investment in a
partnership?
a. Net assets of the previous partnership are not revalued
b. The new partner’s initial capital balance is equal to his or her investment
c. Assuming that recorded assets are properly valued, the book value of the new partnership is equal to the
book value of the previous partnership and the investment of the new partner
d. The bonus always results in an increase to the previous partners’ capital balances

44. If goodwill is suggested by the consideration paid to a withdrawing partner,

a. only the goodwill traceable to the withdrawing partner may be recorded.
b. goodwill traceable to the original partnership is allocated among the partners according to their
respective interests in capital.
c. The goodwill traceable to the withdrawing partner represents the difference between the partner’s
capital balance and the consideration he or she receives.
d. none of the above.
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 45. Edzer buys Erika's partnership interest in the MarRikKeith partnership. Erika thus retires, leaving Maria Cecilia
and Kristel Keith as Edzer’s co-partners. Prior to Edzer entering the partnership, Maria Cecilia, Erika, and
Kristel Kieth split profits and losses equally. Edzer pays ₱75,000 for Erika’s capital which, at the time, totaled
₱60,000. No revaluation of partnership assets or liabilities occurs at the time. In recording this event on the
partnership books
a. Goodwill is booked based on the book value/fair value difference.
b. ₱7,500 bonuses are added to Maria Cecilia and Kristel Keith capital.
c. ₱5,000 bonuses are added to Erika, Maria Cecilia, and Kristel Keith capital.
d. Edzer capital is created in the amount of ₱60,000.

C 46. The fair market value of a partnership can be implied by

a. adding the incoming partner's market value of consideration to the book value of the existing
partnership.
b. the tax basis of the old partner's assets added to the incoming partner's consideration.
c. The incoming partner's market value of consideration divided by the incoming partner's percentage share
in profit and loss.
d. The incoming partner's market value of consideration divided by the incoming partner's percentage
ownership share in the new partnership.

A 47. If a bonus is traceable to the previous partners rather than to incoming partner, it is allocated among the
partners according to the
a. profit-sharing percentages of the previous partnership.
b. profit-sharing percentages of the new partnership.
c. capital percentages of the previous partners.
d. capital percentages of the new partnership.

B 48. The admission of a new partner under the bonus method will result in a bonus to
a. the old partners only.
b. the new partner only.
c. either the new partner or the old partners, but not both.
d. none of the above..

D 49. In the Majeck partnership, Magel and Jeck had a capital ratio of 1:4 and a profit and loss ratio of 4:3,
respectively. The bonus method was used to record Myka’s admittance as a new partner. What ratio would
be used to allocate, to Magel and Jeck, the excess of Myka’s contribution over the amount credited to Myka’s
capital account?
a. Magel and Jeck’s new relative ratio
b. Magel and Jeck’s new relative profit and loss ratio
c. Magel and Jeck’s old capital ratio
d. Magel and Jeck’s old profit and loss ratio

50. When BJ retired from the partnerhip of BJ, CJ, and HJ, the final settlement of BJ’s interest exceeded his
capital balance. Under the bonus method, the excess
a. Was recorded as goodwill
b. Was recorded as an expense
c. Reduced the capital balances of CJ and HJ
d. Had no effect on the capital balances of CJ and HJ

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 51. Assume that the capital of an existing partnership is ₱130,000 and that existing assets are overvalued by
₱10,000. If an incoming partner acquires a 25% interest in the partnership for ₱37,000, goodwill traceable to
the incoming partner is
a. ₱7,000
b. ₱9,667
c. ₱3,000
d. ₱5,000

52. Jo, Lee, and Vi are partners sharing profits 30%, 20%, and 50%, and with capital balances of ₱350,000,
₱250,000, and ₱350,000, respectively. The partners agreed to dissolve the partnership and upon liquidation,
all of the partnership’s assets are sold and sufficient cash is realized to pay all claims except one for ₱50,000.
Vi is personally insolvent, but the other two partners are capable of meeting any indebtedness of the firm. Of
the remaining claim against the firm, Jo is to absorb
a. ₱15,000
b. ₱25,000
c. ₱30,000
d. ₱40,000

B 53. If a partnership has only non-cash assets, all liabilities have been properly disbursed, and no additional
liquidation expenses are expected, the maximum potential loss to the partnership in the liquidation process
is:
a. the fair market value of the non-cash assets
b. the book value of the non-cash assets
c. the estimated proceeds from the sale of the assets less the book value of the non-cash assets
d. none of the above

54. Under the doctrine of marshaling of assets, unsatisfied partnership creditors

a. Must first proceed against the partner with the largest capital balance
b. May attach to the assets of an individual partner before individual creditors have been satisfied
c. May proceed against any personally solvent partner
d. May proceed against any personally solvent partner but only to the extent of their capital balance in the
partnership

55. As of December 31, 2013, the books of CPA Partnership showed capital balances of: C, ₱40,000; P, ₱25,000;
and A, ₱5,000. C, P, and A share profits and losses in the ratio of 3:2:1 respectively. The partners decided to
liquidate and they sold all non-cash assets for ₱37,000. After settlement of all liabilities amounting ₱12,000,
they still have cash of ₱28,000 left for distribution. Assuming that any capital debit balance is uncollectible,
the share of C in the distribution of the ₱28,000 cash would be
a. ₱17,800
b. ₱18,000
c. ₱19,000
d. ₱17,000

56. Partners; Mae, Estela and Patricia have capital balances of ₱24,000, ₱45,000, and ₱90,000 respectively. They
split profits in the ratio of 3:3:4, respectively. Under a predistribution plan, one of the partners will get what
amount in liquidation before any other partners get anything
a. ₱22,500
b. ₱30,000
c. ₱40,000
d. ₱75,000

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 57. Dina, Loui & Wella are in the process of liquidating their NoBaDe partnership. They have the following capital
balances and profit and loss percentages:

Capital Balance Profit/Loss %

Dina ₱5,000 debit 20%
Loui 18,000 credit 50%
Wella 6,000 credit 30%

The partnership balance sheet shows cash of ₱5,000, non-cash assets of ₱14,000, and no liabilities.

Assuming no liquidation expenses, what safe payment could be made?

a. ₱5,000 split between Loui & Wella by a ratio of 5/8 and 3/8, respectively.
b. ₱5,000 to Loui only
c. ₱1,000 to Dina, 2,500 to Loui, and 1,500 to Wella
d. Dina will contribute ₱7,800, Loui will receive ₱11,000, and Wella will receive ₱1,800

58. On October 1, 2021, Carla and Clara joined in a partnership. Carla contributed cash while Clara contributed
merchandise worth ₱25,000 and a second-hand delivery truck currently valued at ₱50,000 but encumbered
by a one-year chattel mortgaged note for ₱15,000 which will be assumed by the partnership. If initial capital
balances are to conform to the profit-sharing ratio of 2:3, respectively, the amount of cash contributed by
Carla was
a. ₱24,000
b. ₱30,000
c. ₱40,000
d. ₱50,000

59. Which of the following characterizes a partnership?

a. Partnership entities provide for taxes at the same rates used by corporation
b. In theory, partnerships are more able to attract capital
c. Like corporations, partnerships have an infinite life
d. Partners are liable only to the extent of their capital balances

B 60. Which of the following characteristics of a partnership most likely explains why a public accounting firm is
organized as a partnership from a public policy viewpoint?
a. A partnership is not a taxable entity
b. A partnership is characterized by unlimited liability
c. A partnership is characterized by a fiduciary relationship among the partners
d. Salaries to the partners are not considered a component of net income

C 61. If a new partner acquires a partnership interest directly from the partners rather than from the partnership
itself,
a. No entry is required
b. The partnership assets should be revalued
c. Assets will be increased by the investment of the new partner
d. Total partnership capital will not be changed

62. Assume that the capital of an existing partnership is ₱90,000 and all existing assets reflect fair market values.
If an incoming partner acquires a 40% interest in the partnership for ₱55,000, the goodwill traceable to the
incoming partner is
a. ₱15,000
b. ₱5,000
c. ₱3,000
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 d. ₱2,000

63. The following is the priority sequence in which liquidation proceeds will be distributed for a partnership
a. Partnership drawings, partnership liabilities, partnership loans, and partnership capital balances
b. Partnership liabilities, partnership loans, and partnership capital balances
c. Partnership liabilities, partnership loans, partnership drawings, and partnership capital balances
d. Partnership liabilities, partnership capital balances, and partnership loans

64. Victor, Ria, and Ellaine have the following capital balances; ₱40,000, ₱50,000 and ₱30,000 respectively. The
partners share profits and losses 20%, 40%, and 40% respectively. Ria retires and is paid ₱80,000 based on
the terms of the original partnership agreement. Under the bonus method, what is the capital balance of the
remaining partners after the dissolution?
a. Victor, ₱40,000; Ellaine, ₱30,000
b. Victor, ₱30,000; Ellaine, ₱10,000
c. Victor, ₱50,000; Ellaine, ₱50,000
d. Victor, ₱80,000; Ellaine, ₱70,000

65. Princess and Aira formed a partnership in 2013. the partnership agreement provides for annual salary
allowances of ₱55,000 for Princess and ₱45,000 for Aira. The partners share profits equally and losses in the
ratio of 60:40. The partnership had earnings of ₱80,000 for 2013 before any allowance to partners. What
amount of the earnings should be credited to each partner’s capital account?
a. Princess, ₱40,000; Aira, ₱40,000
b. Princess, ₱43,000; Aira, ₱37,000
c. Princess, ₱44,000; Aira, ₱36,000
d. Princess, ₱45,000; Aira, ₱35,000

66. A, B, and C are partners sharing profits in a 5:3:2 ratio, and with capital balance of ₱ 95,000, ₱80,000, and
₱60,000, respectively on December 31, 2012. The partners decided to admit D as a new partner on January 1,
2013. D will contribute cash of ₱80,000 to the partnership and also pay ₱10,000 for 15% of B’s share. D is to
have a 20% share in profits. After the admission of D, the total capital will be ₱330,000 and D’s capital will be
₱70,000. After admission of D, B’s capital balance would be
a. ₱72,600
b. ₱74,600
c. ₱79,100
d. ₱81,100

67. The doctrine of marshaling assets

a. Is applicable only if the partnership is insolvent
b. Allows partners to first contribute personal assets to unsatisfied partnership creditors
c. Is applicable if either the partnership is insolvent or individual partners are insolvent
d. Provides that amounts owed to personal creditors and to the partnership for debit capital balances are
shared proportionately from the personal asset of the partners

D 68. Which of the following would be least likely to be used as a means of allocating profits among the partners in
an accounting practice?
a. Salaries
b. Bonus as a percentage of net income before bonus
c. Interest on ending capital balances
d. Interest on average capital balances

69. A partner's maximum loss absorption potential is calculated by

a. dividing the partner's capital balance by his or her profit-and-loss-sharing percentage.
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 b. multiplying the partner's capital balance by his or her profit-and-loss-sharing percentage.
c. multiplying distributable assets by the partner's profit-sharing percentage.
d. dividing the partner's capital balance by his or her percentage interest in capital.

70. Maria, Dina, and Grace are in partnership with capital account balances and profit and loss ratio as follows:
₱45,500 (50%); ₱17,500 (30%); and ₱5,250 (20%) respectively. When they agreed to liquidate the
partnership, the noncash assets are sold, liabilities of ₱5,400 are paid. The remaining cash to be distributed to
them amounts to ₱31,500. What is the amount of loss on realization?
a. ₱36,750
b. ₱89,150
c. ₱68,250
d. ₱31,500

71. On December 1, 2021, AA and BB formed a partnership with contributing the following assets at fair market
values:
AA BB
Cash ………………………………… P 9,000 P18,000
Machinery and equipment…….. 13,500 -
Land ………………………………... - 90,000
Building …………………………….. - 27,000
Office Furniture ………………….... 13,500 -

The land and building are subject to a mortgage loan of P54,000 that the partnership will assume. The
partnership agreement provides that AA and BB share profits and losses, 40% and 60%, respectively and
partners agreed to bring their capital balances in proportion to the profit and loss ratio and using the capital
balance of BB as the basis. The additional cash investment made by AA should be:
a. P18,000
b. P 85,500
c. P134,100
d. P166,250

Use the following information to answer the next three questions.

OO and PP are partners sharing profits in this proportion – 60:40. A balance sheet prepared for the partners
on April 1, 20x4 shows the following:
Cash P 48,000 Accounts payable P 89,000
Accounts Receivable 92,000 OO, capital 133,000
Inventories 165,000 PP, capital 108,000
Equipment 70,000
Less: Acc. depreciation 45,000 25,000
Total Assets P 330,000 Total Liabilities & Capital P 330,000

On this date, the partners agree to admit RR as a partner. The terms of the agreement are summarized
below. Assets and liabilities are to be restated as follows:
• An allowance for possible uncollectible of P4,500 is to be established.
• Inventories are to be restated at their present replacement value of P170,000.
• Accrued expenses of P4,000 are to be Recognized.
OO, PP and RR will divide profits in the ratio of 5:3:2. Capital balances of the partners after the formation of
the new partnership are to be in the aforementioned ratio, with OO and PP making cash settlement between
them outside of the partnership to adjust their capitals, and RR investing cash in the partnership for his
interest.

72. The cash to be invested by RR is:

Page 12 of 18 • BAFACR1X Final Examination • Prepared by Sir Orly Manalang
 a. P60,250
b. P50,000
c. P47,500
d. P59,375

73. The total capital of the partnership after the admission of RR is:
a. P296,875
b. P237,500
c. P301,250
d. P286,850

74. Cash settlement between OO and PP is:

a. OO will pay PP P17,537.50
b. OO will invest P17,537.50
c. PP will pay OO P17,537.50
d. PP will withdraw P17,537.50

75. The Trading Company, a partnership, was formed on January 1, 2021, with four partners, DD, EE, FF, and GG.
Capital contributions were as follows: DD, P25,000; EE, P12,500; FF, P12,500; GG, P10,000. The partnership
agreement provides that partners shall receive 5% interest in the amounts of their capital contributions. In
addition, DD is to receive a salary of P2,500 and EE a salary of P1,500. The agreement further provides that FF
shall receive a minimum of P1,250 per annum from the partnership and GG a minimum of P3,000 per annum,
both including amounts allowed as interest on capital and their respective shares of profits. The balance of
the profit is to be shared in the following proportions: DD, 30%; EE, 30%; FF, 20% and GG, 20%. Calculate the
amount that must be earned by the partnership during 2021, before any charges for interest on capital or
partners’ salaries, in order that DD may receive an aggregate of P6,250 including interest, salary and share of
profits.
a. P 8,333.33
b. P15,000.00
c. P15,333,33
d. P16,166.67

76. Pepe and Pilar started a partnership some years ago and managed to operate profitably for several years.
Recently, however, they lost a substantial legal suit and incurred unexpected losses on accounts receivable
and inventories. As a result, they decided to liquidate. They sold all assets and only P162,000 was available to
pay liabilities, which amounted to P297,000. Their capital account balances before the liquidation and their
profit and loss sharing ratios are shown below:

Capital Balances Profit and Loss ratios

Pepe P207,000 60%
Pilar 121,500 40%
Pepe is personally insolvent after investing cash to pay the unpaid creditors, but Pilar has personal assets in
excess of P900,000.

In the settlement to partners, how much cash should Pepe received?

a. P63,900
b. P-0-
c. P15,300
d. P63,000

Page 13 of 18 • BAFACR1X Final Examination • Prepared by Sir Orly Manalang

 77. On November 30, 2008 Bee, Cee, and Dee decided to liquidate BCD Partnership. Their capital balances and
profit and loss on this date are as follows:
Bee, capital P50,000 (40%)
Cee, capital 60,000 (30%)
Dee, capital 20,000 (30%)
The net income from January 1 to November 30, 2008 is P44,000. On November 30, 2008, cash and liabilities
are P40,000 and P90,000, respectively.

For Bee to received P55,200 in full settlement of his interest in the firm, how much must be realized from the
sale of the firm’s non-cash assets?

a. P223,000
b. P255,000
c. P149,000
d. P193,000

78. The balance sheet of the Watch Partnership on October 10, 2008 when it decided to liquidate was as follows:
Cash P40,000 Liabilities P60,000
Other assets 125,000 Rolex capital (50%) 45,000
Swatch capital (30%) 42,000
________ Timex capital (20%) 18,000
Total P165,000 Total P165,000
Assume the other assets with a book value of P90,000 are sold for P50,000 and that all available cash, except
for a P10,000 contingency fund, is distributed immediately. In this case:
a. Rolex should receive nothing
b. Swatch should receive P10,000
c. Timex should received P1,000
d. The cash should be distributed in the profit and loss ratio

79. Gilbert, Joseph and Li are partners with capital balance of P350,000, P250,000 and P350,000 and sharing
profits 30%, 20% and 50% respectively. Partners agree to dissolve the business and upon liquidation, all of
the partnership assets are sold and sufficient cash is realized to pay all the claims except one for P50,000. Li is
personally insolvent, but the other two partners are able to meet any indebtedness to the firm. On the
remaining claim against the partnership, Gilbert is to absorb.
a. P40,000
b. P15,000
c. P30,000
d. P25,000

80. As of December 31, 2008, the books of AME Partnership showed capital balances of:
A, P40,000; M, P25,000; E, P5,000. The partners’ profit and loss ratio was 3:2:1, respectively. The partners
decided to liquidate and they sold all non-cash assets for P37,000. After settlement of all liabilities amounting
to P12,000, they still have cash of P28,000 left for distribution. Assuming that any capital debit balance is
uncollectible, the share of A in the distribution of the P28,000 cash would be:
a. P17,800
b. P18,000
c. P19,000
d. P17,000

Page 14 of 18 • BAFACR1X Final Examination • Prepared by Sir Orly Manalang

 81. Cen, Deng, and Lala are partners with capital balances on 31 December 2008 of P300,000, P300,000 and
P200,000 respectively. Profit are shared equally. Lala wishes to withdraw and it is agreed that she is to take
certain furniture and fixtures with second hand value of P50,000 and note for the balance of her interest. The
furniture and fixtures are carried in the books at P65,000. Brand new, the furniture and fixtures may cost
P80,000. Lala’s acquisition of the second-hand furniture and fixtures may cost P80,000. Lala’s acquisition of
the second-hand furniture will result to:
a. Reduction in capital of P15,000 each for Cen and Deng.
b. Reduction in capital of P10,000 for Lala.
c. Reduction in capital of P5,000 each for Cen, Deng and Lala.
d. Reduction in capital of P7,500 each for Cen and Deng.

82. MM is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus a bonus of 10% of
net income after salaries and bonus as a means of allocating profit among the partners. Salaries traceable to
the other partners are estimated to be P100,000. What amount would be necessary so that MM would
consider the choices to be equal?
a. P165,000
b. P290,000
c. P265,000
d. P305,000

83. RR, a partner in the RD partnership, is entitled to 40% of the profits and losses. During 2008, RR contributed
land to the partnership that cost her P50,000, but had a fair value of P60,000. Also during 2008, RR had
Drawings of P80,000. The balance of RR’s capital accounts was P120,000 at the beginning of the year and
P150,000 at the end of the year.
What is the partnership’s profit(loss) for 2008.
a. P(75,000)
b. P(50,000)
c. P150,000
d. P125,000

84. On January 2, 2008 Phil, Art, and Rey formed the PAR partnership contributing cash as follows:
Phil P 192,000
Art 288,000
Rey 432,000
The partnership contract provides the following provisions in respect with partner’s remuneration:
Interest of 12% on average capital balances.

Annual salaries as follows:

Phil P28, 800
Art P24, 000
Rey P27, 200
Remainder of the net income divided 40% to Phil, 30% to Art, and 30% to Rey.
Income before partner’s salaries and interest for the year ended. December 31, 2008 was P184, 160. Phil
invested additional cash of P48, 000 to the partnership on July 1, 2008. Rey withdrew P72, 000 from the
partnership on October 1, 2008. The partners also withdrew P1, 500 monthly against their share of net
income for the year.

What is the capital balance of Phil on December 31, 2008?

a. P274, 320
b. P286,992
c. P235,200
d. P257,280
Page 15 of 18 • BAFACR1X Final Examination • Prepared by Sir Orly Manalang
 85. Herm, Mar and Ama formed a partnership on January 1, 2008 and contributed P150,000, P200,000 and
P250,000, respectively. The articles of Co-partnership provides that the operationg income be sahred among
the partners as follows:
• As salary, for Herm in the amount of P24,000, for Mar, P18,000 and for Ama, P12,000.
• Interest of 12% on the average capital during 2008 of the three (3) partners and
• the remainder in the ratio 2:4:4 respectively.

Additional information:
Herm contributed additional capital on July 1, P30,000 and made a drawing on October 1, P10,000. Mar
contributed additional capital on August 1, P20,000 and made a drawing on October 1, P10,000 and Ama
made a drawing of P30,000 on November 1. Operating income for the year ended December 31, 2008,
P176,000.

The Partners’ capital balances on December 31, 2008 are:

a. Herm, P179,680; Mar, P229,360; Ama,P239,360
b. Herm, P179,760; Mar, P229,520; Ama,P239,520
c. Herm, P189,680; Mar, P239,360; Ama,P269,360
d. Herm, P223,180; Mar, P272,060; Ama,P280,760

86. Abe, Bert, and Carl are partners sharing profit on a 7:2:1 ratio. On January 1, 2008. Dave was admitted into
the partnership with 15% share in profits. The old partners continue to participate in profits in their original
ratios.

For the year 2008, the partnerships showed a profit a profit of P15,000. However, it was discovered that the
following items were omitted in the firm’s book:
________________________________________________________________________
Unrecorded at year end 2007 2008
Accrued expense P1,050
Accrued income 875
Prepaid expenses P1,400
Unearned income 1,225

The share of partner Bert in the 2008 net profit is:

a. P2,197.50
b. P2,490.50
c. P2,637.00
d. P3,149.75

87. Henry, Marta and Nestor are partners with average capital balances in 2008 of P240,000, P120,000, and
P80,000 respectively. Partners receive 10% interest on their average capital balances. After deducting salaries
of P60,000 to Henry and P40,000 to Nestor, the residual profit or loss is divided equally. In 2008 the
partnership sustained a P66,000 loss before interest and salaries to partners. By what amount should
Nestor’s capital account change?
a. P30,000 decrease
b. P22,000 decrease
c. P48,000 increase
d. P28,000 increase

88. CPA Partnership had assets with book value of ₱240,000 and a market value of ₱195,000, outside liabilities of
₱70,000, loans payable to Partner CC of ₱20,000, and capital balances for Partners CC, PP, and AA of ₱70,000,

Page 16 of 18 • BAFACR1X Final Examination • Prepared by Sir Orly Manalang

 ₱30,000, and ₱50,000. The partners share profits and losses equally. How would the first ₱100,000 of
available cash be distributed in the event of liquidation?
a. ₱70,000 to outside liabilities, ₱20,000 to CC, and the balance equally among partners
b. ₱70,000 to outside liabilities, and ₱30,000 to CC
c. ₱70,000 to outside liabilities, ₱25,000 to CC and ₱5,000 to AA
d. ₱40,000 to CC, ₱20,000 to AA, and the balance equally among the partners

89. Arturo Perez, a partner in the AP Partnership, has a 30% participation in partnership profits and losses.
Perez’s capital account has a net decrease of P60,000 during the calendar year 2008. During 2008, Perez
withdrew P130,000 (charged against his capital account) and contributed property valued at P25,000 to the
partnership. What was the net income of the AP Partnership for 2008?
a. P105,000
b. P233,333
c. P350,000
d. P550,000

90. On January 1, 2008, A, B, C and D formed Bekha Trading Co., a partnership, with capital contributions as
follows: A, P50,000; B, P25,000: C, P25,000; and D, P20,000. The partnership contract provided that each
partner will receive a 5% interest on contributed capital, and that A and B shall receive salaries of P5,000 and
P3,000, respectively. The contract also provided that C shall receive a minimum of P2,500 per annum, and D a
minimum of P6,000 per annum, which is inclusive of amounts representing interest and share of remaining
profits. The balance of the profits shall be distributed to A, B, C and D in 3:3:3:2 ratio.

What amount must be earned by the partnership, before any charge for interest and salaries, so that A may
receive an aggregate of P12,500 including interest, salary and share of profits?
a. P16,667
b. P30,000
c. P30,667
d. P32,333

CHALLENGE QUESTIONS:
Input your answers for the following problems WITHOUT currency sign, comma separator, or decimal point ( i.e. if
your answer is Php 123,456 input it as 123456.

Use the following information for the next three questions.

The following balance sheet for the partnership BUCOLIC, RURAL and COUNTRYSIDE were taken from the books
on September 30, 2016;
ASSETS LIABILITIES AND PARTNERS’ EQUITY
CASH ₱ 40,000 LIABILITIES ₱ 100,000
OTHER ASSETS 360,000 BUCOLIC, CAPITAL 74,000
RURAL, CAPITAL 130,000
COUNTRYSIDE, CAPITAL 96,000
The partners agreed to distribute the profits as follows:
- Allow annual salaries to BUCOLIC and RURAL of ₱3,000 each
- Allow interest of 6% on beginning capital
- Allow a bonus of 10% to RURAL as an expense after salaries and interest
- Remaining, 40% to BUCOLIC, 40% to RURAL and 20% to COUNTRYSIDE
91. If the net income of the partnership was ₱61,000 during the period ending December 31, 2016, what is the
total share of RURAL in the net income? (2 points)
92. If COUNTRYSIDE receives his share of net income of ₱3,440 for the three-month period ending December 31,
2016, what was the bonus given to RURAL? (2 points)
Page 17 of 18 • BAFACR1X Final Examination • Prepared by Sir Orly Manalang
 93. In relation to the immediately preceding item, how much was the total net income recognized by the
partnership that will be reported in its Income Statement for the same period? (2 points)

94. Partners Mae, Estela and Patricia have capital balances of ₱24,000, ₱45,000, and ₱90,000 respectively. They
split profits in the ratio of 3:3:4, respectively. Under a predistribution plan, one of the partners will get what
amount in liquidation before any other partners get anything? (2 points)

95. As of December 31, 2013, the books of CPA Partnership showed capital balances and profit & loss ratio of: C,
₱40,000(3/6); P, ₱25,000(2/6); and A, ₱5,000(1/6). The partners decided to liquidate, and they sold all non-
cash assets for ₱37,000. After settlement of all liabilities amounting ₱12,000, they still have cash of ₱28,000
left for distribution. Assuming that any capital debit balance is uncollectible, the share of C in the distribution
of the ₱28,000 cash would be: (2 points)

“Don’t stop to get to the top and when you get to the top don’t stop.”
-Blair Cook

Page 18 of 18 • BAFACR1X Final Examination • Prepared by Sir Orly Manalang