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Sample/practice exam 29 March 2019, answers

Introduction To Financial Accounting (University of the Philippines System)

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QUIZZER 11. A-40,000

1. D-P18,000 12. A-P290,000
2. D-P870/ P(180) 13. A-P370,000
3. D- P65,550
14. C-P50,000.
4. A- 157,985 15. B-Retada.
5. B-P35,000;P75,000 16. A-100,000
6. B-P500,000 17. C-P250,000; P350,000
18. A-
P240,000;P360,000
7. C-Yacapin
8. C-lsada, P65,000; U. Reyes, P81,000 19. D- P240,000
9. A-P330,000 20. D-P120,000
10. B-Pedernal P150,000; Pating P160,000; and Liggayu P170,000

Questions with Solutions and answers

1. On May 1, 201B, Gonzaga and Balance farmed a partnership and agreed to share
profits and losses in the ratio of 3:7, respectively. Gonzaga contributed a parcel
of land that cost P10,000. Balance contributed P40,000 cash. The land was sold
for P18,000 on May 1, 2018 immediately after formation of the partnership.
What amount should be recorded in Gonzaga’s capital account on formation of
the partnership?
A.P15,000 C.P10,000
B.P17,400 D.P18,000

2. On Mar. 1, 2018, Sarabia and Abad decided to combine their businesses and
form a partnership. Their statement of financial position on Mar. 1. before
adjustments, showed the following:

Sarabia Abad
Cash P 9,000 P 3,750
Accounts receivable 18,500 13,500
Inventories 30,000 19,500
Furniture and Fixtures (net) 30,000 9,000
Office Equipment (net) 11,500 2,750
Prepaid Expenses 6,375 3,000
Total P 105,375 P 51,500

Accounts Payable 45,750 18,000

Capital 59,625 33,500
Total P 105,375 P 51,500

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They agreed to have the following items recorded in their books:

a. Provide 2% allowance for doubtful accounts.
b. Sarabia's furniture and fixtures should be P31,000, while Abad's office
equipment is under-depreciated by P250.
c. Rent expense incurred previously by Sarabia was not yet recorded amounting to
P1.000, while salary expense incurred by Abad was not also recorded amounting to
P800.
d. The fair market values of inventory amounted to:
For Sarabia P 29,500
For Abad 21,000

Compute the net (debit) credit adjustment for Sarabia and Abad respectively:
A. P2,870/ P2,820 C. P(870)/ P180
B. P(2,870)/ P(2,820) D. P870/ P(180)

Pig Quail
Allowance for doubtful accounts:
Pig: 2% × ₱18,500 ₱ 370
Quail: 2% × ₱13,500 ₱ 270
Furniture and Fixtures (₱31,000-₱30,000) (1,000)
Office equipment 250
Accrued Rent expenses 1,000
Accrued salary expense 800
Inventory adjustments:
Pig (₱29,500-₱30,000) 500
Quail (₱21,000-₱19,500) (1,500)
Net adjustments (debit) credit ₱ 870 ₱ (180)

3. Using the same information in the previous number, what is amount of total
liabilities after the formation?
A. P63,750 C. P63,950
B. P61,950 D. P65,550

Unadjusted total liabilities (₱45,750+₱18,000) ₱ 63,750

Add (deduct): adjustments:
Accrued rent expenses 1,000
Accrued salary expenses 800
Adjusted total liabilities ₱ 65,550

4. Using the same information is #2, what is the amount of total assets after the
formation?
A. P157,985 C. P160,765
B. P156,875 D. P152,985

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Unadjusted total assets (₱105,375+₱51,500) ₱ 156,875

Add (deduct): adjustments:
Allowance for doubtful accounts (₱370+₱270) (640)
Furniture and fixtures 1,000
Office equipment (250)
Inventory (₱1,500-₱500) 1,000
Adjusted total assets after formation ₱ 157,985

5. Ables and Galang executed a partnership agreement that lists the following
assets contributed at the partnership's formation:
Ables Galang
Cash P20,000 P30,000
Inventory 15,000
Building 40,000
Furniture and Equipment 15,000

The building is subject to a mortgage of P10,000, which the partnership has

assumed. The partnership agreement also specified that profits and losses are to be
distributed equally. What amounts should be recorded as capital for Ables and
Galang at the formation of the partnership?
Ables Galang
A. P35,000 P85,000
B. P35,000 P75,000
C. P55,000 P55,000
D. P60,000 P60,000

6. Orcajada invested in a partnership a parcel of land which cost his father

P200,000. The land had a market value of P300,000 when Orcajada inherited it
three years ago. Currently, the land is independently appraised at P500,000 even
though Orcajada insisted that he "wouldn't take P900,000 for it." The land should be
recorded in the accounts of the partnership at
A. P300,000 C. P900,000
B. P500,000 D. P200,000

7. On Apr. 30, 2018, Lacson, Yacapin, and Bernal formed a partnership by

combining their separate business proprietorships. Lacson contributed cash of
P50,000. Yacapin contributed property with a P36, 000 carrying amount, a P40,000
original cost, and P80,000 fair value. The partnership accepted responsibility for the
P35,000 mortgage attached to the property.
Bernal contributed equipment with a P30,000 carrying amount, a P 75,000 original
cost and a P55.000 fair value. The partnership agreement specifies that profits and
losses are to be shared equally but is silent regarding capital contributions. Which
partner has the largest Apr. 30, 2018, capital balance?

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A. Bernal C. Yacapin
B. Lacson D. All capital account balances are
equal

8. On Aug. I, lsada and Ureta-Reyes pooled their assets to form a partnership, with
the firm to take over their business assets and assume the liabilities. Partnership
capital are to be based on net assets transferred after the following adjustments.
Profits and losses are allocated equally.
The inventory of Ureta-Reyes is to be increased by P4,000; an allowance for
doubtful accounts of P1,000 and P1,500 are to be set up in the books of Isada and
Ureta-Reyes, respectively; and accounts payable of P4,000 is to be recognized in
Isada’s books. The individual trial balances on August, before adjustments, follow:
ISADA URETA-REYES
Assets P75,000 P113,000
Liabilities 5,000 34,500

What is the capital of lsada and Ureta-Reyes after the above adjustments?
A. lsada, P68,750; U. Reyes, P77,250
B. lsada. P65.000; U. Reyes, P76,000
C. lsada, P65,000; U. Reyes, P81,000
D. lsada, P75,000; U. Reyes, P81,000

Isada Ureta
Net assets ₱ 70,000 ₱ 78,500
Increase in inventory 4,000
Allowance for doubtful account (1,000) (1,500)
Increase in accounts payable (4,000) ------------
Capital ₱ 65,000 ₱ 81,000

9. Calma and Abello formed a partnership on April 1 and contributed the following
assets:
Calma Abello
Cash P150,000 P50,000
Land 310,000
The land was subject to a mortgage of P30,000, which was assumed by the
partnership. Under the partnership agreement, Calma and Abello will share profit
and loss in the ratio of one-third and two-thirds, respectively. Abello's capital
account at April 1 should be
A. P330,000. C. P300,000.
B. P360,000. D. P340,000.

10. Pedernal, Pating and Liggayu are forming a new partnership. Pedernal is to
invest cash of P100,000 and stapling equipment originally costing P120,000 but has

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a second hand market value of P50,000 Pating is to invest cash of P160,000.

Liggayu whose family is engaged in selling stapling equipment, is to contribute cash
of P50,000 and a brand new stapling equipment to be used by the partnership with
a regular price of 120,000 but which cost their family's business P100,000. Partners
agreed to share profits equally. The capital balances upon formation are '
A. Pedernal, P220,000; Pating, P160,000; and Liggayu, P150,000.
B. Pedernal, P150,000; Pating, P160,000; and Liggayu, P170,000.
C. Pedernal, P160,000; Pating, P160,000; and Liggayu, P160,000.
D. Pedernal, P176,666; Pating, P176,666; and Liggayu, P176,668.

Pedernal Pating Liggayu

Cash ₱ 100,000 ₱ 160,000 ₱ 50,000
Stapling equipment 50,000 120,000
Capital balances ₱ 150,000 ₱ 160,000 ₱ 170,000

11. Estrada and Molina formed a partnership on Mar. 1, 2018 and contributed the
following assets:
Estrada Molina
Cash P80,000
Equipment P50,000

The equipment was subject to a chattel mortgage of P10,000 that was assumed by
the partnership. The partners agreed to share profits and losses equally, Molina's
capital account at Mar. 1, 2018 should be
A. P40,000. C. P60,000.
B. P50,000. D. P45.000.

Equipment ₱ 50,000
Mortgage payable (10,000)
Molina’s, capital ₱ 40,000

12. On Mar 1 2018 Kalaw and Borromeo formed a partnership with each
contributing the following assets:
Kalaw Borromeo
Cash P30,000 P70,000
Machinery and Equipment 25,000 75,000
Building 225,000
Furniture and Fixtures 10,000

The building is subject to mortgage loan of P80,000, which is to be assumed by the

partnership. Agreement provides that Kalaw and Borromeo share profits and lasses
30% and 70%, respectively. On Mar 1, 2018 the balance in Borromeo's capital
account should be
A. P290,000. B. P370,000.

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C. P314,000 D. P305,000

13. The same information in the previous number except that the mortgage loan is
not assumed by the partnership. On Mar. 1, 2018 the balance in Borromeo's capital
account should be
A. P370,000. C. P290,000.
B. P305,000. D. P314,000.

14. On July 1, Faminial and Feltavero formed a partnership, agreeing to share profits
and losses in the ratio of 4:6 respectively. Faminial contributed a parcel of land that
cost P25,000. Fetalvero contributed P50,000 cash. The land was sold for P50,000 on
Julv 1, three hours after formation of the partnership. How much should be recorded
in Faminial's capital account on the formation of the partnership:
A. P25,000. C. P50,000.
B. P10,000. D. P20,000.

15. On April 30, 2018, Foja, Lupian and Retada formed a partnership by combining
their separate business proprietor. Foja contributed cash of P50,000. Lupian
contributed property with a P36,000 carrying amount, a P40,000 original cost, and
an P80,000 fair value. The partnership assumed the P35,000 mortgage attached to
the property. Retada contributed equipment with a P30,000 carrying amount, a
P75,000 original cost, and P55,000 fair value. The partnership agreement specified
that profits and losses are to be shared equally. Which partner has the largest Apr.
30, 2018, capital account balance?
A. Foja. C. Lupian.
B. Retada. D. All capital account
balances are equal.

Foja Lupian Retada

50,000 80,000 55,000
(35,000)
50,000 45,000 55,000

16. Lacson and Solis started a partnership. Lacson contributed a building that she
purchased 10 years ago for P100,000. The accumulated depreciation on the building
on the date of formation of the partnership is P25,000 and the fair value is
P110,000. For what amount will Lacson's capital account be credited on the books of
the partnership?
A. P100,000 C. P110,000
B. P75,000 D. P25,000
Fair value ₱ 100,000

Use the following information to answer the next two questions

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Helena and Indiana formed by contributing P250,000 and P350,000 cash.

They agreed to share profits equally but to share capital 40:60, respectively.
17. Using bonus method, compute the capital balances of Helena and Indiana?
A. P200,000; P300,000 C. P250,000; P350,000
B. P240,000; P360,000 D. P300,000; P300,000

18. Using goodwill method, compute the capital balances of Helena and Indiana?
A. P240,000; P360,000 C. P250,000; P250,000
B. P250,000; P375,000 D. P350,000; P350,000

19. A, Q and W contributed a total of P600,000 cash to form WAQ Partnership. Only
W posses the technical expertise required by the business so A and Q agreed to
provide 10% of their contributed capital as bonus to W. A and W contributed
P240,000 and P120,000, respectively. How much is Q’s adjusted capital balance
after formation?
A. P120,000 C. P200,000
B. P168,000 D. P240,000

20. A, B and C formed a partnership and contributed P100,000, P50,000 and

P80,000 cash, respectively. A and C further contributed non-cash assets with agreed
values of P50,000 and P20,000, respectively. Owing to the business expertise of B
and C, A concurred that they will be credited with 20% goodwill based on their
contributed capital. How much is the adjusted capital of C after formation?
A. P80,000 C. P100,000
B. P96,000 D. P120,000

A B C
Cash 100,000 50,000 80,000
Non-Cash 50,000 20,000
Goodwill (30,000) 10,000 20,000
20,000 60,000 120,000

(100,000*20%=20,000)

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