NAME: ___________________________ DATE: _________ SCORE:

Directions: Use the answer sheet to indicate your final answer. Use black ballpen and no erasure. If
cheating is discovered, the working student who will be supervising you may deduct points.

1. When property other than cash is invested in a partnership, at what amount should the noncash
property be credited to the contributing partner’s capital account?
a. Fair value at the date of contribution.
b. Contributing partner’s original cost.
c. Assessed valuation for property tax purposes.
d. Contributing partner’s tax basis.
2. A and B agreed to form a partnership. A shall contribute ₱80,000 cash while B shall contribute
₱200,000 cash. However due to the expertise that A will be bringing to the partnership, the partners
agreed that they should initially have equal interests in the partnership capital. After recording the
partners’ contributions, A’s capital account should have a balance of
a. 40,000.
b. 80,000.
c. 140,000.
d. 200,000.
3. A and B share equally in partnership profits and losses. During the year, A’s capital account had a net
increase of ₱50,000. Partner A made contributions of ₱10,000 and capital withdrawals of ₱60,000
during the year. How much was the partnership profit for the year?
a. 180,000 c. 210,000
b. 200,000 d. 480,000
4. The following are the capital account balances and profit and loss ratios of the partners in AB
Partnership as of January 1, 20x2:
Capital accounts Profit or loss ratios
A, Capital 600,000 40%
B, Capital 1,000,000 60%
1,600,000

On January 1, 20x2, C was admitted to the partnership when he acquired 20% interest in the net assets
and profits of the firm for a ₱400,000 investment. The bonus method was used to record C’s admission
into the partnership.

For the year 20x2, the partnership earned profit of ₱4,000,000. However, it was discovered that the
following items were overstated:
20x1 20x2
Accrued income 80,000 100,000
Prepaid asset 140,000 200,000
Accrued expense 160,000 240,000
Unearned income 60,000 40,000

How much is the share of A in the 20x2 profit?

a. 1,273,600
b. 1,286,400
c. 1,592,000
d. 1,208,600
5. On January 1, 20x1, the partners of ABC Co. decided to liquidate their partnership. The following
information was made available:
Cash 30,000
Accounts receivable 380,000
Inventory 260,000
Furniture & fixtures, net 120,000
Total 790,000
Accounts payable 165,000
A, Capital (70%) 350,000
B, Capital (30%) 275,000
Total 790,000
C offered to buy for ₱760,000 the partnership assets including liabilities but excluding cash and after
certain assets are to be restated to their fair values as follows:

Accounts receivable, ₱350,000

Inventory, ₱250,000

Furniture, ₱135,000

How much will A and B receive as final settlement of their partnership interests?

a. 570,000

c. 790,000

b. 760,000

d. 625,000

6. The statement of affairs of ABC Co. indicates that unsecured creditors without priority with total claims
of ₱720,000 may expect to recover only ₱288,000 after all the assets were sold. Among the creditors
of ABC Co. are the following:
• Government – taxes payable of ₱400,000, inclusive of ₱80,000 assessments and surcharges.
• XYZ bank – loan payable of ₱4,000,000 and accrued interest of ₱200,000, backed by collateral security
with realizable value of ₱4,800,000.
• Alpha Financing Co. – loan payable of ₱3,200,000 backed by collateral security with realizable value of
₱2,000,000.
• Mr. B – loan payable of ₱1,000,000 and accrued interest of ₱200,000. No collateral security.

How much is the expected recovery of partially secured creditors?

a. 2,480,000
b. 2,160,000
c. 1,280,000
d. 0

7. The following information was taken from the statement of realization and liquidation of Jury and John
ABC Co. which is undergoing liquidation:
ASSETS:

Assets to be realized 8,000,000

Assets acquired 60,000

Assets realized 4,720,000

Assets not realized 880,000

LIABILITIES:

Liabilities liquidated 8,520,000

Liabilities not liquidated 4,760,000

Liabilities to be liquidated 11,480,000

Liabilities assumed 128,000

SUPPLEMENTARY ITEMS:

Supplementary expenses 100,000

Supplementary income 72,000

How much is the net gain (loss) for the period?

 a. (4,132,000)
b. (28,000)
c. 4,160,000
d. (4,160,000)

A and B formed a joint operation. The following were the transactions during the year:

A B

Total purchases 400 320

Total sales 480 240

Expenses paid 800

Other income 40

The joint operation was completed at the end of the year. Each joint operator is entitled to a 10%
commission on its purchases and a 20% commission on its sales. Any remaining profit or loss is divided
equally.

8. How much is the profit (loss) of the joint operation?

a. 760
b. (760)
c. 840
d. (840)

9. On the cash settlement between the joint operators,

a. A pays B ₱368.
b. B pays A ₱368.
c. A pays B ₱428.
d. B pays A ₱428.

10. According to PFRS 15, a promised good or service is distinct if

I. The customer can benefit from the good or service either on its own or together with other
resources that are readily available to the customer.
II. The promise to transfer the good or service is separately identifiable from other promises in the
contract.
III. The promise to transfer the good or service is explicitly stated in the contract, the rights of the
parties and payment terms are identifiable, and the collectability of the revenue from the contract
is probable.
a. I and II
b. I and III
c. I, II and III
d. None of these
11. According to PFRS 15, how does an entity account for a promise in the contract to transfer a good or
service that is not distinct?
a. The entity shall not recognize any revenue from the promise to transfer a non-distinct good or
service; any consideration received therefrom is treated as a liability.
b. The entity shall recognize revenue from a promise to transfer a non-distinct good or service at the
earlier of the following events: the entity has no remaining obligation in the contract and the
contract is terminated and the consideration received is non-refundable.
c. The entity shall combine the non-distinct good or service with the other promises in the contract
and treat the combined promises as a single performance obligation.
d. The entity shall ignore the promise to transfer a non-distinct good or service and shall account
only those promises in the contract to transfer distinct goods or services.
12. If an entity’s promise to grant a license is distinct,
a. the general principles of PFRS 15 are applied to determine whether the performance obligation is
satisfied over time or at a point in time.
 b. the specific principles of PFRS 15 are applied to determine whether the performance obligation is
satisfied over time or at a point in time.
c. both the general and specific principles are used to determine whether the performance
obligation is satisfied over time or at a point in time and whether the grant of license provides the
customer with a ‘right to access’ or a ‘right to use.’
d. US GAAP (FAS No. 45) is applied to determine whether there is substantial performance of the
initial services required in the contract.
13. Which of the following does not indicate that the nature of an entity’s promise to transfer a license is
to provide the customer the right to access the entity’s intellectual property as it exists throughout
the license period?
a. The intellectual property to which the customer has rights changes throughout the license period.
b. The entity continues to be involved with its intellectual property
c. The contract requires, or the customer reasonably expects, that the entity will undertake activities
that significantly affect the intellectual property to which the customer has rights and the
customer is exposed to any positive or negative effects of those activities.
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 the license is granted.
14. Which of the following statements is incorrect if an entity’s promise to grant a license is not distinct
and that the performance obligation is satisfied at a point in time?
a. Treat all promises in the contract, including the grant of license, as a single performance obligation.
b. Recognize the fixed consideration as revenue in full when the license is effectively transferred to
the customer.
c. Recognize the sales-based (or usage-based) consideration in the contract in full when the license
is effectively transferred to the customer.
d. Recognize the sales-based (or usage-based) consideration in the contract as the subsequent sales
or usages occur, notwithstanding the fact that the performance obligation is satisfied at a point in
time.
15. On January 1, 20x1, Pongcuter Co. enters into a contract with a customer to grant a software license
for ₱1,000,000. The fee is payable at contract inception. The license has a term of four years, to reckon
from the date the customer can use the software. The customer can determine how and when to use
the right without further performance by XYZ Co. and does not expect that XYZ Co. will undertake any
activities that significantly affect the intellectual property to which the customer has rights. The
software is transferred to the customer on February 1, 20x1. However, the code, which is necessary
for the customer to use the software, is transferred only on April 1, 20x1. How should XYZ Co. recognize
revenue from the fixed consideration in the contract?
a. in full on February 1, 20x1
b. in full on April 1, 20x1
c. deferred and amortized over four years starting on February 1, 20x1
d. deferred and amortized over four years starting on April 1, 20x1
16. ABC Co. acquired an investment in XYZ Co., a joint venture, for ₱100,000, incurring transaction costs
of ₱1,000 which results to a 40% control on the corporation. ABC Co. determined that it has joint
control over XYZ. ABC Co. uses the PFRS for SMEs and elects the equity model for its investments in
joint ventures. XYZ Co has a profit of 600,000 for the year and declared dividends of 500,000. The
investment’s fair values were ₱135,000 December 31, 20x1. Costs to sell were estimated at ₱4,000
throughout. ABC Co. recognizes in its profit or loss for 20x1 which of the following amounts?
A. 200,000
B. 185,000
C. 190,000
D. 189,000
17. How much is the investment in Joint Venture for the year 20x1?
A. 141,000
B. 131,000
C. 140,000
D. 135,000
18. You are an accountant. Your client, a franchisor, asked you for an advice regarding the recognition of
revenue from a franchise contract. Your advice to your client would most certainly be based on which
of the following standards?
a. FAS No. 45 (US GAAP)
b. PFRS 15
c. PAS 15
d. PFRS 5
19. If the promise to grant a license is distinct and that the license provides the customer the “right to
access” the entity’s intellectual property, how is revenue recognized from the initial fee in the
contract?
a. in full upon the signing of the contract
b. in full when the customer obtains and starts using the license
c. in full when the initial services to setup the contract are substantially performed
d. deferred and amortized over the license period
On Jan. 1, 20x1, ABC Co. entered into a franchise agreement with XYZ Co. The franchise contract gives
XYZ Co. the right to use ABC’s trademark and proprietary processes for a period of 4 years. The
franchise requires payment of an upfront fee of ₱1,000,000, payable at contract inception, and 5%
monthly royalty based on sales. Aside from the granting of the license, the franchise agreement also
requires ABC Co. to undertake pre-opening activities to setup the contract and post-commencement
activities, such as research and development and marketing campaigns, to support the intellectual
property. Although the activities do not result in the direct transfer of a good or service to XYZ Co. as
the activities occur, it is expected that XYZ Co. will benefit from them. All the necessary preparations
were completed and XYZ Co. started business operations on January 31, 20x1.
20. How should ABC Co. recognize revenue from the continuing franchise fee?
a. ABC Co. shall estimate the variable consideration and amortize it as revenue in full on Jan. 1, 20x1.
b. ABC Co. shall estimate the variable consideration and amortize it as revenue over the license
period.
c. ABC Co. shall estimate the variable consideration, discount it to present value, subject it to
“Constraining estimates of variable consideration,” and amortize it to revenue over the license
period.
d. ABC Co. shall recognize revenue equal to 5% of the franchisee’s sales as the sales occur.
21. How should the partners in a business partnership share in the P/L of the partnership?
a. Equally
b. At whatever is reasonable
c. In accordance to their agreement
d. If silent, according to their contribution
22. Under PFRS 11, joint arrangements that are joint ventures are accounted for under
a. equity method in accordance with PAS 39.
b. equity method in accordance with PAS 28.
c. fair value method in accordance with PFRS 9.
d. proportionate consolidation method in accordance with PAS
23. In the cash distribution plan, which partner gets the first cash distribution?
a. The partner with the largest loan balance
b. The partner with the largest loss absorption potential
c. The partner with the largest capital balance
d. The partner with the largest profit or loss ratio
24. CC Partnership began operations on June 1, 2024. On that date, Caloy and Chris have capital credits of
P35,000 and P48,000, respectively. The partnership has the following profit-sharing plan:
• 10% interest on partners’ capital balances at the end of the year
• P12,000 and P15,000 annual salaries for Caloy and Chris, respectively
• Remaining profit will be divided to Caloy and Chris on a 3:2 ratio, respectively

During the year, Caloy invested P30,000 worth of merchandise and withdrew P8,000 cash, while Chris
invested P24,000 cash. The partnership earned a profit of P53,275 during the year. How much is Chris’
capital balance at the end of 2024?
A. P84,475
B. P88,965
C. P85,325
D. P96,950

25. Four production companies jointly control and operate a certain cargo. Each party uses the said cargo
to transport its own goods in return for which it bears a proportion of the expenses. Each party has
control over its share of future economic benefits but together they do not establish a corporation or
other entity. What type of joint arrangement is this?
a. Jointly controlled operation
b. Jointly controlled entity
c. Joint Venture
 d. Joint Operation
26. What is the accounting treatment of the transaction price when a contract with a customer has
multiple performance obligations?
a. The transaction price shall be recognized as revenue of the most important performance
obligation
b. The transaction price shall be allocated equally to the different performance obligations
c. The transaction price shall be allocated to the different performance obligations by reference to
their relative standalone selling prices
d. The transaction price shall be recognized as revenue only at the end of completion of all
performance obligations
27. Statement I: The gain or loss on realization of non-cash assets is distributed to all partners
Statement II: all partners shall receive a distribution of cash upon liquidation of a partnership
Statement III: An insolvent partner will not receive any distribution from the partnership
a. Only statement III is true
b. Only statement II is true
c. All statements are true
d. None of the statements are true
28. How are anticipated administrative expenses reported on a statement of financial affairs?
a. As a footnote until actually incurred
b. As a liability with priority
c. As a partially secured liability
d. As an unsecured liability
29. Statement I: Partially secured creditors will always receive a settlement less than the amount due to
them.
Statement II: Unsecured liabilities with priority are not secured by any asset but are mandated by law
to be paid first after any other unsecured liabilities
Statement III: The total free assets in the statement of financial affairs are available to fully secured
creditors.
a. Only statement II is true
b. Only statement I is true
c. All statements are true
d. None of the statements are true

B Inc. filed bankruptcy and has undergone liquidation. The receiver received the statement of financial
position of the corporation and has the following information prior to liquidation:

Cash 600,000 Accounts payable 200,000

Accounts receivable 200,000 Salaries payable 400,000
Machinery 800,000 Taxes payable 600,000
Building 2,400,000 Loan Payable 800,000
Mortgage payable 1,000,000
Share capital 1,600,000
Deficit (600,000)
• The loan payable is secured by accounts receivable with estimated realizable value of P120,000
and machinery with estimated realizable value of P480,000.
• The mortgage payable is secured by building.
• Liquidation expenses amounting to P1,200,000.
• At the end of liquidation, the holder of loan payable recovered P680,000.
30. What is the estimated recoverable amount of the accounts payable?
a. P170,000 c. P30,000
b. P120,000 d. P80,000

30. What is the estimated net gain (loss) on realization and liquidation?
a. P(1,240,000) c. P(440,000)
b. P(1,800,000) d. P(400,000)

31. Franchise revenue are recognized over time if

a. franchise rights are transferred at a point in time
b. the franchisor is providing access to the right rather than transferring control
c. performance obligations regarding franchise rights are completed when the franchise opens
 d. the franchisee fee is payable upon signing of contract
32. In a “statement of affairs,”
A. Assets pledged with partially secured creditors are shown on the asset side of the statement and as
a deduction on the liability side of the statement.
B. Assets pledged with fully secured creditors are shown only on the liability side of the statement.
C. Liabilities owed to fully secured creditors are shown only on the asset side of the statement.
D. Liabilities owed to partially secured creditors are shown on the asset side of the balance sheet and
as a deduction on the liability side of the statement.
32. Which of the following is incorrect?
a. Loan to partners is a liability account
b. Due to partner is a liability account
c. Due from a partner is an asset account
d. Receivable from partner is an asset account
33. ABC Computers manufactures and sells computers that include a warranty to make good on any defect
in its computers for 150 days (often referred to as an assurance warranty). In addition, it sells
separately an extended warranty, which provides protection from defects for three years beyond the
150 days (often referred to as a service warranty). How many performance obligations are in the
contract?
a. 0
b. 1
c. 2
d. 3
34. The second step in the process for revenue recognition is to
A. allocate transaction price to the separate performance obligations.
B. determine the transaction price.
C. identify the contract with customers.
D. identify the separate performance obligations in the contract.
35. Partial satisfaction of a multiple performance obligation is reported on the statement of financial
position as
A. contract liability.
B. receivable.
C. contract asset.
D. unearned service revenue.
36. All revenue for franchise companies is derived from
A. assistance for site selection and negotiating lease.
B. bookkeeping and advisory services.
C. sale of initial franchise and continuing fees.
D. advertising and promotion.
37. The Statement of Realization and Liquidation differs from the Statement of Affairs because
A. The Statement of Realization and Affairs reports estimated realizable values rather than actual
liquidation results
B. The Statement of Realization and Affairs is a summary of secured debt activity only
C. The Statement of Realization and Affairs is prepared only at final completion of the liquidation
process
D. The Statement of Realization and Affairs reports actual liquidation results rather than estimated
realizable values
38. A Company enters into bankruptcy proceedings on April 30. Its balance sheet on that date is as follows:
Cash 25,000 Accounts Payable 70,000
Merchandise 60,000 Loan Payable 150,000
PPE 100,000 Stockholders’ Equity (35,000)
Total 185,000 Total 185,000

None of the liabilities are secured. The following transactions occur between April 30 and August 31:
• Merchandise with a book value of 45,000 was sold for 30,000
• PPE with a book value of 40,000 was sold for 25,000
• Wages and admin expenses of 10,000 were accrued
• An initial payment of 30 centavos per peso of indebtedness was paid to unsecured creditors

The statement of realization and liquidation would show a total: “assets to be realized” and “liabilities not
liquidated” :
 A. 160,000 & 164,000
B. 185,000 & 164,000
C. 160,000 & 154,000
D. 185,000 & 154,000
39. ABC specializes in selling and installing upscale theater systems. On March 1, ABC sold a premium
package that includes a projector set, speakers and high quality seats, along with installation service
for 32,500. If sold separately, each of these goods would have a cost of 15,000 (projector), 12,500
(speaker), 17,500 (seats) and 3,000(installation). How much of the transaction price would be
allocated to the projector, speakers, seats and installation service, assuming that each of these are
separate performance obligations:
A. 15,000, 12,500, 17,500, 3,000
B. 10,156, 8,463, 11,849, 2,031
C. 32,500, 0, 0, 0
D. 10,165, 8436, 11,894, 2,013
40. The estimated amount available for free assets in a statement of affairs for business enterprise
undergoing bankruptcy liquidation is equal to the assets?
A. Carrying amount less current fair values
B. Carrying amount plus gain or less loss on realization
C. Carrying amount plus loss or less gain on realization
D. Current fair value less carrying amounts
41. The total free assets in the statement of affairs will be available to the following except?
A. Fully secured creditors
B. Partially secured creditors
C. Unsecured creditors with priority
D. Unsecured creditors without priority

The accountant of ABC company prepared a statement of affairs. Total assets which there are no claims
are expected to be 2,100,000. Total unsecured claims of all classes totaled to 3,150,000. The following are
some relevant information:

• Accrued salaries of 45,000

• Unsecured note for 30,000 on which 1,800 of interest has accrued
• A note for 90,000 secured by 120,000 receivable, estimated to be 60% collectible
• Unpaid income taxes of 105,000

42. What is the percentage of recovery of unsecured liability with priority?

a. 65% c. 60%
b. 80% d. 100%

43. What is the amount realized by partially secured creditors?

a. 31,800 c. 58,500
b. 74,700 d. 83,700

ABC company experienced financial difficulties and decided to liquidate. A trustee was appointed by the
court regarding the administration of the corporation. Presented below is the financial position before the
start of liquidation:

Cash 4,050,000 Notes Payable 750,000

Equipment 3,750,000 Wages Payable 2,250,000
Building 7,200,000 Income tax payable 1,500,000
Loan Payable 3,000,000
Mortgage Payable 3,750,000
Contributed Capital 6,000,000
Deficit (2,250,000)

It is expected that administrative expenses amounting to 400,000 will be paid. The loan payable is
secured by the equipment which is estimated to be sold at 2,250,000. The mortgage payable is fully
secured by the estimated realizable value of the building. At the end of the liquidation the estimated
percentage settlement of the partially secured creditor is 92%.

44. What is the amount of the total free assets?

 a. 5,270,000 c. 5,187,000
b. 5,170,000 d. 5,180,000

45. Which of the following is not a step in recognizing revenue according to IFRS 15?
a. Identify the contract with a customer
b. Determine the transaction price
c. Identify the performance obligation in the contract
d. Recognize revenue before title of the asset is transfer to the customer
46. Revenue for sales-based royalty payments should be recognized
A. When the amount of sales can be determined
B. On the date payment is received by the franchisor
C. On the date the performance obligation is satisfied
D. On the date the contract was signed
47. R, S and T formed a joint operation. R was designated as the managing joint operator and was to record
the joint operation’s transaction in his own books. As manager, R was to be allowed a salary of 12,000,
the remaining P/L are to be divided equally
The following are some information before adjustment for joint operations inventory and profit
Debit Credit
Joint Operations, Cash 48,000
Joint Operations 15,000
S, Capital 1,000
T, Capital 27,000

The arrangement was terminated at the end of the year and unsold merchandise costing 10,500 were
taken over by T. R made cash settlement with S and T.
In the final cash settlement, how much does T receive? (AFAR DAYAG 658 # 39)
A. 31,500
B. 27,000
C. 21,000
D. 10,500
48. The particular relationship between parties that signifies the existence of a joint arrangement is:
A. Significant influence by one party over the other party
B. Control over the operating policies of one party by another party
C. Shared influence by two parties over the activities of another party
D. Joint control by the parties over the activities of an operation
49. PFRS 11 joint arrangements, provides that joint control exists where:
A. No single party is in a position to control the activity unilaterally
B. The decisions in areas essential to the goals of the joint arrangement do not require the consent
of the parties
C. No one party may be appointed as manager of the joint arrangement
D. One party alone has power to control the strategic operating decisions of the joint arrangement.

ABC financial position before the start of liquidation is as follows:

ASSETS LIABILITIES AND EQUITY

Cash 100,000 Accounts Payable 1,600,000
Accounts Receivables 600,000 Income Tax Payable 900,000
Inventory 1,560,000 Note Payable (secured by 1,000,000
equipment)
Land 800,000 Loan Payable (secured by land 1,200,000
& building)
Building 1,200,000 Share Capital 2,000,000
Equipment 400,000 Retained Earnings (2,040,000)
Total 4,660,000 Total 4,660,000

Additional Information:
• Only 60% of the accounts receivable is collectible
• The entire inventory is expected to be sold half the price
• The land and building are expected to be sold at a lump sum price of 2,300,000
• The equipment is expected to be sold at its carrying amount but after refurbishment cost of
70,000
 • Certain accounts payable are measured at gross of 23,000 cash discount which ABC intends to
take. A supplier waived repayment of a 420,000 account
• The taxing authority gave ABC a six month tax amnesty to settle tax liability for 780,000
• Interest of 80,000 and 70,000 are expected to be paid on the note and loan, respectively
• Liquidation cost of 120,000 are expected to be incurred
• SSS, Philhealth and Pag-Ibig contributions of 160,000 are not reflected on the balance sheet
above are expected to be paid
50. How much is the estimated deficiency to unsecured creditors without priority?
A. 567,000
B. 697,000
C. 767,000
D. 817,000
51. How much are the net free assets?
A. 1,210,000
B. 1,570,000
C. 1,907,000
D. 2,270,000
52. How much total amount can the issuer of the note payable expect to receive?
A. 693,018
B. 729,078
C. 805,875
D. 908,127
53. Mr X an unsecured creditor without priority has a claim of 80,000/ How much can Mr X expect to
recover on his claim?
A. 50,760
B. 33,513
C. 45,135
D. 49,620
54. A Co and B Co, a national distributor of textbooks, enter into a contract to acquire a warehouse in a
particular region. Each party will use the warehouse to store its own inventories. The parties agree to
share in the cost of acquiring and maintaining the warehouse. Under PFRS 11, the arrangement
between the two distributor is most likely a
A. Joint operation
B. Joint venture
C. Joint arrangement
D. None of these
55. On settlement, B Co, a joint operator had a credit balance in its joint operation account, representing
only its own transaction with the joint operation as well as those it has made on behalf of the joint
operation. Which of the following statements is most likely to be correct?
A. The joint operation has earned profit
B. The joint operation has incurred loss
C. B Co may need to make cash payments to the other joint operators
D. B Co will receive cash from the other joint operators
56. It is the initial report prepared at the start of the liquidation process
A. Statement of affairs
B. Statement of realization and liquidation
C. Statement of corp liquidation and reorganization
D. None of these
57. Which of the following would most likely not be considered as a separate performance obligation in
relation to a franchise agreement?
A. Grant of license to use the franchisor’s trade name
B. Transfer of equipment to be used in the franchisee’s business
C. Franchisor’s promise to undertake activities to support the franchise
D. All of these are separate performance obligations
58. Contract costs recognized as asset are
A. Amortized in a manner that is consistent with the recognition of the related revenue
B. Deferred and amortized using straight-line method
C. Depreciated over the estimated useful life of the asset
D. Expensed immediately when incurred
Andrix Asterix Co. has filed for voluntary insolvency and is about to liquidate its business. Andrix Asterix
Co.’s statement of financial position immediately prior to the liquidation process is shown below:

Andrix Asterix Co.

Statement of financial position

As of December 31, 20x0

ASSETS
Current assets:
Cash 160,000
Accounts receivable 880,000
Note receivable 400,000
Inventory 2,120,000
Prepaid assets 40,000
3,600,000
Noncurrent assets:
Land 2,000,000
Building, net 8,000,000
Equipment, net 1,200,000
11,200,000
Total assets 14,800,000

LIABILITIES AND EQUITY

Current liabilities:
Accrued expenses 884,000
Current tax payable 1,400,000
Accounts payable 4,000,000
6,284,000
Noncurrent liabilities:
Note payable (secured by equipment) 1,200,000
Loan payable (secured by land and building) 8,000,000
9,200,000
Capital deficiency:
Share capital 2,000,000
Retained earnings (deficit) (2,684,000)
(684,000)
Total liabilities and equity 14,800,000

Additional information:

The following were determined before the commencement of the liquidation process:

a. Only 76% of the accounts receivable is collectible.

b. The note receivable is fully collectible and, in addition, interest of ₱40,000 is expected to be collected.
c. The inventory has an estimated selling price of ₱1,680,000 and estimated costs to sell of ₱40,000.
d. The prepaid assets are non-refundable.
e. The land and building have fair values of ₱8,000,000 and ₱3,200,000, respectively. However, Andrix
Asterix Co. expects to sell both assets at a single price of ₱10,400,000. Costs to sell are negligible
because the prospective buyer agrees to shoulder all costs relating to the transfer of the property.
f. The equipment is expected to be sold at a net selling price of ₱800,000.
g. Liquidation costs of ₱120,000 are expected to be incurred.
h. The accrued expenses include accrued salaries of ₱100,000.
i. Interest of ₱60,000 is expected to be paid on the loan.
j. All the other liabilities are stated at their expected net settlement amounts.

59. How much are the total assets pledged to fully secured creditors?
a. 11,200,000
b. 12,000,000
 c. 10,400,000
d. 0

60. How much is presented in the statement of affairs as “net free assets?”
a. 3,682,800
b. 4,048,800
c. 2,908,800
d. 3,628,800

61. How much is presented in the statement of affairs as “partially secured liabilities?”
a. 1,200,000 c. 2,820,000
b. 1,260,000 d. 3,920,000

62. What is the estimated recovery percentage of unsecured creditors without priority? (round-off answer to
two decimal places)
a. 75.00% c. 70.00%

b. 65.71% d. 72.00%

63. State the correct sequence of the following steps of revenue recognition under PFRS 15.
I. Determine the transaction price
II. Recognize revenue when (or as) the entity satisfies a performance obligation
III. Identify the performance obligations in the contract
IV. Allocate the transaction price to the performance obligations in the contract
V. Identify the contract with the customer

A. V, IV, II, I, III

B. V, I, IV, III, II
C. V, III, I, IV, II
D. V, I, III, IV, II
64. An entity, a movie distribution company, licenses Movie XYZ to a customer. The customer, an operator
of cinemas, has the right to show the movie in its cinemas for six weeks. In exchange for providing the
license, the entity will receive a portion of the operator’s ticket sales for Movie XYZ. Which of the
following statements is incorrect?
A. The only performance obligation in the contract is the promise to grant the license.
B. The fact that the performance obligation in the contract is satisfied over time or at a point in time
is irrelevant when determining how revenue is recognized on the contract.
C. The transaction price is a variable consideration.
D. The entity shall estimate the variable consideration, subject the estimate to the “constraining’
principle of PFRS 15, and recognize the resulting amount at the point in time when the license is
transferred to the customer.
65. On December 1, 20x1, CANOROUS Co. granted a 5-year franchise right to MELODIOUS, Inc. for an
initial franchise fee of ₱400,000 and a 10% sales-based royalty. The initial franchise fee is non-
refundable and due upon signing of the contract. At contract inception, CANOROUS determines that
the nature of its promise to grant the license is to provide the customer with the right to access
CANOROUS’s intellectual property as it exist throughout the license period. As of December 31, 20x1,
CANOROUS has no remaining obligation or intent to refund any of the cash received, all the initial
services necessary to setup the contract have been performed, and MELODIOUS started operating the
franchised business. MELODIOUS reported sales of ₱800,000 for 20x1. How much revenue shall
CANOROUS recognize in 20x1?
A. 480,000
B. 86,667
C. 80,000
D. 0
66. 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 in four equal annual payments starting November 1, 20x2. The license
period is 4 years. The franchise contract requires DRINK Co. to undertake pre-opening activities
necessary to setup the contract and post-opening activities that would further improve the intellectual
 property to which the franchisee has rights. All the preopening activities are completed, and TIPPLE
Co. started operations, on January 31, 20x2. How should DRINK Co. recognize revenue from the initial
franchise fee?
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.
67. A and B formed a partnership on March 1, 20x1. The partnership agreement stipulates the following:
• Monthly salary allowances of ₱10,000 for A and ₱6,000 for B. Salary allowances are to be
withdrawn by the partners throughout the period and are to be debited to their respective
drawings accounts.
• The partners share profits equally and losses on a 60:40 ratio.

During the period the partnership earned profit of ₱200,000 before salary allowances. How much is
the share of Partner B in the partnership profit?
A. 120,000
B. 100,000
C. 80,000
D. 76,000

68. Partnership capital and drawings accounts are similar to the corporate
A. paid in capital, retained earnings, and dividends accounts.
B. retained earnings account.
C. paid in capital and retained earnings accounts.
D. preferred and common stock accounts.
69. A and B agreed to form a partnership. The partnership agreement stipulates the following:
• Initial capital of ₱300,000.
• A 25:75 interest in the equity of the partnership.

A contributed ₱100,000 cash, while B contributed ₱200,000 cash. Which partner should provide
additional investment (or withdraw part of his investment) in order to bring the partners’ capital
credits equal to their respective interests in the equity of the partnership?

A. A shall provide additional capital of ₱25,000.

B. B shall withdraw capital of ₱25,000.
C. B shall make an additional investment of ₱25,000.
D. No additional contribution or withdrawal shall be made.

70. ABC enters into a contract with a customer to build a building for P 100,000,000, with a performance
bonus of P 50,000,000 that will be paid based on the timing of completion. The amount of the
performance bonus decreases by 10% per week for every week beyond the agreed-upon completion
date. The contract requirements are similar to contracts that ABC has performed previously, and
management believes that there is a 60% probability that the contract will be completed by the
agreed-upon completion date, a 30% chance that it will be completed one week late, and only a 10%
probability that it will be completed two weeks late.

Determine the expected value of the contract price.

A. 90,000,000
B. 147,500,000
C. 150,000,000
D. 145,000,000