1st Examination

nd nd
2 Term, 2 Semester, S.Y. 2016-2017
Advanced Financial Accounting & Reporting, Part 1
(ACCTG 7)

I. Multiple Choice. Choose the letter that corresponds to your answer. Provide solution in good form when
needed.

The business assets of PAK and GANERN appear below:

PAK GANERN
Cash P 11,000 P 22,354
Accounts Receivable 234,536 567,890
Inventories 120,035 260,102
Land 603,000 -
Building - 428,267
Furniture & Fixtures 50,345 34,789
Other Assets 2,000 3,600
Total P 1,020,916 P 1,317,002

Accounts Payable P 178,940 P 243,650

Notes Payable 200,000 345,000
Pak, Capital 641,976 -
Ganern, Capital - 728.352
Total P 1,020,916 P 1,317,002

PAK and GANERN agreed to form a partnership by contributing their respective assets and equities subject
to the following adjustments:
a) Accounts receivable of P20,000 in PAK's books and P35,000 in GANERN are uncollectible.
b) Inventories of P 5,500 and P6,700 are worthless in PAK’s and GANERN’s respective books.
c) Other assets of P2,000. and P3,600 in PAK’s and GANERN’s respective books are to be written off.

1. The capital account of the partners after adjustments will be:

a. PAK, P615,942; GANERN, P717,894 c. PAK, P640,876; GANERN, P683,050
b. PAK, P640,876; GANERN, P712,345 d. PAK, P614,476; GANERN, P683,052

2. The same information in Number 1, how much total assets does the partnership have after formation?
a. 2,337,918 b. 2,237,918 c. 2,265,118 d. 2,365,218

3. On February 1, 2017, JAJA and JEJE formed a partnership, agreeing to share for profits and losses in the
ratio 2:3, respectively, JAJA invested a parcel of land that cost him P25,000. JEJE invested P30,000 cash.
The land was sold for P 50,000 on the same date, three hours after formation of the partnership. How much
should be the capital balance of JAJA right after formation?
a. 25,000 b. 30,000 c. 60,000 d. 50,000

4. For financial accounting purposes, assets of an individual partner contributed to a partnership are recorded
by the partnership at
a. Historical Cost c. Fair market value
b. Book Value d. lower of cost or market value

5. "A contract whereby two or more persons bind themselves to contribute money, property or industry to a
common fund with the intention of dividing the profits among themselves"
a. Contrata duo personarum c. Delectus personae
b. Avisala Eshma d. Partnership

6. AB admits NORMAL as a partner in business. Accounts in the ledger for AB on January 30, 2017, just
before admission of NORMAL, show the following balances:
Cash in Bank P 6,800
Accounts Receivable 14,200
Merchandise Inventory 20,000
Accounts Payable 8,000
AB, Capital 33,000
It is agreed that for purposes of establishing AB’s interest, the following adjustments shall be made:
a. An allowance for doubtful accounts of 3% of accounts receivable is to be established.
b. The merchandise inventory is to be valued at P23000.
c. Prepaid salary expenses of P600 and accrued rent expense of P800 are to be recognized.

NORMAL is to invest cash to obtain 1/3 interest in the partnership.

Compute for: (1) AB’ adjusted capital before the admission of NORMAL; and (2) the amount of cash
investment by NORMAL.
a. (1) P35,347; (2) P11,971 c. (1) P35,347; (2) P17,687
b. (1) P36,374; (2) P18,487 d. (1) P28,174; (2) P14,087

7. On January 30, 2017, HAHA, HIHI and HUHU formed a partnership by combining their separate business
proprietorships. HAHA contributed cash of P75,000. HIHI contributed property with a P54,000 carrying
amount, a P60,000 original cost, and P120,000 fair value. The partnership accepted responsibility for the
P52,500 mortgage attached to the property. HUHU contributed equipment with a P45,000 carrying amount, a
P112,500 original cost, and P82,500 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 January
31,2017, capital balance? Prove your answer.
a. HAHA b. HIHI c. HUHU d. All capital balance are equal

8. MAHAL KO and MAHAL AKO agreed to form a laundry shop business in Davao City. They further agreed
that adjustments be made in the book of MAHAL KO after which MAHAL AKO will contribute cash equal to
the net assets after adjustments. The ledger account balances of MAHAL KO are as follows:
Cash in Bank P 65,000
Accounts Receivable 40,000
Estimated Uncollectible Accounts (3,000)
Laundry Equipment 120,000
Accumulated Depreciation (35,000)
Accounts Payable 15,000
The following adjustments are to be made:
d. Accounts Receivable should have a 70% probability of collection
e. Laundry Equipment should have a fair market value of P100,000

What amount of adjustment to be made on the Estimated Uncollectible Accounts?

a. to be increased by P9,000 c. to be increased by P12,000
b. to be decreased by P9,000 d. to be decreased by P12,000

9. What amount the Equipment is carried in the partnership book? (Refer to #8)
a. 85,000 b. 100,000 c. 120,000 d. 135,000

10. How much cash that MAHAL AKO should contribute? (Refer to #8)
a. 178,000 b. 188,000 c. 193,000 d. 208,000

_________________________________________THE END______________________________________

“Do the hard jobs first. The easy jobs will take care of themselves.”
– Dale Carnegie