Exam (elaborations)

ADVANCED FINANCIAL ACCOUNTING & REPORTING

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ADVANCED FINANCIAL ACCOUNTING & REPORTING

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ADVANCED FINANCIAL ACCOUNTING & REPORTING

ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY CPA Review Batch 45  May 2023 CPALE  12 February 2023  03:00 PM – 06:00 PM ADVANCED FINANCIAL ACCOUNTING and REPORTING FIRST PRE-BOARD EXAMINATION Page 1 of  INSTRUCTIONS: Select the correct answer for each of the questions. Mark only...

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resa the review school of accountancy cpa rev

Institution ADVANCED FINANCIAL ACCOUNTING & REPORTING
Course ADVANCED FINANCIAL ACCOUNTING & REPORTING

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lOMoARcPSD|47166518

ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Batch 45  May 2023 CPALE  12 February 2023  03:00 PM – 06:00 PM

ADVANCED FINANCIAL ACCOUNTING and REPORTING FIRST PRE-BOARD EXAMINATION

INSTRUCTIONS: Select the correct answer for each of the questions. Mark only one answer
for each item by shading the box corresponding to the letter of your choice on the
answer sheet provided. STRICTLY NO ERASURES ALLOWED. Use pencil no. 2 only.

1. The partnership of Dana, Elsie, Fe, and Gloria is being liquidated over the first
few months of 2023. The trial balance at January 1, 2023 is as follows:
Debits Credits
Cash P 200,000
Accounts receivable 56,000
Inventory 142,000
Equipment – net 300,000
Land 150,000
Loan to Dana 20,000
Accounts payable P 400,000
Dana, capital – 20% 170,000
Elsie, capital – 10% 80,000
Fe, capital – 50% 140,000
Gloria, capital – 20% _________ ___78,000
P 868,000 P 868,000
Additional information:
1. The partners agree to retain P20,000 cash on hand for contingencies and
distribute the rest of the available cash at the end of each month.
2. In January, half of the receivables were collected. Inventory that cost
P75,000 was liquidated for P45,000. The land was sold for P250,000.
3. The accounts payable was liquidated.
How much will each partner receive for the month of January 2023?
A. Dana, P68,000; Elsie, P39,000; Fe, P -0-; Gloria, P -0-
B. Dana, P81,000; Elsie, P45,500; Fe, P -0-; Gloria, P 9,000
C. Dana, P65,333; Elsie, P37,667; Fe, P -0-; Gloria, P -0-
D. Dana, P103,000; Elsie, P -0-; Fe, P -0-; Gloria, P -0-
2. CC admits DD as a partner in business. Accounts in the ledger for CC on November
30, 2023, just before the admission of DD, show the following balances:
Cash P 6,800
Accounts receivable 14,200
Merchandise inventory 20,000
Accounts payable 8,000
CC, capital 33,000
It is agreed that for purposes of establishing CC’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 P23,000.
(c) Prepaid salary expenses of P600 and accrued rent expense of P800 are to be
recognized.
DD is to invest sufficient cash to obtain a 1/3 interest in the partnership. Compute:
(1) CC’s adjusted capital before the admission of CC, and (2) the amount of cash
investment by DD:
A. (1) P35,347; (2) P11,971 C. (1) P35,374; (2) P17,687
B. (1) P36,374; (2) P18,487 D. (1) P28,174; (2) P14,087
3. On June 30, 2022, the balance sheet of the Oakley, Pine, and Woods partnership,
together with their respective profits and loss ratios was as follows:
Assets, at cost P180,000
Oakley, loan 9,000
Capital, Oakley (20%) 42,000
Capital, Pine (20%) 39,000
Capital, Woods (60%) 90,000
Oakley has decided to retire from the partnership. By mutual agreement, the assets
are to be adjusted to their current value of P216,000 and the partnership is to pay
Oakley P61,200 for her partnership interest, including her loan, which is to be
repaid in full.

, lOMoARcPSD|47166518

ADVANCED FINANCIAL ACCOUNTING & REPORTING
ReSA Batch 45 – May 2023 CPALE Batch
12 February 2023  03:00 PM to 06:00 PM AFAR First Pre-Board Exam
4. On July 1, 2023, Sayonara Company has the following balance sheet:
Assets Liabilities and Capital
Cash P 20,400 Accounts Payable P 38,400
Other Assets 219,600 Due to Palmer 14,400
Other liabilities 84,000
Palmer, capital–50% 28,800
Larsen – 50% 74,400

As of July 1, 2023, the partners have personal net worth as follows:
Palmer Larsen
Assets P 62,400 P 91,200
Liabilities 56,400 122,400

The personal net worth of each partner does not include amounts due to or from the
partnership. Assume the other assets are sold for P123,600 after incurring
liquidation expenses of P4,800. How much should Larsen receive?
A. P -0- C. P 24,000
B. P 22,800 D. P 16,800

Items 5 to 7 are based on the following information:
Orville Company recently petitioned for bankruptcy and is now in the process of
preparing a statement of affairs. The carrying values and estimated fair values of the
assets of Orville Company are as follows:

Carrying Value Fair Value
Cash P 20,000 P 20,000
Accounts Receivable 45,000 30,000
Inventory 60,000 35,000
Land 75,000 70,000
Building (net) 180,000 100,000
Equipment (net) 170,000 80,000
Total P 550,000 P335,000

Debts of Orville are as follows:
Accounts payable P 60,000
Wages Payable (all have priority) 10,000
Taxes payable 10,000
Notes payable (secured by receivable and inventory 120,000
Interest on Notes Payable 6,000
Bonds Payable (secured by land and building) 150,000
Interest on bonds Payable 7,000
Total P 363,000

5. What is the total amount of unsecured claims?
A. P 93,000 C. P121,000
B. P113,000 D. P126,000

6. What estimated amount will be available for general unsecured creditors upon
liquidation?
A. P28,000 C. P113,000
B. P93,000 D. P121,000

7. What is the estimated dividend percentage?
A. 23% C. 77%
B. 93% D. 68%

8. Following is the balance sheet of the ABCD Partnership at March 31, 2023, when the
partnership is to be liquidated:

Cash P 6,000 Liabilities P 12,400
Other assets 126,000 A, loan 12,000
B, loan 14,400
D, loan 9,600
A, capital – 25% 16,200
B, capital – 25% 12,000

, lOMoARcPSD|47166518

ADVANCED FINANCIAL ACCOUNTING & REPORTING
ReSA Batch 45 – May 2023 CPALE Batch
12 February 2023  03:00 PM to 06:00 PM AFAR First Pre-Board Exam

During the month of April 2023, assets having a book value of P18,000 are sold at
a loss of P2,400. Liquidation expenses of P600 are paid as well as P7,200 of the
liabilities. Of the liabilities shown in the balance sheet, P240 represents salary
payable to D and P160 represents salary payable to C.
On April 30, 2023 cash to be distributed to A, B, C, and D as follows:
A B __ C D___
A. P -0- P -0- P -0- P 9,000
B. P 1,950 P 1,950 P 1,950 P 1,950
C. P -0- P -0- P -0- P 1,950
D. P -0- P -0- P 9,000 P -0-

Items 9 through 11 are based on the following information:
From the following data from the records of ABC Partnership
Balance Sheet
December 31, 2022
Assets
Cash P 2,000
Other Noncash Assets __28,000
Total P 30,000
Liabilities and Capital
Liabilities P 5,000
A, loan 2,500
A, capital 12,500
B, capital 7,000
C, capital ___3,000
Total P 30,000
Profit and loss ratio is 3:2:1 for A, B, and C, respectively. The Other noncash assets
were realized as follows:
Date Cash Received Book Value
January 2023 P 6,000 P 9,000
February 2023 3,500 7,700
March 2023 12,500 11,300
Cash is distributed as other noncash assets realized.
9. The total loss on liquidation to A is:
A. P3,000 C. P1,000
B. P2,000 D. P 0
10. Total cash received by B is:
A. P 0 C. P2,000
B. P1,500 D. P5,000
11. Cash received by C in January is:
A. P 0 C. P 500
B. P 200 D. P1,000

12. Tillman Textile Company has a single branch in Bulacan. On March 1, 2023, the home
office accounting records included an Allowance for Overvaluation of Inventories -
Bulacan Branch ledger account with a credit balance of P32,000. During March,
merchandise costing P36,000 was shipped to the Bulacan Branch and billed at a price
representing a 40% markup on the billed price. On March 31, 2023, the branch
prepared an income statement indicating a net loss of P11,500 for March and ending
inventories at billed prices of P25,000. What is the amount of adjustment for
Allowance for Overvaluation of Inventories to reflect the true branch net income?
A. P39,257 debit C. P39,333 debit
B. P46,000 credit D. P46,000 debit
Items 13 to 15 are based on the following information:
At the end of its fiscal year on June 30, 2023, the Ritz, Sally, and Tracy Partnership
had account balances as follows:
Cash P 20,000 Accounts payable P 35,000
Accounts receivable 30,000 Loan from Sally 25,000
Inventories 70,000 Ritz, capital (20%) 70,000
Plant assets, net 60,000 Sally, capital (30%) 50,000

Loan to Ritz __30,000 Tracy, capital (50%) __30,000

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