Republic of the Philippines

EASTERN SAMAR STATE UNIVERSITY

College of Business Management and Accountancy
Borongan City

REMOVAL EXAMINATION
Acctng 321 Advanced Financial Accounting and Reporting 2

Instruction: Read the questions carefully. Answer the following questions by shading the letter of your correct answer.

1. On June 30, 2012, the consolidated balance sheet for the partnership of Eddy, Fox and Grimm together with their
respective profit and loss sharing percentage was as follows:
Assets, net of liabilities 320,000 Eddy, Capital (50%) 160,000
Fox, Capital (30%) 96,000
Grimm, Capital (20%) 64,000
Hamm is admitted as a new partner with a 25% interest in the partnership and that Hamm is admitted as a new
partnership for a cash payment of P 140,000, total goodwill implicit in the transaction is to be recorded. Immediately after
admission of Hamm, Eddy’s capital account balance should be
a. 280,000 b. 210,000 c. 160,000 d. 140,000

2. The book value of Ply Co. show the following balances on December 31, 2012:
Accounts receivable 313,750
Deferred gross profit 38,000
Analysis of the accounts receivable reveal the following:
Regular accounts 207,500
2011 installment accounts 16,250
2012 installment accounts 90,000
Sales on an installment basis in 2011 were made at 30% above cost, in 2012 at 33 1/3% above cost. Expenses paid were
P 1,500 relating to installment sales. How much is the net income on installment sales?
a. 11,000 b. 11,500 c. 16,000 d. 10,250

3. The Gamboa Construction Co. started work on three job sites during the current year. Data relating to the three jobs
are given below:
Contract Cost Est. cost to Billings on
Site Collections
price incurred complete contract
Batangas 500,000 375,000 0 500,000 400,000
Laguna 700,000 100,000 400,000 100,000 50,000
San Fernando 250,000 100,000 100,000 0 0
What amount of income should be reported for the current year if the percentage of completion method is used for all
contracts?
a. 65,000 b. 190,000 c. 215,000 d. 240,000

4. Using the same information above. What would be the amount of Construction in Progress to be reported on the
balance sheet if the percentage completion method is used?
a. 165,000 b. 265,000 c. 575,000 d. 765,000

5. In 2012, Camel Corp. was forced into bankruptcy and begun to liquidate. The following selected account balances were
taken from its statement of affairs:
Book value Estimated current values
Assets pledged with partially secured creditors 80,000 50,000
Total free assets 220,000 160,000

Book value Amount unsecured

Preferred claims 16,000 0
Partially secured liabilities 75,000 25,000
Unsecured liabilities 155,000 155,000
What is total amount available for payment of claims of unsecured creditors?
a. 0 b. 144,000 c. 160,000 d. 210,000

6. Using the above information. What is the amount of deficiency to creditors?

a. 180,000 b. 160,000 c. 144,000 d. 36,000
7. On March 1, 2013 entities A and B each acquired 30% of the ordinary voting shares of entity AB for P 300,000. Entities
A and B immediately agreed to share control over entity AB. On December 31, 2013, entity AB reported a profit of P
80,000 and declared a dividend of P 100,000. At December 31, 2013, the fair value of each venturer’s investment in entity
AB is P 293,000 and the cost to sell amounts to P 3,000. There is no published price quotation for entity AB. Entity AB
uses the cost model of accounting for investments. At December 31, 2013, entities A and B must each report their
investment in entity AB at
a. 290,000 b. 293,000 c. 300,000 d. 296,000

8. Hanz, Ivy and Jasper and Kelly own a publishing company that they operate as a partnership. Their agreement
includes the following:
 Hanz will receive a salary of 20,000 and a bonus of 3% of income after all the bonuses.
 Ivy will receive a salary of 10,000 and a bonus of 2% of income after all the bonuses.
 all partners are to receive the following: Hanz – 5,000; Ivy – 4,500; Jasper – 2,000 and Kelly – 4,700, representing
10% interest on their average capital balances.
 Any remaining profits are to be divided equally among the partners.
How would a net loss of P 40,000 be allocated among the partners?
Hanz Ivy Jasper Kelly
a. 3,261.75 (7,169.25) (18,181.25) (17,911.25)
b. 3,450.00 (7,050.00) (19,550.00) (16,850.00)
c. 4,116.75 (6,764.25) (20,026.25) (17,326.25)
d. 4,50.00 4,500 (8,000.00) (5,300.00)

9. The Grey and Redd Partnership was formed on January 2, 2012. Under the partnership agreement, each partner has
an equal initial capital balance. Partnership net income or loss is allocated 60% to Grey and 40% to Redd. To form the
partnership, Grey originally contributed assets, costing P 30,000 with a fair value of P 60,000 on January 2, 2012 and
Redd contributed P 20,000 cash. Drawing by the partners during 2012 totaled P 3,000 to Grey and P 9,000 by Redd. The
partnership income in 2011 was P 25,000. Under the bonus method, what is the amount of bonus?
a. 20,000 bonus to Grey c. 40,000 bonus to Grey
b. 20,000 bonus to Redd d. 40,000 bonus to Redd

10. After incurring a losses resulting from very profitable operations, the Goh Kong Wei Partnership decided to liquidate
when the partners’ capital balances were:
Goh, capital (40%) 80,000 Kong, capital (30%) 130,000 Wei, capital (20%) 96,000
The non-cash assets were sold in installment. Available cash were distributed to partners in every sale of noncash assets.
After the second sale of noncash assets, the partners received the same amount of cash in the distribution. And from the
third sale of noncash assets, cash available for distribution amounts to P 28,000 and unsold noncash assets has a book
value of P 12,500. Using the cash priority program, what amount did Wei received in the third installment of cash?
a. 11,600 b. 8,000 c. 5,600 d. 0

11. On January 1, 2010, Sonia, Celia, Nona and Zita formed Zubuan Trading Co., a partnership, with contributions as
follows: Sonia, P 50,000; Celia, P 25,000; Nona, P 25,000 and Zita, P 20,000. The partnership contract provided that each
partner shall receive a 5% interest on contributed capital, and that Sonia and Celia shall receive salaries of P 5,000 and P
3,000, respectively.
The contract also provided that Nona shall receive a minimum of P 2,500 per annum, and Zita a minimum of P
6,000 per annum, which is inclusive of amounts representing interest and share of remaining profits. The balance of the
profits shall be distributed to Sonia, Celia, Nona and Zita in a ratio of 3:3:2:2.
What amount must be earned by the partnership, before any charge for interest and salaries, so that Sonia may
receive an aggregate of P 12,500 including interest, salary and share of profits?
a. 32,333 b. 30,000 c. 30,667 d. 16,667

12. As of July 1, 2011, FF and GG decided to form a partnership. Their balance sheets on this date are:
FF GG
Cash 15,000 37,500
Accounts receivable 540,000 225,000
Merchandise inventory 202,500
Machinery and equipment 150,000 270,000
Accounts payable 135,000 240,000
Capital 570,000 495,000
The partners agreed that the machinery and equipment of FF is under depreciated by P 15,000 and that of GG by P
45,000. Allowance for doubtful accounts is to be set up amounting to P 120,000 for FF and P 45,000 for GG. The
partnership agreement provides for a profit and loss ratio and capital interest of 60% and 40%, respectively. How much
cash must FF invest to bring the partners’ capital balances proportionate to their profit and loss ratio?
 a. 142,500 b. 52,500 c. 172,500 d. 102,500

13. Partners RJ, RS and RX share profits and losses in the ratio of 5:3:2. At the end of a very profitable year, they decided
to liquidate the firm. The partner’s capital account balances at this time are as follows:
RJ – P 165,000 RS – P 186,750 RX – P 112,500
The liabilities accumulate to P 225,000, including a loan of P 75,000 from RJ. The cash balance is P 45,000. All the
partners are personally solvent. The partners plan to sell the assets in installment. If RS received P 27,000 from the first
distribution of cash, how much did RX receive at that time?
a. 15,000 b. 6,000 c. 9,000 d. 16,500

14. Ang, Beng and Ching are partners sharing profits in the ratio of 3:3:2. On June 30, their capital balances are as
follows:
Ang 600,000
Beng 400,000
Ching 300,000
The partners agree to admit Dong on the following agreement:
a. Dong is to pay Ang P 400,000 for ½ interest of Ang’s interest.
b. Dong is also to invest P 300,000 in the partnership.
c. The total capital of the partnership is to be P 2,000,000, of which Dong’s interest is to be 25%.
What are the capital balances of the partners after the admission of Dong?
Ang Beng Ching Ang Beng Ching
a. 487,500 587,500 425,000 c. 400,000 300,000 300,000
b. 300,000 400,000 300,000 d. 187,500 187,500 125,000

15. Magic Mobile Homes is to be liquidated. All creditors, both secured are owed P2 million. Administrative costs of
liquidation and wages payments are expected to be P 500,000. A sale of assets is expected to bring P 1.8 million after all
costs and taxes. Secured creditors have a mortgage lien for P 1.2 million on the factory which will be liquidated for P
900,000 out of the sale proceeds. The corporate tax rate is 34%. How much and what percentage of their claims will the
unsecured creditors receive, in total?
a. 100,000 ; 12.50% c. 300,000; 37.50%
b. 290,909; 36.36% d. 600,000; 75%

16. On January 1, 2013 entities A and B each acquired 30% of the ordinary voting shares of entity X for P 600,000.
Entities A and B immediately agreed to share control over entity X. For the year ended December 31, 2013 entity X
reported a profit of P 800,000 and declared and paid dividend of P 300,000. At December 31, 2013, the fair value of each
venturer’s investment in entity X is P 850,000. However, there is no published price quotation for entity X. Investments are
accounted for using the fair value model. For the year ended December 31, 2013, profit or loss is to be increased by
a. 340,000 b. 90,000 c. 250,000 d. 300,000

17. Computers, Inc. sells computers on the installment basis. For this year ended December 31, 2013, the following were
reported:
Cost of installment sales 525,000
Loss on repossession 13,500
Fair value of repossessed merchandise 112,500
Account defaulted 180,000
Deferred gross profit, 12/31 108,000
How much was collected during the year?
a. 210,000 b. 264,000 c. 390,000 d. 415,715

18. The following data were taken from the records of Camille Appliance Co. before its accounts were closed for the year
2012. The company sells exclusively on the installment basis and it uses the installment method of recognizing profit:
2010 2011 2012
Installment sales 400,000 440,000 420,000
Cost of installment sales 240,000 272,800 256,200
Operating expenses 100,000 94,000 96,000
Balances as of December 31:
Installment contract receivable – 2010 220,000 110,000 28,000
Installment contract receivable – 2011 250,000 92,000
Installment contract receivable – 2012 238,000
During 2012, because some customers can no longer be located, the company wrote off P 9,000 of the 2010 installment
accounts and P 2,800 of the 2011 installment accounts were uncollectible. Also during 2012, a customer defaulted and
the company repossessed merchandise appraised at P 2,400 after costs of reconditioning estimated at P400. The
merchandise had been purchased in 2010 by a customer who still owed P 5,000 at the date of the repossession. The net
income on December 31, 2012 is
a. 157,156 b. 61,000 c. 60,156 d. 59,156

19. Cebu Construction Co. began operation on January 2, 2012. During the year, the company entered into a contract
with Tommy Company to construct a manufacturing facility. At that time, Cebu Construction Co. estimated that it would
take five years to complete the facility at a total cost of P 1,800,000. The total contract price for construction of the facility
is P 2,500,000. During the year, the company incurred P 440,000 in construction costs related to the construction project.
The estimated costs to complete the contract are P 1,560,000. Tommy was billed and paid 30% of the contract price
subject to 10% retention. Using the percentage of completion method, how much is the excess of Construction in
Progress over Contract Billings or Contract Billings over Construction in Progress?
a. 200,000 current asset c. 200,000 current liability
b. 125,000 current liability d. 125,000 current asset

20. ST Construction Co.’s construction jobs, which commenced during 2012:

Project 1 Project 2
Contract price 420,000 300,000
Costs incurred during 2012 240,000 280,000
Estimated costs to complete 120,000 70,000
Billed to customers during 2012 250,000 290,000
Received from customers during 2012 240,000 280,000
General and administrative expenses 20,000 10,000
It is therefore agreed between the contractor and the client that any costs incurred are expected to be recoverable. What
amount of net income (loss) would ST Construction Co. report in its 2012 income statement?
Cost recovery method of Percentage of completion Cost recovery method of Percentage of completion
construction method method construction method method
a. (30,000) (80,000) c. (70,000) (30,000)
b. (50,000) (10,000) d. (80,000) (40,000)

 end of examination 
God bless !!!
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ANSWER SHEET
Removal Examination
Accounting 321 Advanced Financial Accounting and Reporting 2

Name: ___________________________________________________________

A B C D A B C D
1 [A] [B] [C] [D] 11 [A] [B] [C] [D]
2 [A] [B] [C] [D] 12 [A] [B] [C] [D]
3 [A] [B] [C] [D] 13 [A] [B] [C] [D]
4 [A] [B] [C] [D] 14 [A] [B] [C] [D]
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6 [A] [B] [C] [D] 16 [A] [B] [C] [D]
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8 [A] [B] [C] [D] 18 [A] [B] [C] [D]
9 [A] [B] [C] [D] 19 [A] [B] [C] [D]
10 [A] [B] [C] [D] 20 [A] [B] [C] [D]