QuestionAccounting for Home Office and Branch MULTIPLE CHOICES.1. Romy Corporation has one branch office, named Tibo Branch. Romy is performing the end-of-the-period reconciliation of its Tibo Branch. The following items are unsettled at the end of the accounting period (you may assume that the item has been reflected in the accounts of the underlined entity):” Romy has agreed to remove P750 of excess freight charges charged to Tibo when Romy shipped twice as much inventory as Tibo requested. Tibo mailed a check for P11,000 to Romy as a payment for merchandise shipped from Romy to Tibo. Romy has not yet received the check. Tibo returned defective merchandise to Romy. The merchandise was billed to Tibo at P4,000 when its actual cost was P3,000. Advertising expense attributable to the branch office were paid for by the home office in the amount of PS,000. If the adjusted balances for the Tibo Branch Account and the Romy Home Office Account is PS00,000, what unadjusted balance was listed in (1) Romy’s Tibo Branch Account and (2) Tibo’s Home Office Account? a. ( 1) P510,250 and ( 2) P505,000. b. ( 1) P515,000 and (2) P495,750. c. ( 1) P514,000 and ( 2) P516,000. d. ( 1) P504,000 and (2) P500,750. 2. The Meycauayan branch of Marco Company, at the end of its first quarter of operations, submitted the following income statement: Sales P300,000 Cost of sales: Shipments from home office P280,000 Local purchases 30,000 Total P310,000 Inventory at end 50,000 260,000 Gross margin on sales P 40,000 Expenses 35,000 Net income P 5,000 Shipments to the branch were billed at 140% of cost. The branch inventory as at September 30 amounted to P50,000 of which P6,600 was locally purchased. Markup on local purchases, 20% over cost. Branch expenses incurred by home office amounted to P2,500. On September 30, the branch inventory at cost and net income realized by the home office from the branch operations, respectively are: a. P37,600 and P72,600 b. P31,600 and P 5,000 c. P50,000 and P55,000 d. P37,600 and P70,100 3. A home office transfers inventory to its branch at a 20% markup on cost. During 2018, inventory costing the home office P80,000 was transferred to the branch. At year-end, the home office adjusted its Unrealized Intercompany Inventory Profit account downward by P18,200. The branch’s year-end balance sheet shows P4,800 of inventory acquired from the home office. How much is the beginning inventory of the branch at cost? a. P 15,000 c. P 3,000 b. P 18,000 d. P 16,000 Sulu, Inc. established a branch in Jolo to distribute part of the goods purchased by the home office. The home office prices inventory shipped to the branch at 20% above cost. The following account balances were taken from the ledger maintained by the home office and the branch: Sulu, Inc. Jolo, Branch Sales P 600,000 P 210,000 Beginning inventory 120,000 60,000 Purchases 500,000 – Shipment to branch 130,000 – Shipment from home office 156,000 Operating expenses 72,000 36,000 Ending inventory 98,000 48,000 All of the branch inventory is acquired from the home office. 4. On the basis of these account balances, the combined net income of the home office and the branch is: a. P170,000 c. P278,000 b. P 70,000 d. P132,000 Bicol Company is engaged in merchandising both at Home Office in Makati and a branch in Cebu. Selected accounts in the trial balances of the Home Office, and the branch at December 31, 2018 follow: Debit Home Office Branch Inventory, January P 23,000 P 11,550 Branch 58,300 Purchases 190,000 Shipments from Home Office 105,000 Freight in from Home Office 5,500 Sundry expenses 50,000 25,000 Credit Home Office 53,300 Sales 155,000 140,000 Shipments to Branch 110,000 Allow. for overvaluation of branch inventory – Jan. 1 1,000 Additional information: a. Cebu branch receives all its merchandise from the home office. The Home Office bills the goods at cost plus 10% mark-up. At December 31, 2018 a shipment with a billing price of P5,000 was in transit to the branch. Freight on this shipment was P250 which is to be treated as part of inventory. b. December 31, 2018 inventories, excluding the shipment in transit was: Home Office, at cost 30,000 Cebu Branch, at billed value (excluding freight of P520) 10,400 5. Net income of the Home Office was a. P 10,000 c. P 20,000 b. P 15000 d. P 22,000 6. True income of Cebu Branch was a. P 10,470 c. P 12,470 b. P 11,470 d. P 13,470 The following data were taken from the records of Star Corporation of Manila and its Bulacan Branch for 2018: Manila office Bulacan branch Sales P 530,000 P157,500 Inventory, Jan. 1 57,500 22,250 Purchases 410,000 Shipment to branch 105,000 Shipment from home office 126,000 Inventory, Dec. 31 71,250 29,250 Expenses 191,000 50,750 In 2018, Home office billed the branch at 120% of cost which was lower by 5% than last year’s. 7. The combined net income of the home office and the branch for 2018 was: a. P48,325 c. P49,850 b. P48,575 d. P56,075 Nicole Company has a branch in Boracay established on April 1, 2018. During the year 2018, the home office shipped merchandise to the branch at billed value of P125,000 which was 25% above cost. At the end of the year, the branch reported sales of P200,000, operating expenses of P95,000, and a net income from the operation of P15,000. 8. The true income of the branch was a. P 15,000 c. P 18,000 b. P 25,000 d. P 33,000Xero Corporation operates a number of branches in Metro Manila. On June 30, 2018, its Sta. Clara branch showed a Home Office account balance of P27,350 and the Home Office books showed a Sta. Clara branch account balance of P25,550. The following information may help in reconciling both accounts: 1. A P12,000 shipment charged by Home Office to Sta. Clara branch was actually sent to and retained by Sta. Isabel branch. 2. A P15,000 shipment, intended and charged to Sto. Domingo branch was shipped to Sta. Clara branch and retained by the latter. 3. A P2,000 emergency cash transfer from Sta. Isabel branch was not taken up in the Home Office books. 4. Home Office collects a Sta. Clara branch accounts receivable of P3,600 and fails to notify the branch. 5. Home office was charged for P1,200 for merchandise returned by Sta. Clara branch on June 28. The merchandise is in transit. 6. Home office erroneously recorded Sta. Clara branch’s net income for May, 2018 at P16,275. The branch reported a net income of P12,675. 9. What is the reconciled amount of the Home Office and Sta. Clara branch reciprocal accounts? a. P21,750 c. P27,350 b. P23,750 d.P20,150 The LL Company established a branch in Makati City on June 1, 2019. The branch is to receive substantially all merchandise from the home office. During the remainder of 2019, shipments to the branch amounted to P180,000 which included a 20% mark-up on cost. The branch purchased P45,000 additional merchandise for cash and reported unsold merchandise of P60,000 at year-end. The branch made sales of P292,500, paid expenses of P72,000 and remitted to the home office all sales proceeds. The allowance for overvaluation of branch inventory account on the home office books showed a balance of P7,500 after adjustment. 10. Compute the: (1) branch inventory on December 31, 2019 at cost, and (2) the branch net income as far as the home office is concerned: a. (1) P45,000; (2) P78,000 b. (1) P52,500; (2) P78,000 c. (1) P52,000; (2) P55,500 d. (1) P50,000; (2) P79,500The following information are extracted from the books and records of PP Company and its branch. The balances are at December 31, 2019, the third year of the corporation’s existence. Home Office Books Branch Books Sales P600,000 Expenses 200,000 Shipments from home office 360,000 Allowance for overvaluation P72,500 The branch acquired all of its merchandise from the home office. The inventories of the branch at billed prices are as follows: January 1, 2019 P75,000 December 31, 2019 84,000 1. The adjusted profit of the branch in so far as the home office is concerned is: a. P107,500 c. P 58,500 b. P 49,000 d. P 60,000 Nicole Company’s Kalibo branch reports a profit of P17,000 for the year 2019 and a balance in its Home Office account at the end of the year of P88,000 after closing. The branch income currently is unrecorded by the home office. During the year, the home office had shipped inventory to the branch at an intracompany profit of P14,000. Of that amount, P6,000 currently is unrealized. 2. Assuming the branch has made all entries to adjust and close its books for 2019, what is balance in the home office’s Investment in Branch account? a. P 65,000 c. P 88,000 b. P 71,000 d. P 94,000 Bicol Company is engaged in merchandising both at Home Office in Makati and a branch in Cebu. Selected accounts in the trial balances of the Home Office, and the branch at December 31, 2018 follow: Debit Home Office Branch Inventory, January P 23,000 P 11,550 Branch 58,300 Purchases 190,000 Shipments from Home Office 105,000 Freight in from Home Office 5,500 Sundry expenses 50,000 25,000Credit Home Office 53,300 Sales 155,000 140,000 Shipments to Branch 110,000 Allow. for overvaluation of branch inventory – Jan. 1 1,000 Additional information: a. Cebu branch receives all its merchandise from the home office. The Home Office bills the goods at cost plus 10% mark-up. At December 31, 2018 a shipment with a billing price of P5,000 was in transit to the branch. Freight on this shipment was P250 which is to be treated as part of inventory. b. December 31, 2018 inventories, excluding the shipment in transit was: Home Office, at cost 30,000 Cebu Branch, at billed value (excluding freight of P520) 10,400 3. Net income of the Home Office was a. P 10,000 c. P 20,000 b. P 15000 d. P 22,000 4. True income of Cebu Branch was a. P 10,470 c. P 12,470 b. P 11,470 d. P 13,470 Trial balances for the home office and for the branch of Mermaid Company show the following accounts before adjustment as of December 31, 2018. The home office bills merchandise to the branch at 20% above cost. HO Branch Unrealized intercompany inventory profit P10,800 Shipments to branch 24,000 Purchases (other vendors) P7,500 Shipments from Home Office 28,800 Merchandise inventory – December 1, 2018 45,000 5. What part of the December 1, 2018 branch inventory represents acquisitions from outside purchases, and what part represents acquisitions from the home office? Outsider Home Office a. P9,000 P36,000 b. 10,000 35,000 c. 12,000 33,000 d. 15,000 30,000 Universal Textiles has a single branch in Cagayan de Oro City. On March 1, 2019, the home office accounting records included an Allowance for Overvaluation of Inventories with a credit balance of P32,000. During March, merchandise costing P36,000 was shipped to the CDO branch and billed at a price representing a 40% markup on the billed price. On March 31, the branch reported a net loss of P11,500 for March and ending inventories at billed prices of P25,000. Mark-up was uniform on all shipments. 6. Calculate the overstatement of the cost of sales in the branch income statement in terms of the actual cost of sales, i.e. per home office cost. a. P46,000 c. P39,257 b. P22,000 d. P40,000 On December 31, 2019, the Branch account in the Manila Home Office books shows a balance of P55,500. You ascertain the following facts in analyzing this account. 1. On December 31, 2019, merchandise billed at P5,800 was in transit from the home office to the branch. 2. The branch had collected home office accounts receivable of P560; the home office was not notified. 3. On December 29, 2019, the home office mailed a check for P2,000 to the branch, but the accountant for the home office had recorded the check as a debit to Charitable Contributions; the branch had not received the check as of December 31, 2019. 4. Branch net income for December 2019 was recorded erroneously by the home office at P840 instead of P480. 5. On December 28, 2019, the branch had returned supplies costing P220 to the home office; the home office had not recorded the receipt of the supplies as at Dec. 31. 7. Calculate the adjusted balance of the reciprocal accounts at December 31, 2019. a. P49,680 c. P46,980 b. P57,480 d. P54,8708. The AB Trading Co. operates a branch in Iloilo. At close of business on December 31, 2018, Home Office account in the branch books showed a credit balance of P372,900. The interoffice accounts were in agreement at the beginning of the year. For purpose of reconciling the interoffice accounts, the following facts were ascertained; a. A furniture costing the home office P4,600 was picked up by the branch as P460. The branch will maintain and use the asset. b. The branch writes-off uncollectible, accounts of P1,260. The allowance for doubtful accounts is maintained on the books of the home office. The home office was not yet notified. c. Freight charge on merchandise made by the home office for P2,715 was recorded in the branch books as P7,215. d. Home office credit memo for P9,710 was recorded by the branch at P7,910. e. Iloilo branch failed to take up a P2,450 debit memo from the home office. f. The home office inadvertently recorded a remittance for P3,730 from its Ilocos branch as remittance from its Iloilo branch. g. Insurance premium of P1,675 charged by the home office was taken up twice by the branch. h. A P14,500 branch remittance to the home office initiated on December 28, 2018, was recorded on the home office books on January 2, 2019. i. A home office inventory shipment to Ilocos branch on December 29, 2018, was recorded by the branch on January 3, 2019; the billing of P47,000 was at cost, j. A branch customer remitted a P19,000 to the home office, The home office recorded this cash collection on December 22, 2018. Meanwhile, back at the branch, no entry has been made yet. Determine the balance of the Investment in Branch account before adjustments: a. P364,545 c. P319,545 b. P307,515 d. P366,545Multiple Choice: 1. Manahan Co., which began operations on January 1, 2020, appropriately uses the installment method of accounting to record revenues. The following information is available for the years ended December 31, 2020 and 2021: 2020 2021 Sales P 1,000,000 P 2,000,000 Gross profit realized on Sales made in: 2020 150,000 90,000 2021 – 200,000 Gross profit percentages 30% 40% What amount of installment accounts receivable should Manahan report in its December 31, 2021, balance sheet? a. P1,100,000 b. P1,300,000 c. P1,700,000 d. P1,900,000 2. On January 1, 2020, Enteng Co. sold a used machine to Cooper, Inc. for P525,000. On this date, the machine had a depreciated cost of P367,500. Cooper paid P75,000 cash on January 1, 2020 and signed a P450,000 note bearing interest at 10%. The note was payable in three annual installments of P150,000 beginning January 1, 2021. Enteng appropriately accounted for the sale under the installment method. Cooper made a timely payment of the first installment on January 1, 2021 of P195,000, which included interest of P45,000 to date of payment. At December 31, 2021, Enteng has deferred gross profit of a. P105,000 b. P 99,000 c. P 90,000 d. P 76,500 3. Sendong Co., which began operations on January 1, 2021, appropriately uses the installment method of accounting. The following information pertains to Sendong’s operations for the year 2021: Installment sales P 1,000,000 Regular sales 600,000 Cost of installment sales 500,000 Cost of regular sales 300,000 General and administrative expenses 100,000 Collections on installment sales 200,000 The realized gross profit for the year 2021 should be a. P 200,000 b. P 320,000 c. P 400,000 d. P500,000 4. Refer to Sendong, The balance in the deferred gross profit account in Sendong’s December 31, 2021 balance sheet should be a. P 200,000 b. P 320,000 c. P 400,000 d. P500,000 5. Several of Fox, Inc.’s customers are having cash flow problems. Information pertaining to these customers for the years ended December 31, 2020 and 2021 follows: 12/31/20 12/31/21 Sales P 10,000 P 15,000 Cost of sales 8,000 9,000 Cash collections On 2020 sales 7,000 3,000 On 2021 sales – 12,000 If the cost-recovery method is used, what amount would Fox report as gross profit from sales to these customers for the year ended December 31, 2021? a. P 2,000 b. P 3,000 c. P 5,000 d. P15,000AFAR-02 6. Wood Corporation has a normal gross profit on installment sales of 30%. A 2019 sale resulted in a default in 2021. At the date of default, the balance of installment receivable was P8,000, and the repossessed merchandise had a fair value of P4,500. Assuming the repossessed merchandise is to be recorded at fair value, the gain or loss on repossession should be a. P0 b. a P1,100 loss. c. a P1,100 gain. d. a P2,500 loss. 7. Cagayan Furniture uses the installment sales method. No further collections could be made on an account with a balance of P10,000. It was estimated that the repossessed furniture could be sold for P5,500 if P900 were spent reconditioning it. The gross profit rate on the original sale was 40% and gross profit on the sale of repossessed furniture was 20%. The loss on repossession was a. P2,700 b. P2,500 c. P4,500 d. P7,000 8. Matson Company sold some machinery to the Finney Company on January 1, 2020. The cash selling price would have been P473,850. Finney entered into an installment sales contract which required annual payments of P125,000, including interest at 10%, over five years. The first payment was due on December 31, 2020. What amount of interest income should be included in Matson’s 2021 income statement (the second year of the contract)? a. P12,500. b. P39,624. c. P39,670 d. P34,885. 9. On January 1, 2020, Colt Co. sold land that cost P60,000 for P80,000, receiving a note bearing interest at 10%. The note will be paid in three annual installments of P32,170 starting on December 31, 2020. Because collection of the note is very uncertain, Colt will use the cost recovery method. How much revenue from this sale should Colt recognize in 2020? a. P0 b. P 6,000 c. P 8,000 d. P20,000 10. The Brownout, Inc. began operating at the beginning of the calendar year 2021 and, using the installment method of accounting, presented the following data for the first year: Installment sales P400,000 Gross margin 40% Inventory, Dec. 31, 2021 P 60,000 General and administrative expenses 30,000 Accounts receivable, Dec. 31, 2021 100,000 The balance of the deferred gross profit account should be: a. P192,000 b. P160,000 c. P 96,000 d. P 40,000 11. Refer to Brownout, Inc., the net income for the year 2021 amounted to a. P40,000 b. P10,000 c. P90,000 d. P130,000 12. Quincy Enterprises uses the installment method of accounting, and it has the following data at yearend: Gross margin on cost 66-2/3% Unrealized gross profit P192,000 Cash collections including down payments 360,000 What was the total amount of sales on installment basis? a. P480,000 b. P552,000 c. P648,000 d. P840,000 13. A refrigerator was sold to Alyanna Castro for P16,000, which included a 40% mark-up based on selling price. She made a down payment of 20%, paid four of the remaining sixteen equal payments, and then defaulted on further payments. The refrigerator was repossessed, at which time the fair value was determined to be P6,800. The repossession resulted in the following loss/gain: a. P 56.80 b. P1,040.00 c. P2,960.00 d. P4,056.8014. Home Appliances, Inc. began operation in May, 2020 by selling exclusively on the installment basis. Using the installment method of income recognition, the company summarized the following data at the end of the first eight-month period: installment sales, P450,000; various expenses, P23,000; accounts receivable, P330,000; and, inventory, P80,000. If the gross margin based on cost is 66- 2/3%, the net income was: a. P25,000 b. P48,000 c. P57,000 d. P80,000 15. On January 2, 2020, Yardley Co. sold a plant to Ivory, Inc. for P1.5 million. On that date, the plant’s carrying cost was P1 million. Ivory gave Yardley P300,000 cash and a P1.2 million note, payable in four annual installments of P300,000 plus 12% interest. Ivory made the first principal and interest payment of P444,000 on December 31, 2020. Yardley uses the installment method of revenue recognition. In its 2020 income statement, what amount of realized gross profit should Yardley report? a. P344,000 b. P200,000 c. P148,000 d. P100,000ADVANCED FINANCIAL ACCOUNTING AND REPORTING ACCOUNTING FOR PARTNERSHIP 1. Lino and Nilo formed a new partnership. L i n o invests P600,000 in cash for 60% interest in the partnership. N i l o contributes land that has an original cost of P80,000, and a fair market value of Pl 40,000, and a building that has a tax basis of P100,000, and a fair market value of P180,000. The building is subject to a mortgage of P80,000 which the partnership assumes. Nilo is required to contribute additional cash in case her noncash contributions would be insufficient for her equity in the new firm. How much cash should Nilo still contributes? a. P80,000 b. P160,000 c. P220,000 d. P300,000 2. The partnership of Ellen and Farida was formed on March 31, 2020. At that date, Ellen invested Pl00,000 cash and office equipment valued at P60,000. Farida invested Pl 40,000 cash, merchandise costing P220,000 and furniture valued at P200,000, but subject to a note payable of P100,000 which the partnership will assume. Their agreement provides for sharing ratio of 75:25, respectively. The agreement further provides that the partners should initially have an equal interest in the partnership. / Under the bonus method, what is the total capital ofthe partners upon its formation? a. P600,000 b. P620,000 c. P720,000 d. P700,000 3. On October 1, 2020, Ingrid admits Jackie for an interest in her business. On this date, Ingrid’s capital account shows a balance of P316,800. The following were agreed upon before partnership formation: * Prepaid expenses of P35,000 and accrued expenses of P10,000 are to be recognized. * 5% of the outstanding P200,000 accounts receivable of Ingrid is to be recognized as uncollectible. * Jackie is to be credited with a one-third interest in the partnership and is to invest additional cash aside from her investment of P100,000. The amount of cash to be contributed by Jackie, and the total capital of partnership, respectively? a. 65,900 & 497,700 b. 65,900 & 342,400 c. 110,500 & 442,400 d. 165,900 & 497,700 4. A & B have just formed a partnership. A contributed cash of P882,000 and office equipment that cost P378,000. The equipment had been used in his sole proprietorship business and had been 70% depreciated. The current value of the equipment is P252,000. A also contributed a note payable of P84,000 to be assumed by the partnership. A is to have a 60% interest in the partnership. B contributed P630,000 worth of merchandise with fair value. Assume the use of the bonus method, the partners’ capital must be in conformity with ..their profit and loss ratio upon formation In the formation of the partnership, which of the following is not true? a. The agreed capital of A upon formation is P1,008,000. b. The capital of B will decrease by P42,000 as a result of the transfer of capital. c. The total contributed capital of the partnership is Pl,680,000. d. There is no investment or withdrawal of asset under the bonus method.For questions 5 & 6 The following balance sheet for the partnership of Anton, Bernard, & Carlos were taken from the books on September 30, 2020: Cash 80,000 Liabilities 200,000 Other Assets 720,000 Anton, Capital 148,000 Bernard, Capital 260,000 Carlos, Capital 192,000 The partners agreed to distribute the profits as follows: ? Annual salaries to Anton and Bernard of P6,000 each ? 6% interest on beginning capital ? 10% bonus to Bernard (the bonus to be treated as an expense after salaries and interest) ? Remaining profit -4:4:2, respectively 5. If the net income of the partnership was P122,000 during the three-month period ending December 31, 2020, the total share of Bernard in the net income is a. 22,880 b. 43,720 c. 45,400 d. 55,400 6. If Carlos receives as his share of net income of P6,880 for the three-month period ending December 31, 2020, the total income realized by the partnership for the same period before salaries, interest, and bonus was a. 34,000 b. 40,000 c. 50,000 d. 100,000 7. The partnership agreement of X, Y, & Z provides for the division of net income, as follows: * Y, who manages the partnership is to receive an annual salary of P120,000. * Each partner is to be allowed interest of 10% on ending capital. * Balance is to be divided 40:25:35, respectively. During 2020, X invested an additional P90,000 in the partnership. Y made an additional investment of P75,000 and withdrew P110 ,000. Z withdrew P60,000. No other investments or withdrawals were made during 2020. On January 2, 2020, the capital balances of X, Y, & Z are P300,000, P410,000, & P220,000, respectively. Total capital at year end was P600,000. The capital balances of X, Y, & Z, respectively, at year-end are a. (176,000); 948,125; (172,125) b. 214,000 ; 410,250; 24,250 c. 214,000; 398,125; (12,125) d. 390,000 ; 375,000; (165,000) 8. The following balance sheet for the partnership of C, I, & G were taken from the books on October 1, 2020: Cash P 100,000 Liabilities P200,000 Other assets 400,000 C, Capital 120,000 I, Capital 95,000 G, Capital 85,000 Total 500,000 Total 500,000 The partners agreed to distribute profits as follows: ? Annual salaries to C & I of P5,000 each. ? Annual interest of 5% on beginning capital. ? Bonus of 15% to C based on income after salaries, interest, & bonus. ? Remaining profits, 25% to C, 35% to I, & 40% to G.The partnership began its operations on October 1, 2020 and net income for the year ended December 31, 2020 is P69,500. Which of the following is true? a. The bonus to C is P5,804. b. Net income after salaries, interest, and bonus is P38,696. c. I’s total share in the net income is P21,688. d. G’s share on the profit after salaries, interest, and bonus is P13,543. 9. The partnership agreement of DD, EE, and FF provides for the division of net income as follows: ? FF, who manages the partnership is to receive a salary of P15,000 per month. ? Each partner is to be allowed interest of 6% on average capital. ? Remaining profit or loss is to be divided equally. During 2020, DD invested an additional P170,000 in the partnership while EE and .FF an additional of P80,000 and P90,000, respectively. DD withdrew P60,000, EE withdrew P150,000, and FF withdrew P90,000. No other investments or withdrawals were made during 2020. On January 1, 2020, the capital balances of DD, EE, & FF. were P450,000, P520,000, & P300,000, respectively. Total capital at year end was P1,520,000. Which of the following is not true in the statement of partners’ capital? a. DD’s capital will increase by P14,500 share in net income. b. FF’s capital at the end of 2020 after share in net income is P482,200. c. EE’s capital account will have a net increase of P56,700 from beginning d. DD’s capital account is P92,300 higher than FF’s at year-end . 10. Partners Holy, Noble, and Saint are in the process of finalizing their profit and loss sharing agreement. They have agreed that Noble and Saint are to receive annual salaries of P90,000 each. Holy, the managing partner, has two options: Option 1 – He will receive an annual salary of P220,000, or Option 2 – He will receive an annual salary of P 180,000 plus a bonus of 20% of net profit after subtracting their salaries and his bonus What amount of net income would Holy get the same share irrespective of his choice? a. 500,000 b. 600,000 c. 800,000 d. 900,000 11. The following is the condensed balance sheet of partners Ursula, Vanessa, & Winnie: Cash P 360,000 Accounts Payable P 840,000 Other assets 3,320,000 Winnie, Loan 120,000 Ursula, Receivable 80,000 Ursula, Capital 1,240,000 Vanessa, Capital 800,000 Winnie, Capital 760,000 Assume that the assets and liabilities are fairly valued, and that the partnership decided to admit Zeny as a partner with 20% interest. No goodwill or bonus is to be recorded. The original partners P/L ratio to 4:3:3, respectively. How much should Zeny contribute in cash or other assets? a. 310,000 b. 560,000 c. 568,000 d. 700,000 12. X, Y, & Z formed a partnership on January 2, 2020, with the following investments: X, P100,000; Y, P150,000; Z, P225,000. The partnership agreement states that profits and losses are to be shared equally by the partners after considering the following: * Salaries allowed to partners: X, P60,000; Y, P48,000, Z, P36,000. * Average partners’ capital balances during the year shall be allowed 10%.Additional Information: * On June 30, 2020, X invested an additional P60,000 . * Z withdrew P70,000 from the partnership on September 30, 2020. * Share on the remaining profit partnership was P5,000 for each partner. The total partnership capital on December 31, 2020 is a. 405,000 b. 407,000 c. 465,000 d. 672,750 13. The partnership of X and Y provides for 3:2 sharing ratio. Prior to the admission of the third partner ( Z ), their capital accounts are X, P84,000; and Y, P56,000. Z invests P35,000 for a P28,000 interest and partners agreed that the net assets of the new partnership. would be P210,000 after revaluation of assets._ Upon admission of Z, which of the following is not correct? a. The bonus from the new partner to X is P4,200. b. The capital of Y will increase by Pl 6,800 after admission of Z c. The capital of Z is to be credited at P28,000 d. The capital of X will increase by P21,000 after admission of Z 14. Imee, Jackie, & Lucy are partners with capital balances as of January 1, 2020 of Pl 00,000, P150,000, P200,000, respectively. They share profits and losses on a 5:3:2 ratio, respectively. On July 1, 2020, Imee withdrew from the partnership. Partners agreed that at the time of lmee’s withdrawal , certain inventories had to be revalued at P70,000 from its cost of P50,000 . For the six- month period ending June 30, 2020, the partnership generated a net income of P150,000. Further, partners agreed to pay Imee P225,000 for her interest and that the remaining partners’ capital accounts would be in proportion to their capital balance before withdrawal. The payment to Imee included a bonus from Jackie of a. 40,000 b. 36,000 c. 24,000 d. 50,000 15. The condensed balance sheet of t he partnership of Monique, Nancy, & Olivia with corresponding P/L percentages as of June 30, 2020 is shown below: Net Assets P400,000 Monique, Capital (50%) P200,000 Nancy, Capital (30%) 120,000 Olivia, Capital 80,000 As of said date, Monique retired from the partnership. By mutual agreement, assets will be revalued, and she will be paid P225,000 for her interest in the partnership. After Monique’s retirement, the total net assets of the partnership was a. 175,000 b. 200,000 c. 225,000 d. 250,000 For questions 16 & 17 The balance sheet of Sandy, Telly, & Umen at April 30, 2020 shows the following: Assets Liabilities & Capital Other Assets P100,000 Sandy, Loan P 9,000 Sandy, Capital 15,000 Telly, Capital 31,000 Umen, Capital 45,000Sandy is retiring from the partnership. By mutual agreement, the assets are to be adjusted to their fair value of P130,000. Telly & Umen agreed that the partnership will pay Sandy P37,000 cash_for her interest, exclusive of her loan which is to be paid in full separately. The partners’ P/L ratio is 2:2:6, respectively. 16. What is the balance of Umen’s capital account after Sandy’s retirement? a. A. 50,000 b. B. 51,000 c. 53,400 d. 60,000 17. What is the balance of assets after Sandy’s retirement ? a. 130,000 b. 63,000 c. 93,000 d. 84,000 18. The partnership of Y, E, & S provides for 3:3:4 sharing in profits and losses, respectively. S is retiring from the partnership and by mutual agreement the assets are to be adjusted to their fair values which is P30,000 higher than their carrying amount. Y and E agree that the partnership will pay P87,000 to S for his partnership interest, exclusive of his loan which is to be repaid in full separately. Before the retirement of S, the following data are available: Total assets P200,000 S, Loan Y, Capital E, Capital S, Capital Which of the following is not correct? a. Capital balance of Y after retirement of S is 56,500 b. Total assets after retirement of S is P123,000 c. Bonus received by S from Y is P2,500 d. Capital balance of E after retirement of S is P65,600 Item Nos.19 and 20 are based on the following information: The following are the capital balances and profit and loss ratios of the partners Mona, Nona, and Ona: Capital Profit & Loss Ratio Mona P 20,000 20% Nona 10,000 30% Ona 5,000 50% Total P 35,000 100% After realization of the assets and payment of l
