LAGUNA UNIVERSITY

ADVANCED FINANCIAL ACCOUNTING AND REPORTING 2

1st Quiz
AUGUST 18, 2018
Problem 1
Nagato Company has the following information of its revenue fir the past two years. Presented
below are the accounts related to the revenue:

Related to Installment Sales: 2017 2018

Accounts Receivable 60,000(Beg.) 45,000(End)

Sales 25,000 30,000
Collections:
From 2017 20,000 15,000
From 2018 25,000

Gross profit rate:

Based on sales 20%
Based on cost 25%
Other information:
On 2018, repossession of merchandise happened in relation to the 2017 Installments sales. The
related installment receivable was already excluded from 2018 ending balance of accounts
receivable. The estimated selling price of repossessed item is P12,000, normal profit is 10%,
disposal cost is amounted to P500 and reconditioning cost is P2,000.

1. What is the balance of Unrealized gross profit or deferred gross profit as of 2017?

2. How much is the gain or loss on repossession?

Problem 2
Maito barbershop is one of the famous barbershops in town. On October 1, 2017, Guy made a
franchise agreement with Maito barbershop.
The agreement are follows:
Total franchise fee:
Downpayment 200,000
Non interest bearing note 1,800,000

The note is payable in 3 years for 600,000 each year starting December 31, 2017, effective
interest is 12%.

Continuing franchise fee is 2% per gross monthly receipts and total receipts for three months is
150,000.

Gross profit rate is 20%. Substantial performace has already been performed by the franchisor,
downpayment is non refundable and the collection of the note is reasonably assured.

1. What is the franchise direct cost?

2. Based on the original problem what is the franchise net income?

Problem 3
Rock Lee construction company was contracted by Tsunade to build 1,500 housing units at Konoha,
for its villagers affected by pain's attacked.

The contract price for 1,500 housing units is P50,000,000 for 3year period.
Year 1 Year 2 Year 3

Cost Incurred 10M 20M 15M

Cost at completion 40M 62.5M ---
Progress Billings 11M 19M 20M

1. What is the balance of Construction in progress as of Year 2?

2. What is the balance of Construction in progress as of Year 3?

Problem 4
Questions 1 through 2 are based on the following:
Comparative trial balances of the home office and the two branches of Norway Corporation at
December 31, 2016 were as follows:

Home Office Branch 1 Branch 2

Cash P 5,000 P15,000 P22,000
Accounts receivable 80,000 30,000 40,000

1
Inventories 150,000 60,000 48,000
Branch 1 170,000
Branch 2 165,000
Plant assets 730,000 250,000 200,000
Purchases 900,000
Shipment from H.O 300,000 240,000
Expenses 300,000 75,000 50,000
Total P2,500,000 P730,000 P600,000

Accounts payable P100,000 P45,000 P30,000

Other liabilities 80,000 15,000 5,000
Loading in Br. Inventories 108,000
Capital stock, P10 par 500,000
Retained earnings 262,000
Home office 170,000 165,000
Sales 1,000,000 500,000 400,000
Shipments to branches 450,000 0 0
Total P2,500,000 P730,000 P600,000

Additional information:
Home office and Branch inventories at December 31, 2016 were:

Home office(at cost) P120,000

Branch 1(at billed price) 72,000
Branch 2(at billed price) 96,000

1. How much is the ending inventory of Branch 1 at cost?

2. How much is the correct net income of Branch 2 as far as the home office is concerned?

Problem 5
Rodelyn, a partner in the Resuello Partnership, has a 30% participation in partnership profits
and losses. Rodelyn’s capital account has a net decrease of P60,000 during the year 2017. During
2017, Rodelyn withdraw P130,000 (charged against his capital account) and contributed property
valued at P25,000 to the partnership.

1. What was the net income of Rusuello Partnership for 2017?

On January 2, 2017 Wenna and Del Rosario Partnership begins its operations with the following
investments:

Wenna 80,000
Del Rosario 40,000

According to the partnership agreement, all profits will be distributed as follows:

• Wenna will be allowed a monthly salary of 8,000 with 4,000 assigned to Del Rosario
• The partners will be allowed with interest equal to 10% of the capital balance as of
the first day of the year
• Wenna will be allowed a bonus of 10% of the net income after bonus.
• The remainder will be divided on the basis of the beginning capital for the first year
and equally for the second year.
• Each partner is allowed to withdraw up to 4,000 year.
Partnership’s operation results in a net loss of 6,000 in 2017 and a profit of 22,000 in 2018.
Each partner withdraws the maximum amount each year.

1. What is the capital balance of Wenna on December 31, 2018?

Problem 6
On April 27, 2017, the capital accounts of Arn, Kate and Kristina show the following balances:

Arn P360,000
Kate 225,000
Kristina 135,000

At this time, Liza is admitted to the firm when she purchase a one-sixth interest in the firm
for P82,500. The old partners equalized their capital investments. Afterwards, all the partners
agree to divide profits and losses equally. The new partnership closes its books on June 30,
2017 reporting a profit of P12,600 for two months. The partners made the following withdrawals:
Arn and Kristina, P750 per month; Kate and Liza, P1,000 per month. On June 30, 2017, Liza invest
enough cash to increase her capital to a one-third interest in the partnership. How much cash is
to be invested by Liza?