CEBU CPAR CENTER, INC.

PRACTICAL ACCOUNTING 2
OCTOBER 2007 BATCH
1st PRE-BOARD EXAMS JULY 24,
2007 (Tuesday)
INSTRUCTIONS: Select the correct answer for each of the following questions.
Mark only one answer for each item by writing a VERTICAL LINE corresponding
to the letter of your choice on the answer sheet provided. STRICTLY NO
ERASURES ALLOWED. Use Pencil No. 1 or No. 2 only.

1. On January 1, 2007, OPS Company purchased 20% of the common shares of

WIN Corporation for P200,000. WIN's net income for the year 2007 was
P150,000 and it paid cash dividends of P180,000 on its common shares. As
such, WIN's total dividends paid have exceeded its income earned since it was
acquired by OPS. Amortization of the purchase price discrepancy was P10,000
since the date of acquisition. What is the balance in the investment in WIN
account at the end of 2007 under the cost and equity methods?
Cost Method Equity Method
a. P194,000 P184,000
b. P194,000 P194,000
c. P200,000 P184,000
d. P200,000 P194,000

2. Consolidated financial statements are prepared primarily to satisfy the needs

of which of the following users?
a. Non-controlling shareholders of the subsidiary
b. Bureau of Internal Revenue
c. Controlling shareholders of the subsidiary
d. Shareholders of the parent company

Use the following information for numbers 3-4

On January 1, 2005, BB Company acquired 25% of the common shares of GG
Corporation for P550,000, giving it significant influence. At that time, GG's
financial statements included common shares of P300,000 and retained
earnings of P1,300,000. There was no difference between the book value and
fair value of GG's identifiable assets and liabilities.

3. During 2005, GG incurred a loss of P100,000 and paid dividends of P40,000.

An asset valuation test at December 31, 2005 indicated that GG's goodwill had
become impaired by 10%. Which of the following represents BB's investment
income (loss) from its investment in GG for 2005?
a. P10,000 investment income
b. P15,000 investment loss
c. P25,000 investment loss
d. P40,000 investment loss

4. During 2006, GG had net income of P200,000 and paid dividends of P80,000.
Assume that an evaluation of goodwill at 2005 and 2006 indicated no goodwill
impairment since the date of acquisition. BB's Investment in GG account would
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have which of
the following balances at December 31, 2006?
 a. P505,000 b. P545,000 c. P550,000 d. P575,000

Use the following information for numbers 5-6

On January 1, 2007, PL Ltd. purchased 25% of the outstanding common shares
of SK Inc. and thereby obtained significant influence over the policy decisions
of SK. On September 1, 2007, PL purchased another 35% of SK's outstanding
common shares and thereby obtained control over the policy decisions of SK.
PL accounts for this investment using the cost method and reported net
income of P300,000. SK reported net income of P120,000 for the year ended
December 31, 2007. This income was earned evenly throughout the year.
Neither company paid any dividends during the year.

5. What is consolidated net income for the year ended December 31, 2007?
a. P360,000 b. P420,000 c. P344,000 d. P372,000

6. What is the minority interest net income in the Consolidated Income Statement
on December 31, 2007?
a. P 48,000 b. P 16,000 c. P 72,000 d. P 64,000

Use the following information for numbers 7-8

PJ owns 80% of the common shares of QK and 40% of the common shares of
RL. In addition, QK owns 15% of the common shares of RL.

7. Based strictly on its share ownership, which of the following best represents
PJ's relationship to RL?
a. No significant influence c. Joint control
b. Significant influence d. Control

8. On PJ's separate entity financial statements, what percentage of RL's income

would flow to PJ under
the equity method of accounting?
a. 40% b. 52% c. 55% d. 65%

9. On March 1, 2007, PQR acquired 15% of the outstanding shares of ZZZ. Based
solely on PQR's shareholdings in ZZZ, at how much method should PQR report
its investment in ZZZ on its December 31, 2007 financial statements?
a. Acquisition Cost Dividends
b. Fair value d. Proportionate consolidation
c. Cost affected by Share in NI &

Use the following information for numbers 10-12

Thick Company acquired 80% of the common shares of Slim Corporation on
January 1, 2000. The following summary information is from the companies’
financial records:
THICK COMPANY
2005 2006
Cost of goods sold P 400,000 P 500,000
Amortization expense 100,000 120,000
SLIM CORPORATION
CEBU CPAR_PA2 - 1st PREBOARD OCT 07 Page 4 of 13

2005 2006
Cost of goods sold P 200,000 P 300,000
Amortization expense 65,000 70,000

During 2005, Slim’s sales included P100,000 for goods sold to Thick at a gross
profit margin of 30%. Of these goods, P20,000 remained in inventory at
December 31, 2005. Slim also sold P110,000 of goods to Thick in 2006 at a
gross profit margin of 30%, and P30,000 remained in ending inventory. Ignore
income
taxes for these companies.

10. On Thick’s consolidated financial statements for the year ended December
31, 2006, cost of goods sold would be shown at which of the following
amounts?
a. P687,000 b. P690,000 c. P693,000 d. P800,000

11. When Thick acquired its 80% interest in Slim on January 1, 2000, it paid
P1,000,000 for the shares. At that time, Slim’s assets and liabilities had fair
value equal to book value, except for its equipment, which had fair value of
P200,000 and book value of P180,000 and a remaining useful life of 10 years.
Which of the following amounts for amortization expense would be shown on
Thick’s consolidated expense for 2006?
a. P188,000 b. P188,400 c. P190,000 d. P191,600

12. The partnership agreement for the partnership of Brisbane and Ric
provided for salary allowances of P450,000 to Brisbane and P350,000 to Ric,
and the residual profit was allocated equally. During 2007, Brisbane and Ric
each withdraw cash equal to 80 percent of their salary allowances. If during
2008, the partnership had profit in excess of P1,000,000 without regard to
salary allowances and withdrawals, Brisbane’s equity in the partnership would
a. Increase more than Ric’s c. Increase the same as Ric’s
b. Decrease more than Ric’s d. Decrease the same as Ric’s

13. Roxanne Alvarez is trying to decide whether to accept a salary of P40,000

or a salary of P25,000 plus a bonus of 10% of the net income after salaries
and bonus as a means of allocating profit among the parties. Salaries
traceable to the other partners are estimated to be P100,000. What amount of
income would be necessary so that Rozanne Alvarez would consider to be
equal?
a. . P165,000 b. P290,000 c. P265,000 d. P305,000

14. Ric and Jason shares net income or losses 40% and 60%, respectively. On
January 2, 2007, Gen was admitted to the Ric- Gen Jason Partnership by the
investment of the net assets of her highly profitable single proprietorship. The
partners agreed to the following current fair values of the identifiable net
assets of Gen’s single proprietorship; Current assets P70,000, Plant assets
P230,000, Liabilities P200,000.
The balance sheet of the Ric and Jason partnership on December 31, 2006,
follows:

Ric and Jason Partnership

CEBU CPAR_PA2 - 1st PREBOARD OCT 07 Page 5 of 13

Condensed Balance Sheet

December 31,2006

Current Assests P100,000 Liabilities P300,000

Plant assets (net) 500,000 Ric, Capital 200,000
Jason, Capital
100,000
P600,000 P600,000

Gen’s capital account was credited for P120,000, the partners agreed further
that the carrying amounts of the net assets of the Ric and Jason partnership
were equal to their current fair values, and that the accounting records of the
old partnership should be used for the new partnership. The following income-
sharing plan was adopted for the new partnership:
1. A bonus of 10% of net income after deduction of the bonus to Gen as
managing partner.
2. Remaining net income or loss as follows: 30% to Ric; 40% to Jason
and 30% to Gen.
For the year ended December 31, 2007, the Ric-Gen Jason Partnership had net
income of P55,000 before the bonus Gen.
Compute: (1) the capital of Jason after Gen’s admission on January in the
partnership, and (2) share of Jason in the net income:
a. (1) P88,000; (2) P20,000 c. (1) P192,000; (2) P25,000
b. (1) P88,000; (2) P19,800 d. (1) P120,000; (2) P20,000

15. C and D wish to acquire the partnership interest of their partner E on July
10, 2007. Partnership assets are to be used to acquire E’s partnership
interest, the balance sheet for the CDE Partnership on that date shows the
following:
CDE Partnership
Balance Sheet
July 10, 2007

Cash P 74,000 Liabilities P 45,000

Receivables (net) 36,000 C, capital 120,000
Equipment (net) 135,000 D, capital 60,000
Goodwill 30,000 E, capital 50,000
P 275,000 P 275,000

C, D, and E share earning in the ratio of 3:2:1, respectively. E wants to retire

from the partnership. If E is paid P54,000 and bonus method is used, what is
the capital account balance of C and D:
C D C D
a. P117,000 P58,400 c. P117,600 P60,000
b. P120,000 P60,000 c. P122,400 P61,600

16. Partners R, E, and H share net income and losses in a 5:3:2 ratio,
respectively. At the end of a very unprofitable year, they decided to liquidate
the partnership. The partners’ capital account balances on this date were as
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follows: R P22,000; E P24,900 and H P15,000. The liabilities in the balance

sheet amounted to P30,000, including a loan of P10,000 form R. The cash
balance was P6,000.
The partners plan to sell the noncash assets on a piece meal basis and to
distribute cash as rapidly as it becomes available. All three partners are
personally solvent.
If R received a total of P20,000 as a result of the liquidation, what was the total amount realized by the
partnership on the sale of the non cash assets?
a. P61,900 b. . P85,900 c. P73,900 d. P24,000

17. Dennis, Brisbane and Ric form a partnership on January 1, 2007 investing
P15,000, P10,000 and P10,000 respectively; profits are to be shared in the
ratio of 2:1:1 respectively. It is agreed that 6% (1/2 of 1% per month) is to be
charged on withdrawals that decrease capitals below the original investments.
On March 1, Dennis withdraws P5,000. Business is unsatisfactory and it is
decided to dissolve the partnership. Partnership assets realize P5,000 and the
accountant distributes this cash to the proper parties on November 1, 2007.
All parties are solvent and proper settlement is made among partners the same
day.
How much will Dennis contribute to the partnership for the final settlement?
a. P2,500 b. P2,600 c. P2,700 d. . P2,800

18. Partners A, B, C and D, who share profits 5:3:1:1 respectively, decide to

dissolve. Capital balances at this time are P60,000, P40,000, P30,000 and
P10,000 respectively. Before selling the firm’s assets, the partners agree to
the following:
1. Partnership furniture and fixtures, with the book value of P12,000, is to
be taken over by partner A at a price of P15,000.
2. Partnership claims of P20,000 are to be paid off and the balance of cash
on hand, P30,000, is to be divided in a manner that will avoid the need
for any possible of cash from a partner.
How much the P30,000 cash be distributed to the partners?
A B C D
a. P0 P 0 P30,000 P 0
b. P(2,500) P11,500 P20,500 P500
c. P0 P20,000 P10,000 P 0
d. P0 P20,000 P20,000 P 0

19. D, E and F attorneys, decide to form a partnership and agree to distribute

profits in the ratio of 5:3:2. It is agreed, however, that D and E shall guarantee
fees from their own clients of P60,000 and P50,000 respectively, that any
deficiency is to be charged directly against the account of the partner with fees
exceeding the guarantee. Fees earned during 2007 are classified as follows:
From clients of D P100,000
From clients of E 40,000
From clients of F 10,000
Operating expenses for 2007 are P20,000.
From the above data, compute the net effect on partners’ capital increase or
(decrease) by:
D E F
a. P100,000 P26,000 P24,000
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b. P 40,000 P(20,000) ---

c. P 90,000 P(20,000) P20,000
d. P 50,000 P 30,000 P20,000

20. A balance sheet for the partnership of J, K, and L who share profits 2:1:1
respectively, shows the
following balances just before liquidation:
Cash Other Liabilities J, Cap. K, Cap. L, Cap.
assets
P48,000 P238,000 P80,000 P88,000 P62,000 P56,000
In the first month of liquidation, P128,000 was received on the sale of certain
assets. Liquidation expenses of P4,000 were paid, and additional liquidation
expenses of P3,200 are anticipated before liquidation is completed. Creditors
were paid P22,400. Available cash distributed to the partners.
The cash to be received by each partner based on the above data:
J K L
a. P56,000 P28,300 P28,300
b. P86,000 P61,000 P55,000
c. P29,400 P32,700 P26,700
d. P88,000 P62,000 P56,000

21. Raymond, Jane, and Venus are partners and share profits and losses as
follows: Salaries of P20,000 to Raymond; P15,000 to Jane; and none to Venus.
If net income exceeds salaries, then a bonus is allocated to Raymond. The
bonus is 5 % of net income after deducting salaries and the bonus. Residual
profits or residual losses are allocated 10 % to Raymond; 20 % to Jane, and 70
% to Venus. After the allocation was recorded and the books were closed, the
partners discovered an error and that correction of the error would reduce the
net income from P70,000 to P30,000. The error involved understated
depreciation expense.
How much is the necessary adjustment to Raymond’s capital?
a. Increase by b. Increase by c. Decrease by d. Decrease by
P25,000 P19,500 P5,500 P7,667

22. Gloria, Noli and Loren are partners in a business and share in its earnings
at the respective rates of 50%, 30%, and 20%. At the beginning of the new
fiscal year, they admit Fidel who is to invest in the firm sufficient cash funds to
give him a one-third interest in the capital and in the earnings. The following
closing balance is taken from the old firm’s books:

Cash P200,00 Accounts payable P100,000

0
Marketable 150,000 Loans payable – 60,000
securities bank
Accounts 450,000 Gloria, capital 350,000
receivable
Noli, capital 200,000
________ Loren, capital __90,000
P800,00 P800,000
0
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The securities have a market value of P100,000, and an allowance of P50,000

is required to cover bad debts. No other adjustment of the net assets is
necessary, but the three old partners must among themselves bring the
balances in their capital accounts into agreement with their interest in the
earnings. The settlement among the old partners
a. Gloria will receive from Noli, c. Noli pays Loren, P8,000.
P30,000. d. Loren pays Gloria, P30,000.
b. Gloria will receive from Loren,
P38,000.

23. The condensed balance sheet of the partnership of TJ, RJ, and VJ with
corresponding profit and loss sharing percentages as of June 30, 2005 was as
follows:
Net assets P400,000 TJ, capital (50%) P200,000
RJ, capital (30%) 120,000
________ VJ, capital (20%) __80,000
P400,000 P400,000
As of said date, TJ retired from the partnership. By mutual agreement, he was
paid P225,000 for his interest in the partnership. The resultant goodwill was
to be recorded. After TJ’s retirement, the total net assets of the partnership
was
a. P225,000 b. P200,000 c. P175,000 d. P250,000

24. Las Vegas retired from the partnership of Las Vegas, New York, and New
Jersey. Las Vegas’s cash settlement from the partnership was based on new
goodwill determined at the date of retirement plus the carrying amount of the
other net assets. As a consequence of the settlement, the capital accounts of
New York and New Jersey were decreased. In accounting for Las Vegas’s
withdrawal, the partnership could have used the
Bonus Method Goodwill Method
a. No Yes
b. No No
c. Yes Yes
d. Yes No
25. Partners Lovelle and Carlo share income and loss equally after each has
been credited in all circumstances with annual salary allowances of P15,000
and P12,000, respectively. Under this arrangement, Lovelle will benefit by
P3,000 more than Carlo in which of the following circumstances?
a. Only is the partnership has earnings of P27,000 or more for the year.
b. Only if the partnership does not incur a loss for the year.
c. In all earnings or loss situations.
d. Only if the partnership has earnings of at least P3,000 for the year.
26. Metcalf, Petersen, and Rusell are partners with capital balances of P50,000,
P30,000, P20,000, respectively. The partners share income and loss equally.
For an investment of P50,000 cash, Andersen is to be admitted as a partner
with a one-fourth interest in capital and income. Based on this information, the
amount of Andersen’s investment can best be justified by which of the
following?
CEBU CPAR_PA2 - 1st PREBOARD OCT 07 Page 9 of 13

a. Andersen will receive a bonus from the other partners upon her admission
to the partnership.
b. Assets if the partnership were overvalued immediately prior to Andersen’s
investment.
c. The books value of the partnership’s net assets was less than their fair
value immediately prior to Andersen’s investment.
d. Andersen is apparently bringing goodwill into the partnership, and her
capital account will be credited for the appropriate amount.
27. A partnership is formed by two individuals who were previously sole
proprietors. Property other than cash which is part of the initial investment in
the partnership would be recorded for financial accounting purposes at the:
a. Proprietors’ book values or the fair value of the property at the date of the
investment, whichever is higher
b. Proprietors’ book values or the fair value of the property at the date of
the investment, whichever is lower.
c. Proprietors’ book values of the property at the date of the investment.
d. Fair value of the property at the date of the investment.
28. If L is the total capital of a partnership before the admission of a new
partner, I is the total capital of the partnership after the investment of a new
partner, M is the amount of the new partner’s investment, B is the amount of
the capital credit to the new partner, then there is:
a. L bonus to the new partner if I = L + M and B < M.
b. Goodwill to the old partners if I > (L + M) and B = M.
c. Neither bonus nor goodwill if I = L – M and B > M.
d. Goodwill to the new partner if I > (L + M) and B < M.

29. On April 30, 2004, Philip, Winston, and Marl form a partnership by
combining their separate business proprietorships. Philip contributed cash of
P50,000. Winston contributed property with a P36,000 carrying amount, a
P40,000 original cost, and P80,000 fair value. The partnership accepted
responsibility for the P35,000 mortgage attached to the property. Crown
contributed equipment with a P30,000 carrying amount, a P75,000 original
cost, and P55,000 fair value. The partnership agreement specifies that profits
and losses are to be shared equally but is silent regarding capital
contributions. What partner has the largest April 30, 2004, capital account
balances?
a. Philip b. Winston c. Marl d. All capital account balances
are equal

30. In the AMS-ALMS partnership, Ams and Alms had a capital ratio of 3:1 and a profit and loss
ratio of 2:1, respectively. The bonus method was used to record Abs’ admittance as a new partner.
What ratio should be used to allocate, to Ams and Alms, the excess of Abs’ contribution over the
amount credited to Abs’ capital account?
a. Ams and Alms’ new relative capital c. Ams and Alms’ old capital ratio.
ratio. d. Ams and Alms’ old profit and loss
b. Ams and Alms’ new relative profit ratio.
and loss ratio.

31. When Nora retired from the partnership of Nora, Norman, and Norla, the
final settlement of Nora’s interest exceeded Nora’s capital balance. Under the
CEBU CPAR_PA2 - 1st PREBOARD OCT 07 Page 10 of 13

bonus method, the excess:

a. Was recorded as goodwill.
b. Was recorded as an expense.
c. Reduced the capital balances of Norman and Norla
d. Had no effect on the capital balances of Norman and Norla.

32. In a partnership liquidation, the final cash distribution to the partners

should be made in accordance with the:
a. Partners’ profit and loss sharing ratio.
b. Balances of the partners’ loan and capital accounts.
c. Ratio of the capital contribution by the partners.
d. Ratio of the capital contributions less withdrawals by the partners.

33. When property other than cash is invested in a partnership, at what amount
should the non-cash property be credited to the contributing partner’s capital
account?
a. Contributing partner’s tax basis.
b. Contributing partner’s original cost.
c. Assessed valuation for property tax purposes.
d. Fair value at the date of contribution.

34. Partners Cora and Zon share income in a 2:1 ratio, respectively. Each
partner receives an annual salary allowance of P6,000. If the salaries are
recorded in the accounts of the partnership as an expense rather than treated
as an allocation of income, the total amount allocated to each partner for
salaries and net income would be
a. Less for both Cora and Zon. b. More for Cora and less for Zon
b. Unchanged for both Cora and Zon. c. d. More for Zon and less for
Cora.

35. The partnership of Eugene, Alfred and Jericho shared profits and losses
equally. When Eugene withdrew from the partnership, the partners agreed that
there was unrecorded goodwill in the partnership. Under the bonus method,
the capital balances of Alfred and Jericho were
a. Not affected.
b. Each reduced by one-half of the total amount of the unrecorded goodwill.
c. Each reduced by one-third of the total amount of the unrecorded goodwill.
d. Each reduced by one-half of Eugene’s share of the total amount of the
unrecorded goodwill.

36. In accounting for the liquidation of a partnership, cash payments to

partners after all non-partner creditors’ claims have been satisfied , but before
the final cash distribution, should be according to:
a. The partners’ relative profit and loss sharing ratios.
b. The final balances in partner capital accounts.
c. The partners’ relative share of the gain or loss on liquidations.
d. Safe payments computations.
CEBU CPAR_PA2 - 1st PREBOARD OCT 07 Page 11 of 13

37. If A is the total capital of a partnership before the admission of a new

partner, M is the total capital of the partnership after the admission of the new
partner, I is the amount of the new partner’s investment, and E is the amount
of capital credited to the new partner, then there is
a. Goodwill to the new partner if M > (A + I) and E < I
b. Goodwill to the old partners if M = A + I and E > I
c. A bonus to the new partner if M = A + I and E > I
d. Neither bonus nor goodwill if M > (A + I) and E > I

38. Joy, Inna and Izza, sharing profits and losses 50%, 30%, and 20%,
respectively, have capital credit balances of P40,000, P30,000, and P20,000,
respectively. They decided to admit a new partner, Rita, to a 30% interest in
the partnership upon Rita’s investment of an amount equal to 5/6 of her capital
credit with no assets adjustment recognized. Immediately after the admission
of Rita, the capital credit balance of Inna will be:
a. P28,200 b. P30,000 c. P31,800 d.
P33,000

Use the following information for numbers 39-40

Lehcar, Consolida
Co. ted
Current Assets P P
106,000 146,000
Plant Assets (net) 270,000 374,286
Investment in A Co. (cost) 100,000 -
Goodwill - 8,100
Total P P
476,000 528,386

Current liabilities P P 28,000

15,000
Minority - 39,386
Capital Stock 350,000 350,000
Retained Earnings 111,000 111,000
Total P P
476,000 528,386

Lehcar Co., acquired 70% of the outstanding capital stock of OC Co. The
separate balance sheet of Lehcar Co. immediately after the business
combination and the consolidated balance sheet are show above. P10,000 of
the excess payment of the investment in OC Co. was ascribed to
undervaluation of the plant assets, and the balance to goodwill. The current
assets of OC Co. include a P2,000 receivable from Lehcar Co. which arose
before the business combination.

39. What is the total of current assets on OC Co.’s separate balance sheet at the
time Lehcar Co. acquired its 70% interest?
a. P38,000 b. P40,000 c. P42,000 d.
P104,000

40. Based on the same figures given above, the total stockholders’ equity of OC
Co.’s separate balance sheet at the time Lehcar, Co. acquired its 70% interest
is
CEBU CPAR_PA2 - 1st PREBOARD OCT 07 Page 12 of 13

a. P 64,000 b. P121,287 c. P131,620

d. P117,000

Use the following information for numbers 41-42

On October 1, 2007, separate statements of Steven Co. and Sydney Co. appear below:
Steven Sydney
Cash P 59,700 P 7,500
Accounts Receivable 136,000 23,900
Inventories 57,300 9,250
Plant and equipment 286,300 13,600
P P 54,250
539,300

Liabilities P 123,800 P 11,900

Capital Stock 100,000 10,000
Additional Paid-in Capital 25,000 -
Retained Earnings 290,500 32,350
P P 54,250
539,300
Steven Co. acquired an 80% interest in Sydney Co. On the acquisition date,
October 1, 20007, the fair market values of Sydney Co.’s assets were properly
reflected in its accounts. P40,000 was paid for this acquisition.

41. In the preparation of a consolidated balance sheet, the elimination entry as

to goodwill in the consolidated working paper will be
a. A credit to the Investment account by P6,120.
b. A credit to the Investment account by P7,650.
c. A charge to the Investment account by P3,178.
d. A credit to the Plant and Equipment account by P6,120.

42. To complete the eliminating entries, the other accounts affected are the
capital stock and retained earnings of Sydney Co. in these amounts.

a. b. c. d.
Capital Stock P P P P
8,265 6,470 6,470 8,000
Retained Earnings P P P P
28,558 28,558 25,880 25,880

Use the following information for numbers 43-44

BNC Co. acquired its 60% interest in EFL Co. four years ago for P200,000 and
has accounted for its investment by the equity method. At the time of the
acquisition, the purchase premium has been identified as follows:
Inventory = P 8,000 (sold in year following purchase)
Equipment = 30,000 (15-year life)
Building = 12,000 (40 year life)
For the first three years after acquisition, EFL Co. had reported total earnings
of P90,000 and paid total dividends of P50,000. In 2007, the current year, the
CEBU CPAR_PA2 - 1st PREBOARD OCT 07 Page 13 of 13

parent company earned P60,000 and paid P40,000 for dividends, while the
subsidiary earned P30,000 and paid P20,000 for dividends.

43. The consolidated net income for 2007 was,

a. P86,167 b. P75,700 c. P87,700 d. P 90,000

44. On BNC Company’s books, the investment’s carrying value at the end of the
current year would be?
a. P200,000 b. P212,800 c. P222,000
d. P230,000

45. To comply with certain requirements, companies A, B, and C agree to

consolidate. The new corporation will be known as DDD Corporation, and the
following pertinent information were gathered:

Company Company Company C

A B
Total assets P 1,100,000 P P 1,200,000
1,500,000
Total liabilities 800,000 900,000 800,000
Annual net income 105,000 240,000 136,000

Additional information:
a) The total assets and the total liabilities are at audited values, and they
have been agreed upon as the basis for the consolidation.
b) DDD Corporation will issue 10%, P100 par value, cumulative preferred
shares for the net assets contributed, and P100 par value common
stocks for earnings in excess of a 15% normal rate of return capitalized
at 20%.
c) Cash equivalents to 30% of the par values of the common stock to be
issued will be paid by the stockholders of the three companies and will
be treated as premium on common shares.

The total preferred shares to be issued and premium on common shares are:
a. 13,000 shares and P429,000
b. 12,900 shares and P377,500
c. 13,000 shares and P487,500
d. 13,700 shares and P539,000

end of examination