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a. Yes Yes
b. Yes No
c. No No
d. No Yes
Problems
1. The following is the condensed balance sheet of the partnership J,K and L, who share
profits and losses in the ratio of 4:3:3.
Assume that the assets and liabilities are fairly valued on the balance sheet and that the
partnership decides to admit M as a new partner, with a 20% interest. No goodwill or bonus is to
be recorded. How much should M contribute in cash or other assets?
a. P568,000
b. P740,000
c. P700,000
d. P560,000
2. Each of Potter Pie Co.’s 21 new franchisees contracted to pay an initial franchise fee of
P30,000. By December 31, 1998, each franchisee had paid a non-refundable P10,000
fee and signed a note to pay P10,000 principal plus the market rate of interest on
December 31, 1999, and December 31, 2000. Experience indicates that one franchisee
will default on the additional payments. Services for the initial fee will be performed in
1999. What amount of net unearned franchise fees would Potter report at Dec 31, 1998?
a. P400,000
b. P600,000
c. P610,000
d. P630,000
3. The following data relates to a construction job started by Romeo Company during x3:
Total contract price P100,000
Actual costs during x3 20,000
Estimated remaining costs 40,000
Billed to customer during x3 30,000
Received from customer during x3 10,000
Under percentage of completion, how much should Romeo recognize as gross profit for
x3?
a. P0
b. P13,333
c. P26,667
d. P33,333
4. On Jan 1, 1999, Tom Bravo sells 20 acres of farmland for P6,000,000 taking in
exchange a 10% interest-bearing note. Tom Bravo purchased the farmland in 1984 at a
cost of P5,000,000. The note will be paid in three installments of P2,412,690 each Dec
31, 1999, 2000, and 2001. How much must be the deferred gross profit at the end of
1999 under the installment method of revenue recognition?
a. P1,000,000
b. P 697,885
c. P 637,462
d. P 592,885
5. BAGUIO Co. buys goods from Kowloon Co. of Hongkong payable in Hongkong dollars
on a 60-day credit term. BAGUIO Co.’s balance sheet, as of June 30, 19x6, reflected a
payable to Kowloon Co., for merchandise valued at HK$250,000 that were purchased at
the going rate of P4.00/HK$. What exchange gain or loss should BAGUIO Co. recognize
assuming that the prevailing exchange rate on June 30, 19x6 is HK$0.275/P?
a. P6,250 gain
b. P25,000 loss
c. P27,500 gain
d. P90,909 gain