LEARNING ADVANCEMENT REVIEW CENTER ADV

RM 413 DONA AMPARO BUILDING ESPANA BOULEVARD CORNER G. TOLENTINO ST.

SAMPALOC, MANILA ACC
CONTACT # (02) 244 6342 / 0915 537 1189 / 0943 595 5364
(1)
REVIEW ON ADVANCED ACCOUNTING 1 (FEU) ALGER TANG

PARTNERSHIP ACCOUNTING

1. On June 30, the partners of ABC Partnership had the following capital balances together with their
profit and loss sharing ratio (after closing entries for the six-month period ended June 30):
AA, capital (50%) P 30,000
BB, capital (20%) 120,000
CC, capital (30%) 70,000

DD was admitted into the partnership for a 20% interest in the total capital of the partnership in
exchange for an investment of P50,000 cash. The existing partners agreed to increase the carrying
amount of the existing property, plant and equipment by P75,000.

How much is the capital balances of AA, BB, CC and DD, respectively immediately after
dissolution?

2. On July 1, the statement of financial position of ABC Partnership, together with their respective profit
and loss ratios, follow:
Assets P600,000

AA, capital (40%) P100,000

BB, capital (30%) 300,000
CC, capital (30%) 200,000
Total P600,000

CC decided to retire from the partnership. The partners agreed to adjust their assets to the current fair
value of P750,000. CC will be paid P250,000 cash in settlement of his interest.

How much is the capital of AA and BB after the retirement of CC?

3. On December 31, 2019, the partners of ABC partnership decided to liquidate the partnership. The
statement of financial position immediately prior to the liquidation (with respective profit and loss
ratio in parentheses) is presented as follows:
Cash P 140,000 Liabilities P 905,000
Receivable from partner B 35,000 Payable to partner C 48,000
Other non-cash assets 1,615,000 A, capital (50%) 324,000
B, capital (30%) 262,000
C, capital (20%) 251,000
Total Assets P1,790,000 Total Liabilities and Equity P1,790,000

All the non-cash assets were sold for P600,000 and liquidation expenses of P15,000 were paid.
Partners A and C are personally solvent while partner B is insolvent.

How much cash would A, B and C receive after liquidation?

 LEARNING ADVANCEMENT REVIEW CENTER ADV
RM 413 DONA AMPARO BUILDING ESPANA BOULEVARD CORNER G. TOLENTINO ST.
SAMPALOC, MANILA ACC
CONTACT # (02) 244 6342 / 0915 537 1189 / 0943 595 5364
(1)
REVIEW ON ADVANCED ACCOUNTING 1 (FEU) ALGER TANG

4. The partners of A and B Partnership started liquidating their partnership on July 1, 2019. The partners
share profits and losses in the following ratio: 40% to A and 60% to B. The statement of financial
position of the partnership immediately before the liquidation appeared as follows:
Cash P 17,500 Accounts payable P 65,000
Receivable 45,000 A, capital 51,000
Inventory 79,000 B, capital 95,500
Equipment, net 70,000
Total P211,500 Total P211,500

During the month of July, the partners collected P1,500 of the receivables with no loss. The partners
also sold the inventory for total proceeds of P65,500.

How much is the cash payment to A on July 31, 2019?

INSTALLMENT SALES

5. Butter Company sells merchandise on installment basis. As of the beginning of 2017, the ledger
accounts of the entity included the following:
Installment accounts receivable – 2015 P 600,000
Installment accounts receivable – 2016 1,920,000
Deferred gross profit – 2015 252,000
Deferred gross profit – 2016 720,000

At the end of 2017, account balances before adjustment for realized gross profit were:
Installment accounts receivable – 2015 P 600,000
Installment accounts receivable – 2016 480,000
Installment accounts receivable – 2017 2,600,000
Deferred gross profit – 2015 252,000
Deferred gross profit – 2016 687,000
Deferred gross profit – 2017 1,200,000

Installment sales in 2017 were made at a mark-up of 25% based on cost. During 2017, a customer
defaulted (the sale was not related to 2017). The company repossessed the merchandise with an
estimated market value of P40,000.

a. How much is the gain (loss) on repossession assuming that the collectability of the installments
are reasonably assured and that no allowance for doubtful accounts was set-up prior to the
repossession?
b. How much is the gain (loss) on repossession assuming that the collectability of the installments
are not reasonably assured?
c. How much is the realized gross profit for 2017?
 LEARNING ADVANCEMENT REVIEW CENTER ADV
RM 413 DONA AMPARO BUILDING ESPANA BOULEVARD CORNER G. TOLENTINO ST.
SAMPALOC, MANILA ACC
CONTACT # (02) 244 6342 / 0915 537 1189 / 0943 595 5364
(1)
REVIEW ON ADVANCED ACCOUNTING 1 (FEU) ALGER TANG

6. Chips Company sold merchandise costing P129,600 on installment basis on October 1, 2017. The
installment selling price was set at P183,600. However, a trade-in allowance of P46,800 was provided
to the customer in exchange for a used merchandise. Cash of P10,800 was paid immediately with the
balance to be paid in ten monthly installments due at the end of each month commencing the month
after the month of sale. Chips estimates that the merchandise can be resold for P54,000 after incurring
reconditioning costs of P2,700 and a 15% profit margin was expected from the sale of second-hand
merchandise. Costs to sell the traded in merchandise was estimated at P4,000. How much is the
realized gross profit for 2017?

CONSTRUCTION CONTRACTS

7. RK Construction uses the percentage of completion in accounting for its construction contracts. On
January 3, 2016, RK began construction activities on a P3 million construction contract that was
estimated to be completed at a total cost of P2.25 million as of December 31, 2016. The following
updated data were provided to you as of December 31, 2017:
Profit from construction in 2016 P 300,000
Costs incurred to date 1,800,000
Estimated costs to complete 600,000

What was the percentage of work done in 2017?

8. On January 5, 2018, you were recently as the accountant of Lotus Construction Company. In
reviewing the existing records of the company, you find the following information regarding one of
the company's recently completed project:
Contract price P25,000,000)
Construction in progress account as of 2015 5,000,000)
Actual construction cost incurred in 2017 10,250,000)
Gross profit (loss) in 2015 500,000)
Gross profit (loss) in 2016 1,750,000)
Gross profit (loss) in 2017 (P0,250,000)

How much costs did the company incur in 2016?

FRANCHISOR ACCOUNTING

9. During December of the current year, Sugo Company (franchisor) and Happy Company (franchisee)
entered into a franchise contract for an initial franchise fee of P300,000, with 40% of the initial
franchise fee payable immediately upon signing of the contract. The unpaid balance was evidenced by
a non-interest bearing note payable in three equal annual installments every December 31 starting the
year after the signing of the contract. The note had a present value of P128,000. The down payment of
40% is non-refundable while the collectability of the note is not reasonably assured. As of December
31 of the current year, Sugo has rendered the required initial services related (as per franchise
 LEARNING ADVANCEMENT REVIEW CENTER ADV
RM 413 DONA AMPARO BUILDING ESPANA BOULEVARD CORNER G. TOLENTINO ST.
SAMPALOC, MANILA ACC
CONTACT # (02) 244 6342 / 0915 537 1189 / 0943 595 5364
(1)
REVIEW ON ADVANCED ACCOUNTING 1 (FEU) ALGER TANG

agreement) to the down payment. However, Sugo has to render substantial future services related to
the initial franchise fee.

10. On December 31, 2017, Vikings Company signed an agreement authorizing Four Seasons to operate
as a franchisee for an initial franchise fee of P750,000. Four Seasons immediately paid P300,000 with
the balance to be paid in three annual payment of P150,000 each, beginning December 31, 2018. The
credit rating of Four Seasons indicate that the collection of the balance is reasonably assured. No
future services are required to be performed. The appropriate discount rate is 12% and the appropriate
present value factor is 2.4018.

11. On January 1, 2019, ABC entered into a franchise agreement with a franchisee. As part of its
franchise agreement, ABC requires the franchisee to pay a non-refundable upfront franchise fee of
P950,000 upon opening a restaurant and ongoing payment of royalties, based on 10% of franchisee’s
sales.As part of the franchise agreement, ABC provides pre-opening services and supply and
installation of cooking equipment and cash registers.

The franchise agreement’s performance obligations had the following stand-alone prices:
Performance obligation Stand-alone price
Pre-opening service such as employee training, site preparation, etc. P120,000
Supply and installation of cooking equipment and cash registers 180,000
Franchise rights 700,000

For the year ended 2019, ABC was able to perform all pre-opening services as well as installed all
equipment and cash registers. The franchisee reported sales revenue of P1,000,000 for the year ended.

a. Assuming that the franchisor transferred the control of the franchise rights to the franchisee, how
much is the total revenue recognized by the franchisor for 2019?
b. Assuming that the franchisor provided the franchisee access to the rights for a period of ten years
beginning January 1, 2019, how much is the total revenue recognized by the franchisor for 2019?