FINAL EXAM

1. The joint operations accounts in the tooks of the joint operator, X, Y and Z, show the balances below,
upon termination of the joint operations and distribution of the profits

Accounts with X Y Z
Dr(Cr) Dr(Cr) Dr(Cr
X - P2,500 P2,500
Y P4,000 - 4,000
Z (6,500) (6,500)

Final settlement of the joint operations will require payments as follows:

a. X pays P2,500 to Z, and Y pays P4,000 to Z.
b. Z pays P2,500 to X, and P4,000 to Y.
c. Y pays P6,500 to X, and Z pays P2,500 to Y.
d. No payment(s) to be made

2.Reyes, Silva and Tan formed a joint arrangement. Reyes was designated as the managing joint
operator and was to record the joint operation's transactions in his own books. As manager, Reyes was
to be allowed a salary of P12,000; the remaining profit or loss was to be divided equally. The following
balances appeared at the end of 2013, before adjustment for joint operations inventory and profit:

Debit Credit
Joint operations cash P48.000
Joint operations - 15,000
Silva, capital 1,000
Tan, capital 27,000
The arrangement was terminated on December 31, 2013 and unsold merchandise costing P10,500 were
taken over by Tan. Reyes made cash settlement with Silva and Tan. In the final cash settlement, how
much did Tan receive?
a. 31,500 c. 21,000
b. 27,000 d. 10,500

3. Bar and Car join in an arrangement for the sale of football souvenirs at the Rose Bowl game. Partners
agree to the following: (1) Bar shall be allowed a commission of 20% on net purchases made by him, (2)
each member shall be allowed a commission of 25% on his own sales, (3) any remaining profit shall be
shared equally, Joint operation transactions follow:
Bar Car
Cash purchases P950
Expenses paid - 150
Sales (each keeps his receipts) 800 600
The joint operation profit (loss) is:
a. P450 c. P(300)
b. 300 d. (450)
4. Using the same information in No. 3, the amount due to (from) joint operators:
a. Bar, P415; Car, P(415) c. Bar, P645; Car, P645
b. Bar, P420; Car, P(420) d. Bar, P-0-; Car, P-0-

5. Ramos, Silva and Torre formed a joint operation.' Ramos is to act as managing joint operator and is
designated to record the joint operation accounts in his books. As manager, he is allowed a salary of
P12,000. Remaining profit (loss) is to be divided equally. The following balances appear at the end of
2013 before adjustments for joint operation's inventory and profits.

Debit Credit
Joint operations cash P48,000
Silva, capital 3,000
Torre, capital P27,000

The arrangements is to terminate on December 31, 2013 with unsold merchandise costing P10,400.
Assuming that the joint operations profit is P5,000, what is the balance of the Joint Operation's account
before the distribution of profit?
a. 6,400 (Credit) c. 19,000 (Debit)
b. 5,400 {Debit) d. 15,400 (Debit)

6. no Using the same information in No. 5 and assuming that the joint operations incurs a loss of P1,000,
what is the balance of the joint operation's account before the distribution of loss?
a. 9,400 (Debit) c. 11,400 (Debit)
b. 9,400 (Credit) d. 11,400 (Credit)

7. Alas and Bernal are joint operators in a joint arrangements for the acquisition of construction supplies
at'an auction. The two joint operators agreed to contribute cash of P20,000 each to be used in
purchasing the supplies, and to share profits and losses equally, they also agreed that each shall record
his purchases, sales and expenses in his own books. Several months later, the two joint operators
terminated the arrangement.
The following data relate to the venture activities

Alas Bernal
Joint operation P16,000 Cr. P1400 Cr.
Value of inventory taken 600 2,200
Expenses paid from JV cash 800 1,800

The amount of joint operations sales is:

a. 77,000 c. 34,400
b. 27,000 d. None

8.K and L join in a venture for the sale of certain merchandise. The participants agree to the following:
• K shall be allowed a commission of 10% on his net purchase.
• The participants shall be allowed commissions of 25% on their respective sales.
• K and L shall divide the profit or loss 60% and 40%, respectively.
Joint venture transactions follows:
Dec. 1 K makes cash purchase of P57,000
3 L pays venture expenses of P9,000.
 5 Sales are as follows: K- P48,000; L- P36,000. The participants keep their own cash receipts.
6 K returns unsold merchandise and receives P15,000 cash.
15 The participants make cash settlement.

In the distribution of the net profit of the venture, what are the shares of K and L, respectively?
a. 4,260 3,230
b. 4,680 3,120
c. 4,820 3,430
d. 4,840 4,230

9. In the final settlement, what amount would L pay K?

a. 14,100 c. 14,890
b. 14,880 d. 15,100

10.Carlos and Horace join in a venture for the sale of handicraft souvenir at the PICPA Convention. They
agreed that Carlos shall be allowed a commission of 20% on his net purchases; that each member shall
be allowed a commission of 25% on his sales; and that any remaining profit shall be shared in the
respective ratio of 6:4. The venture's transactions follows: cash purchase of PI,900 and sales of PI,600
were made by Carlos, and expenses of P300 and sales of PI,200 were made by Horace. Each keeps his
own sales receipts. What is the joint venture profit (loss)?
a. 600 c. 700
b. (650) d. 900

11. How much is the amount due to (from) participants in the final settlement?
Carlos Horace
a. 415 (415)
b. 792 (792)
c. 860 (860)
d. 972 (972)

Use the following information for questions 12-15: Seasons Construction is constructing an office
building under contract for Cannon Company. The contract calls for progress billings and payments of
$930,000 each quarter. The total contract price is $11,160,000 and Seasons estimates total costs of
$10,650,000. Seasons estimates that the building will take 3 years to complete, and commences
construction on January 2, 2012.

12. At December 31, 2012, Seasons estimates that it is 30% complete with the construction, based on
costs incurred. What is the total amount of Revenue from Long-Term Contracts recognized for 2012 and
what is the balance in the Accounts Receivable account assuming Cannon Cafe has not yet made its last
quarterly payment?
Revenue Accounts Receivable
a. $3,720,000 $3,720,000
b. $3,195,000 $ 930,000
c. $3,348,000 $ 930,000
d. $3,195,000 $3,720,000
13. At December 31, 2013, Seasons Construction estimates that it is 75% complete with the building;
however, the estimate of total costs to be incurred has risen to $10,800,000 due to unanticipated price
increases. What is the total amount of Construction Expenses that Seasons will recognize for the year
ended December 31, 2013?
a. $8,100,000 b. $4,725,000 c. $4,792,500 d. $4,905,000

14. At December 31, 2013, Seasons Construction estimates that it is 75% complete with the building;
however, the estimate of total costs to be incurred has risen to $10,800,000 due to unanticipated price
increases. What is reported in the balance sheet at December 31, 2013 for Seasons as the difference
between the Construction in Process and the Billings on Construction in Process accounts, and is it a
debit or a credit?
Difference between the accounts Debit/Credit
a. $2,535,000 Credit
b. $930,000 Debit
c. $660,000 Debit
d. $930,000 Credit

15. Seasons Construction completes the remaining 25% of the building construction on December 31,
2014, as scheduled. At that time the total costs of construction are $11,250,000. What is the total
amount of Revenue from Long-Term Contracts and Construction Expenses that Seasons will recognize
for the year ended December 31, 2014?
Revenue Expenses
a. $11,160,000 $11,250,000
b. $2,790,000 $ 2,812,000
c. $2,790,000 $ 3,150,000
d. $2,812,500 $ 2,812,500

The following information relates to questions 16 and 17. Cooper Construction Company had a contract
starting April 2013, to construct a $12,000,000 building that is expected to be completed in September
2015, at an estimated cost of $11,000,000. At the end of 2013, the costs to date were $5,060,000 and
the estimated total costs to complete had not changed. The progress billings during 2013 were
$2,400,000 and the cash collected during 2013 was 1,600,000.

16. For the year ended December 31, 2013, Cooper would recognize gross profit on the building of:
a. $421,667 b. $460,000 c. $540,000 d. $0

17. At December 31, 2013 Cooper would report Construction in Process in the amount of:
a. $460,000 b. $5,060,000 c. $5,520,000 d. $4,720,000

18. Monroe Construction Company uses the percentage-of-completion method of accounting. In 2013,
Monroe began work on a contract it had received which provided for a contract price of $20,000,000.
Other details follow:
2013
Costs incurred during the year $9,600,000
Estimated costs to complete as of December 31 6,400,000
Billings during the year 8,800,000 Collections during the year 5,200,000
What should be the gross profit recognized in 2013?
a. $800,000 b. $10,400,000 c. $2,400,000 d. $4,000,000

Use the following information for questions 19 and 20. On May 1, 2013, TV Inc. consigned 80 TVs to
Ed's TV. The TVs cost $360. Freight on the shipment paid by Ed’s TV was $800. On July 10, TV Inc.
received an account sales and $17,200 from Ed's TV. Thirty TVs had been sold and the following
expenses were deducted:
Freight $800
Commission (20% of sales price) ?
Advertising 520
Delivery 280
*19. The total sales price of the TVs sold by Ed's TV was
a. $20,500. b. $21,500. c. $21,850. d. $23,500.

*20. The inventory of TVs will be reported on whose balance sheet and at what amount?
Balance Sheet of Amount of Inventory
a. TV Inc. $18,500
b. TV Inc. $18,000
c. Ed's TV $18,500
d. Ed's TV $18,000

21. Which of the following is not an accurate representation concerning revenue recognition?
a. Revenue from selling products is recognized at the date of sale, usually interpreted to mean the
date of delivery to customers.
b. Revenue from services rendered is recognized when cash is received or when services have been
performed.
c. Revenue from permitting others to use enterprise assets is recognized as time passes or as the
assets are used.
d. Revenue from disposing of assets other than products is recognized at the date of sale.

22. X of Kolkata sends out 1000 boxes costing Rs.2000 each to Y of Delhi. 1/10th of the boxes were
lost in transit. 2/3rd of the remaining boxes sold by consignee at cost + 25%. The sale value will
be: (NO Choices)

23. (RPCPA EXAM) Aircon Inc. consigned 12 one-horse power air-condition units to Argy Trading and
paid P2,000 freight out. Gross margin is 25% of selling price which was set for P12,000. The
consignee is allowed a commission of 5% on sales but is required to give an advance payment to
be deducted proportionately based on sales made. Argy Trading’ account sales on December
2015, gave a remittance for 6 units sold after deducting selling expenses of P800, delivery and
installation of P1,200 and the appropriate commission and advances. Amount Due for
remittance? (NO Choices)
Moran Appliances consigned on November 5 five electric fans costing P800 each to Dizon Marketing
Company, which was to sell them at any price above P1,000. The amount over P1,000 will represent
consignee's commission. Moran paid the trucking cost of P200 and is to reimburse Dizon for local
delivery to customers. During December, Dizon Marketing sold three fans, two for cash at P1,500 each
and one on credit at P1,800 of which it had collected 50%. Dizon paid P170 for local delivery to
customers. Full remittance is required within a month from the time goods are sold.
24. Assuming that Dizon Marketing made interim settlement as of December 15, how much should
it remit to Moran Appliances? (NO Choices)
25. How much is the profit to date of Moran Appliances resulting from the consignment? (NO
Choices)
26. How much is the profit to date of Dizon? (NO Choices)

27. Goods on consignment including freight and insurance are inventoriable cost of
a) consignor until it is sold c) both consignee and consignor
b) consignee until it is sold d) neither consignee nor consignor

28. Braun, Inc. appropriately uses the installment-sales method of accounting to recognize income
in its financial statements. Some pertinent data relating to this method of accounting include:
2012 2013
Installment sales $750,000 $720,000
Cost of installment sales 570,000 504,000
Gross profit $180,000 $216,000
Rate of gross profit 24% 30%
Balance of deferred gross profit at year end:
2012 $108,000 $ 36,000
2013 198,000
Total $108,000 $234,000
What amount of installment accounts receivable should be presented in Braun's December 31, 2013
balance sheet?
a. $720,000 b. $810,000 c. $780,000 d. $866,666

29. Hartz Co., which began operations on January 1, 2013, appropriately uses the installmentsales
method of accounting. The following information pertains to Hartz's operations for the year
2013:
Installment sales $2,000,000
Regular sales 800,000
Cost of installment sales 1,200,000
Cost of regular sales 480,000
General and administrative expenses 160,000
Collections on installment sales 480,000
The deferred gross profit account in Hartz's December 31, 2013 balance sheet should be
a. $192,000. b. $320,000. c. $608,000. d. $800,000.
 30. On January 1, 2012, Orton Co. sold a used machine to King, Inc. for $700,000. On this date, the
machine had a depreciated cost of $490,000. King paid $100,000 cash on January 1, 2012 and signed
a $600,000 note bearing interest at 10%. The note was payable in three annual installments of
$150,000 beginning January 1, 2013. Orton appropriately accounted for the sale under the
installment method. King made a timely payment of the first installment on January 1, 2013 of
$260,000, which included interest of $60,000 to date of payment. At December 31, 2013, Orton has
deferred gross profit of
a. $140,000. b. $132,000. c. $120,000. d. $102,000.

31. Piper Co. began operations on January 1, 2013 and appropriately uses the installment method of
accounting. The following information pertains to Piper's operations for 2013:
Installment sales 2,400,000
Cost of installment sales 1,440,000
General and administrative expenses 240,000
Collections on installment sales 1,100,000
The balance in the deferred gross profit account at December 31, 2013 should be
a. $440,000. b. $660,000. c. $520,000. d. $960,000.
32. Gema, Inc. began operations on January 1, 2011 and appropriately uses the installment method of
accounting. The following data are available for 2011:
Installment accounts receivable, 12/31/2011 P600,000
Installment sales for 2011 1,050,000
Gross profit on sales 40%
Under the installment method, Gema's deferred gross profit at December 31, 2011 would be
a. 360,000 c. 240,000 b. 270,000 d. 180,000
33. The Central Plains Subdivision sells residential subdivision lots on installment basis. The following
information was taken from the company's records as at December 31,2011:
Installment Accounts Receivable:
January 1,2011 P755,000
December31,2011 840,000
Unrealized Gross Profit, January 1, 2011 339,750
Installment Sales 950,000
How much is the balance of Unrealized Gross Profit as at December 31, 2011?
a. 378,000 c. 427,500 b. 339,750 d. 389,250
34. Tayag Corp., which began operations in 2013, accounts for revenues using the installment method.
Tayag's sales and collections for the year were P60,000 and P35,000, respectively Uncollectible accounts
receivable of P5,000 were written off during 2013. Tayag's gross profit rate is 30%. On December 31,
2013, what amount should Tayag report as deferred revenue?
a. P10,500 c. P7,500 b. P9,000 d. P6,000
35. On January 1, 2011, Art Company sold its idle plant facility to Tony, Inc. for P1,050,000. On this date,
the plant had a depreciated cost of P735,000. Tony paid P150,000 cash on January 1, 2011 and signed a
P900,000 note bearing interest at 10%. The note was payable in three annual installments of P300,000
beginning January 1,2012. Art appropriately accounted for the sale under the installment method. Tony
made a timely payment of the first installment on January 1,2012 of P390,000 which included interest
of P90,000 to date of payment. At December 31, 2012, Art has deferred gross profit of
a. 153,000 c. 225,000 b. 180,000 d. 270,000
36. Gianne Co., sold a computer on installment basis on October 1, 2011. The unit cost to the company
was P86,400, but the installment selling price was set at P122,400. Terms of payment included the
acceptance of a used computer with a trade-in allowance of P43,200. Cash of P7,200 was paid in
addition to the traded-in computer with the balance to be paid in ten monthly installments due at the
end of each month commencing the month of sale. It would require P1,800 to recondition the used
computer so that it could be resold for P36,000. A 15% gross profit was usual from the sale of used
computer. The realized gross profit from the 2011 collections amounted to:
a. 5,760 c. 11,520 b. 14,100 d. 48,960
37. MM Company began operations on January 1, 2011 and appropriately uses the installment method
of accounting. The following data are available for 2011 and 2012
2011 2012
Installment sales P1,200,000 P1,500,000
Cash collections from:
2011 sales 400,000 500,000
2012 sales 600,000
Gross profit on sales 30% 40%
The realized gross profit for 2012 is
a. 240,000 c. 440,000 b. 390,000 d. 600,000
38. Spicer Corporation has a normal gross profit on installment sales of 30%. A 2009 sale resulted in a
default early in 2011. At the date of default, the balance of the installment receivable was P24,000, and
the repossessed merchandise had a fair value of P13,500. Assuming the repossessed merchandise is to
be recorded at fair value, the gain or loss on repossession should be:
a. P 0 c. a P3,300 loss b. P3,300 gain d. a P7,500 loss
39. The Molino Furniture Company appropriately used the installment sales method in accounting for
the following installment sale. During 2011, Molino sold furniture to an individual for P3,000 at a gross
profit of P1,200. On June 1, 2011, this installment account receivable had a balance of P2,200 and it was
determined that no further collections would be made. Molino, therefore, repossessed the
merchandise. When reacquired, the merchandise was appraised as being worth only P1,000. In order to
improve its salability, Bengal incurred costs of P100 for reconditioning. Normal profit on resale is P200.
What should be the loss on repossession attributable to this merchandise?
a. 220 c. 320 b. 620 d. 880
40. If a Home Office bills merchandise shipments to the branch at a markup of 20% on cost, the
markup on billed price is:
a. 16.67% c. 25%
b. 20% d. Some other percentage

41. On December 31, the Inv. in Branch account on the home books shows a balance of
P150,000. The following facts are ascertained:

1. Merchandise billed at P5,000 is in transit on December 31, from the home office to the branch.
2. The branch collected a home account receivable for P2,000. The branch did not notify the home
office of cash collection.
3. On December 30, the home office mailed a check of P10,000 to the branch but the bookkeeper
charged the check to General Expenses; the branch has not received the check as of December
31.
4. Branch profit for December was recorded by the home office at P8,900 instead of P9,800.
5. Branch returned supplies of P1,000 to the home office but the home office has not yet recorded
the receipt of the supplies.
Compute the balance of the Home Office account on the branch book as of December 31 before its
adjustment. (NO Choices)

42.A home office transfers inventory to its branch at a 20% markup on cost. During 2008, 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

43.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.

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, 2008
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, 2008 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, 2008 inventories, excluding the shipment in transit was:

Home Office, at cost 30,000

Cebu Branch, at billed value

(excluding freight of P520) 10,400

44. Net income of the Home Office was

a. P 10,000 c. P 20,000
b. P 15000 d. P 22,000
45. True income of Cebu Branch was
a. P 10,470 c. P 12,470
b. P 11,470 d. P 13,470

46. Xero Corporation operates a number of branches in Metro Manila. On June 30, 2008, 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, 2008 at P16,275. The
branch reported a net income of P12,675.
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
47. The LL Company established a branch in Makati City on June 1, 2008. The branch is to receive
substantially all merchandise from the home office. During the remainder of 2008, 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.

Compute the: (1) branch inventory on December 31, 2008 at cost, and (2) the branch net income as
far as the home office is concerned (branch true income):

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) P79,500

48. A sale should not be recognized as revenue by the seller at the time of sale if
a. payment was made by check.
b. the selling price is less than the normal selling price.
c. the buyer has a right to return the product and the amount of future returns cannot be reasonably
estimated.
d. none of these.

49. In accounting for a long-term construction-type contract using the percentage-ofcompletion

method, the gross profit recognized during the first year would be the estimated total gross profit from
the contract, multiplied by the percentage of the costs incurred during the year to the
a. total costs incurred to date.
b. total estimated cost.
c. unbilled portion of the contract price.
d. total contract price.

50. Under the cost-recovery method of revenue recognition,

a. income is recognized on a proportionate basis as the cash is received on the sale of the product.
b. income is recognized when the cash received from the sale of the product is greater than the cost of
the product.
c. income is recognized immediately.
d. none of these.