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Financial Accounting & Reporting

FINAL GRADING EXAMINATION
KEY ANSWERS
Acctg. Cycle of a Merch. Accounting for
Introduction to Accounting
Bus. Corporations
1.      C 35.   A 69.   B
2.      D 36.   B 70.   C
3.      B 37.   A 71.   D
Accounting Concepts and Principles 38.   C 72.   C
4.      D 39.   B 73.   D
5.      D 40.   C 74.   C
6.      B Partnership Formation 75.   D
7.      B 41.   A 76.   A
8.      B 42.   C 77.   B
9.      C 43.   B 78.   B
The Accounting Equation 44.   B 79.   D
10.   D 45.   B 80.   D
11.   A Partnership Operations 81.   B
Types of Major Accounts 46.   D 82.   D
12.   A 47.   B 83.   A
13.   B 48.   D Accounting for Dividends
Books of Accounts and Double-Entry
49.   A 84.   B
System
14.   B 50.   B 85.   C
15.   C 51.   A 86.   B
16.   B 52.   C 87.   A
17.   C 53.   B 88.   B
Business Transactions & Their Analysis 54.   B 89.   A
18.   D Partnership Dissolution 90.   B
19.   B 55.   C Bonus question
20.   D 56.   A 91.   D
21.   C 57.   B
22.   C 58.   D
23.   D 59.   A
24.   B 60.   B
Posting to the Ledger 61.   D
25.   C 62.   B
26.   D 63.   C
27.   C Partnership Liquidation
Adjusting Entries 64.   B
28.   B 65.   C
29.   B 66.   C
30.   A 67.   A
Accounting Cycle of a Service Business 68.   C
31.   B
32.   D
33.   C
34.   B
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SOLUTIONS:

25. C
Accounts receivable
beg.
(squeeze) 80,000  
60,000 40,000
   
100,000 end.

36. B - 280,000 + 890,000 + 30,000 – 220,000 = 980,000

37. A - 360,000 + 50,000 – 20,000 – 15,000 = 375,000

38. C 340,000 + 990,000 + 40,000 – 360,000 = 1,010,000 Cost of goods sold;

1,200,000 – 1,010,000 = 190,000 gross profit

39. B - 140,000 + 790,000 + 10,000 – 60,000 = 880,000 Cost of goods sold;

1,800,000 – 220,000 = 1,580,000 Net sales – 880,000 = 700,000 Gross profit

42. C
Partnershi
  A B p
Cash 500,000 - 500,000
Land (at fair value) 800,000 800,000
Total 500,000 800,000 1,300,000

Mortgage payable - 200,000 200,000

A, capital 500,000 500,000
B, capital (800K – 200K) 600,000 600,000
Total 500,000 800,000 1,300,000

43. B
Cash 184,000
A, Capital (184,000 ÷ 2) 92,000
B, Capital (184,000 ÷ 2) 92,000

44. B
Partnershi
  A B p
Cash 500,000 - 500,000
Accounts receivable
(100K – 20K) 80,000 - 80,000
Building (700K – 50K) 650,000 650,000
Total 580,000 650,000 1,230,000

A, capital 580,000 580,000

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B, capital 650,000 650,000

Total 580,000 650,000 1,230,000

45. B
Cash 184,000
A, Capital (184,000 ÷ 2) 92,000
B, Capital (184,000 ÷ 2) 92,000

The cash settlement among the partners is not recorded in the partnership’s books because this is not a
transaction of the partnership but rather a transaction among the partners themselves.

47. B

Step 1:
A, Capital
- beg.
Withdrawals 60,000 10,000 Additional investment
? Share in profit
end. 50,000

Step 2:
A, Capital
- beg.
Withdrawals 60,000 10,000 Additional investment
100,000 Share in profit (squeeze)
end. 50,000

Step 3: 100,000 ÷ 40% = 250,000 partnership profit

Step 4: B’s share: 250,000 x 60% = 150,000

48. D
  A B C Total
Amount being allocated 100,000
Allocation:
1. Salaries 12,000 8,000 20,000
2. Bonus (100K - 20K) x 10% 8,000 8,000
3. Interest on cap.
(100K x 10%);(60K x 10%);(120K x 10%) 10,000 6,000 12,000 28,000
4. Allocation of remainder:
(100K - 20K - 8K - 28K) = 44K;
(44K x 40%); (44K x 30%); (44K x 30%) 17,600 13,200 13,200 44,000
As allocated 47,600 19,200 33,200 100,000

49. A
Balance, Jan. 1, 20x1 252,000 12/12 252,000
Additional investment, July 1 72,000 6/12 36,000
Withdrawal, August 1 (27,000) 5/12 (11,250)
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Weighted average capital 276,750

Multiply by: 10%
Interest 27,675

50. B
  Red White Total
Amount being allocated     80,000
Allocation:
1. Salaries 55,000 45,000 100,000
2. Allocation of remaining profit
(80K profit – 100K salaries) = -20K
(-20 x 60%); (-20K x 40%) (12,000) (8,000) (20,000)
As allocated 43,000 37,000 80,000

51. A
  Fox Greg Howe Total
Amount being allocated (33,000)
Allocation:
1. Salaries 30,000 - 20,000 50,000
2. Interest on capital 12,000 6,000 4,000 22,000
3. Allocation of balance
(-33K – 50K - 22K) = -105K / 3 (35,000) (35,000) (35,000) (105,000)
As allocated 7,000 (29,000) (11,000) (33,000)

52. C
  Axel Berg Cobb Total
Amount being allocated       250,000
Allocation:
1. Bonus to A
First 100K (100K x 10%) 10,000 10,000
Over 100K [(250K - 100K) x 20%] 30,000 30,000
2. Bonus to Berg and Cobb
(250K - 10K - 30K - 150K) x 5% 3,000 3,000 6,000
3. Allocation of bal. (204K / 3) 68,000 68,000 68,000 204,000
As allocated 108,000 71,000 71,000 250,000

53. B [140K + (40K x 6/12) – (15K x 5/12) = 153.75K x 10% = 15,375

57. B
Total capital after admission 150,000
Multiply by: Interest of Lind 1/3
Capital credit to Lind 50,000
Contribution of Lind (40,000)
Bonus to Lind 10,000
Multiply by: Old P/L ratio of Blau 60%
Deduction to Blau's capital 6,000

Interest of Blau before admission of Lind 60,000

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Deduction to Blau's capital (6,000)

Adjusted capital of Blau after admission 54,000

58. D - (60K + 20K + 15K) = 95K total capital after admission x 20% = 19,000

59. A
Payment to Eddy 180,000
Capital balance of Eddy 160,000
Excess payment to Eddy 20,000

Fox Grimm
Capital balances before retirement 96,000 64,000
Share in excess payment to Eddy (12,000) (8,000)
Capital balances after retirement 84,000 56,000

60. B
Eddy, capital 160,000
Fox, capital 96,000
Grimm, capital 64,000
Investment of Hamm 140,000
Total partnership capital after admission 460,000
Multiply by: Interest of Hamm 25%
Capital credit to Hamm 115,000
Investment of Hamm 140,000
Bonus to old partners (25,000)

Eddy, capital (before admission) 160,000

Share in bonus to old partners (25K x 50%) 12,500
Eddy, capital (after admission) 172,500

61. D - (348K + 232K) = 580K ÷ 80% = 725K capital after admission x 20% = 145,000

62. B
The total loss on the sale is computed as follows:
Sale of other assets 500,000
Carrying amount of other assets (625,000)
Total loss on sale (125,000)

The partial settlement to partners is computed as follows:

  Alpha Beda Totals
Capital balances before liquidation 348,000 232,000 580,000
Receivable from Beda (20,000) (20,000)
Total 348,000 212,000 560,000
Allocation of loss
[125K x (60% & 40%)] (75,000) (50,000) (125,000)
Amounts received by the partners 273,000 162,000 435,000
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64. B
  A (50%) B (25%) C (25%) Totals
Cap. bal. before liquidation 76,000 64,000 56,000 196,000
Allocation of loss (78,000) (39,000) (39,000) (156,000)
Total (2,000) 25,000 17,000 40,000
Allocation of deficiency 2,000 (1,000) (1,000) -
Total - 24,000 16,000

65. C
Net proceeds 320,000
Carrying amount of all other assets (720,000)
(400,000
Loss )

  A (50%) B (30%) C (20%) Totals

Cap. bal. before liquidation 250,000 86,000 40,000 376,000
Payable to partners 64,000 20,000 84,000
Total 250,000 150,000 60,000 460,000
Allocation of loss (200,000) (120,000) (80,000) (400,000)
Total 50,000 30,000 (20,000) 520,000
Additional contribution 20,000 20,000
Total 50,000 30,000 - 540,000

66. C
  A B C
Personal assets 90,000 240,000 180,000
Personal
liabilities (75,000) (150,000) (216,000)
(36,000
Net free assets 15,000 90,000 )

67. A - (100,000 x 40%) = 40,000

79. D
Jan. 2, Share capital (100,000 x ₱10) 1,000,000
20x3 Sh. premium – orig. issuance (2.7M x 100K/900K) 300,000
Retained earnings 500,000
Cash 1,800,000

  Share premium Retained earnings

Dec. 31, 20x2 2,700,000 1,300,000
Debit (300,000) (500,000)
Jan. 2, 20x3 2,400,000 800,000
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80. D
Jan. 5, Cash (20,000 x 15) 300,000
20x1
Ordinary share (20,000 x 10) 200,000
Share premium 100,000
July 14, Treasury shares (5,000 x 17) 85,000
20x1
Cash 85,000
Dec. 27, Cash (5,000 x 20) 100,000
20x1
Treasury shares (5,000 x 17) 85,000
Share premium – Treasury shares 15,000

100,000 + 15,000 = 115,000

81. B
Dec. 27, Cash (3,000 x 25) 75,000
20x1
Treasury shares (3,000 x 18) 54,000
Share premium – Treasury shares 21,000

83. A
  Issued Outstanding
Issued as of Dec. 31, 20x1 100,000 100,000
Treasury shares as of Dec. 31, 20x1 (5,000)
20x2 transactions:
May 3 - reissuance of treasury shares 1,000
Aug. 6 - issuance of new shares 10,000 10,000
Totals 110,000 106,000
Nov. 18 - 2-for-1 share split 2 2
Ending balances 220,000 212,000

84. B
Total cash dividends declared 44,000

Dividends to preference sh. [(4,000 x 100 x 6%) + 12,000]

(36,000)
Dividends to ordinary sh. 8,000

85. C
Total dividends declared 100,000
Allocation:
Basic allocation to preference shares: (30,000 x 10 x 5%) 15,000
Basic allocation to ordinary shares: (200,000 x 1 x 5%) 10,000
Excess subject to participation (100,000 – 15,000 – 10,000) 75,000
Participation of preference sh. (75,000 x 3/5) 45,000
Participation of ordinary sh. (75,000 x 2/5) 30,000
Balance -

Total dividends to ordinary shareholders = 10,000 + 30,000 = 40,000

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86. B
10% ('small' dividend) - at fair
value 15,000
28% ('large' dividend) - at par value 30,800
Total debit to retained earnings 45,800

87. A - Stock dividend payable (share dividend distributable) is not a liability.