REVIEWER IN SIR RANDY c. Assessed valuation for property tax purposes.

d. Contributing partner’s tax basis.

THEORIES CHAPTER 1 6. Partnership capital and drawings accounts are similar to

the corporate
1. Which of the following is not a characteristic of most a. Paid in capital, retained earnings, and dividends accounts.
partnership? b. Retained earnings account.
a. Limited liability c. Paid in capital and retained earnings accounts.
b. Limited life d. Preferred and common stock accounts.
c. Mutual agency
d. Ease of formation 7. If the partnership agreement does not specify how income
is to be allocated,
Characteristics of Partnership profits and loss should be allocated
1. Ease of formation a. Equally.
2. Separate legal personality b. In proportion to the weighted average of capital invested
3. Mutual agency during the period.
4. Co-ownership of property c. Equitably so that partners are compensated for the time
5. Co-ownership of Profits and effort
6. Limited Life expended on behalf of the partnership.
7. Transfer of Ownership d. In accordance with their capital contribution.
8. Unlimited Liability
8. Which of the following is not a component of the formula
2. Which of the following is not a characteristic of the used to distribute
proprietary theory that income?
influences accounting for partnerships? a. Salary allocation to those partners working.
a. Partners’ salaries are viewed as a distribution of income b. After all other allocation, the remainder divided according
rather than a component to the profit and
of net income. loss sharing ratio.
b. A partnership is not viewed as separate entity, distinct, c. Interest on the average capital investments.
taxable entity. d. Interest on notes to partners.
c. A partnership is characterized by limited liability.
d. Changes in the ownership structure of a partnership result 9. Which of the following is not considered a legitimate
in the dissolution . expense of a partnership?
a. Interest paid to partners based on the amount of invested
3. Which of the following statements is correct with respect capital.
to a limited [Link] on assets contributed to the partnership by
partnership? partners.
a. A limited partner may be an unsecured creditor of the c. Salaries for management hired to run the business.
limited partnership. d. Supplies used in the partners’ offices.
b. A general partner may not also be limited partner at the
same time. 10. The fact that salaries paid to partners are not a
c. A general partner may be a secured creditor of the limited component of partnership
partnership. income is indicative of
d. A limited partnership can be formed with limited liability a. A departure from generally accepted accounting principles.
for all partners. b. Being characteristic of the entity theory.
c. Being characteristic of the proprietary theory.
4. An advantage of the partnership as form of business d. Why partnerships are characterized by unlimited liability
organization would be;
a. Partners do not pay income taxes on their share in 11. Which of the following results in dissolution of a
partnership income. partnership?
b. A partnership is bound by the act of the partners. a. The contribution of additional assets to the partnership by
c. A partnership is created by mere agreements of the an existing
partners. partner.
d. A partnership may be terminated by the death or b. The receipt of a draw by an existing partner.
withdrawal of a partner c. The winding up of the partnership and the distribution of
remaining assets to
5. When property other than cash is invested in a the partners.
partnership, at what amount d. The withdrawal of a partner from a partnership.
should the non cash property be credited to the contributing
partner’s capital 12. When a new partner is admitted to a partnership, an
account? original partner’s capital
a. Fair value at the date of contribution. account may be adjusted for
b. Contributing partner’s original cost.
a. A proportionate share of the incoming partner’s QUIZ
investment.
b. His or her share of previously unrecorded intangible assets 1. Velasco, Osenia and Balmes are partners in an
traceable to the accounting firm with each partner owning an equal
original partners. share of the business. Osenia died suddenly of a
c. His or her share of previously unrecorded intangible assets heart attack. What will most likely become of the
traceable to the partnership.
incoming partner. a. Velasco and Balmes will be able to purchase
d. None of the above. Osenia’s interest from his estate.
b. It will immediately cease to exist, Velasco and
13. Which of the following best characterizes the bonus Balmes will have to find new jobs.
method of recording a new c. Osenia’s share of the business will automatically be
partner’s investment in a partnership? split between Velasco and Balmes.
a. Net assets of the previous partnership are not revalued. d. It will be dissolved. Velasco and Balmes will lose
b. The new partner’s initial capital balance is equal to his or personal property to pay business debt.
her investment.
c. Assuming that recorded assets are properly valued, the 2. The partnership agreement is contained in the
book value of the new article of the partnership, an express contract
partnership is equal to the book value of the previous among the partners. Such an agreement ordinarily
partnership and the does not include
investment of the new partner. a. the right and duties of the partners.
d. The bonus always results in an increase to the previous b. a limitation on a partner’s liability to creditors.
partners’ capital c. the allocation of income between the partners.
balances d. the right and duties of the partners in the event of
partners dissolution.

14. If goodwill is traceable to the previous partners, it is 3. The division of partnership profits on the basis of
a. Allocated among the previous partners according to their salaries, interest and an agreed ratio is usually
interest in capital. necessary because
b. Allocated among the previous partners only if there are no a. Most investors require this method of distribution.
other assets to be b. This reflects the amount of time devoted to the
revalued. partnership by the partners.
c. Allocated among the previous partners according to their c. Partners seldom contribute time, effort and
original profit or resources equally.
loss sharing percentages. d. This prevents arguments among the partners.
d. Not possible for goodwill to also be traceable to the
incoming partner. e. The division of partnership profits on the basis of
salaries, interest and an agreed ratio is
15. The goodwill and the bonus methods are two means of f. usually necessary because
adjusting for differences 4. In a liquidation, the liabilities of a partnership should
between the net book value and the fair market value of paid.
partnership when new a. Before any sale of assets.
partners are admitted. Which of the following statements b. Before the distribution of gains and losses on the
about these methods disposal of assets.
is correct? c. After a revaluation of assets.
a. The bonus method does not revalue assets to market d. Before the distribution of cash to partners.
values.
b. The bonus method revalues assets to market values. 5. A and B are partners. On January 2, 2010, C was
c. Both methods result in the same balances in the partner admitted as a new partner. At the time of C’s
capital accounts. admission, the partnership creditors were M for
d. Both methods result in the same total value of partner P50,000 and N for P30,000. After January 2, 2010,
capital account, but the partnership borrowed from O – P20,000 and
the individual capital account vary. P40,000 from P. On May 15, 2010, the partnership
became insolvent leaving an obligation amounting
to P140,000 and partnership assets amounting to
P30,000. The creditors are going after the separate
properties of the partners to satisfy their remaining
claims. How are the creditors’ claims satisfied?
Statement 1 – M and N can go after the separate
properties of A and B but C’s separate properties are
not answerable to their claims.
Statement 2 – O and P can go after the separate
properties of A, B and C.
 a. True; True
b. B. True; False
c. C. False; True
d. D. False; False
e. True; True
f. B. True; False
g. C. False; True
h. D. False; False
a. True, True b. True; False
b. False; True d. False; False

6. X, Y and Z form Y Partnership to engage in import-

export business. The partners agrees that the profit
will be divided on the following ratio: X – 20%, Y-
30%, Z- 50%, but no agreement as to losses. After
one year of operation, there was a loss of P10,000.
How will you apportion this losses if the capital
contributions are as follows: X – P20,000; Y -
P15,000; Z – P5,000. (2 points)
a. According to their capital contribution: X- P5,000; Y-
P3,750; Z- P1,250.
b. X – P2,000; Y – P3,000; Z – P5,000.
c. Equally among X, Y and Z.
d. A third party may be called to make the distribution.

SOLUTION:
X- 10,000 * 10%=2,000
Y- 10,000 * 30%=3,000
Z- 10,000 * 50%=5,000
3,000+79,000= 12,000+70,000
7. As of December 31, the books of AME Partnership 79,000- 37,000= 42,000
showed capital balances of A – P40,000; M –
P25,000; and E – P5,000. The partners’ profit and NOTE: kaya nalaman na may outstanding cash gawa hindi
loss ratio were [Link], respectively. The partners match ang natirang cash (28k) sa natira sa proceeds ng sale of
decided to dissolve and liquidate. They sold all the NCA (25k) after magbayad ng liab
non-cash assets for P37,000 cash. After settlement
of all liabilities amounting to P12,000, they still have
P28,000 cash left for distribution. How much is
recognized gain or loss? (2 points)
a. 45,000 b. 44,000
c. 42,000 d. 40,000

SOLUTION:
ASSET = LIABILITIES+ EQUITY For the next 2 question: The following condensed
balance sheet is presented for the partnership of Alfa and
37,000-PINAGBENTAHAN 3,000- OTSTANDING Beda, who share profits and losses in the ratio of 60:40,
BALANCE NG CASH respectively:

Cash 45,000
Other assets 625,000
Beda, loan 30,000
700,000

Accounts payable, 120,000

Alfa, capital 348,000
Beda, capital 232,000
700,000

8. The assets and liabilities are fairly valued on the

balance sheet. Alfa and Beda decide to admit Capp
as a new partner with a 20% interest. No goodwill
or bonus is to be recorded. What amount should
 Capp contribute in cash or other assets? (2 points) 16. Assets (pledged against debt of P130,000) 50,000
a. 110,000 b. 116,000 17. Other assets 80,000
c. 140,000 d. 145,000 18. Liabilities with priority 42,000
19. Unsecured creditors 200,000
SOLUTION: 100%- 20%=80% 20. Cebuano Company has had severe financial
difficulties and is considering the possibility of
ALFA CAPITAL: 348,000 21. liquidation. At this time, the company has the
BEDA CAPITAL: 232,000 following assets (stated at net realizable value) and
580,000 -80% 22. liabilities.
( 725,000) 23. Assets (pledged against debts of P70,000) P116,000
145,000 -20% 24. Assets (pledged against debt of P130,000) 50,000
25. Other assets 80,000
26. Liabilities with priority 42,000
9. Instead of admitting a new partner, Alfa and Beda 27. Unsecured creditors 200,000
decide to liquidate the partnership. If the other 28. Cebuano Company has had severe financial
assets are sold for P500,000, what amount of the difficulties and is considering the possibility of
available cash should be distributed to Alfa? (2 29. liquidation. At this time, the company has the
points) following assets (stated at net realizable value) and
a. 273,000 c. 255,000 30. liabilities.
b. b. 327,000 d. 348,000 31. Assets (pledged against debts of P70,000) P116,000
32. Assets (pledged against debt of P130,000) 50,000
SOLUTION: USE 60: 40 RATIO 33. Other assets 80,000
34. Liabilities with priority 42,000
625,000-500,000=125,000
35. Unsecured creditors 200,000
(ALFA 60%, 125,000*60%=75,000; BEDA 40%,125,000* 40%=
36. Cebuano Company has had severe financial
50,000) difficulties and is considering the possibility of
348,000 - 75,000= 273,000 37. liquidation. At this time, the company has the
following assets (stated at net realizable value) and
10. Which of the following best illustrates the insolvency 38. liabilities.
of a firm? 39. Assets (pledged against debts of P70,000) P116,000
a. The filing of bankruptcy proceedings against 40. Assets (pledged against debt of P130,000) 50,000
the firm. 41. Other assets 80,000
b. The firm has more liabilities than assets. 42. Liabilities with priority 42,000
c. A deficit in the firm’s retained earnings. 43. Unsecured creditors 200,000
D. The firm has negative working capital. 12. Cebuano Company has had severe financial
difficulties and is considering the possibility of
liquidation. At this time, the company has the following
assets (stated at net realizable value) and liabilities.

Assets (pledged against debts of P70,000) P116,000

Assets (pledged against debt of P130,000) 50,000
Other assets 80,000
Liabilities with priority 42,000
Unsecured creditors 200,000
11. Liabilities of P180,000 existed at the beginning of a
period. During the period, liabilities recorded at In liquidation, how much would be paid to the partially
P88,000 were settled for P76,000, and a new secured creditors? (2 pts)
liability of P24,000 were incurred. A statement of
realization and liquidation would show liabilities not A.130,000 b.200,000
liquidated” of (2 pts) c. P 50,000 d. P 74,000
a. 204,000 b. 128,000
c. 116,000 d. 92,000
SOLUTION: (116K -70K= 46K) (130K-50k= 80K)
SOLUTION: 46,000+ 80,000= 126,000
180,000 +24,000= 204,000 126,000-42,000= 84,000/ 280,00=30%( LIB W/
204,000-88,000= 116,000 PRIO 200k + 80k OTHER ASSET)

12. Cebuano Company has had severe financial 50,000 + 24,000= 74,000
difficulties and is considering the possibility of
13. liquidation. At this time, the company has the
following assets (stated at net realizable value) and NOTE: 80,000* 30% = 24,000
14. liabilities. yung 80k na remaining debt sa partially secured liab.
15. Assets (pledged against debts of P70,000) P116,000
 Costs of hiring plant and equipment 560,000
13. A statement of affairs shows P30,000 of assets
pledged to partially secured creditors, liabilities of Advance payments to subcontractors
P65,000 to partially secured creditors. P25,000 to (subcontractedwork is not yet started) 80,000
unsecured creditors with priority, and P90,000 to other
unsecured creditors. If the deficiency to unsecured What is the percentage of completion of the contract as of
creditors is P40,000, what is the amount of net free the end of the first year?
assets? a. 42% b. 45% c. 50% d. 46%
a. P 85,000 b. P 75,000
c. P 50,000 d. P 110,000p

SOLUTION:
35,000+ 90,000= 125,000
125,000- 40,000= 85,000

4. On Oct. 1, 20x1, ABC Co. enters into a construction

MODULE 4 “CONSTRUCTION CONTRACT” contract with a customer. The performance obligation in
1. The primary issue in accounting for construction contracts the contract will be satisfied over time. ABC Co. uses the
is “cost-to-cost” method in measuring its progress. The
b. the allocation of contract revenue and contract costs to estimated total contract cost is ₱10M. In 20x1, ABC Co.
the accounting periods in which construction work is incurred a total cost of ₱6M, which includes ₱2M advance
performed. payment to a subcontractor (the subcontracted work is not
yet started) and ₱200,000 cost of materials not yet
2. A construction contract may be installed. ABC Co. does not regard the cost of the unused
a. fixed price contract c. a combination of a and b materials as significant in relation to the expected total
b. cost plus contract. d. any of these contract costs. Moreover, ABC Co. retains control over the
unused materials because it can use them in a contract
3. VALEDICTION Construction Co. entered into a P80M fixed with another customer. The contract price is ₱20M. How
price contract for the construction of a private road for much is the revenue recognized in 20x1?
FAREWELL SPEECH, Inc. The performance obligation on the a. 7,600,000 b. 12,000,000
contract is satisfied over time. VALEDICTION measures its c. 8,200,000 d. 11,600,000
progress on the contract using the “cost-to-cost” method.
The estimated total contract cost is P40M. The following
were the actual costs incurred by VALEDICTION during the
first year of the construction:

Costs of negotiating the contract

(charged immediately as expense) 400,000
0.38 * 20,000,000 = 7,600,000
Costs of materials used in construction 12,000,000
5. On January 1, 20x1, ABC Co. enters into a contract with a
Costs of materials purchased but not customer for the construction of `a building. The contract
yet used in construction 2,000,000 price is ₱1,000,000. The following are the transactions during
20x1:
Site labor costs 4,000,000  At contract inception, the customer makes an
advance payment of ₱100,000 as facilitation fee.
Site supervision costs 800,000  ABC Co. incurs total contract costs of ₱300,000
during the period.
Depreciation of equipment used in  The estimated costs to complete as of year-end
construction 480,000 amounts to ₱500,000.
 ABC Co. collects the billing, net of 10% retention by
Depreciation of idle construction the customer to be used to rectify any unsatisfactory
equipment 240,000 work determined at the completion of the contract.
How much is the gross profit earned from the contract in
Costs of moving plant, equipment 20x1?
and materials to and a. 75,000 c. 375,000
from the contract site 160,000 b. 82,000 d. 482,000
 Costs incurred in 20x2 = ₱4,500,000 - ₱2,400,000 =
₱2,100,000.

8. How much is the gross profit recognized in 20x3?

a. 1,000,000.
b. 1,500,000
c. 2,100,000
d. 2,800,000

Use the following information for the next three cases

(three questions per case):
In 20x1, ABC Co. enters into a construction contract with a
customer. The contract price is ₱10,000,000. Information on
the contract follows:
20x1
20x2 20x3
Costs incurred to date 2,400,000
4,500,000 6,000,000
Estimated costs to complete 3,600,000
1,500,000 -

Case #1: Case #2:

At contract inception, ABC Co. assesses its performance At contract inception, ABC Co. assesses its performance
obligations in the contract and concludes that it has a single obligations in the contract and concludes that it has a single
performance obligation that is satisfied over time. ABC Co. performance obligation that is satisfied over time. However,
determines that the measure of progress that best depicts its ABC Co. determines that the outcome of the performance
performance on the contract is “cost-to-cost” method. obligation cannot be reasonably measured but expects to
recover the contract costs incurred.
6. How much is the revenue recognized in 20x1? 9. How much is the revenue recognized in 20x1?
a. 4,200,000 a. 4,200,000 c. 2,400,000
b. 4,000,000. b. 4,000,000 d. 0
c. 2,800,000
d. 3,500,000 10. How much is the cost of construction recognized as
expense in 20x2?
Total Cost incurred to date a. 2,100,000.
Percentage Completion = Total costs incurred to date + b. 2,400,000
Estimated costs to complete c. 3,800,000
Percentage Completion = 2, 400,000 d. 0
2,400,000 + 3,600,000
= 40% 11. How much is the gross profit recognized in 20x3?
a. 5,500,000
40% * 10,000,000 = 4,000,000 b. 1,500,000
c. 4,000,000
7. How much is the cost of construction recognized as d. 2,100,000
expense in 20x2?
a. 2,100,000.
b. 2,400,000
c. 3,800,000
d. 1,500,000
Costs incurred in 2022 = Costs incurred to date in 20x2 - Costs
incurred to date in 20x1
Case #3:
At contract inception, ABC Co. assesses its performance How much is the total balance of the “construction in
obligations in the contract and concludes that it has a single progress” accounts as of December 31, 20x1 under of
performance obligation. completion method?
In its determination of the satisfaction of the performance a. 4,000,000
obligation, ABC Co. that, during the construction period, ABC b. 6,000,000
Co. retains control over the asset created in the contract. This c. 14,000,000
precludes the customer from simultaneously receiving and d. 0
consuming the benefits provided by ABC Co.’s performance
as ABC Co. performs. Moreover, the asset created in the
contract has an alternative use to ABC Co. because, in case
the contract is cancelled, ABC Co. retains ownership over any MODULE 5: ACCOUNTIGN FOR FRANCHISE
asset created and can direct that asset for another use 1. You are an accountant. Your client, a franchisor, asked you
without significant modification or cost. Accordingly, ABC Co. for an advice regarding the recognition of revenue from a
concludes that the performance obligation is satisfied at a franchise contract. Your advice to your client would most
point in time. certainly be based on which of the following standards?
ABC Co. determines the point in time when the a. FAS No. 45 (US GAAP)
performance obligation is satisfied using the principles in b. PFRS 15
PFRS 15 and concludes that the performance obligation is c. PAS 15
satisfied only when the construction is completed and the d. PFRS 18
control over the promised good is transferred to the
customer. 2. The consideration received from a contract with a
customer that does not meet the criteria under ‘Step 1’ of
12. How much is the revenue recognized in 20x1? PFRS 15 is
a. 4,200,000 a. recognized as liability.
b. 4,000,000 b. recorded through memo entry only.
c. 2,400,000 c. disclosed only.
d. 0 d. b and c

13. How much is the cost of construction recognized as 3. Entity A enters into a franchise contract with Customer X.
expense in 20x2? The agreement provides Customer X the right to access Entity
a. 2,100,000 A’s intellectual property. How should Entity A recognize
revenue from the franchise agreement?
b. 2,400,000 a. over time, as Customer X receives and consumes the
c. 3,800,000 benefit from Entity A’s performance of providing access to
d. 0 its intellectual property.
b. at a point in time when Entity A transfers control over the
14. How much is the gross profit recognized in 20x3? promised license to Customer X.
a. 5,500,000 c. a or b as a matter of an accounting policy choice
b. 1,500,000 d. when there is “substantial performance” by Entity A in
c. 4,000,000 accordance with US GAAP.
d. 2,100,000
Use the following information for the next two cases:
On December 31, 20x1, Entity A enters into a contract with
Customer X to transfer a license for a fixed fee of ₱100,000
payable as follows:
 20% is payable upon signing of contract.
 80% is represented by a note receivable collectible
in 4 equal annual installments starting December 31,
20x2. The appropriate discount rate is 12%.

Case #1:
4. The license provides Customer X the right to use Entity A’s the rights every ten years for an indefinite period of time.
patented processes. Customer X continues to operate using Over what period of time should Northern amortize the gate
its trade name and has the discretion of developing a new rights?
product name for the products it will produce using the a. 5 years
patented processes. The license does not explicitly require b. 15 years
Entity A to undertake activities that will significantly affect c. 40 years
the intellectual property to which Customer A has rights. d. No amortization
Neither does Customer X expect that Entity A will undertake
such activities. Entity A grants the license to Customer X on 8. If a franchise becomes worthless prior to the end of its
December 31, 20x1. How much revenue from the franchise estimated useful life, the unamortized balance in the
contract will Entity A recognize in 20x1? franchise account should be written off as a(an):
a. 80,747 a. Prior period adjustment
b. 21,187 b. Impairment loss
c. 20,000 c. Expense in the current period
d. 0 d. Change in estimate
9. Mark Co. bought a franchise from Fred Co. on January 1,
2020 for P204,000. An independent consultant retained by
Mark estimated that the remaining useful life of the franchise
was 50 years. Its unamortized cost on Fred’s books at January
1, 2020 was P68,000. Mark has decided to use the franchise
indefinitely. What amount should be amortized for the year
ended December 31, 2020?
a. 5,100
b. 4,080
c. 4,000
d. 0

Case #2:
5. The license provides Customer X the right to use Entity A’s
patented processes. The agreement requires Customer X to
discontinue using its trade name and instead use Entity A’s
trade name. Customer X is bound by the terms of the 10. On January 2, 2020, Rafa Co. purchased a franchise with a
contract to abide with Entity A’s policies on the use of the useful life of ten years or P50,000. An additional franchise fee
processes but is given the right to any subsequent of 3% of franchise operation revenues must be paid each
modifications to the processes. How much revenue from the year to the franchisor. Revenues from franchise operations
franchise contract will Entity A recognize in 20x1? amounted to P400,000 during 2020. In its December 31, 2020
a. 80,747 balance sheet, what amount should Rafa report as an
b. 20,187 intangible asset – franchise?
c. 20,000 a. 33,000
d. 0 b. 43,800
c. 45,000
d. 50,000

6. Which of the following should be expenses as incurred by

the franchises for a franchise with an estimated useful life of
10 years? MODULE 3:
a. Amount to be paid to the franchisor for the franchise MULTIPLE CHOICE: THEORY
b. Periodic payments to a company, other then the 1. An arrangement of which two or more parties have joint
franchisor, for that company’s franchise control.
c. Legal fees paid to the franchisee’s lawyers to obtain the a. j operation c. joint arrangement
franchise b. joint venture d. elbow joint
d. Periodic payments to the franchisor based on the
franchisee’s revenue 2. The contractually agreed sharing of control of an
arrangement, which exists only when decisions about the
7. Northern Airline purchased airline gate rights at Newark relevant activities require the unanimous consent of the
International Airport for P2,000,000 with a legal life of five parties sharing control.
years. However, Northern has the ability and right to extend a. significant influence c. control
b. joint control d. contractual control
  C is appointed as the manager of the joint
3. A joint arrangement whereby the parties that have joint operation. As compensation, C is entitled to a ₱120
control of the arrangement have rights to the net assets of salary plus bonus of 25% on profit after salary and
the arrangement. bonus.
a. joint operation c. joint arrangement  Interest of 10% per annum is allowed to A and B’s
b. joint venture d. elbow joint capital contributions.
 C is charged for the cost of any unsold inventory.
4. A joint arrangement whereby the parties that have joint Profit or loss after necessary adjustments shall be
control of the arrangement have rights to the assets, and divided equally.
obligations for the liabilities, relating to the arrangement.
a. joint operation c. joint arrangement
b. joint venture d. elbow joint
1. How much is the profit or loss after salaries but before
5. A party to a joint operation that has joint control of that bonus of the joint operation?
joint operation. a. 192 b. 240 c. 360 d. 420
a. joint operationist c. joint arranger
b. joint venturer d. joint operator

6. A party to a joint venture that has joint control of that joint

venture.
a. joint venturist c. joint arrangementor
b. joint operationer d. joint venturer

7. According to PFRS 11, it is an entity that participates in a

joint arrangement, regardless of whether that entity has joint
control of the arrangement. 2. On the cash settlement between the joint operators,
a. joint arranger c. minority interest a. A pays ₱1,288 c. C receives ₱96
b. party to a joint arrangement d. participating cat b. B pays ₱1,816 d. All of these

8. According to PFRS 11, it is a separately identifiable

financial structure, including separate legal entities or entities
recognized by statute, regardless of whether those entities
have a legal personality.
a. separate vehicle c. special purpose vehicle
b. special purpose entity d. public utility vehicle

9. In a joint arrangement, which of the following establishes

joint control by the parties?
a. mutual sharing of control c. contractual
arrangement
b. ownership interest of more than 20% d. stock
certificate

10. A joint arrangement in which the assets and liabilities

relating to the arrangement are held in a separate vehicle.
a. joint operation c. joint arrangement
b. joint venture d. can be either a or b

MULTIPLE CHOICE: PROBLEM SOLVING 3. How much is the profit (loss) of the joint operation?
Use the following information for the next two questions: a. 200,000 b. (200,000) c. 180,000 d. (180,000)
The following are the transactions of a joint operation
formed by A, B and C during a year: 4. On the cash settlement between the joint operators,
 A contributed cash of ₱400 and merchandise costing a. A pays B ₱368 c. A pays B ₱428
₱800. b. B pays A ₱368 d. B pays A ₱428
 B contributed merchandise costing ₱1,600. Freight-
in paid by B is ₱80
 C made purchases amounting to ₱400 using the cash
contributed by A.
 C paid expenses of ₱800 using its own cash.
 C made total sales of ₱3,200. All the merchandise
was sold except one-half of those contributed by B.
 10. The cost of unsold inventory is ₱72. The joint operation’s
profit is ₱44. How much is the balance of the joint operation
5. How much is the profit (loss) of the joint operation? account before distribution of profit?
a. 760 b. (760) c. 840 d. (840) a. 28 b. 116 c. 56 d. 0

6. On the cash settlement between the joint operators,

a. A pays B ₱368 c. A pays B ₱428
b. B pays A ₱368 d. B pays A ₱428

Unsold merchandise was charged to A at a cost of ₱88. On

the cash settlement between the joint operators,
a. A receives ₱72; C pays ₱32 c. B receives ₱72; C pays
₱32
b. B pays ₱72; A pays ₱40 d. None of these

On the cash settlement between the joint operators,

a. A receives ₱26; C pays ₱16 c. C receives ₱16; A pays
₱10
b. B pays ₱16; A pays ₱10 d. None of these

A’s share in the joint operation’s profit is ₱16. A agreed to be

charged for the unsold merchandise as of year-end. How
much is the cost of unsold merchandise charged to A?
a. 56 b. 62 c. 68 d. 72