AFAR_PRE-TEST 2025

Sometime in 2023, Dustin and Bianca are having a date at Wolfgang. Will and Shuvee are also having a date- at same restaurant. Will, who is a fan and has a major crush on Bianca , approached the couple and had a lovely conversation with them, which led to Will and Shuvee being invited to the couple’s table. After a while, on June 1, 2024, Dustin, Bianca, Will and Shuvee met again to have a double date at a restaurant in Bonifacio Global City, Taguig. During their conversation, Dustin opened an idea of them organizing a business. So, on the same date, they decided to form Forever Partnership, but Shuvee opted not to join them. Bianca contributed cash amounting to P100,000 and a piece of equipment with a book value of P250,000. Dustin, on the other hand, contributed cash in the amount of P300,000 and a building with a cost of P800,000 and accumulated depreciation of P300,000. Lastly, Will contributed cash amounting to P100,000 and inventories with costs of P200,000 and net realizable value of P180,000. The fair value of the building is P600,000. During the dinner, the partners also agreed to the following stipulations that they included in the contract: • The correct valuation of the building should only be equal to P450,000. • The initial contribution of the partners should be in a ratio of 2:5:3, respectively, to Bianca, Dustin, and Will. • The final capital credit should 25%, 40% and 35% respectively to Bianca, Dustin, and Will. They also agreed that there would be no bonus to be given to any of the partners. • No partners will have invest more assets, although some may withdraw and reduce their initial contributions. • Profits will be distributed as follows: - Annual salaries will be given to Bianca and Will equal to P120,000 and P180,000 respectively. - - A bonus of 10% after the bonus will be given to Will. The residual will be allocated in the ratio 3:4:3. The income summary account of Forever Partnership for the year ended December 31,2024, has a credit balance of P110,000. None of the partners invested additional capital or withdrew capital during the year except for the possible withdrawal on the date of formation. 1. How much is Bianca’s initial contribution?

• 100,000

• 300,000

• 350,000

• 450,000

How much is Will’s final capital credit?

• 300,000

• 450,000

• 420,000

• none of the above

How much is Bianca’s share of the net income (loss) of Forever Partnership?

• 47,500

• . 50,500

• (15,500)

• (19,500)

How much is the ending capital of Will on December 31,2024?

• 439,500

• 460,500

• 505,500

• 512,500

After 2 years on January 1, 2026, the partners agreed to admit Jillian as a partner to Forever Partnership. On such a date, the capital balances of Bianca, Dustin, and Will, respectively, are P640,000, P720,000, and P800,000. They agreed that Jillian would be given 25% interest in capital and profit or loss after investing a sufficient amount in the partnership. The partners also agreed that salaries and bonuses will no longer be given to Bianca, Dustin and Will and the remaining P/L ratio will be shared by Bianca, Dustin, and Will in the ratio of 15%, 40%, and 20%, respectively. How much is Jillian’s investment in Forever Partnership?

• 540,000

• 600,000

• 700,000

• 720,000

In connection with the information in #5, On the evening of July 31,2028, while Will on the way to Cebu to celebrate the birthday of his girlfriend, Shuvee, the plane crashed, and he died. On such date, the capital balances of Bianca, Dustin, Will and Jillian are P840,000, P920,000, P1,080,000 and P650,000, respectively. The net income for the year ended 2028 is 2,400,000 before any interest on the estate of Will at the prevailing rate of 12%. 6. How much is Jillian’s ending capital balance on December 31, 2028?

• 1,224,750

• 1,291,750

• 1,946,000

• none of the above

If the agreement provides for the division of losses only. Profits should be divided:

• Equally

• According to original capital ratio

• According to beginning capital ratio

• According to loss sharing ratio

Statement No. 1: A partnership can use full PFRSs or PFRS for SMEs while sole proprietorship can only use PFRS for SEs Statement No. 2: In a partnership formation, the total contributed capital and total agreed capital will not change under the bonus or transfer of capital method.

• Only the first statement is true

• Only the second statement is true

• Both statements are true

• Both statements are false

Az, Ralph, and Mika decided to dissolve their partnership on November 30, 2020. Their profit and loss ratio are as follows: Capital P&L Ratio Az 400,000 40% Ralph 480,000 30% Mika 160,000 30% The net income from January 1, 2020 to November 30 is P352,000. On November 30, the cash balance is P320,000 and that of liabilities is P720,000. The Az is to receive is P441,600 in the settlement of his interest. The total loss on realization is:

• 248,000

• P228,000

• P99,200

• P220,800

Using the same information above, the amount to be realized from the sale of non cash assets is:

• P 1,496,000

• P 2,040,000

• P 220,800

• P1,554,000