AFAR Questionnaire

(Easy)

1. Which of the following procedures is not a necessary step affecting a dissolution of partnership?
a. Revaluing partnership assets
b. Recognizing undistributed profit or loss share of partner at dissolution date
c. Closing of partnership books
d. Revising partners' equity

2. In case of general partnership liquidation, which of the following credits shall be settled first by the liquidating partner?
a. Those owing for partner's capital contribution
b. Those owing to third persons
c. Those owing for the share in partnership profits
d. Those owing to partners for their advances to partnership

3. Which of the following transactions will not affect the total equity of a partnership?
a. Recognition of impairment loss in case of admission of a new partner by investment
b. Withdrawal by a partner
c. Admission of a new partner by purchase of existing partner's interest below its book value
d. Retirement of an existing partner with payment of above the book value of such interest

4. A partner was admitted in an existing partnership through investment of cash equivalent to % of the new Capitalization. If
the capital balance of the old partners increases, what is the most valid reason Philippine GAAP?
a. Asset revaluation of existing partnership's assets
b. Impairment loss of existing partnership assets
c. recognition of goodwill of existing partnership
d. Receipt of bonus from the new partner

5. Which of the following is not a feature of general partnership

a. Limited life
b. Mutual agency
c. Limited liability
d. None of these

6. The estimated amount available for free assets in a Statement of Affairs for a business enterprise undergoing bankruptcy
liquidation is equal to the asset
a. Current fair value less carrying amount
b. Carrying amount less current fair values.

c. Carrying amount plus gain or less loss on realization

d. Carrying amount plus loss or less gain on realization
7. Which of the following statements is correct?
a. Involuntary insolvency occurs when the insolvent corporation voluntarily applied, by petition to a court of law, to be
discharged from its liabilities.
b. Voluntary insolvency occurs when three or more creditors of the insolvent corporation file a petition to a court of law for
the adjudication of the corporation as insolvent.
c. The Conceptual Framework and the PFRSs are intended to apply to liquidating entities.
d. The measurement bases under the Conceptual Framework and the PFRSs are not applicable to liquidating.

8. Assets in the statement of affairs are classified into

a. Assets pledged to fully secured creditors
b. Assets pledged to partially secured creditors
c. Free assets.
d. All of these

9. These are liabilities secured by assets with realizable values that are equal to or greater than the expected net settlement
amounts of the liabilities
a. Unsecured liabilities with priority
b. Fully secured creditors
c. Partially secured creditors
d. Unsecured liabilities without

10. It refers to the process of converting the non-cash assets of the partnership and distributing the total cash to the
creditors and the remainder to the partners.
a. Termination
b. Liquidation
c. Operation
d. Dissolution

(Average)

1. A 1:3:2 ratio is the same as

a. 10%:30% 20%
b. 20% 50% 30%
c. 1/6:1/2:1/3
d. 1/10:3/10:2/10

2. It is a statutory type of business combination which occurs when two or more companies. merge into one single entity
which shall be one of the combining companies.
a. Consolidation
b. Stock acquisition
c. Merger
d. Mutual combination

Arianne and Venus are partners who share profits and losses in a ratio of 3:2 respectively, and have the following capital
balances on December 31,2020: Marianne, Capital, P3,500,000 Cr and Venus, Capital, P2,000,000Cr. Assume that the
partners agreed to let kathrina into the partnership by investing P1,000,000 for a one-fourth interest

3. Venus capital balance will be

a. P1,750,000
b. P2,000,000
c. P2.250,000
d. P1.650.000
Solution: 3.5M + 2M+ 1M = 6M x 1/4 = 1,625,000 - 1M = 625k x 2/5 = 250k 2M-250k= 1,750,000

4. Arianne capital balance will be

a. P3.050.000
b. P3,125,000
c. P3,500,000
d. P3.875,000
Solution: 3.5M - (625k x 3/5) = 3,125,000

5. On this date the dividend liability is set up

a. Date of declaration
b. Date of record
c. Date of distribution
d. Date of payment

6. Which of the following should be considered nonmonetary?

a. Trade receivables
b. Deferred tax liabilities
c. Accrued expense
d. Taxes payable

7.Xatu and Yen have capital balances of P150,000 and P180,000 respectively. Zet is to invest P60,000 for 15% in the
partnership interest and is also in the profit or loss. There is an undistributed income in the amount of P80,000. Partners X
and Y share profit and loss of 65:35. How much is the capital credit of Zet upon his admission?
a. P60.000
b. P61.500
c. P72,000
d. P70,500
Solution: 150k + 180k + 60k + 80k = 470k x 15% = 70,500
8. Shey, Apple, and Tan are partners with capital balances of P112,500, P46,875, and P140,625 respectively, sharing profits
and losses in the ratio of 3:2:1. Paz is admitted as a new partner bringing with him expertise and is to invest cash for You sent
a 25% interest in the partnership which includes a P25,000 credit for goodwill upon his admission. How much cash should Paz
contribute?
A. P100,000
B. P225,000
C. P75,000
D. P125,000
Solution: 112,500 + 46,875 + 140,625 = 300k 375k - 300k = 75k + 25 k = 100k

9. In statement of affairs, assets pledged for partially secured creditors are

a. Included with assets pledged for fully secured creditors
b. Offset against partially secured liabilities
c. Included with free assets
d. Disregarded

10. Property was purchased on December 31, 2019 for 20 million baht. The general price index in the country was 60.1 on
that date. On December 31, 2021, the general price index had risen to 240.4. If the entity operates in a hyperinflationary
economy, what would be the carrying amount in the financial statements of the property after restatement?
a. 20 million baht
b. 80 million baht
c. 1,200.2 million baht
d. 4.808 million baht

(Difficult)
1. The following condensed balance sheet is presented for the partnership of Smith and Jones, who share profits or losses in
the ratio of 60:40, respectively:

Other assets P450,000

Smith, loan 20,000
P470,000

Accounts payable P120,000

Smith, Capital 195,000
Jones, Capital 155,000
P470,000

The partners decided to liquidate the partnership. If the other assets are sold for P385,000, what amount of the available
cash should be distributed to Smith?
A. P136, 000
B. P156,000
C. P159,000
D. P195,000

2. The following are information regarding partnership business

1.A partnership has the following capital balances: Allen, capital P60.000

Bums, capital 30,000

Costello, capital 90,000

Profits and losses are split as follows: Allen (20%), Bums (30%), and Costello (50%) Costello wants to leave the partnership
and is paid P100,000 from the business based on provisions in the articles of partnership. If the partnership uses the bonus
method, what is the balance of Burma's capital account after Costello withdraws?
a. P24,000
b. P27,000
c. P33,000
d. P36,000

3. Sherty. Madjona, and Stephanie are partners. Their contributions are as follows: Sherly. P700.000, Madiona, P300.000; and
Stephanie, services. The partners did not agree on how to divide profits or losses. If there is a loss of P100,000, how should
the loss be shared by the partners?
a. Shely, P70,000, Majona. P30,000 and Stephanie, nothing
b. Sherly, P60,000, Majona. P20.000 and Stephanie, P20,000
c. Sherly, P35,000, Majona. P35,000 and Stephanie, P30,000
d.Sherly, P50,000, Majona. P30,000 and Stephanie, P20,000

4. On December 31,2019 and 2020, Kenjie Company had 100,000 ordinary shares and 10,000 cumulative preference shares
of 5% par value. No dividends were declared on either the preference or ordinary shares in 2019 or 2020. Net income for the
current year was P850,000. What is the amount reported as basic earnings per share?
a. P8.50
b. P8.00
c. P9.50
d. P9.00

5. At the beginning of the current year, Mercado Co. had 270,000, PS par value shares outstanding. On June 1, the entity
acquired 25,000 shares to be held in the treasury. On December 1.2020, when the market price of the share was P25, the
entity declared a 10% share dividend to be issued to shareholders of record on December 15. What was the impact of the
share dividend on retained eamings?
a 390,000 decrease
b.490, 000 decrease
c.390.000 increase
d.490,000 increase

6. At the break-even point of 2,500 units, variable costs are $55,000, and fixed costs are $32,000. How much is the selling
price per unit?
a. $9.20
b.$12.80
c. $34.80
D. $22.00
Solution: 55k + 32k = 87k/2,500 = 34.80

For items 7-10

Slow Company developed the following information for its product:
Per Unit
Sales price $90
Variable cost $54
Contribution margin $36
Total fixed costs $1,080,000

7. How many units must be sold to break even

a. 40,000
b. 35,000
c. 25, 000
d. 30,000
Solution: 1,080,000/36 = 30K

8. What is the total sales that must be generated for the company to eam a profit of $60,000?
a. $2,850,000
b. $1,130.000
c. $2,855,000
d. $3,000,000
Solution: Contribution margin ratio = 36/90 = 0.40
(1,080,000+60,000)/0.40 = 2,850,000

9. If the company is presently selling 45,000 units, but plans to spend an additional $108,000 on an advertising program, how
many additional units must the company sell to earn the same net income it is now making?
a. 1,000
b. 3,000
c. 5,000
d.3,500
Solution: 108,000/36 = 3,000

10. Using the original data in the problem, compute a new break-even point in units if the unit sales price is increased 20%,
unit variable cost is increased by 10%, and total fixed costs are increased by $135,000.
a. 25,000
b. 26,000
c. 30, 000
d. 35,000
Solution: SP= 90 x 1.20 = 108
VC= 59.4
CM = 48.6
TFC= 1,080,000+135K= 1,215,000
1,215,000/48.6 = 25,000
(Clincher)

1. A type of preference shares that give the issuing corporation the right to purchase (retire) the shares from its holders at a
specified price:
Ans. Callable Preference Shares