Interim Assessment 2 With Answer Keys

1. Which of the following is not one of the basic shareholders rights?
a. The right to participate in earnings.

b. The right to maintain one's proportional interest in the corporation.
c. The right to participate in the proceeds of the sale of corporate assets upon liquidation of the
corporation.
d. The right to inspect the accounting records of the corporation.
D
2. On February 1, authorized ordinary share was sold on a subscription basis at a price in excess of
par value, and 20 percent of the subscription price was collected. On May 1, the remaining 80
percent of the subscription price was collected. Share premium would increase on
February 1 May 1 February 1 May 1
a. No Yes c. Yes No
b. No No d. Yes Yes
C
3. The entry to record the issuance of ordinary shares for fully paid share subscriptions is
a. a memorandum entry.
b. Dr. Common Stock Subscribed; Cr. Common Stock; Cr. Additional Paid-In Capital
c. Dr. Subscribed Share Capital; Cr. Subscriptions Receivable
d. Dr. Subscribed Share Capital; Cr. Share Capital
D
4. The issuance of shares of preferred stock to shareholders
a. increases preferred stock outstanding.
b. has no effect on preferred stock outstanding.
c. increases preferred stock authorized.
d. decreases preferred stock authorized.
A
5. It is credited under memorandum method only upon issuance of shares.
a. Unissued share capital c. Authorized share capital
b. Share capital d. Subscribed share capital
B
6. It shows how much cash can be safely paid to the partners during installment liquidation to
avoid overpayment
a. Cash priority program c. Liquidation statement
b. Maximum loss absorption capacity d. Safe payment schedule
D
7. The purpose of this schedule is to determine which partner will be paid first and which partner
will be paid last, after all the liabilities are settled.
a. Cash priority program c. Liquidation statement
b. Maximum loss absorption capacity d. Safe payment schedule
A
8. In the preparation of schedule of safe payment to partners, cash withheld for future liquidation
expenses and unrecorded liabilities that may be discovered is treated as:
a. Operating expenses c. Loss on realization
b. Liabilities d. Possible loss
D
9. In the Cash Priority Program, which partners gets the first cash distribution?
a. Partner with the largest loan balance c. Partner with largest capital balance
b. Partner with the highest MLAC d. Partner with largest profit and loss ratio
B
10. What is the largest possible loss resulting from the realization of partnership assets that the
accountant estimates when preparing a safe payment schedule?
a. Book value of recorded assets c. Fair value of recorded assets
b. Fook value of recorded non-cash assets d. Fair value of recorded non-cash assets
D
1. On January 1, 2023, COMMISERATE CONDOLE Co. received authorization from the SEC to
issue share capital of ₱2,000,0000 divided into 20,000 shares with par value per share of ₱100. Of
the total authorized share capital, 25% was subscribed at par value and 25% of the total
subscription was paid at subscription date. On February 1, 2023, COMMISERATE received full
payment for 4,000 subscribed shares and issued the related share certificates. On February 28,
2023, COMMISERATE received cash subscription for 2,000 shares at par value.
Requirements:
a. Provide the necessary journal entries under (1) memorandum method and (2) journal entry
method. (10pts.)
b. Prepare the share capital portion of COMMISERATE’s statement of financial position as of
February 28, 2023. (5pts.)
Requirement (a):
Jan. 1, 2023
Memorandum method Journal entry method
Memo entry – Authorized capitalization is Unissued share capital 2,000,000
P2,000,000 divided into 20,000 shares with par Authorized share capital 2,000,000
value per share of P100.
Cash (2M x 25% x 25%) 125,000 Cash (2M x 25% x 25%) 125,000
Subscription receivable 375,000 Subscription receivable 375,000
Subscribed share capital Subscribed share capital
(2M x 25%) 500,000 (2M x 25%) 500,000
Feb. 1, 2023
Cash 300,000* Cash 300,000*
Subscription receivable 300,000 Subscription receivable 300,000
Subscribed share capital 400,000 Subscribed share capital 400,000
Share capital 400,000 Unissued share capital 400,000
*Subscription price of 4,000 shares (4,000 x P100) 400,000

Portion already paid (400,000 x 25%) (100,000)
Balance collected 300,000
Feb. 28, 2023

Cash (2,000 x P100) 200,000 Cash (2,000 x P100) 200,000
Share capital 200,000 Unissued share capital 200,000
Requirement (b):
Share capital 600,000 Authorized share capital 2,000,000
Subscribed share capital 100,000 Unissued share capital (1,400,000)
Subscription receivable* (75,000) Issued share capital 600,000
Subscribed share capital 100,000
Subscription receivable* (75,000)
Total Share capital 625,000 Total Share capital 625,000
2. SECERN TO SEPARATE Co. started operations on January 1, 2023. Its authorized capitalization
is ₱2,000,000 divided into 20,000 shares with par value per share of ₱100. SECERN Co. receives
cash subscriptions for 5,000 shares at ₱120 per share. On January 31, 2023, SECERN receives
subscription for 2,000 shares at ₱160 per share.
Requirement: Provide the necessary journal entries. (5 pts.)
Jan. 1, Cash (5,000 x P120) 600,000

2023
Share capital (5,000 x P100) 500,000
Share premium [5,000 x (P120 – P100)] 100,000
Jan. 31, Subscription receivable (2,000 x P160) 320,000
2023
Subscribed share capital (2,000 x P100) 200,000
Share premium [2,000 x (P160 – P100)] 120,000
3. Partners Aida, Belen and Corazon decided to liquidate their partnership. A summary of the
partnership’s statement of financial position is shown below:
Assets Liabilities Equity
Cash Non-cash Aida (20%) Belen (30%) Corazon (50%)
20,000 480,000 30,000 100,000 170,000 200,000
One-third of the non-cash assets were sold for P70,000. The partnership paid P8,000 liquidation
expenses. Corazon is insolvent.
Required: How much cash did the partners received from the settlement of the partners’ interests.
(10 pts.)
Net cash proceeds (70,000 – 8,000) 62,000

Less: Carrying amount of non-cash assets (480,000)
Total loss on sale (418,000)
A (20%) B (30%) C (50%) Totals

Capital balances 100,000 170,000 200,000 470,000
Allocation of loss
[418K x (20%; 30% & 50%)] (83,600) (125,400) (209,000) (418,000)
Total 16,400 44,600 (9,000) 52,000
Allocation to solvent partners* (3,600) (5,400) 9,000 -
Amts. received by the partners 12,800 39,200 - 52,000
* (9,000 x 2/5 = 3,600); (9,000 x 3/5 = 5,400)
4. Partners JJ, KK and LL decided to liquidate their partnership. A summary of the partnership’s
statement of financial position is shown below:
Cash 50,000
Non-cash assets 1,200,000
Total 1,250,000
Accounts payable 100,000
Payable to JJ 50,000
JJ, Capital (50%) 540,000
KK, Capital (30%) 360,000
LL, Capital (20%) 200,000
Total 1,250,000
Required: Compute the cash distribution to the partners using the cash priority program.(10%)
Step 1: Determine the MLAC and Rankings
JJ (50%) KKB (30%) LL (20%)

Capital balances 540,000 360,000 200,000
Payable to JJ (right of offset) 50,000
Total 590,000 360,000 200,000
Divide by: P/L ratios 50% 30% 20%
MLAC 1,180,000 1,200,000 1,000,000
Rankings 2nd 1st 3rd
Step 2: Equalize the MLAC

JJ (50%) KK (30%) LL (20%)
Rank of payment 2nd 1st 3rd
Maximum loss absorption capacity 1,180,000 1,200,000 1,000,000
Difference between 1st and 2nd (20,000)
Total 1,180,000 1,180,000 1,000,000
Difference between 1st, 2nd, & 3rd (180,000) (180,000)
Equal balance of MLAC 1,000,000 1,000,000 1,000,000
Step 3: Cash priority program

Cash priority program
JJ (50%) KK(30%) LL (20%)
Rank of payment 2nd 1st 3rd
1st priority (20,000 x 30%) 6,000
2nd priority (180,000 x 50% & 30%) 90,000 54,000
Totals 125,000 60,000 -

Interim Assessment 2 With Answer Keys

Uploaded by

Copyright:

Available Formats

Interim Assessment 2 With Answer Keys

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Interim Assessment 2 With Answer Keys

Uploaded by

Copyright:

Available Formats

1. Which of the following is not one of the basic shareholders rights?

a. The right to participate in earnings.

*Subscription price of 4,000 shares (4,000 x P100) 400,000

Feb. 28, 2023

Requirement: Provide the necessary journal entries. (5 pts.)

Jan. 1, Cash (5,000 x P120) 600,000

Net cash proceeds (70,000 – 8,000) 62,000

A (20%) B (30%) C (50%) Totals

* (9,000 x 2/5 = 3,600); (9,000 x 3/5 = 5,400)

Step 1: Determine the MLAC and Rankings

JJ (50%) KKB (30%) LL (20%)

Rankings 2nd 1st 3rd

Step 2: Equalize the MLAC

Step 3: Cash priority program

You might also like

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.