1.

If the completed-contract method is used, what is the basis for determining the income to be recognized in the second year of a three-year contract?

Select one:

a. No income would be recognized in year 2.

b. Incremental cost for the second year only.

c. Latest available estimated costs.

d. Cumulative actual costs incurred only.

2.

In the accounting statement of affairs, the gains or losses upon liquidation would equal

Select one:

a. Total estimated realizable value of assets minus the amount assigned to secured creditors

b. Total estimated realizable value of assets minus the amount remaining unsecured creditors

c. The book value of assets minus their realizable value

d. Net book value of assets minus book value of liabilities

AA-BB partnership had a net income of P75,000 for the month ended September 30, 20x7. CC purchased an interest in the AA-BB partnership of AA and BB by paying AA P100,000 for half of his capital and half of his 50% percent profit sharing interest on October 1,20x7. At this time AA capital balance was P184,000 and BB capital balance was P236,000. CC should receive a credit to his capital account balance of:

Select one:

a. P45,500

b. P10,000

c. P8,000

d. P37,500

4.

Golf and Hotel enter into a contract to speculate on the stock market, each using approximately their personal cash. The earnings are to be divided equally, and settlement is to be made at the end of the year after securities have been sold. A summary of the monthly brokerage statements for the year follows:

	Golf	Hotel
Total of all purchases confirmations	P 45,000	P 18,000
Total of all sales confirmations	48,700	16,800
Interest charged on margin accounts	80	50
Dividends credited to accounts	40	100

Final settlement will require payments as follows:

Select one:

a. None

b. Golf pays Hotel P2,405

c. Golf receives from Hotel P1,150

d. Golf and Hotel receive P1,255 each

5.

On January 3, 20x8, Lincoln Services, Inc., signed an agreement authorizing Lisa Company to operate as a franchisee over a 20-year period for an initial franchise fee of P100,000 received when the agreement was signed. Lisa commenced operations on July 1, 20x8, at which date all of the initial services required of Lincoln had been performed. The agreement also provides that Lisa must pay a continuing franchise fee equal to 5% of the revenue from the franchise annually to Lincoln. Lisa's franchise revenue for 20x8 was P800,000. For the year ended December 31, 20x8, how much should Lincoln record as revenue from franchise fees in respect of the Lisa franchise?

Select one:

a. P140,000

b. P45,000

c. P42,500

d. P90,000