Our Lady of Fatima University

Quezon City Campus

College of Business and Accountancy
Reviewer for the Qualifying Examination

1. These payments are included in the computation of cash discounts.

a. Downpayments, subsequent partial payments & final payments
b. Downpayments& subsequent partial payments
c. Subsequent partial payments & final payments
d. Final payments only

2. This group of journal entries is prepared to update certain accounts at the end of the accounting period before
preparing the periodic financial reports.
a. Closing entries c. Adjusting entries
b. Correcting entries d. Reversing entries

3. This ledger account’s ending balance is transferred to the trial balance.

a. Subsidiary ledger
b. General ledger
c. Both subsidiary & general ledger
d. Neither general nor subsidiary ledger

4. This is a reason why certain expense accounts require adjustments at the end of the accounting year.
a. Some paid expenses are to be recognized in the next accounting period.
b. Some incurred expenses are payable in the next accounting period.
c. Some incurred expenses (like supplies used) are not recorded as they are incurred.
d. All of the above

5. .This special journal may be used to record cash sales of merchandise.

a. Either sales journal or cash receipts journal
b. Both cash receipts journal and sales journal
c. Sales journal
d. Cash receipts journal

6. These accounts represent the decrease in invoice price for damaged but unreturned merchandise.
a. Purchase returns and allowances, Sales returns and allowances
b. Sales returns and allowances, Sales discounts
c. Purchase returns and allowances, Purchase discounts
d. Sales discounts, Purchase discounts

7. These accounts are always affected by each period-end adjusting entries.

a. Both income statement account and balance sheet account
b. Income statement accounts
c. Balance sheet accounts
d. Either income accounts or balance sheet accounts

8. This account represents the net income or net loss of the accounting year.
a. Owner, capital c. Owner, drawing
b. Income and expense summary d. None of the above

9. . This method of recording inventories does not require an adjusting entry for unsold merchandise at year-end.
a. Gross method c. Net method
b. Perpetual method d. Periodic method

10. These sections in the statement of comprehensive income is presented when the functional format is used.
a. Operating expenses, Cost of goods sold, Other income & Other expenses
b. Operating expenses & Cost of goods sold
c. Cost of goods sold, Other income & Other expenses
d. Operating expenses, Other income & Other expenses

11. This type of adjusting entry may be reversed at the start of the next accounting period.
a. Ending inventory
b. Prepaid expense (using asset method)
c. Unearned income (using liability method)
d. None of the above

[Type text]
 12. This kind of commercial organization is also known as retailing business.
a. Sole proprietorship c. Merchandising
b. Manufacturing d. Service

13. This type of accounts does not require periodic adjustment at the end of the accounting period.
a. Accrued expenses c. Uncollectible accounts
b. Ending inventories d. Cash

14. These accounts do not appear in the post-closing trial balance.

a. Revenue, expense and drawing accounts
b. Revenue and expense accounts
c. Revenue accounts
d. Expense accounts

15. This type of discounts is recorded in the accounting books.

a. Cash discounts
b. Either cash discounts or trade discounts
c. Trade discounts
d. Neither trade discounts nor cash discounts

16 This document may or may not be prepared during the accounting cycle.
a. Worksheet d. All of the above
b. Adjusted trial balance
c. Journal for reversing entries

17. This party shoulders the cost of delivery of the merchandise with terms ‘FOB shipping point’ from shipping
point to destination point.
a. Seller
b. Buyer
c. Both seller and buyer
d. Either seller or buyer as may be agreed upon

18 This type of year-end adjustments pertains to advance collection of a future revenue.

a. Either accrued income or unearned income
b. Accrued income
c. Unearned income
d. Earned income

19. These items comprise the total factory cost of a manufacturing business.
a. Factory overhead
b. Direct labor& factory overhead
c. Raw materials used & direct labor
d. Factory overhead, direct labor & raw materials used

20. This statement is true when the total debit balance and the total credit balance of the preliminary trial balance
are equal.
a. The debit amounts are equal to the credit amounts in both the journal and ledger.
b. The debit entries and credit entries are correct in both the journal and ledger.
c. The debit amounts are equal to the credit amounts in the ledger.
d. The debit entries and credit entries are correct in the ledger.

21. These components of production process total to the cost of goods available for sale.
a. Ending & beginning inventories of finished goods
b. Beginning & ending inventories of finished goods & cost of goods manufactured
c. Cost of goods manufactured & beginning inventory of finished goods
d. Ending inventory of finished goods & cost of goods manufactured

22. This ‘Merchandise inventory’ account appears in both the balance sheet and income statement.
a. Merchandise inventory beginning & Merchandise inventory ending
b. Merchandise inventory beginning
c. Merchandise inventory ending
d. Neither Merchandise inventory ending nor Merchandise inventory beginning

23. These journal entries are posted to the ledger.

a. Regular entries
b. Regular & adjusting entries
[Type text]
 c. Regular, adjusting & closing entries
d. Regular, adjusting, closing & reversing entries

24. This trial balance is prepared for the same purpose as the post-closing trial balance.
a. Both preliminary trial balance and adjusted trial balance
b. Neither adjusted trial balance nor preliminary trial balance
c. Preliminary trial balance
d. Adjusted trial balance

25. These items are the inventories in a manufacturing entity.

a. Finished goods, factory supplies, goods-in-process & direct materials,
b. Direct materials & finished goods
c. Goods-in-process, factory supplies & finished goods
d. Direct materials, goods-in-process & finished goods

26. This group of adjusting entries are prepared for expenses that are incurred but unrecorded.
a. Prepaid expense
b. Accrued expense
c. Unpaid expense
d. Either accrued expense or prepaid expense

27. This information is determined by physical inventory count at the end of the accounting period under the
periodic inventory system.
a. Both ‘Beginning inventory’ and ‘Ending inventory’
b. ‘Cost of goods sold’
c. ‘Ending inventory’
d. Both ‘Cost of goods sold’ and ‘Ending inventory’

28. This business entity produces or purchases goods for its primary source of income.
a. Merchandising & partnership
b. Manufacturing & merchandising
c. Corporation & manufacturing
d. Corporation

29. This account appears in the closing entries only.

a. Owner’s withdrawal account c. Income summary account
b. Owner’s capital account d. All of the above

30. This special journal may contain transactions on credit purchases of inventories.
a. Purchases journal
b. Cash disbursements journal
c. Either purchases journal or cash disbursements journal
d. Both cash disbursements journal and purchases journal

31. This account is a contra-income account.

a. Sales returns and allowances & sales discounts
b. Freight-out, sales discounts & sales returns and allowances
c. Sales returns and allowances
d. Sales discounts

(For numbers 33 - 35) : ABC Merchandising sells goods on credit. Data relevant to its inventories are as follows: List
price - P 40,000,000; Trade discount terms - 3%, 2%; Down payment - 20%; Cash discount terms - 3/5,2/7,n/10.

32. How much is the trade discount ?

a. P 1,588,000 c. 2,000,000
b. 1,976,000 d. 3,140,000

33. Compute the invoice price.

a. P 38,000,000 c. 38,024,000
b. 36,860,000 d. 38,412,000

34. Determine the cash discount if payment is received on the 6th day from date of sale.
a. P 608,384 c. 760,480
b. 760,000 d. 608,000

[Type text]
 (For numbers 36 - 39) : DEF Trading has the following account balances in its adjusted trial balance : Depreciation
- P 3,400; Merchandise inventory, Jan. 1 - 58,300; Accumulated depreciation - 10,500; Accounts payable - 2,500;
Accounts receivable - 5,100; DEF, capital - 78,500; Sales - 273,500; Allowance for uncollectible accounts - 300;
Purchases - 61,700; Salaries and wages - 70,400; Supplies on hand - 3,300; Rent expense - 60,300; Equipment &
furniture - 31,800; Utilities expense - 34,100; DEF, drawing - 7,900; Uncollectible accounts - 100; Cash - 20,800;
Supplies; 8,100. Moreover, its unsold inventory was counted to be P 61,400.

35. The following accounts may have both general and subsidiary ledgers.
a. Accounts receivable & accounts payable
b. Cash in bank & plant assets
c. Accounts payable, accounts receivable & cash in bank
d. Cash in bank, accounts receivable, plant assets & accounts payable

36. Compute the total debit in the compound closing entry for all income and expense accounts (including the
ending inventory).
a. P 273,500 c. 393,200
b. 331,800 d. 334,900

37. How much is the total credit in the compound closing entry for all income and expense accounts (excluding the
“Income summary” account) ?
a. P 238,100 c. 296,400
b. 233,300 d. 291,600

38. Assuming that the “Income summary” account has a debit balance of P 300,000, determine the balance of
“DEF, capital” after preparing all the closing entries.
a. (P 229,400) c. 386,400
b. 370,600 d. 378,500

39. The “Unexpired insurance” account of P 31,680 which is equivalent to twelve months will expire on May 31 of
the following year. In the adjusting entry for the current year, how much is the adjustment to the prepaid
expense account ?
a. P 31,680 decrease c. 18,480 decrease
b. 13,200 increase d. No adjustment.

40. A promissory received last June 30, 2012 will mature after one year. Its face amount and interest rate are P
5,700 and 12%, respectively. Compute the adjustment to the accrued income account on December 31, 2012.
a. No adjustment. c. 684
b. P 570 d. 342

41. The weekly salary of employees (from Monday to Saturday) for P 27,780 is paid on Tuesday of the following
week. December 31 was a Monday. Calculate the year-end adjustment to the accrued expense account.
a. P 23,150 c. 9,260
b. 4,630 d. No adjustment.

42. Consider the following account balances as of December 31: Accounts receivable, P 22,700; Allowance for
uncollectible accounts, P 1,350; Sales, P 258,600. It is estimated that 5% of accounts receivable may be
uncollectible. In the December 31 adjusting entry, what is the appropriate debit in the adjusting entry?
a. P 1,135 : Uncollectible accounts
b. P 1,350 :Allowance for uncollectible accounts
c. 2,485 :Uncollectible accounts
d. 215 :Allowance for uncollectible accounts

43. The “Machinery” account totals to P 234,000. Of this amount, P 52,000 was acquired on August 31, 2012. The
estimated residual value is 10% of cost, while the predetermined economic life is 8 years. For the 2012
adjusting entry, what is the correct amount of depreciation?
a. P 22,425 :
b. 26,325 :
c. 20,475 :
d. 24,375 :

44. An advance collection of P 9,400 from a preferred customer was recorded as part of the total sales amounting
to P 762,400. What is the appropriate account to be credited in the adjusting entry ?
a. Sales c. Advances from customers
b. Accounts receivable d. Unearned sales

[Type text]
 45. After the year-end physical inventory count, the cost of unsold merchandise was determined to be 20% larger
than last year’s ending inventory of P 132,800. How much is the current year’s debit to the Merchandise
inventory account in the adjusting entry ?
a. P 166,000 c. 33,200
b. 159,360 d. 26,560

46. The rental for five months amounting to P 17,450 was collected and recorded last October 1 using a revenue
account. At the end of the calendar year, what should be debited in the relevant adjusting entry
a. P 3,490 : Unearned rent income c. 10,470 : Unearned rent income
b. 13,960 : Rent income d. 6,980 : Rent income

47. In the “Supplies expense” account totalling P 21,770, the amount of P 19,380 was consumed during the year.
How much is the “Unused supplies” account to be reported in the income statement ?
a. P 19,380 c. 21,770
b. 2,390 d. 0

48. The “Accumulated depreciation - fixtures” account balance of P 23,850 relates to the “Furniture and fixtures”
of P 63,600 which was 5.5 years old as of trial balance date. In the annual statement of comprehensive income,
what is the amount of depreciation expense ?
a. P 3,975 c. 5,300
b. 4,770 d. 4,336

49. For the January 6 transactions, how much is the net increase in the “subscribed share capital” ?

Jan 6 The certificate of incorporation was received which authorizes the corporation to issue 20,000 units of
par-value shares for a total authorized capital of P 4,000,000.
6 The treasurer’s affidavit showed that the incorporators subscribed to 25% of the authorized capital and
paid 25% of the subscriptions. The 5 incorporators subscribed to equal number of shares at par value.
6 Total incorporation costs of P 37,800 were incurred prior to the receipt of the certificate of incorporation.
Of this amount, 50 shares were issued as payment for the services of an accountant at an agreed price of
P 12,500.

A. P 250,000 C. 1,000,000
B. 750,000 D. 1,010,000

50. For the February 4 transactions, how much is the net increase in the “share capital” ?
Feb 4 The certificate of incorporation was received which authorizes the corporation to issue 20,000 units of
par-value shares for a total authorized capital of P 4,000,000.
4 The treasurer’s affidavit showed that the incorporators subscribed to 25% of the authorized capital and
paid 25% of the subscriptions. The 5 incorporators subscribed to equal number of shares at par value.
4 Total incorporation costs of P 37,800 were incurred prior to the receipt of the certificate of incorporation.
Of this amount, 50 shares were issued as payment for the services of an accountant at an agreed price of
P 12,500.
A. P 10,000 C. 250,000
B. 12,500 D. 260,000

51. For the March 27 transactions, how much is the net increase in “additional paid-in capital” ?
Mar 27 Various subscriptions contracts were signed. Stock certificates were issued for fully-paid 1,240 shares (P
200 par) at P 210. For partially-paid 1,180 shares which were subscribed at P 220, a 50% initial payment
was collected.
A. P 12,400 C. 23,600
B. 36,000 D. 0

52. For the April 10 transactions, how much is the net increase in “share capital” ?
Apr 10 Various subscriptions contracts were signed. Stock certificates were issued for fully-paid 1,240 shares (P
200 par) at P 210. For partially-paid 1,180 shares which were subscribed at P 220, a 50% initial payment
was collected.
A. P 248,000 C. 236,000
B. 390,200 D. 484,000

53. For the April 11, transactions, how much is the net increase in “additional paid-in capital” ?
Apr 11 Shares of stock (par value of P 200, previous issue price of P 205) were reacquired for a total amount of
P 38,080. The stock certificates for 60 shares were canceled. But the other 130 shares reacquired for P
26,260 were held in treasury.
A. P 0 B. 300
[Type text]
 C. 480 D. 180

54. For the May 17, transactions, how much is the net decrease in “shareholders’ equity” ?
May 17 Shares of stock (par value of P 200, previous issue price of P 205) were reacquired for a total amount of
P 38,080. The stock certificates for 60 shares were canceled. But the other 130 shares reacquired for P
26,260 were held in treasury.
A. P 38,080 C. 38,000
B. 26,260 D. 11,820

55. For the July 4 transaction, how much is the net decrease in “treasury shares” ?
May 22 Shares of stock (par value of P 200, previous issue price of P 205) were reacquired for a total amount of
P 38,080. The stock certificates for 60 shares were canceled. But the other 130 shares reacquired for P
26,260 were held in treasury.
Jul 4 A total of 40 treasury shares were retired.
A. P 8,200 C. 8,080
B. 8,000 D. 8,120

56. For the September 7 transaction, how much is the net decrease in “additional paid-in capital” ?
Jul 22 Shares of stock (par value of P 200, previous issue price of P 205) were reacquired for a total amount of
P 38,080. The stock certificates for 60 shares were canceled. But the other 130 shares reacquired for P
26,260 were held in treasury.
Sep 7 A total of 40 treasury shares were retired.
A. P 200 C. 120
B. 80 D. 0

57. This is not a characteristic of a corporation.

A. separate legal existence C. unlimited liability
B. transferability of ownership D. artificial being

58. This is the process of formally organizing a corporation.

A. organization C. articulation
B. promotion D. incorporation

59. . This is the accounting treatment for a corporate organization cost.

A. outright expense C. other asset
B. intangible asset D. deferred expense

61. This is an artificial being created by operation of law formed by five to 15 persons.
A. corporation C. incorporated
B. incorporation D. organization

62. These are the persons who originally formed the corporation.
A. partners C. managers
B. incorporators D. shareholders

63. These are the costs incurred in connection with the incorporation. These include cost of printing stock
certificates and filing fees.
A. processing fees C. pre-operating expenses
B. notary fees D. one-time fees

64.. This is the class of share capital which entitles the holder to an equal or pro-rata division of profits without any
preference or advantage over any class of stock.
A. common stock C. outstanding stock
B. preferred stock D. subscribed capital

65. This is the maximum number of years in the life of a corporation.

A. 10 years C. 50 years
B. 100 years D. 500 years

66. This is the minimum amount upon which no-par, no-stated value share capital are to be subscribed or issued.
A.10 pesos C. 1 peso
B. 15 pesos D. 5 pesos

67.. This is the document evidencing share capital ownership in a corporation.

A. articles of incorporation B. stock and transfer book
[Type text]
 C. stock certificate D. stock receipt

68. This statement is true for the par value of a share capital.
A. usually different from its market value
B. often higher for preference share than for ordinary share
C. an arbitrary amount assigned to a share of stock
D. all of these

69. This body is regarded as the supreme authority in matters of management of the regular business affairs of a
corporation.
A. board of directors C. majority stockholders
B. minority stockholders D. none of the above

70. This is not a right of ordinary shareholders.

A. voting right
B. right to receive a proportionate share of assets in corporate liquidation
C. right to receive guaranteed dividends
D. pre-emptive right

71. This is the right of the corporation to continue as a juridical entity for the period stated in the Articles of
Incorporation despite death of any stockholder.
A. right of succession C. right of existence
B. right of pre-emption D. none of the above

72.. This document regulates the various internal matters regarding the calling and conducting of meeting of
stockholders and directors.
A. by-laws C. voting trust agreement
B. articles of incorporation D. none of the above

73. . This is the basis of recording the non-cash asset received as payment for share capital.
A. its book value
B. its fair market value
C. the lower of its book value or fair market value
D. the higher of its book value or fair market value

74. This is the entry to record the issuance of share capital for fully paid stock subscription.
A. Memorandum entry C. Debit: Share Capital Subscribed;
B. Debit: Share Capital Subscribed; Credit: Additional Paid-in capital
Credit: Share Capital D. Debit: Share capital subscribed;
Credit: Subscription receivable

75.. This is not a correct statement which describes the advantage of a corporation from a partnership.
A. The death of a stockholder will not dissolve the corporation because of its power of succession.
B. Its management is centralized under the Board of Directors.
C. Shareholders have limited liability and shareholders are not general agents of the business.
D. all of the above

76. This is an incorrect statement concerning the similarities between a partnership and a corporation.
A. Both are created by law and must file a copy of its certificate with the proper government authorities.
B. All corporate stockholders and all limited partners in a limited partnership have limited liability.
C. Both are recognized for national income tax purposes as taxable entities.
D. Both may engage in income generating business activities.

77. This is a correct statement about the retained earnings account.

A. It has a credit balance if earnings have been greater than losses and dividends, and is reported as part of
“Shareholders’ Equity” in the Statement of Financial Position
B. It has a debit balance if losses have exceeded earnings, and is reported as part of assets on the Statement of
Financial Position
C. It represents the amount of cash available for payment of dividends if there have been profitable operations
D. It is a special fund for paying shareholders’ dividends on the basis of income

(For numbers 78 - 85) Partners A, B and C (dividing profits and losses equally) decided to liquidate ABC
Merchandising on May 17, 2013.Consider the following relevant data.

a) The post-closing trial balance had the following amounts.

[Type text]
 Cash P 20,000
Non-cash assets 480,000
Payable to non-partners 80,000
Payable to A 10,000
Payable to B 15,000
A, capital 160,000
B, capital 40,000
C, capital 195,000

b) The noncash assets were sold as follows.

Date Cost Proceeds
October 21 P 310,000 P160,000
December 7 170,000 200,000

Settlement to partners was made once cash became available. On October 21, however, cash amounting to P 10,000
was withheld for possible liquidation expenses.

78. How much is the total financial interest of A immediately after the October 21 realization
A. P 160,000 C. 120,000
B. 210,000 D. 110,000

79. What is the total amount of liabilities to partners immediately before the December sale of noncash assets ?
A. P 10,000 C. 25,000
B. 15,000 D. 5,000

80. In the first schedule of cash payment to partners, how much is total remaining assets to be deducted from the
partners’ financial interest ?
A. P 180,000 C. 170,000
B. 310,000 D. 480,000

81. Compute the total cash available for payment to partners after the December realization of assets.
A. P 380,000 C. 300,000
B. 360,000 D. 210,000

82. Who did not receive any cash from the first cash distribution to partners ?
A. A C. C
B. B D. None

83. Determine the cash payment to B after the December sale.

A. P 5,000 C. 15,000
B. 10,000 D. 0

84. If a cash priority program is prepared on May 17, how much is the loss absorption capacity of C ?
A. P 585,000 C. 195,000
B. 510,000 D. 165,000

85. Based on a cash priority program, what is the total cash to be distributed to partners in the first priority of payment
?
A. P 230,000 C. 30,000
B. 115,000 D. 25,000

(For numbers 86 - 90)Partners P and Q had been dividing profits and losses equally. On July 1, 2012, PQ Partnership
admitted R as a new partner. After closing and adjusting the old partnership books, the capital balances of P and Q
were P 48,000 and P 37,000, respectively. Based on their agreement, R invested P 10,000 and purchased 1/2 of P’s
interest for P 35,000. Moreover, R was credited a capital of P 40,000. The new partnership shall continue to divide
net income equally.

86. .Determine the total amount of contributed capital of the partners.

A. P 125,000 C. 101,000
B. 106,000 D. 95,000

87. .What is the agreed total partnership capital ?

A. P 135,000 C. 125,000
B. 95,000 D. 101,000

88. How much is the bonus, if any, to the new partner ?

[Type text]
 A. P 0 D. 16,000
B. 5,000

C. 6,000
.89. Compute the capital of the new partner at the start of business operations for the new partnership.
A. P 40,000 C. 40,000
B. 45,000 D. 34,000

90.Which of the following journal entries pertinent to the admission of R is (are) correct ?

(1) Cash 10,000

R, capital 10,000

(2) P, capital 35,000

R, capital 35,000

(3) R, capital 6,000

P, capital 3,000
Q, capital 3,000

A. (1), (2) and (3) C. (1) and (3)

B. (1) and (2) D. (1) only

(For numbers 91 - 95)From January 1 - March 31, 2012, AB partnership earned a net income of P 90,000. On April 1, C
was admitted as a new partner after purchasing 25% ownership interest from A and B for P 50,000 each. On this
date, the partnership assets and liabilities were determined to be fairly valued. The capital balances of A and B
before net income were P 120,000 and P 170,000, respectively. Profit-loss ratio between A and B was 1:2, while
between A, B and C was 1:2:1, respectively.

91. .How much is the total partnership capital immediately before admitting C as a new partner ?
A. P 290,000 C. 285,000
B. 300,000 D. 380,000

92. .Compute the amount of “A, capital” before selling 25% to C.

A. P 165,000 C. 170,000
B. 150,000 D. 120,000

93. What is the “B, capital” balance after admitting the new partner ?
A. P 180,000 C. 127,500
B. 172,500 D. 120,000

94. .Determine the beginning capital of the new partnership.

A. P 380,000 C. 400,000
B. 390,000 D. 480,000

95. .Prepare the journal entry to record the purchase of interest.

A. Debit : Cash P 100,000 C. Debit : A, capital P 30,000

Credit : C, capital 100,000 B, capital 42,500

B. Debit : A, capital P 50,000 Credit : C, capital 72,500
D. Debit : A, capital P 37,500
B, capital 50,000
Credit : C, capital 100,000 B, capital 57,500
Credit : C, capital 95,000

(For numbers 96 - 103) After some years of unprofitable operations, partners X and Y agreed to liquidate their
partnership business, XY Merchandising, on June 30, 2013. The following data were available on this date.

a. After recording the year-end adjusting and closing entries, the assets and liabilities were reported as follows.
Cash P ?
Non-cash assets 360,000
Liabilities, outside creditors 70,000
Liabilities, Y 10,000
X, capital 230,000
Y, capital 90,000
[Type text]
b. Cash proceeds from the realization of noncash assets are presented below.
Date Cost Proceeds Gain (loss) on sale
July 27 P 100,000 P 120,000 ?
Sept. 23 260,000 ? (80,000)

c. Partners X and Y, with profit-loss ratio of 60:40, respectively, agreed to accept cash distribution after selling all the
noncash assets.

96. What is the adjusted balance of cash on June 30, 2013 ?

A. P 0 C. 120,000
B. 40,000 D. 160,000

97. .In the July 27 realization of assets, determine the share Y in the gain or loss on sale.
A. P 20,000 loss on sale C. 10,000 loss on sale
B. 12,000 gain on sale D. 8,000 gain on sale

98. .What is the total gain or loss on realization after the July and September sale of noncash assets ?
A. P 100,000 loss on realization C. 20,000 gain on realization
B. 60,000 loss on realization D. 80,000 gain on realization

99. .How much is the total proceeds from the cash sale of assets ?
A. P 300,000 C. 360,000
B. 340,000 D. 400,000

100. In the distribution of partnership cash, who is the first to receive payment ?
A. X (for capital) C. Non-partners (for liabilities)
B. Y (for capital) D. Y (for liabilities)

101. .After selling the noncash assets in September, determine the amount of total cash available for distribution to
partners.
A. P 340,000 C. 300,000
B. 270,000 D. 260,000

102. .How much is the total financial interest of X and Y, respectively, immediately before payment to partners ?
A. P 194,000 and 76,000 C. 242,000 and 98,000
B. 194,000 and 66,000 D. 242,000 and 108,000

103. .Based on the order of cash payment, who is the last to receive cash ?
A. Y (for liabilities) C. X (for capital)
B. Y (for capital) D. X and Y (for capital)

(For numbers 104 - 108)On September 1, 2012, partners X and Y consented to admit Z into the partnership by
investing P 60,000. After dividing the net loss of P 12,000, the capital balances of X and Y were P 88,000 and P
63,000, respectively. Immediately before admitting Z, it was agreed that the recorded amount of “Merchandise
inventory” of P 76,000 should be adjusted to P 58,000. The profit-and-loss sharing agreement was 2:1 (for X and Y,
respectively) and equally (for X, Y and Z).

104. .Calculate the adjusted capital of X before the investment.

A. P 76,000 C. 73,000
B. 68,000 D. 82,000

105. .How much is the net increase (net decrease) in the financial interest of Y after the investment of Z ?
A. P 0 C. (6,000)
B. 2,000 D. 10,000

106. .What is the adjusted capital of the dissolved partnership ?

A. P 151,000 C. 139,000
B. 121,000 D. 133,000

107. Determine the beginning capital of Z in the new partnership.

A. P 58,000 C. 54,000
B. 56,000 D. 60,000

108. .Record the admission of Z as a new partner.

[Type text]
 A. Debit : Cash, P 60,000 Credit : Z, capital, P 60,000
B. Debit : X, capital, P 40,000 Credit : Z, capital, 60,000
Y, capital, 20,000
C. Debit : X, capital, P 30,000 Credit : Z, capital, P 60,000
Y, capital, 30,000
D. Debit : X, capital, P 20,000 Credit : Z, capital, P 60,000
Y, capital, 40,000
109. .This is not one of the causes of partnership dissolution.
A. Incapacity of an existing partner
B. Admitting a new partner
C. Incorporating a partnership
D. Sale of more than 50% of a partner’s financial interest to another existing partner

110. This transfer of capital results when the agreed capital credited to the new partner is less than the amount of
capital purchased from any, some or all of the old partners.
A. Bonus to new partner
B. Bonus to old partners
C. Bonus to new and old partners
D. Bonus to any partner

111. This situation may arise when the agreed capital of all the partners is different from their contributed capital.
A. overstatement or understatement of recorded amount of certain asset(s) or liability(ies)
B. bonus to partner(s)
C. (A) and (B), if (A) is insufficient
D. (A) and (B), if (B) is insufficient

112. This transaction results to an admission of a new partner.

A. Lending cash to the partnership on a long-term basis by a third party
B. Purchase from the partnership of noncurrent assets by a third party
C. Purchase from a partner of ownership interest by a third party
D. (A), (B) and (C)

113. This statement is true regarding partnership dissolution when a new partner joins the partnership through purchase
of capital.
A. The new partnership takes over the operations of the dissolved partnership.
B. The new partnership contract is not essential.
C. The new partner is admitted with the approval by majority or all of the partners.
D. The new partner is an industrial partner.

114. This sale of capital by a partner does not result to any gain or loss to the partnership.
A. Selling price is equal to recorded amount of capital sold
B. Selling price is less than the recorded amount of capital sold
C. Selling price is more than the recorded amount of capital sold
D. (A), (B) and (C)

115. This mode of admitting a new partner may give rise to bonus to a new partner.
A. Admission by purchase of interest C. (A) or (B)
B. Investment D. Neither (A) nor (B)

116. .This event may follow partnership dissolution.

A. Formation of a new business (sole proprietorship, partnership or corporation)
B. Liquidation of the dissolved partnership
C. (A) or (B)
D. Neither (A) nor (B)

117. This kind of partner is admitted as a new partner when the admission is through purchase or sale of interest.
A. Capitalist partner C. Capitalist-industrial partner
B. Industrial partner D. (A) or (B)

118. .This accounting procedure(s) should be considered in recording partnership dissolution.

A. Adjustment, if any, of assets and liabilities
B. Division of net income or net loss
C. (A) and (B)
D. Neither (A) nor (B)

[Type text]
119. This event pertains to the winding up of partnership operations.
A. Liquidation C. Operations
B. Dissolution D. Formation

120. This party receives the cash proceeds from the sale of capital or interest to the new partner.
A. Partnership
B. Selling partner
C. Selling partner and non-selling partners
D. Partnership, selling partner and non-selling partners

121. This account is debited in the partnership journal to record the sale of a partner’s capital to a new partner.
A. Cash or receivable account
B. Capital account of selling partner
C. Capital account of selling and non-selling partners
D. Capital of new partner

122. .This account(s) is(are) either debited or credited in the journal entry to record any adjustment of partnership asset
or liability in connection with the admission of a new partner through sale of interest.
A. Capital accounts of selling and non-selling partners
B. Capital accounts of new and old partners
C. Capital accounts of non-selling partners
D. Capital account of selling partner

123. This stage in the life of a partnership pertains to the termination of its life but not of its operations.
A. Liquidation C. Dissolution
B. Acquisition D. Consolidation

124. These partners’ capital accounts are credited in dividing the net income earned by the partnership as of the date of
admission of new partner by purchase of interest.
A. Selling partners C. Selling and new partners
B. New partners D. Selling and non-selling partners

125. .This transfer of capital from one or some partners to one or some partners arises when the capital credited to the
new partner as agreed upon is greater than his investment or contribution.
A. Bonus to any partner
B. Bonus to old and new partners
C. Bonus to old partners
D. Bonus to new partner

126. This is the journal entry to eliminate the negative capital balance of partner X.
A. Debit : X, capital P xxx Credit : Cash xxx
C. Debit : X, capital P xxx
Credit : Payable to X xxx Credit : Y, capital xxx
B. Debit : Capital P xxx
Credit : Z, capital xxx
D. Neither (A), (B) nor (C)

128. These transactions occur during the liquidation process.

A. Payment of liabilities to partners
B. Settlement of obligations to outside creditors
C. (A) and (B)
D. Neither (A) nor (B)

129. This account shall be deducted against the partners’ capital to determine the adjusted capital balances immediately
before liquidation.
A. Drawing account C. Neither (A) nor (B)
B. Noncash asset that cannot be realized D. Both (A) and (B)

130. This transaction is referred to as realization.

A. Payment of debts to creditors C. Settlement of liquidation expenses
B. Conversion of noncash assets to cash D. All of the above

132. This party’s financial interest is the last to be settled in the order of priority in partnership liquidation.
A. Partners for capital C. External creditors for liabilities
B. Partners for undistributed profits D. Internal creditors for liabilities
[Type text]
133. This item has the effect of decreasing the capital of partners.
A. Liquidation expense C. Both (A) and (B)
B. Unrecorded liability D. Neither (A) nor (B)

134. . This partnership obligation is settled during the liquidation period.

A. Liquidation expenses C. Newly discovered liabilities
B. Recorded payables D. All of the above

135. This partner’s account shall be considered in computing his financial interest in a schedule of safe payment.
A. Capital of partner C. Receivable from partner
B. Withdrawal of partner D. (A), (B) and (C)

136. .These partners are liable for unpaid partnership debts up to the amount of their investments only.
A. Industrial partners C. Limited partners
B. General partners D. Industrial and limited partners

137. .These partner’s accounts are closed to the partner’s “capital” account at the start of the liquidation period.
A. ‘Receivable’ from partner, ‘Payable’ to partner & ‘Withdrawal’ of partner
B. ‘Receivable’ from partner & ‘Payable’ to partner
C. ‘Receivable’ from partner & ‘Withdrawal’ of partner
D. ‘Payable’ to partner & ‘Withdrawal’ of partner

138. This account may arise from the realization of noncash partnership assets.
A. Loss on sale of assets C. Either A or B
B. Gain on sale of assets D. Neither A nor B

139. This partner can absorb the capital deficiency of another partner.
A. Solvent partner with negative capital balance
B. Insolvent partner with positive capital balance
C. Neither (A) nor (B)
D. Both (A) and (B)

140. This is the excess of cash proceeds over the book value of the noncash assets sold.
A. Either gain or loss on realization C. Loss on realization
B. Gain on realization D. Neither gain nor loss on realization

141. This is the journal entry to record the amount of cash withheld from the total cash available for distribution to
partners A and B.
A. No journal entry B, capital xxx
B. Debit : Cash P xxx
Credit : Cash xxx
Credit : A, capital xxx D. Debit : Cash P xxx
B, capital xxx
Credit : Noncash assets xxx
C. Debit : A, capital P xxx

142. . This is the order of accounting procedures to eliminate the capital deficiency of a partner during liquidation.
A. Invest, offset, absorb C. Offset, invest, absorb
B. Absorb, invest, offset D. Invest, absorb, offset

143.This schedule of cash distribution may be prepared anytime before cash settlement is made to any partner.
A. Cash priority program C. Both (A) and (B)
B. Schedule of safe payment D. Neither (A) nor (B)

144. This journal entry shows the distribution of net loss between partners A and B.
A. Debit : Income summary P xxx Credit : A, capital P xxx
B, capital xxx
B. Debit : A, capital P xxx Credit : Income summary P xxx
B, capital
C. Debit : Expense summary P xxx Credit : A, capital P xxx
B, capital xxx
D. Debit : A, capital P xxx Credit : Expense summary P xxx
B, capital

[Type text]
145. This basis shall be used in dividing net loss if the partnership contract stipulates on the division of net income but
not on the division of net loss.
A. Original investments of the partners
B. Beginning capital of the partners
C. Average capital of the partners
D. Agreement on distribution of partnership net income

146. These parties are the contracting parties in the admission of a new partner by investment.
A. Partnership, old partners and new partner
B. Old partners and new partner
C. Partnership and old partners
D. Partnership and new partner

147. This group of entries shows the net income or net loss at the end of the accounting period.
A. Adjusting entries C. Reversing entries
B. Closing entries D. Correcting entries

148. This factor in distributing partnership profits or losses is based primarily on the difference in the capital balances
of the partners.
A. Fixed or arbitrary ratio C. Salary to partner
B. Interest on capital D. Bonus to partner

149. This accounting procedure should be considered in recording partnership dissolution.

A. Adjustment of assets and liabilities C. (A) or (B)
B. Division of net income or net loss D. Neither (A) nor (B)

(For numbers 172 - 175)

JKL Partnership had a net loss of P 72,000 for 2012. Their profit-loss sharing ratio was 1:2:3 for partners J, K and
L, respectively.

172. How much is the share of partner L if all the partners are capitalist partners ?
A. P 42,000 C. 24,000
B. 36,000 D. 12,000

173. Compute the decrease in capital of partner K if only partners J and L are capitalist partners.
A. P 0 C. 24,000
B. 12,000 D. 36,000

174. What is the amount of debit to “J, capital” in recording the distribution of net loss to the partners if J and K are
the capitalist partners ?
A. P 48,000 C. 24,000
B. 36,000 D. 12,000

175. Calculate the decrease in partnership capital after closing the net loss for the year if partner K is an industrial
partner.
A. P 36,000 C. 60,000
B. 48,000 D. 72,000

176. This method of allocating partnership net income at the end of the period recognizes the difference in services
rendered by the partners in the partnership.
A. Bonus to partner C. Interest on capital
B. Salary to partner D. (A) and (B)

(For numbers 178 - 180)

In dividing profits and losses, partners F, G and H agreed on the following terms.
Interest on partner’s capital : 20% of capital
Salary to F : P 6,000 per month
Bonus to G as managing partner : 10% of net income
Remainder : Equally

At the end of 2012 : (a) net income amounted to P 1,220,000 ; and (b) the capital balances of the partners were P
140,000, P 150,000 and P 190,000, for F, G and H, respectively.

178. Calculate the total share in net income of the partners on account of interest, salary and bonus.
A. P 152,000 B. 190,000
[Type text]
 C. 252,000 D. 290,000

179. Determine the total share of the partners in net income to be divided equally among the partners.
A. P 1,220,000 C. 1,124,000
B. 1,148,000 D. 930,000

180. What is the total credit to “F, capital” in recording the shares of the partners in net income ?
A. P 382,000 C. 410,000
B. 462,000 D. 338,000

(For numbers 190 - 191)

On December 31, 2012, the records of ST partnership revealed the following data.
Net loss P 240,000
Beginning capital : S 75,600
: T 104,400
Ending capital : S 63,750
: T 61,250

190. What is the percentage share of S in partnership loss if the partners agreed to divide income and losses based on
capital balances at the start of the accounting period ?
A. 72.41 % C. 31.50 %
B. 75.60 % D. 42.00 %

191. How much will be the decrease in “T, capital” if the partners’ ending capital balances shall be the basis of profit-
loss distribution ?
A. P 139,200 C. 100,800
B. 117,600 D. 122,400

193. This journal entry for allocating net income to partners R and S shows the salary to partner R as a mode of
profit-and-loss distribution.
A. Debit : Income summary P xxx Credit : R, capital P xxx
Salary expense xxx S, capital xxx
B. Debit : Income summary P xxx Credit : R, capital P xxx
S, capital xxx
C. Debit : Salary expense P xxx Credit : Income summary P xxx
R, capital xxx
S, capital xxx
D. Debit : Salary expense P xxx Credit : R, capital P xxx
S, capital xxx

194. The art of recording and communicating financial information of a business entity

a. bookkeeping c. journalizing
b. accounting d. none of the above

195. They are external users of accounting information.

a. Lenders, Customers, and Government c. Investors, Lenders and Managers

b. Investors, Employees, and Managers d. none of the above

194. The accounting concept which says that the business has a separate and distinct personality from that of the
owners.

a. Entity concept c. Cost Principle

b. Materiality Principle d. none of the above

195. This form of business is owned by a single person

a. Corporation c. Partnership
b. Sole Proprietorship d. none of the above

196. It is a business whereby two or more persons bind themselves together to contribute money, property or
industry to a common fund.

a. Corporation b. Sole Proprietorship

[Type text]
 c. Partnership d. none of the above

197. Bookstore, retail store, and hardware are examples of _

a. Service concern c. Manufacturing

b. Merchandising d. none of the above

198. It deals with the acquisition of raw materials and the conversion of these raw materials into finished product.

a. Manufacturing c. Merchandising
b. Service d. none of the above

199. A business entity which deals with rendering of services

a. Single proprietorship c. Manufacturing

b. Service concern d. none of the above

200. Exchange of goods and services for value

a. Bookkeeping c. Transactions
b. Journalizing d. None of the above

201. It is the economic obligations of an enterprise.

a. Asset c. Capital
b. Liability d. None of the above

202. Asset can be converted into cash or used up within a short period of time, usually one year

a. Current asset c. Properties and equipment

b. Non-current asset d. None of the above

203. Right or properties owned by the business

a. Asset c. Capital
b. Liability d. None of the above

204. It is the residual interest of an owner in the business.

a. asset c. capital
b. liability d. none of the above

205. An example of fixed asset

a. prepaid expense c. cash

b. land d. none of the above

206. Which of the following is not a current liability

a. unearned rent c. mortgage payable

b. notes payable d. none of the above

207. The term owner’s equity is synonymous to

a. assets c. liability
b. capital d. none of the above

208. Currency, coins and paper money is an example of

a. current asset b. properties and equipment

[Type text]
 c. cash d. none of the above

209. Promissory notes sent to creditors is an example of

a. asset

b. Liability d. none of the above

c. Capital

210. Accrued interest income is an example of

a. asset c. capital
b. liability d. none of the above

211. Assets having no physical existence

a. current asset c. fixed asset

b. intangible asset d. none of the above

212. Which of the following is a qualitative characteristics of accounting information, which assures that the
accounting methods are uniformly and consistently used by business?

a. Comparability c. Understandability
b. Reliability d. Completeness

213. Which of the following accounting assumptions relates to the presumption of continuous and indefinite
operations of a business?

a. Accountig period c. Business entity

b. Going concern d. Accrual basis

214. Which of the following is a business transaction/

a. Revision of some existing business policies was implemented
b. Salary of employees was paid
c. A new secretary was hired
d. Received an award

215. The government body which conducts the CPA licensure examination.
a. Professional Regulation Commission
b. Board of Accountancy
c. Philippine Institute of Certified Public Accountant
d. Financial Reporting Stadards Council

216. Primary source of income is the sale of inventory

a. Service c. Bookkeeping
b. Merchandising d. Manufacturing

217. Atty. Ivan Carmona began the practice of law by investing P20,000 in cash and a law library of P30,000.
a. increase in assets and increase in proprietorship
b. increase in liabilities and increase in proprietorship
c. increase in assets and increase in liabilities
d. none of the above

218. Paid the monthly rental of the office space P2,000

a. increase in assets and increase in proprietorship
b. increase in liabilities and increase in assets
c. decrease in assets and increase in proprietorship
d. decrease in proprietorship and decrease in asset

219. Purchased office equipment, P5,000 and office supplies, P1,000 for cash.
[Type text]
 a. increase in assets and increase in proprietorship
b. increase in one form of asset and decrease in another form of asset
c. increase in assets and increase in liabilities
d. none of the above

220. Completed legal work for Teri Obemio and collected ₱4,000 cash.
a. increase in assets and increase in proprietorship
b. increase in assets and increase in liabilities
c. increase in one form of asset and decrease in another form of asset
d. none of the above

221. Purchased additional office equipment from Botong Trading on credit. ₱5,550
a. increase in assets and increase in proprietorship
b. increase in assets and increase in liabilities
c. decrease in assets and decrease in proprietorship
d. none of the above

222. Paid in semi-monthly salary of the office secretary, ₱3,250.

a. increase in assets and increase in proprietorship
b. increase in assets and increase in liabilities
c. decrease in assets and decrease in proprietorship
d. none of the above

223. Completed legal work for Karla Mullon on credit, ₱1,500.

a. increase in assets and increase in proprietorship
b. increase in assets and increase in liabilities
c. decrease in assets and decrease in proprietorship
d. none of the above

224. Paid one-half of the amounts due to Botong Trading.

a. increase in assets and increase in proprietorship
b. increase in assets and increase in liabilities
c. decrease in assets and decrease in liabilities
d. none of the above

225. Karla Mullon paid her accountant in full.

a. increase in assets and increase in proprietorship
b. increase in one form of asset and decrease in another form of asset
c. increase in assets and increase in liabilities
d. none of the above

226. Withdrew ₱1,000 from the practice for personal expenses.

a. increase in assets and increase in liabilities
b. increase in assets and increase in liabilities
c. decrease in assets and decrease in proprietorship
d. none of the above

I. Analyze each of the given terms/criteria/activities, and choose from the chices below the category that would
appropriately represent the term/criteria. Shade the letter of your answer.

Choices for 227 - 241

A. Sole Proprietorship
B. Partnership
C. Corporation
227. The simplest form of ownership.
228. Its owner hold shares of stock issued by the Business.
229. it is owned by more than one person.
230. It is not separate legal entity but its owner is personally responsible for its debts.
231. The debts of the business are the responsibility of the business and not the owners.
232. It is managed by the Board of Directors.
233. It should be SEC registered.
234. It can operate for fifty years after which it can apply for a renewal.
235. Death of the owner-investor may lead to the business closure.
236. It is considered easy & inexpensive to both set up & dissolve..
237. Owner is not personally liable for the debts.of the business
238. It is tending to be small service-type businesses and retail establishments.
[Type text]
239. Business organization has a single owner.
240. It is not distinct from its proprietor.
241. Having the right of successions and powers.

Choices for 249 – 258

A. Service
B. Merchandising
C. Manufacturing
249 Beauty parlor 254 Tutorial services
. .
250 Law office 255 Massage parlor
. .
251 Furniture factory 256 SM department store
. .
252 Sari-sari store 257 Colgate-Palmolive
. . Philippines
253 Candy factories 258 Hardware shop
.

Choices for 259 – 275

A. Assets D. income
B. Liabilities E. Expense
C. Proprietorship
25 Furniture and 26
Salaries expense
9 fixtures. 9
26 26
Accounts Receivable Service income
0 7
26 26
Prepaid insurance Professional fees
1 8
26 26
Interest payable Utilities expense
2 9
26 27
Prepaid rent Building
3 0
26 27
Pacquiao, withdrawal Cash
4 1
26 27
Advertising expense Inventory
5 2
26 27
Travel expense Notes receivables
6 3
26 27
Interest revenue Notes payable
7 4
26 27
Dental Revenue Gas and fuel expense
8 5

II. Compute the following unknown amount.

Choices for nos. 86 - 97
A B C D E
756,89 200,00 23,45 29,811 73,45
0 0. 9. 9
87,00 86,45 355,00 45,32 56,64
0 7. 0. 3 6
4,56 68,89 85,00 32,42 12,89
7 2 0. 6. 7

ASSETS 200,000 355,000 278 45,323 280 73,459

LIABILITIES 276 268,000 23,459 12,897 56,646 281
CAPITAL 115,000 277 733,431 279 29,811 68,892

III. Identification: Identify the effect of the following:

Choices for 282 – 292
a. Debit
b. Credit
[Type text]
 282. Increase in asset 288. Increase in liability
283. Decrease in liability 289. Decrease in drawings
284. Increase in expense 290. Decrease in expense
285. Decrease in income 291. Increase in income
286. Increase drawings 292. Increase in capital
287. Decrease in asset

IV. Determine whether each statement is True or False.

293. Bookkeepers prepare and interpret financial statements.
294. The financial reports are intended to provide relevant information both to internal and external parties.
295. The entity concept sets personal transactions apart from business transactions.
296. Appliance dealers are examples of business in manufacturing concern.
297. Chart of accounts is a created list of the accounts used by a business entity in recording business transaction.
298. Customer is an internal user of accounting information.
299. Accounting is the profession concerned with the preparation of business records for use in making evaluations
and decisions.

300. The purchase accunts normally has a debit balance. There are instances wherein goods are returned for some
reasons. It is proper to credit the amount returned to.

a. Purchase account c. Purchase returns and allowances

b. Purchase discount d. none of the above

301. To encourage early payment of account, the seller offers a discount on the invoice price. To take up the
discount.

a. purchase account is credited c. purchase return and allowances

b. purchase discount is credited d. none of the above

302. If the buyer pays his account within the discount period, he is granted the cash discount. The effect is that the
cash settlement would be

a. lower the invoice price c. no change

b. higher the invoice price d. none of the above

303. The term of a purchase 2/10, 1/20, n/30 means that 1% discount will be allowed if the merchandise is paid
within

a. 30 days c. 10 days
b. 20 days d. none of the above

304. Refer to the numbr above. If the merchandise is paid after ten days but still within the discount period, the
buyer is entitled to a discount of

a. 2% c. 10%
b. 1% d. none of the above

305. This kind of discount is a deduction from the catalog or list price granted to purchaser of goods.

a. Cash discount c. Trade discount

b. Loan discount d. None of the above

306. It is a certain percentage o deducted from fthe purchase price granted to the buyer if the latter pays within a
specified period from the date of the purchase.

a. Cash discount c. Trade discount

b. Loan discount d. none of the above

307. A document sent to notify the buyer that the seller has in its records credited the former’s accounts.

[Type text]
 a. Purchase order c. Sales invoice
b. Credit memorandum d. none of the above

308. The purpose of granting discount is to encourage buyers to purchase in larger quantity.

a. Cash loan c. Cash discount

b. Trade discount d. None of the above

309. For merchandising business, an asset that is acquired for the purpose of selling it at profit is

a. Supplies c. Prepaid rent

b. Merchandise Inventory d. None of the above

310. It is a simple recording system of inventory

a. Periodic system c. Counting system

b. Perpetual system d. None of the above

311. All freight charges incurred from the point of shipment to the buyer’s place shall be shouldered and recorded
by the buyer.

a. Free on board shipping point c. Free on delivery

b. Free on board destination d. None of the above

312. It is the seller who shall pay for all the freight charges incurred in delivering the goods to their destination.

a. Free on board shipping point c. Free on delivery

b. Free on board destination d. None of the above

313. It is an income account which is credited when goods or merchandise are sold either for cash or an account
basis.

a. Purchases c. accounts payable

b. sales d. none of the above

314. It is an amount deducted from the regular price of goods that is granted for early payment

a. Trade discount c. Sales discount

b. Cash discount d. none of the above

315. This is debited if the business shoulders the payment for the delivery of goods bought.

a. Freight in c. Sales cost

b. Freight out d. none of the above

316. It is the accumulated cost of all merchandise bought for resale during an accounting period

a. Purchases c. Freight in
b. Sales d. none of the above

317. These are expenses incorporated in the cost of the inventories

a. Freight-in c. Administrative expenses

b. Selling expenses d. none of the above

318. These are operating expenses relating to selling activities

a. Cost of sales c. Administratvie expenses

b. Selling expenses d. none of the above
[Type text]
 319. It is a contra-income account

a. Purchase discount c. Purchases

b. Sales returns and allowances d. Completeness

320. Goods were sold for Php 40,000 at discount term of 2/10, n/15. Some of these goods were delivered for Php
800 as FOB destination. Journal entry would be
a. Debit accounts receivable; Credit Sales
b. Debit accounts receivable and freight-out; Credit Sales and cash
c. Debit purchases; Credit sales
d. None of the above

321. It is a contra expense account

a. Sales return and allowances c. Prepaid expesne

b. Purchases retruns and allowances d. Accrued expense

322. To record cash sale of inventories

a. Debit sales; Credit cash c. Debit sales; Credit Accounts receivable

b. Debit cash; Credit Sales d. No entry

323. To record purchase of inventories on account

a. Debit sales; Credit Purchases c. Debit Purchases; Credit Cash

b. Debit Purchases; Credit Accouints d. Debit Purchases; Credit Sales
payable

324. To record payment of delivery cost on inventories sold

a. Debit freight out; Credit cash c. Debit Freight in; Credit Cash
b. Debit cash; Credit freight in d. No entry

325. To record payment of delivery cost on inventories purchased

a. Debit freight out; Credit cash c. Debit Freight in; Credit Cash
b. Debit cash; Credit freight in d. No entry

326. To record return of inventories previously purchased with cash refund

a. Debit Cash; Credit Purchase returns & c. Debit Sales; Credit Purchases
allowances d. No entry
b. Debit Cash; Credit Sales

327. To record purchase of inventories on account

a. Debit Accounts Receivable; Credit Purchase returns and allowances
b. Debit Purchases; Credit accounts Receivable
c. Debit Sales; Credit Purchases
d. Debit Purchase, Credit Accounts payable

328. To record collection of Accounts recivable with cash discount

a. Debit Cash and Sales Discount; Credit Accounts Receivable
b. Debit Purchases and Purchase discount; Credit accounts Receivable
c. Debit Purchases; Credit accounts Receivable
d. No entry

Choices for nos. 330 -

A B C D E
42,750 2,250.00 45,000 24,227.2 65,550.0
. 8 0
4,472. 427.50 9,450 15,592.5 64,894.5
[Type text] 0 0
3,500. 31,500.0 315 32,426.0 12,897,0
0 0 0
A. Inventories with a catalog price of P45,000 were bought with trade discount term of 5% and Cash discount term of
1/5, n/10. Compute the following:
329. Trade Discount
330. Invoice Price
331. Cash Discount if full payment is made within discount Period.
332. Cash Payment if settlement is made beyond discount period

B. The merchandise with total list price of P75,000 was bought with the following discount terms: trade discount of
5%, 8%; cash discount of 1/7, n/15. Compute the following
333. Purchase price
334. Trade discount
335. Cash Payment if settlement is after 7 days but within 15 days
336. Cash payment if payment is within the discount period
73.
C. Compute the amount of payment of the following purchases:

Choices for nos. 338 - 340

A. P92,000.00 D. P76,440.00
B. P91,080.00 E. P50,000.00
C. P78,000.00

Date of Date of Amount of

Amount Terms Returns
purchase payment payment
Jan. 10 50,000 n/30 None Jan. 31 338
Feb. 11 80,000 2/10, n/30 2,000 Feb. 24 339
July 19 95,000 1/10, n/30 3,000 July 30 340

341. This accounting principle assures that each expense shall be recognized in the same period that the income to
which such expense relates has been recognized.
A. Cash basis C. Continuity concept
B. Accounting period concept D. Matching concept

(For numbers 342 - 344) The following year-end adjusting entries of PQR Services for 2012 relate to interest.
(A) Interest expense xxx
Interest payable xxx

(B) Interest expense xxx

Prepaid interest xxx

(C) Unearned interest income xxx

Interest income xxx

(D) Interest receivable xxx

Interest income xxx

342. Which of the journal entries pertain to the asset method of adjusting interest not yet incurred but already paid ?
A. (A) C. (C)
B. (B) D. (D)

343. What adjusting entry represents accrued interest on a promissory note issued by the business ?
A. (A) C. (C)
B. (B) D. (D)

344. Identify the adjusting entries that may be reversed at the start of the next accounting period ?
A. (A), (B), (C) and (D) C. (B) and (C)
B. (A) and (B) D. (A) and (D)

345. This financial report may be presented using the natural format.
A. Statement of financial position C. Statement of changes in owner’s equity
B. Statement of cash flow D. Statement of comprehensive income

[Type text]
346. This accounting procedure states that revenues and expenses are recorded in the specific period that the
corresponding cash is collected or disbursed.
A. Matching concept C. Accounting period concept
B. Accrual basis concept D. Cash basis concept

347. These accounts do not appear in the post-closing trial balance.

A. Expenses and income C. Income, expenses and owner’s withdrawal
B. Owner’s capital and withdrawal D. Owner’s capital, income and expenses

348. This step in the accounting process is performed immediately before posting the closing entries.
A. Prepare the financial statements C. Prepare the post-closing trial balance
B. Close the temporary accounts D. Journalize the day-to-day transactions

349. These accounts are affected (increased or decreased) in each of the adjusting entries at the end of an accounting
period.
A. Both permanent and temporary accounts C. Nominal accounts only
B. Either permanent or nominal accounts D. Real accounts only

350. These peso columns of the worksheet show the amount of net loss incurred for the specific accounting period.
A. Income statement debit column and balance sheet credit column
B. Income statement credit column and balance sheet debit column
C. Balance sheet debit column and income statement debit column
D. Balance sheet credit column and income statement credit column

352. This accounting method requires that every income is to be reported in the appropriate period in which the
corresponding benefit has been rendered.
A. Cash basis concept C. Revenue recognition concept
B. Separate entity concept D. Going concern concept

353. This trial balance shows the updated balances of all accounts.
A. Preliminary trial balance
B. Adjusted trial balance
C. Post-closing trial balance
D. Adjusted trial balance and post-closing trial balance

354. This account is among those accounts that are closed to the “Income and expense summary” account.
A. Allowance for doubtful accounts C. Owner’s drawing
B. Depreciation D. Accrued rent income

(For numbers 354 - 355) The following accounts appear in the adjusted trial balance columns of the worksheet for STU
Services.
(A) Accumulated depreciation (F) ABC, capital
(B) Accrued salaries (G) Allowance for doubtful accounts
(C) Unearned interest (H) Accrued rent income
(D) Prepaid supplies (I) ABC, personal
(E) Utilities (J) Professional fees

355. These accounts are extended under the balance sheet credit column.
A. (A), (F), and (G) only
B. (A), (B), (F) and (G) only
C. (A), (B), (C) and (F) only
D. (A), (B), (C), (F) and (G) only

356. These accounts are extended to the income statement debit column.
A. (D), (E), (H) and (I) only C. (E) and (H) only
B. (D), (E) and (H) only D. (E) only

357. This account exists only during the closing stage of the accounting process.
A. Owner’s withdrawal C. Income summary
B. Expense D. Income

358. This optional process is undertaken to facilitate the performance of the different steps in the accounting cycle at
the end of the accounting period primarily the preparation of the financial statements.
A. Preparing the adjusted trial balance C. Preparing the worksheet
B. Posting to the ledger D. Preparing the preliminary trial balance

[Type text]
359. This method of recording unearned revenues is used if the relevant income account in the adjusting entry is to be
reduced.
A. Income method C. Asset method
B. Liability method D. Expense method

360. This objective is achieved by preparing adjusting entries.

A. To ensure that the portion of the recorded expense which is already paid but not yet incurred shall be
recognized as an asset
B. To ensure that any income that is already earned but not yet collected shall be recorded as a liability
C. To ensure that a recorded income that is not yet earned shall be recorded as an asset
D. All of the above

361. This financial statement shows the results of operation of the business
A. Income statement C. Statement of changes in owner’s equity
B. Cash flow statement D. Balance sheet

362. This financial statement is also known as the “statement of financial position”.
A. Income statement C. Statement of changes in owner’s equity
B. Cash flow statement D. Balance sheet

363. This method of estimating uncollectible accounts always increases the unadjusted balance of the allowance
account.
A. Aging-of-receivables method
B. Income statement method
C. Balance sheet method
D. Both aging-of-receivables and balance sheet methods

364. These accounts with non-zero balances shall appear in the post-closing trial balance.
A. Income, expenses, assets, owner’s capital and withdrawal, liabilities
B. Owner’s capital, assets, liabilities
C. Liabilities, expenses, owner’s capital, assets, income
D. Assets, owner’s capital and withdrawal, liabilities

365. This group of journal entries is posted to the ledger accounts during the first part of the accounting period.
A. Regular entries C. Closing entries
B. Adjusting entries D. Reversing entries

366. This type of presentation format shows the assets, liabilities and owner’s equity in a vertical arrangement.
A. Report format C. Natural format
B. Functional format D. Account format

367. This method is used in adjusting prepaid expense if the related expense account is increased.
A. Income method C. Liability method
B. Expense method D. Asset method

368. This is an accounting assumption which provides that all business transactions are reported through the basic
financial statements for each period of equal length.
A. Accrual basis concept C. Continuity concept
B. Periodicity concept D. Business entity concept

369. This adjusting entry, among others, may not be reversed at the start of the next accounting period.
A. Accrued income C. Unearned income using the income method
B. Accrued expense D. Prepaid expense using the asset method

370. This adjusting entry relates to unrecorded but incurred expenses.

A. Prepaid expense C. Bad debts expense
B. Accrued expense D. Depreciation expense

371. This type of adjusting entry will reduce total assets if the related expense is initially recorded as asset.
A. Prepaid expense using expense method C. Prepaid expense using asset method
B. Accrued expense D. Depreciation

(For numbers 372 - 373) In the year-end preliminary trial balance, the “Unused supplies” account was reported
at P 2,450. A review of the supplies on hand showed that P 2,100 was already consumed.

372. How much is the adjustment to the “Unused supplies” account ?

[Type text]
 A. P 2,450 C. 2,100
B. 0

373. What account is to be debited in the adjusting entry ?

A. Supplies expense C. No adjustment is necessary
B. Unused supplies
.
(For numbers 374 - 375) DEF Services borrowed P 50,000 on November 1, 2012. The loan and monthly interest of 1%
were due on May 1, 2013. What adjusting entry shall be recorded on December 31, 2012 ?

374. How much is the adjustment to the “Accrued interest expense” account ?
A. P 0 C. 2,000
B. 1,000

375. What account is to be debited in the adjusting entry ?

A. Accrued interest expense C. No adjustment is necessary
B. Interest expense
.
(For numbers 376 -377) A 6-month advance collection of rental fees for P 96,000 was received on September 1, 2012.
“Cash” was debited and “Rent revenue” was credited for this transaction. What adjusting entry, if any, should
be recorded before the preparation of financial statements on December 31.

376. How much is the adjustment to the “Rent revenue” account ?

A. P 0 C. 32,000
B. 48,000

377. What account is to be debited in the adjusting entry ?

A. Unearned rent revenue C. No adjustment is necessary
B. Rent revenue
.
(For numbers 378 - 379) Cash for P 240,000 was paid representing a one-year rental starting April 1, 2012 which was
debited to the “Prepaid rent” account. What adjusting entry shall be recorded at the end of 2012 ?

378. How much is the adjustment to the “Prepaid rent” account ?

A. P 180,000 C. 0
B. 240,000

379. What account is to be debited in the adjusting entry ?

A. Rent expense C. No adjustment is necessary.
B. Prepaid rent

(For numbers 380 - 381) The balance sheet on December 31, 2012 includes the following information about its plant
assets : Delivery equipment, P 360,000 ; Accumulated depreciation, P 99,000. This delivery equipment was
acquired on April 1, 2009.

380. How much is the adjustment to the “Accumulated depreciation” account ?

A. P 27,000 C. 36,000
B. 0

381. What account is to be debited in the adjusting entry ?

A. Accumulated depreciation C. No adjustment is necessary.
B. Depreciation expense

(For numbers 382 - 383) The following unadjusted data relate to the December 31, 2012 preliminary trial balance of
ABC Services.
Tools and equipment P 129,400
Accumulated depreciation 32,100
Salvage value 1,000
The plant assets were acquired 3 years ago from the trial balance date ?

382. How much is the depreciation expense to be recorded ?

A. 32,100 C. 16,050
B. 21,400

383. What is the adjusted balance of the accumulated depreciation account ?

A. P 48,150 B. 64,200
[Type text]
 C. 32,100

(For numbers 384 - 385) Consider the following information gathered for JKL Services on December 31, 2012.
Accounts receivable P 67,000
Sales (of which P 46,000 are on account) 172,000
Allowance for uncollectible accounts 2,100

384. If 4% of accounts receivable is estimated to be uncollectible, how much is the “Uncollectible accounts expense” ?
A. 580 C. 4,780
B. 2,680

385. Compute the “Uncollectible accounts expense” for 2012 if 1% of credit sales is possibly uncollectible.
A. 1,640 C. 460
B. 1,260

386. Last year, the owner’s equity amount was 85,000 as of January 1. During the year, the total income, total
expenses and owner’s withdrawal were P 240,000, P 265,000 and P 20,000, respectively. How much is the owner’s
capital at the end of the year ?
A. P 120,000 C. 80,000
B. 40,000

387. During 2012, the total liabilities increased to P 60,000 while total assets decreased by P 25,000. At the start of the
year, the assets and liabilities were P 270,000 and P 45,000, respectively. How much is the owner’s equity at
the end of the year ?
A. P 140,000 C. 235,000
B. 185,000

(For numbers 388 -) GHI Services reported the following data in its financial statements.
Additional investments P 55,000
Withdrawals for owner’s personal use 20,000
Revenues 235,000
Expenses 80,000
Assets : Jan. 1, P 265,000 ; Dec. 31, P 390,000
Liabilities : Jan. 1, P 90,000 ; Dec. 31, P ?

398. How much is the net increase in capital during the year ?
A. 290,000 C. 190,000
B. 210,000

399. Compute the owner’s capital balance on January 1, 2012.

A. P 210,000 C. 230,000
B. 175,000

400. What is the amount of owner’s equity on December 31, 2012 ?

A. P 365,000 C. 390,000
B. 300,000

401. Calculate the 2012 year-end balance of total liabilities.

A. P 25,000 C. 65,000
B. 90,000

(For numbers 402 - 20) The December 1, 2012 assets and liabilities for ABC Services are as follows.
Cash P 72,400
Accounts receivable 6,800
Supplies on hand 16,200
Fixtures and equipment 84,700
Accumulated depreciation 24,100
Accounts payable 15,900

During December, cash collections were P 31,500 for services and P 4,100 for accounts receivables, while cash
payments were P 2,200 for rental, P 5,200 for salaries, P 2,700 for utilities and P 7,900 for accounts payable. In
addition, cost of supplies used was P 7,400 and estimated depreciation was P 900.

402. What is the December 31 balance of cash ?

A. P 81,700 C. 89,100
B. 90,000
[Type text]
403. How much is the book value of noncurrent assets on December 31 ?
A. P 60,600 C. 84,700
B. 59,700

404. Compute the year-end balance of total current assets.

A. P 113,000 C. 101,500
B. 108,900

Part 1: True or False

Choices:
A – Only the first statement is true
B – Only the second statement is true
C – Both statements are true
D – Both statements are false

405. i. Partnership dissolution is always followed by liquidation

ii. No amount may be distributed to any partner unless the resulting capital balances are all positive.

406. i. In a Statement of Liquidation, there are only classes of assets – cash and other assets (non-cash assets)
ii. After the distribution of cash in partnership liquidation, the business will have zero assets, liabilities and
owner’s equity

407. i. The liquidation ratios will always be equal to the profit and loss ratio of the partners
ii. If the deficient partner is insolvent, his deficiency will be absorbed by the other partners distributed
according to their profit and loss ratio

408. i. The right of offset is exercised when a partner has a capital deficiency and he has at the same time a loan to
the partnership
ii. Personal creditors of individual partners have priority over partnership creditors in the order of claims
against the personal assets of a partner

409. i. All incorporators are shareholders but not all shareholders are incorporators
ii. A corporation, like a partnership, may be formed by the mere agreement of five or more persons

410. i. The authorized shares represent the maximum number of shares that a corporation may issue
ii. Unissued shares represent the number of that may still be subscribed

411. i. Shareholders are the owners of a stock corporation

ii. When the ownership of a corporation changes, the corporation does not terminate

412. i. Stocks with par value cannot be issued at less than the par value.
ii. Share capital that has been sold and issued to a shareholder is called an outstanding share capital

413. i. The owners of a stock corporation are called shareholders

ii. The owners of a non-stock corporation are called members

414. i. When a partnership is incorporated, a new set of books should always be opened for the corporation
ii. When the memorandum entry method is used, the account Capital Stock is credited upon issuance of stocks

418. Liquidation of a partnership includes all of the following steps, except:

a. obtaining court approval c. paying the partnership liabilities
b. selling the partnership’s non-cash assets d. distributing the remaining cash to partners

419. . In the final liquidation transaction, the remaining cash is distributed to the partners. The partners share in
cash according to their
a. profit and loss ratio b. withdrawals
c. capital balances d. cash balance

420. The order of partnership liquidation process is

a. sell assets, disburse cash to partners, pay liabilities
b. disburse cash to partners, pay liabilities, sell assets
c. pay liabilities, sell assets, disburse cash to partners
d. sell assets, pay liabilities, disburse cash to partners

421. In a partnership liquidation, a loss from sale of non-cash assets is

[Type text]
 a. allocated to the partner with the lowest capital balance
b. allocated to the partnership liabilities
c. allocated to the partners based on their capital balances
d. allocated to the partners based on the profit and loss sharing ratio

425. . Class of share capital which entitles the holder to an equal or pro-rata division of profits without any
preference or advantage over any class of stock
a. common stock b. preferred stock
c. outstanding stock d. subscribed capital

432. . This is the right of the corporation to continue as a juridical entity for the period stated in the Articles of
Incorporation despite death of any stockholder
a. right of succession c. right of existence
b. right of pre-emption d. none of the above

433. They regulate the various internal matters regarding the calling and conducting of meeting of stockholders
and directors
a. by-laws c. voting trust agreement
b. articles of incorporation d. . none of the above

434. . The cost of organizing a corporation should be

a. expensed in the year of organization c. reported as tangible asset
b. reported as intangible asset d. deducted from share capital

436. . The entry to record the issuance of share capital for fully paid stock subscription is
a. Memorandum entry
b. Debit: Share Capital Subscribed;
Credit: Share Capital
c. Debit: Share Capital Subscribed;
Credit: Additional Paid-in capital
d. Debit: Share capital subscribed;
Credit: Subscription receivable

For items 440 – 444: Consider the Statement of Liquidation below:

[Type text]
Additional information is as follows:
a. Profit and loss ratio is 60% and 40% to B and C, respectively
b. The partnership’s non-cash asset consist of Inventory amounting to P500,000
c. Personal assets of B and C amount to P100,000 and P50,000, respectively.

440. . The amount of loan given by C to the partnership amounted to:

a. P50,000 b. P25,000
c. P20,000 d. P10,000

441. Non-cash asset was sold at what amount?

a. P280,100 b. P218,100
c. P305,200 c. P220,500

442. . How much additional investment is to be made by C?

a. P18,940 c. P18,960
c. P17,130 d. P17,960

443. . Before the additional investment of C, how much is the remaining cash available for distribution?
a. P11,100 b. P 10,100
c. P 9,100 d. P 12,100

444. How much did B receive?

a. P27,250 b. P23,220
c. P28,600 d. P28,060

445. Candy Corporation was organized on January 1, 2012 with authorized capital of P2,000,000 consisting of 100,000
ordinary shares, P20 par value. Subsequently, incorporators subscribed for 25,000 shares at P24. How much must be
paid upon subscription to comply with the requirement of the Securities and Exchange Commission (SEC)?
a. P600,000 b. P500,000
c. P125,000 d. P150,000

446. The Royal Note Corporation recorded the following journal entry on August 1, 2012
Cash 42,250
Share capital 32,500
Premium on Share Capital 9,750
The explanation reads: “ Issued ordinary capital for P130 per share”

447. . How many shares were issued?

a. 350 b. 315
c. 325 d. 330

448. What is the par value of the share capital?

a.. P10 b. P100
c. P125 d. P1,000

449. On April 8, 2012, Cordillera Corp. declared and issued a 25% ordinary share dividend. Prior to this date,
Cordillera had 20,000 shares of P2 par value ordinary share that were both issued and outstanding. The carrying value
of each share of stock is P20 at the time of declaration of the dividend.

How much is the total stock dividends?

a. P10,000 b. P75,000
c. P30,000 d. P100,000
[Type text]
450. . Using the information above, what is the effect of the stock dividend on total Shareholders’ Equity?
a. decreased by P40,000 c. increased by P100,000
b. decreased by P10,000 d. did not change

(For numbers 493 - 494)

On December 31, 2012, the records of ST partnership revealed the following data.
Net loss P 240,000
Beginning capital : S 75,600
: T 104,400
Ending capital : S 63,750
: T 61,250

493. What is the percentage share of S in partnership loss if the partners agreed to divide income and losses based on
capital balances at the start of the accounting period ?
A. 72.41 % C. 31.50 %
B. 75.60 % D. 42.00 %

494.By how much will the “T. Capital” decrease if the partners’ ending capital balances shall be the basis of profit-loss
distribution ?
A. P 139,200 C. 100,800
B. 117,600 D. 122,400

497. This journal entry shows the distribution of net loss between partners A and B.
A. Debit : Income summary P xxx Credit : A, capital P xxx
B, capital xxx
B. Debit : A, capital P xxx Credit : Income summary P xxx
B, capital
C. Debit : Expense summary P xxx Credit : A, capital P xxx
B, capital xxx
D. Debit : A, capital P xxx Credit : Expense summary P xxx
B, capital

507. This account title represents net income at the end of the accounting period
A. Income and expense summary (debit balance)
B. Partners’ capital (credit balance)
C. Income and expense summary (credit balance)
D. Partners’ capital (debit balance)

[Type text]