2014 Sqe - Fundamentals of Accounting PDF

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
COLLEGE OF ACCOUNTANCY AND FINANCE

Manila
ACCO 2016 and 2026 – FUNDAMENTALS OF ACCOUNTING PARTS 1 AND 2

S P E C I A L Q U A L I F Y I N G E XA M I N A T I O N
May 4, 2014 8:00 am-11:00 am
Name Year and Section
SPECIFIC INSTRUCTIONS
Select the correct answer for each of the following questions. Mark only one answer for each item by shading the letter of your
choice on the scannable answer sheet provided. Work independently. Strictly no erasures allowed. Use pencil no. 2 only.
Friction pen, any form of communication, and any form of cheating will never be tolerated.
M U L T I P L E C H O I C E Q U E S T I O N S
PART 1: THEORY QUESTIONS. (1 point each)
1. What is the purpose of information presented in notes to financial statements?

a. To present management’s responses to auditor’s comments.
b. To provide disclosures required by generally accepted accounting principles.
c. To provide recognition of amounts not included in the totals of the financial statements.
d. All of the above statements are purposes of information presented in the notes to the financial statements.
2. The premium on a two-year insurance policy expiring on June 10, 2013 was paid in total on July 1, 2011. The original
payment was debited to the prepaid insurance account. The appropriate journal entry had been recorded on December 31,
2011. The balance in the insurance expense account on December 31, 2011 should be:
a. Higher than if the original payment had been initially debited to an expense account.
b. Lower than if the original payment had been initially debited to an expense account.
c. The same as it would have been if the original payment had been initially debited to an expense account.
d. The same as the original payment.
3. The balancing figure in the worksheet is net income if

a. In the statement of financial position columns, the total of the debits exceed the total of the credits.
b. In the statement of financial position columns, the total of the credits exceeds the total of the debits.
c. The total of the credits exceeds the total of the debits in the income statement columns.
d. The total of the credits is the same as the total of the debits in the income statement columns.
4. An entity initially records prepayments in real accounts and makes reversing entries when appropriate. Which of the
following items need to be reversed at the beginning of the next accounting period?
a. Accrued items.
b. Prepaid expenses recorded under the asset method.
c. The entry to record the portion of service fees received in advance that is earned by year-end.
d. Both choices B and C are items that need to be reversed at the beginning of the next accounting period.
5. Which of the following transactions would cause a change in equity?

a. Borrowing money from a bank. c. Repayment of bank loan.
b. Purchase of delivery truck on credit. d. Sale of land on credit for a price above cost.
6. Adjusting entries are dated in the journal entries as of the

a. Date they were actually journalized. c. First day of the accounting period.
b. Date which depends on the discretion of the d. Last day of the accounting period.
management.
7. The following statements are all true, except

a. Failure to recognize accrual of assets overstate asset.
b. Failure to recognize accrual of liabilities overstates net income.
c. Failure to recognize earnings previously unearned revenue overstates liabilities.
d. Failure to recognize the consumption of prepaid expense will overstate the net income.
8. Statement 1: The sale of land for cash at a price lower than cost causes no change in total assets.
Statement 2: A trial balance helps to localize errors within an identifiable time period.
a. Only the first statement is true. c. Both statements are true.
b. Only the second statement is true. d. Both statements are false.
9. The journal entries for a bank reconciliation

a. Are taken from the “balance per bank” section only.
b. May include a credit to Accounts Payable account for an NSF Check.
c. May include a credit to Accounts Receivable account for an NSF Check.
d. May include a debit to Miscellaneous Expenses account for bank service charge.
10. If the cash balance shown in a company’s accounting records is less than the correct cash balance, and neither the
company nor the bank has made any errors, there must be
a. Bank charges not yet recorded by the c. Deposits credited by the bank but not yet
company. recorded by the company.
b. Deposits in transit. d. Outstanding checks.
e. Either choices A or C.
PUP COLLEGE OF ACCOUNTANCY AND FINANCE SPECIAL QUALIFYING EXAMINATION
ACCO 2016 AND 2026 – FUNDAMENTALS OF ACCOUNTING PARTS 1 AND 2 May 4, 2014 8:00 am-11:00 am
11. Statement 1: When the current year’s ending inventory is overstated, the current year’s net income is overstated.
Statement 2: Gross profit may be computed as net sales less (beginning inventory + purchases + freight-out – purchase
returns and discounts – merchandise inventory, end).
12. Regarding one purchase of merchandise, the following entries were made by Paul John Company:
Account Titles Debit Credit

Purchases 17,000
Accounts Payable – Supplier 17,000
Transportation-In 1,900
Accounts Payable – Supplier 1,900
What are the shipping terms regarding this transaction?

a. FOB destination, freight collect c. FOB shipping point, freight collect
b. FOB destination, freight prepaid d. FOB shipping point, freight prepaid
13. If an entity ended a period with a larger inventory that it had at the beginning of the period, which of the following statements
is false?
a. Net income was less than gross profit.
b. The cost of goods available for sale was smaller than cost of goods sold.
c. The cost of goods sold was less than net purchases.
d. The cost of goods sold was smaller than net purchases.
14. The following statements are not false, except

a. Adjustment of the petty cash fund is made at the end of the period to avoid understatement of expenses and
overstatement of cash.
b. Entries are made to the petty cash account to increase or decrease the size of the fund or to adjust the balance if
not replenished at year end.
c. The imprest petty cash system in effect adheres to the rule of disbursement by checks.
d. The petty cash account is debited when the fund is replenished.
15. An adjusting entry that records the earned portion of unearned revenue previously recorded always includes a
a. Credit to an account in the asset category. c. Debit to an account in the asset category.
b. Credit to an account in the owners’ equity d. Debit to an account in the liability category.
category.
16. John, Ian, and Benedict are partners with capital balances of P100,000, P60,000, and P40,000, respectively. The partners
share income and loss equally. For an investment of P100,000 cash, Jib is to be admitted as a partner with one-fourth
interest in capital and income. Which of the following can best justify the amount of Jib’s investment?
a. Assets of the partnership were overvalued immediately prior to Jib’s investment.
b. Jib is apparently bringing goodwill into the partnership and his capital account will be credited for the appropriate
amount.
c. Jib will receive a bonus from the other partners upon his admission to the partnership.
d. The book value of the partnership’s net assets was less than their fair value immediately prior to Jib’s investment.
17. Statement 1: The unlimited liability of the partners for partnership debts makes the partnership more reliable from the point
of
view of creditors.
Statement 2: No one becomes a member of the partnership without the consent of majority of the partners.
18. Statement 1: During partnership liquidation, if a partner has a capital deficiency and is personally insolvent, the remaining
partners must absorb the deficiency as additional loss in proportion to their capital balances at the time of
liquidation.
Statement 2: Liquidation expenses which are incurred to facilitate the immediate realization of non-cash assets affect cash
but not capital.
19. Statement 1: A partnership contract may be made either in writing or orally and is perfected by mere consent.
Statement 2: The right of offset is applied when a deficient partner has a loan to the partnership. The amount to be offset is
the amount of the loan or the capital deficiency, whichever is lower.
20. Statement 1: The Accumulated Depreciation and Allowance for Doubtful Accounts, both being contra-asset accounts, are
not
carried in the partnership books since assets should be recorded at net amount.
Statement 2: All partners, whether capitalist or industrial, are to share on whatever partnership profits or losses.
21. Statement 1: Two partners, with capital ratio of 3:1 and profit and loss ratio of 2:1, admitted a new partner into their
business.
Under the bonus method, the old partners’ old profit and loss ratio should be used to allocate the excess of
the new partner’s contribution over the amount credited to his capital account.
Statement 2: When a partner purchases 1/4 interest of the equity from all the partners upon his admission, total partnership
equity is increased by 1/4.
a. Only the first statement is true. b. Only the second statement is true.
Second Semester, Academic Year 2013-2014 Page 2

c. Both statements are true. d. Both statements are false.

22. Statement 1: The other partners must absorb the deficiency in a partner’s capital account on liquidation because of mutual
agency and partnership non-taxability.
Statement 2: When a partnership is liquidated, a solvent partner may contribute cash to eliminate his deficiency.
23. This results when there is a change in the relationship of the partners caused by any partner ceasing to be associated in the
carrying on of the business or by admission of a new partner in the partnership.
a. Dissolution b. Liquidation c. Reorganization d. Winding-up
24. In a partnership, salaries to partners are considered

a. A liability. c. An expense of the business.
b. An allocation of profits and losses. d. Both choices A and C may be considered.
25. Which of the following will not be included as additions in determining the interest of the retiring partner?
a. Loans and advances from the partnership d. Share in the partnership profits to the date of
b. Loans and advances to the partnership retirement
c. Revaluation of assets to increase to current values on
the date of retirement
26. A company declared a cash dividend on its ordinary shares on December 15, 2013, payable on January 12, 2014. How
would this dividend affect shareholders’ equity on the following dates?
12/15/2013 12/31/2013 1/12/2014 12/15/2013 12/31/2013 1/12/2014
a. Decrease No effect Decrease c. No effect Decrease No effect
b. Decrease No effect No effect d. No effect No effect Decrease
27. When a 15% share dividend is distributed, retained earnings would be debited for an amount equal to
a. Retained earnings will not be debited. c. The fair market value of the share on the date
b. The fair market value of the share on the date of distribution.
of declaration. d. The par value of the share.
28. Treasury shares were acquired for cash at a price in excess of its par value. The treasury shares were subsequently
reissued for cash at a price less than its acquisition cost. Assume that the cost method of accounting is used for treasury
transactions, what is the effect on the Retained Earnings of (a) the acquisition at more than its par and (b) resale of treasury
shares, respectively?
a. Increase, no effect. c. No effect, increase.
b. No effect, decrease. d. No effect, no effect.
29. At the date of the financial statements, ordinary shares issued would exceed ordinary share outstanding as a result of the
a. Declaration of a share bonus. c. Payment in full of subscribed shares.
b. Declaration of a share split. d. Purchase of treasury shares.
30. Unlike a share split, a share dividend requires a formal journal entry in the financial accounting records because
a. Share dividends are payable on the date they are declared.
b. Share dividends increase the relative book value of an individual’s shareholdings.
c. Share dividends increase the shareholders’ equity in the issuing firm.
d. Share dividends represent a transfer from Retained Earnings account to Capital Stock account.
PART 2: PROBLEM-SOLVING QUESTIONS. (2 points each)
31. Gal, Lee, and Leo are forming a new partnership. Gal is to invest cash of P1,000,000 and factory equipment originally
costing P1,200,000 but has a second-hand value in the market at P500,000. Lee is to invest cash of P1,600,000, while Leo
is to contribute cash of P500,000, a factory building with a book value of P1,000,000 and an appraised value of P2,000,000,
and a new factory equipment to be used by the partnership with a selling price of P1,200,000 but which costs her business
with P1,000,000. The factory building is subject to a mortgage loan of P800,000 which the partnership did not assume.
Partners agree to share profits equally. How much is the total capital of the newly formed partnership?
a. P5,000,000 b. P5,800,000 c. P6,000,000 d. P6,800,000
32. Red, White, and Blue form a partnership on May 1, 2013. They agree that Red will contribute office equipment with a total
fair value of P40,000; White will contribute delivery equipment with a fair value of P80,000; and Blue will contribute cash. If
Blue wants a one-third interest in the capital and profits, he should contribute cash worth
a. P120,000 b. P180,000 c. P40,000 d. P60,000
33. JP, a partner in JP-Morgan Partnership, has a 30% participation in partnership profits and losses. JP’s capital account had
a net decrease of P60,000 during the calendar year 2013. During 2013, JP withdrew P130,000 (charged against his capital
account) and contributed property valued at P25,000 to the partnership. The net income of the partnership for 2013 is
a. P120,000 b. P150,000 c. P45,000 d. P95,000
34. TM Partnership begins its first year of operations with the following capital balances:
Tan, Capital P200,000
May, Capital 100,000
According to the partnership agreement, all profits will be distributed as follows:

 Tan will be allowed a monthly salary of P20,000 with P10,000 assigned to May.
 The partners will be allowed with interest equal to 10% of the capital balance as of the first day of the year.
 Tan will be allowed a bonus of 10% of the net profit after the bonus.
 The remainder will be divided on the basis of the beginning capital balance for the first year and equally for the second
year.
 Each partner is allowed to withdraw up to P10,000 a year.
Assume that the net loss for the first year of operations is P15,000 with net income of P55,000 in the subsequent year.
Assume further that each partner withdraws the maximum amount from the business each period. What is the balance of
Tan’s capital account at the end of the second year?

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May 4, 2014 8:00 am-11:00 am
a. P180,000 b. P184,750 c. P264,750 d. P284,750
35. Anna, Karen, and Nina are partners sharing profits in the ratio of 3:3:2. On June 30, their capital balances are: Anna –
P600,000, Karen – P400,000, and Nina – P300,000. The partners agree to admit Philomena on the following agreement:
1. Philomena is to pay Anna P400,000 for a 1/2 interest of Anna’s interest.
2. Philomena is also to invest P300,000 in the partnership.
3. The total capital of the partnership is to be P2,000,000, of which Philomena’s interest is to be 25%.
What are the capital balances of Anna, Karen and Nina after the admission of Philomena?
a. P187,500; P187,500; P125,000 c. P400,000; P300,000; P300,000
b. P300,000; P400,000; P300,000 d. P487,500; P587,500; P425,000
36. The partnership of Gary, Jerome, and Paul was formed on January 1, 2013. The original investment were as follows:
Gary, Capital P 80,000
Jerome, Capital 120,000
Paul, Capital 180,000
According to the partnership agreement, net income or loss will be divided among the respective partners as follows:
1. Salaries of P12,000 for Gary, P10,000 for Jerome, and P8,000 for Paul.
2. Interest of 8% on the average capital balance during the year for Gary, Jerome, and Paul.
3. Remainder divided equally.
Additional information is as follows:

1. Net income of the partnership for the year ended December 31, 2013 was P70,000.
2. Gary invested an additional P20,000 in the partnership on July 1, 2013.
3. Paul withdrew P30,000 from the partnership on October 1, 2013.
4. Gary, Jerome and Paul made regular drawings against their shares of net income during 2013 of P10,000 each.
The partner’s capital balances as of December 31, 2013 are

Gary Jerome Paul Gary Jerome Paul
a. P102,333 P122,733 P154,934 c. P122,333 P132,733 P164,934
b. P112,333 P132,733 P164,934 d. P92,000 P102,000 P134,934
37. The partnership accounts of Manzano, Montano, and Montalvo who share earnings in a 4:3:3 ratio are as follows on
December 31, 2013:
Manzano, Drawing (debit balance) P 30,000
Montalvo, Drawing (credit balance) 10,000
Montano, Loan 50,000
Manzano, Capital 160,000
Montano, Capital 130,000
Montalvo, Capital 140,000
Total assets amounted to P700,000, including P80,000 cash and liabilities total P240,000. The partnership was liquidated in
January 2014 and Montalvo received P120,000 cash payment to the liquidation. The loss on realization will be
a. P100,000 b. P75,000 c. P80,000 d. P95,000
38. Molina and Nuevo entered into a partnership agreement in which Molina is to have a 60% interest in capital and profits and
Nuevo is to have a 40% interest in capital and profits. Molina contributes the following:
Cost Fair Value
Land P 20,000 P 40,000
Building 200,000 120,000
Equipment 40,000 30,000
There is a P60,000 mortgage on the building that the partnership agrees to assume. Nuevo contributes P100,000 cash to
the partnership. The partnership formation provided for
a. Bonus of P8,000 given by Molina. c. Bonus of P8,000 to Nuevo and Molina.
b. Bonus of P8,000 given by Nuevo. d. Bonus of P8,000 to Nuevo.
39. Refer to the information provided in the preceding question. Assuming Regie offered to join for a 20% interest in the firm,
how much cash should he contribute?
a. P324,382 b. P330,870 c. P337,487 d. P344,237
40. Kurt decides to invest P200,000 for a 1/4 capital and profit and loss interest in the partnership of Art and Bert, who at that
time had capital balances of P200,000 and P300,000, respectively. Profit and loss ratio of the partners before the admission
was 6:4. If a positive asset revaluation is to be recorded, capital balances of Art, Bert and Kurt would be:
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May 4, 2014 8:00 am-11:00 am
a. P20,000; P30,000; P300,000 c. P215,000; P310,000; P175,000
b. P200,000; P300,000; P200,000 d. P260,000; P340,000; P200,000
41. A three-year insurance policy was purchased on October 1, 2012 for P6,000, and the Prepaid Insurance account was
debited. Assuming a December 31 year-end, what is the reversing entry at the beginning of the next accounting period
(January 1, 2013)?
a. Debit Insurance Expense and credit Prepaid Insurance, P5,500.
b. Debit Prepaid Insurance and credit Insurance Expense, P5,500.
c. Debit Prepaid Insurance and credit Insurance Expense, P500.
d. None.
42. The balance of the Accounts Receivable account at the end of the period is P3,500,000. The credit balance in the
Allowance for Uncollectible Accounts is P16,000 before any adjustment. The company then prepared the following adjusting
entry:

Uncollectible Accounts Expense 89,000
Allowance for Uncollectible Accounts 89,000
The rate uncollectible on all outstanding accounts receivable would have been
a. 3% b. 4% c. 5% d. 7%
43. The following data were taken from Ralph Company:

Assets, beginning P435,000
Assets, ending 501,000
Liabilities, beginning 100,500
Liabilities, ending 95,000
Withdrawal for the year 25,000
How much was the net income for the period?

a. P46,500 b. P66,000 c. P71,500 d. P96,500
44. On March 31, 2014, Lionel Company bought equipment with a useful life of 10 years. This asset is depreciated in a straight
line basis, with 10% scrap value. The 2014 year-end statement of comprehensive income reported depreciation expense on
this equipment amounting to P30,375. How much is the residual value of the service equipment?
a. P30,375 b. P33,750 c. P40,500 d. P45,000
45. Accrued salaries payable of P5,000 were not recorded at December 31, 2012. Supplies on hand of P2,000 at December
31, 2013 were erroneously treated as expense instead of supplies inventory. Neither of these errors were discovered nor
corrected. The effect of these two errors would cause the
a. 2012 net income and December 31, 2012 retained earnings to be understated by P5,000 each.
b. 2012 net income to be overstated by P5,000 and 2013 net income to be understated by P2,000.
c. 2013 net income and December 31, 2013 retained earnings to be understated by P2,000 each.
d. 2013 net income to be understated by P7,000 and December 31, 2013 retained earnings to be understated by
P2,000.
46. Monica Company, on December 31, 2014, reported Insurance Expense totaling P6,000. This amount came from the
expiration of two insurance policies. Policy A, which has a life of two years, was expensed at P2,250, and Policy B, which
has a life of three years, was expensed at P3,750. Both of these aforementioned insurance policies were paid in cash last
September 28, 2014. How much total cash was paid by Monica Company which was debited to Prepaid Insurance account
on September 28, 2014?
a. P18,000 b. P45,000 c. P63,000 d. P80,000
47. Nicole Company paid P72,000 to renew its only insurance policy for three years on March 1, 2013, the effective date of the
policy. On March 31, 2013, Nicole’s unadjusted trial balance showed a balance of P3,000 for the Prepaid Insurance account
and P72,000 for the Insurance Expense account. What amount should be reported for Prepaid Insurance and Insurance
Expense accounts, respectively, for the three months ended March 31, 2013?
a. P70,000 and P3,000. c. P72,000 and P3,000.
b. P70,000 and P5,000. d. P73,000 and P2,000.
48. Provided here is an excerpt from the worksheet of Adrian Company’s fourth month of operations:
Trial Balance Adjusted Trial Balance Income Statement
Debit/(Credit) Debit/(Credit) (Debit)/Credit
Cash 320,000 320,000
Accounts Receivable 124,000 124,000
Office Supplies Inventory 10,000 8,000
Prepaid Insurance 42,000 30,000
Prepaid Rent 24,000 20,000
Equipment 542,000 542,000
Accumulated Depreciation-Equipment (11,583) (17,375)
Salaries Payable (53,000) (58,000)
Service Revenue 159,000
Commission Revenue 12,000
Other operating expenses amount to P65,000. How much is the company’s net income for the fourth month?
a. P106,000 b. P70,208 c. P72,208 d. P82,208
49. On December 31 of the current year, Bunjoi Company’s bookkeeper made an entry debiting Supplies Expense and
crediting Supplies on Hand for P126,000. The Supplies on Hand account had a P153,000 debit balance on January 1. The
December 31 balance sheet showed Supplies on Hand of P114,000. Only one purchase of supplies was made during the
month, on account. The entry for that purchase was
a. Debit Supplies Expense, P87,000, and credit Accounts Payable, P87,000.
b. Debit Supplies on Hand, P165,000, and credit Accounts Payable, P165,000.
c. Debit Supplies on Hand, P87,000, and credit Accounts Payable, P87,000.
d. Debit Supplies on Hand, P87,000, and credit Cash, P87,000.
50. In reconciling the book and the bank balances of Ben-Hur Corporation, you discover the following for the month of
December 2013:
Balance per bank statement P60,000
Balance per books 14,000
Receipts of December 31, 2013 not deposited until January 3, 2014 10,000
Bank service charge for December 100
A paid check for P4,000 was recorded in the cash book as P400. Assuming no errors except as noted, the amount of
outstanding checks is
a. P40,300 b. P43,000 c. P52,500 d. P59,700
51. Obama Company reported a balance of P43,000 in its Cash account at the end of the month. There were P20,000 deposits
in transit and P15,000 of outstanding checks. The bank statement showed a balance of P50,000, service charges of
P6,000, and the proceeds of the note collected by the bank for the company. The note had a face value of P15,000. The
interest on the note collected by the bank was
a. P12,000 b. P3,000 c. P6,000 d. P9,000

52. The cashier misplaced all the bank statements for the past year. You reviewed the accounting records and discovered that
the following journal entry was made to reconcile the June 30, 2013 bank records and accounting records:

Accounts receivable 152,024
Miscellaneous expense 1,250
Notes receivable 20,000
Interest revenue 1,000
Cash 132,274
The unadjusted cash balance in the accounting records was P768,370, outstanding checks were P20,750, and no other
adjustments were required. What is the pre-adjusted bank statement balance at June 30, 2013?
a. P636,096 b. P656,846 c. P789,120 d. P879,894
53. On August 7, 2013, JPIA purchased merchandise from JFINEX costing P50,000, FOB shipping point, 2/10 n/30. How much
should JPIA pay to JFINEX assuming the seller paid for the transportation cost of P900 and payment was made on August
16, 2013?
a. P49,000 b. P49,900 c. P50,000 d. P9,882
54. The following data are available for the month of March and April of the current year:
March April
Inventory, beginning P 7,000 P ?
Inventory, end 6,500 7,500
Purchases 26,000 25,400
Purchase discount 6,500 6,900
Freight-out 5,000 6,000
Net sales 42,000 45,700
Sales return 4,000 4,200
Sales discount 2,000 3,000
Operating expenses 18,500 19,250
Administrative expenses 12,350 12,350
The cost of goods sold for the month of April is

a. P17,500 b. P18,000 c. P23,500 d. Indeterminable.
55. The December 31, 2013 balances of the selected accounts of Toni Company and pertinent information are shown below:
Inventory, January 1, 2014 P2,800,000
Purchases 7,500,000
Purchase returns 500,000
Sales returns 75% of net income
Inventory on December 31, 2012 2,000,000
Gross profit rate on net sales 20%
Operating expense 550,000
What is the amount of gross sales for the current year?

a. P7,000,000 b. P7,750,000 c. P8,500,000 d. P9,125,000
56. Napoles Company has the following selected account balances at June 30, 2013:
Ordinary share capital, no par, P10 stated value, 500,000 shares authorized, 200,000 shares issued P2,000,000
Paid-in capital in excess of stated value-ordinary shares 100,000
Accumulated depreciation-equipment 120,000
Retained earnings 400,000
Paid-in capital in excess of par value-preference shares 120,000
Preference share capital subscribed, 1,000 shares 40,000
Merchandise inventory 240,000
Equipment 500,000
Preference share capital subscription receivable 14,000
10% Preference share capital, P40 par, 40,000 shares authorized 800,000
Pre-operating costs 10,000
The subscription receivable for preference share is collectible within six months. The total shareholders’ equity is
a. P3,436,000 b. P3,446,000 c. P3,450,000 d. P3,460,000
57. PBB Company’s statement of financial position shows total shareholders’ equity of P1,705,000 as of December 31, 2013.
What is the book value per ordinary share assuming that the company has two classes of share capital outstanding,
consisting of 5,000 shares, P100 par value preference shares with liquidation value of P120 per share, and 50,000 shares
of P10 par value ordinary share capital?
a. P 11.50 b. P 22.10 c. P 24.10 d. P 9.50
58. Bianca Corporation had 700,000 shares of ordinary shares authorized and 300,000 shares outstanding at December
31,2013. The following events occurred during 2014:
January 31 Declared 10% share dividend.
June 30 Purchased 100,000 shares.
August 1 Reissued 50,000 shares.
November 30 Declared 2-for-1 share split.
At December 31, 2014, how many shares of ordinary shares outstanding did Bianca have?
a. P560,000 b. P600,000 c. P630,000 d. P660,000

59. Alex Company had the following classes of stock outstanding as of December 31, 2013:
 Ordinary share, P20 par value, 20,000 shares outstanding.
 Preference share, 6%, P100 par value, cumulative, 2,500 shares issued.
During the year, the company purchased 500 of its preference shares for P125. No dividends were paid on preference
share for 2011 and 2012. On December 31, 2011, a total cash dividend of P200,000 was declared. What are the amounts
of dividends payable on both the ordinary shares and preference shares, respectively?
a. P0 and P200,000 c. P164,000 and P36,000
b. P155,000 and P45,000 d. P185,000 and P15,000
60. On December 29, 2013, Robi Corporation was registered at the Securities and Exchange Commission with 100,000
authorized ordinary shares of P100 par value. The following were Robi’s transactions:
December 29, 2013 Issued 400,000 shares at P105 per share
May 14, 2014 Purchased 600 of its ordinary shares at P110 per share
August 9, 2014 400 treasury shares were sold at P95 per share
December 31, 2014 Profit P830,000, cash dividend paid P200,000.
What is the total shareholder’s equity of Eagle Company on December 31, 2014?
a. P10,602,000 b. P4,352,000 c. P4,802,000 d. P4,820,000
PART 3: CASE ANALYSIS PROBLEM. (2 points each)
Ebee Barney Corporation, organized on June 1, 2013, was authorized to issue stock as follows:
 800,000 shares of 9% preference shares, convertible, P100 par
 2,500,000 shares of ordinary shares, P2.50 stated value
During the remainder of the fiscal year ended May 31, 2014, the following transactions were completed in the order given:
1. 300,000 shares of preference shares were subscribed for at P105, and 900,000 shares of ordinary shares were
subscribed for at P26. Both subscriptions were payable 30% upon subscription, the balance in one payment.
2. The second subscription payment was received, except for one subscriber for 60,000 shares of ordinary shares who
defaulted on payment. The full amount paid by this subscriber was returned, and all of the fully paid share was issued.
3. 150,000 shares of ordinary shares were reacquired by purchase at P28.
4. Each preference share was converted into four shares of ordinary shares.
5. The treasury shares was exchanged for machinery with a fair market value of P4,300,000.
6. There was a 2-for-1 share split, and the stated value of the new ordinary share is P1.25.
7. Net income was P830,000.
Based on the above and the result of your comprehensive analysis, determine the following as of December 31, 2014:
61. The outstanding shares for preference

a. 750,000 b. 900,000 c. 2,040,000 d. 4,080,000
62. Ordinary shares

a. P2,100,000 b. P2,550,000 c. P4,200,000 d. P5,100,000
63. Total additional paid-in capital

a. P48,240,000 b. P48,340,000 c. P48,808,000 d. P50,890,000
64. Total contributed capital

a. P53,340,000 b. P53,440,000 c. P53,908,000 d. P55,990,000
65. Total shareholders’ equity

a. P54,170,000 b. P54,270,000 c. P54,738,000 d. P56,820,000
END O F EXAMI NAT I O N

Do not leave the examination room unless you are instructed to do so. Review your own answers.
Return this questionnaire together with the scannable answer sheet and worksheet to the proctor.
STICK TO THE FIGHT WHEN YOUR HARDEST HIT,

IT’S WHEN THINGS SEEM WORST THAT YOU MUST NOT QUIT.
@IAmEBeeBarney 4/28/2014
SEE YOU ON YOUR SECOND YEAR NEXT SCHOOL YEAR! 

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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

COLLEGE OF ACCOUNTANCY AND FINANCE

ACCO 2016 and 2026 – FUNDAMENTALS OF ACCOUNTING PARTS 1 AND 2

1. What is the purpose of information presented in notes to financial statements?

3. The balancing figure in the worksheet is net income if

5. Which of the following transactions would cause a change in equity?

6. Adjusting entries are dated in the journal entries as of the

7. The following statements are all true, except

9. The journal entries for a bank reconciliation

Account Titles Debit Credit

What are the shipping terms regarding this transaction?

14. The following statements are not false, except

Second Semester, Academic Year 2013-2014 Page 2

Second Semester, Academic Year 2013-2014 Page 3

24. In a partnership, salaries to partners are considered

PART 2: PROBLEM-SOLVING QUESTIONS. (2 points each)

According to the partnership agreement, all profits will be distributed as follows:

Second Semester, Academic Year 2013-2014 Page 4

ACCO 2016 and 2026 – FUNDAMENTALS OF ACCOUNTING PARTS 1 AND 2

Additional information is as follows:

The partner’s capital balances as of December 31, 2013 are

ACCO 2016 and 2026 – FUNDAMENTALS OF ACCOUNTING PARTS 1 AND 2

Account Titles Debit Credit

43. The following data were taken from Ralph Company:

How much was the net income for the period?

Second Semester, Academic Year 2013-2014 Page 7

Account Titles Debit Credit

The cost of goods sold for the month of April is

What is the amount of gross sales for the current year?

Second Semester, Academic Year 2013-2014 Page 8

PART 3: CASE ANALYSIS PROBLEM. (2 points each)

61. The outstanding shares for preference

62. Ordinary shares

63. Total additional paid-in capital

64. Total contributed capital

65. Total shareholders’ equity

END O F EXAMI NAT I O N

STICK TO THE FIGHT WHEN YOUR HARDEST HIT,

SEE YOU ON YOUR SECOND YEAR NEXT SCHOOL YEAR! 

Second Semester, Academic Year 2013-2014 Page 9

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