QUALIFYING EXAM REVIEWER

QUIZ MODULE 1-4

1. The terms “record” and “recording” are most synonymous with. *
a) Posting
b) Identifying
c) Journalizing
d) Communicating

2. It is the form of business organization that provides the highest degree of

continuity

a) Partnership
b) Corporation
c) Sole proprietorship
d) Cooperative

3. It is the basic storage of information in accounting. *

a. USB
b. Journal
c. Account
d. Memory Card

4. You are the accountant of a business. Your company entered into a transaction.
After identifying that the transaction is an accountable event, what should you
do next? *
a) Communicate it
b) Tell your boss about it
c) Record it
d) Ignore it

5. This type of business organization is created by a contractual agreement

between two or more individuals *
a) Partnership.
b) Cooperative.
c) Corporation.
d) Sole proprietorship.
6. Under the accrual basis of accounting, a business records a sale. *
a) At the point in time when both sale occurs and collected.
b) When sales occurs or sales price is collected as an accounting policy choice
c) When the sale price is collected.
d) When the sale occurs.

7. This punctuality of information to be able to affect the decisions of users refers

to the qualitative characteristic of. *
a) Verifiability.
b) Relevance
c) Faithful representation.
d) Timeliness.

8. You own a fish ball business. When you get fish ball from your business for your
personal consumption, you pay for it, even though you are the business owner.
You are applying which of the following accounting concepts? *
a) Fishy business.
b) Going concern.
c) Cost-benefit.
d) Separate entity.

9. You acquired goods with normal selling price of P10,000 at a discounted price of
P8,000. You recorded the goods at P8,000. You are applying which of the
following concepts? *
a) Historical cost.
b) Materiality.
c) Discounted price concept.
d) Accrual basis.
10. This accounting concept is “entity-specific”, meaning it depends on the facts
and circumstances surrounding a specific entity. *
a) Going concern.
b) Separate entity.
c) Materiality.
d) Matching.

11. This concept requires the preparation of financial statements at least annually. *
a) Separate entity.
b) Materiality.
c) Accrual basis.
d) Reporting period.

12. When making judgments and estimates under conditions of uncertainty, the
accountant chooses the potentially unfavorable outcome over the favorable
one. This concept refers to *
a) Reporting period.
b) Prudence/Conservatism.
c) Separate entity.
d) Going concern.

13. Information has this qualitative characteristic if it provides a true, correct, and
complete depiction of what it intends to represent. *
a) Faithful representation.
b) Comparability.
c) Verifiability.
d) Relevance.

14. Entity A, a big corporation, purchases a calculator for P500. Entity A

immediately charges the cost as expense. This is acceptable under which of
the following concepts? *
a) Materiality.
b) Cost-benefit.
c) Prudence.
d) Historical cost.
15. Treating a business and its owner as one and the same violates which of the
following principles? *
a) Materiality.
b) Verifiability.
c) Going concern.
d) Separate entity

16. Entity A had total assets of and total liabilities of P120M and P75M, respectively,
at the beginning of the period. During the period, Entity A earned total income of
P60 and incurred total expenses of P45. How much is Entity A’s ending total
equity? *
a) P120M.
b) P90M.
c) P80M.
d) P60M.

17. Entity A’s beginning equity was P60M. If during the year, Entity A earned total
income of P16M and incurred total expenses of P8M, how much is Entity A’s
ending equity? *
a) P84M.
b) P76M.
c) P – 0 -.
d) P68M.

18. Entity A had total assets of P100M and total liabilities of P60M at the beginning of
the period. If at the end of the period, total assets increased by P30M, while total
liabilities remained the same, Entity A’s total equity at the end of the period
would be *
a) P60M.
b) P90M.
c) P80M.
d) P70M.
19. Entity A earned total income of P50M and reported a loss of P8M. Entity A’s total
expenses were *
a) P16M.
b) P42M.
c) P58M.
d) P – 0 -.

20. Entity A had total assets, liabilities, and equity of P140M, P90M and P50M,
respectively, at the beginning of the period. During the period, Entity A’s total
liabilities decreased to P40M, while its profit was P25M. There were no other
transactions or events that affected equity during the period. How much is Entity
A’s ending total assets? *
a) P75M.
b) P115M.
c) P125M.
d) P95M.

21. Entity A has ending total assets of P160M and ending total liabilities of P90M.
Entity A had a beginning equity of P30M. If Entity A incurred total expenses of
P50M during the year, how much was the total income? *
a) P70M.
b) P80M.
c) P90M.
d) P120M.

22. Entity A has ending total assets of P60M and ending total liabilities of P45M.
Entity A had a beginning equity of P10M. If Entity A earned total income of P25M
during the year, how much were the total expenses? *
a) P25M.
b) P20M.
c) P- 0 –
d) P15M.
23. Entity A’s beginning equity was P80M. If during the year, Entity A earned total
income of P10M and incurred total expenses of P18M, how much is Entity A’s
ending equity? *
a) P88M.
b) P52M.
c) P90M.
d) P72M.

24. Entity A incurred total expenses of P60M and reported a profit of P16M. Entity
A’s total income was. *
a) P72M.
b) P76M.
c) P -0 -.
d) P44M.

25. Entity A had total assets, liabilities, and equity of P120M, P75M and P45M,
respectively, at the beginning of the period. During the period, Entity A’s total
liabilities decreased by P20M, while its profit was P25M. There were no other
transactions or events that affected equity during the period. How much is Entity
A’s ending total assets? *
a) P125M.
b) P70M.
c) P85M.
d) P95M.

26. Goods that are held for sale by a business. *

a) Inventory
b) Accounts Payable
c) Accounts Receivable
d) Cash

27. Revenue earned from rendering services. *

a) Service fees
b) Unearned income
c) Gains
d) Sales
28. Income collected in advance but not yet earned. *
 a) Unearned income
b) Sales
c) Service Fee
d) Accrued Income

29. The unused portion of rent paid in advance. *

a) Cash
b) Inventory
c) Prepaid rent
d) Rent expense

30. A customer bought goods from your business, on credit. The customer orally
promised to pay the sale price next week. Which of the following accounts is
increased by this transactions. *
a) Accounts payable
b) Notes payable
c) Accounts receivable
d) Notes receivable

QUIZ MODULE 5-8

1. Your business obtained a ₱1M loan from a financing company. The financing
company made you sign a contract promising to repay the loan after a year.
Which of the following accounts is increased and therefore credited? *
a) Cash
b) Notes payable
c) Accounts receivable
d) Sales

2. You purchased goods to be held for sale in the ordinary course of business
activities, on cash basis. Which of the following accounts is increased and
therefore debited? *
a) Inventory
b) Cash
c) Accounts payable
d) Owner’s equity
3. The minimum balance of an account is zero. In accounting, a
a) Psychotic balance.
b) Crazy balance.
c) LOL balance.
d) Abnormal balance.

4. Entity A’s accounts receivable has a balance of ₱10,000. If the related allowance
for bad debts account has a balance of ₱4,000, the carrying amount of accounts
receivable in Entity A’s financial statements is
a) ₱14,000.
b) 0.
c) ₱4,000.
d) ₱6,000

5. An increase to an account is recorded *

a) In the credit side of that account.
b) In the side of that account that represents its normal balance.
c) Beside the account.
d) In the debit side of that account.

6. At the beginning of the period, a business has a cash balance of ₱20,000. During
the period, total cash collections and total cash payments amounted to ₱100,000
and ₱70,000, respectively. How much is the ending balance of cash? *
a) 10,000
b) 50,000
c) 70,000
d) 30,000

7. When two debits get together, the result is *

a) Addition.
b) Love and happiness.
c) Deduction.
d) Multiplication.
8. Which of the following is not a special journal? *
a) Purchases journal
b) Subsidiary ledger
c) Sales journal
d) Cash receipts journal

9. A customer bought goods from your business, on credit. The customer orally
promised to pay the sale price next week. Which of the following accounts is
increased and therefore debited? *
a) Sales
b) Cash
c) Accounts receivable
d) Notes receivable

10. You opened up a business and invested ₱5M cash as the business’ initial capital.
Which of the following accounts is increased and therefore debited? *
a) Cash
b) Owner’s equity
c) Accounts payable
d) Accounts receivable

11. Quality Managerial Services issued a 30-day, 6% promissory note in the amount
of P25,000. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
o Prepaid Expense – Expense Method
12. As of August 16, the Fast-Line Services received P150,000. Its accountant
recorded the transaction by crediting Unearned Service Income. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
o Prepaid Expense – Expense Method

13. Mega Prime Movers in their ledger accounts appear a credit balance for
Unearned Delivery Service Income in the amount of P112,500. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
o Prepaid Expense – Expense Method

14. Entity A increased to 15% of Accounts Receivable its doubtful account for the
period. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
o Prepaid Expense – Expense Method
15. Kids purchased Air-conditioning unit at an amount of P18,950. Scrap value is
estimated at P2,950 and useful life of 5 years. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
o Prepaid Expense – Expense Method

16. Maria Clara Laundry Services received cash advance from customer in the
amount of P25,000. It initially recorded collection as credit to Laundry Services
Income. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
o Prepaid Expense – Expense Method

17. Happy Homes Day – Care pays its 4 helpers at rate of P300 per day (Monday
through Saturday) payable during Saturday. The end of accounting period is
Thursday. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
o Prepaid Expense – Expense Method
18. Milky Way Computer Rentals received P25,000 for printing of wedding invitation
card as of December 16, 2003 and was rendered as credit to income account.
*
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
o Prepaid Expense – Expense Method

19. Monthly rental of P5,000 was paid in advance for 3-month Moonlight Delivery
Services on October 31, 2003 and recorded as debit to prepaid rent. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
o Prepaid Expense – Expense Method

20. Speed Shoe Repair Center customarily makes the payroll to their shoe makers
and helpers amounting to P25,000 every Wednesday and Saturday respectively.
The accounting period ends on Friday. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
o Prepaid Expense – Expense Method
21. Twilight Waste Enterprise invested his P75,000 in a 45-day, 4.5% time deposit
last November 15. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
o Prepaid Expense – Expense Method

22. On September 1, 2003, Star Promotion made a payment for a 12 months

advertising amounting to P36,000 to Women Fashion Magazine. The initial entry
was debited to Advertising expense. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
o Prepaid Expense – Expense Method

23. On November 1, 2003 an annual insurance premium in the amount of P14,400

was paid in advance by Tamaraw Security Force. At the end of its accounting
period, December 31, 2003, Tamaraw Security Force recorded adjusting entry by
debiting insurance expense. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
 o Prepaid Expense – Expense Method

24. A Fire Insurance Policy was availed of by Dynamic Nursery Homes last
September 1, 2003. By December 31, 2003, Dynamic Nursery recorded an
adjusting entry by debiting Prepaid Insurance. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
o Prepaid Expense – Expense Method

25. A 90 – day, 9% interest bearing rate amount to P30,000 was issued by DMI
Employment Agency to its creditor on April 30, 2003. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
o Prepaid Expense – Expense Method

26. On June 1, 2003, a 90-day, 5% interest per annum time deposit in the amount of
P50,000 was placed by Horizon Travels. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
 o Prepaid Expense – Expense Method

27. An office supplies unused was debited by Red Fox Computer Center in the
amount of P33,500. At the end of the accounting period, physical count was
conducted and the remain balance of office supplies was P18,250. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
o Prepaid Expense – Expense Method

28. A delivery truck in the amount of P235,000 was bought by Quality Freight
Forwarders as of June 2003. It has a scrap value of P35,000 and a useful life of
5 years. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
o Prepaid Expense – Expense Method

29. The Majestic Printing Press realized after several demand that almost 15% of the
accounts receivable of P75,500 is deemed to be uncollectible. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
 o Unearned Income – Income Method
o Prepaid Expense – Asset Method
o Prepaid Expense – Expense Method

30. A 4-door Viajero Apartelle was being rented at the rate of P6,500 per month per
door. Part of the agreement is that a 1-month advance rental is required. At the
end of the accounting period, an adjusting entry was made by crediting the
unearned rent. *
o Accrued Income
o Accrued Expense
o Bad Debts
o Depreciation
o Unearned Income – Liability Method
o Unearned Income – Income Method
o Prepaid Expense – Asset Method
o Prepaid Expense – Expense Method

PRELIM EXAM
1. Which of the following statements regarding the recording of events is valid? *
a) Neither non-accountable nor accountable events are recorded in the
accounting books.
b) Only non-accountable events are recorded in the accounting books.
c) Only accountable events are recorded in the accounting books.
d) Both non-accountable and accountable events are recorded in the accounting
books.

2. Under the accrual basis of accounting, *

a) Income is recorded only when cash is received and expenses are recorded
only when cash is paid.
b) All real accounts have normal debit balances.
c) Income is recorded in the period it is earned and expense is recorded in the
period it is incurred, irrespective of when cash is received or paid.
d) Liabilities, owner’s capital, and drawings all have normal credit balances.
3. External users of general-purpose financial statements include all of the following
except *
a) Investors
b) Creditors
c) Lenders
d) Owners who are directly involved in managing the business

4. Information has this qualitative characteristic if two different users could reach
a general agreement as to what the information intends to represent. *
a) Relevance
b) Verifiability
c) Comparability
d) Faithful representation

5. Under this concept, the life of the business is divided into series of reporting
periods. Thus, businesses normally prepare financial statements at least
annually. *
a) Matching principle
b) Conservatism constraint
c) Time period
d) Unit-of-measure assumption

6. Mr. Van owns a butcher shop, a restaurant, and a catering business. Separate
financial statements are prepared for each business independent of the other
businesses. What accounting principle or assumption is being applied in this
situation? *
a) Full-disclosure principle
b) Matching
c) Time period assumption
d) Separate entity assumption

7. What is the primary purpose of accounting? *

a) To produce accountants.
b) To provide accounts.
c) To provide information that is intended to be useful in making economic
decisions.
d) To count money
8. At year-end, Entity A’s total assets and total liabilities are ₱180M and ₱70M,
respectively. If Entity A had a beginning equity of ₱75M and there were no
contributions from, or distributions to, the owner during the period, how much
profit (loss) did Entity A earn (incur) during the year? *
a) ₱35M
b) ₱25M
c) (₱25M)
d) (₱35M)

9. Which of the following statements is correct? *

a) In accounting parlance, depreciation means the decline in the value of an
asset.
b) Building is a liability account.
c) Freight-out is an expense account.
d) Unearned income is an income account.

10. In accounting, an amount enclosed in parentheses means that the amount is *

a) A negative amount.
b) Owned by the accountant.
c) Full-disclosure principle
d) Not material
.
11. It is a present obligation that has resulted from past events and has the potential
to cause a transfer of an economic resource in its settlement. *
a) Asset.
b) Liability.
c) Income.
d) Expense

12. If income exceeds expenses, *

a) Profit is earned.
b) A loss is incurred.
c) Total equity is decreased.
 d) Total equity is not affected.

13. Entity A had total assets, liabilities, and equity of ₱140M, ₱90M and ₱50M,
respectively, at the beginning of the period. During the period, Entity A’s total
liabilities decreased to ₱40M, while its profit was ₱25M. There were no other
transactions or events that affected equity during the period. How much is Entity
A’s ending total assets? *
a) ₱95M
b) ₱115M
c) ₱125M
d) ₱75M

14. Entity A had total assets and total liabilities of ₱120M and ₱75M, respectively, at
the beginning of the period. During the period, Entity A earned total income of
₱60 and incurred total expenses of ₱45. How much is Entity A’s ending total
equity? *
a) ₱60M
b) ₱90M
c) ₱120M
d) ₱80M

15. The start-up capital of a business consisted of ₱1,000,000 cash provided by the
business owner and an additional ₱250,000 from a bank loan. The total start-up
assets of the business therefore is *
a) ₱1,250,000
b) ₱750,000
c) ₱1,000,000
d) ₱250,000

16. It is an economic resource controlled by the entity that has resulted from past
events and has a potential to produce economic benefits. *
a) Equity
b) Liability
c) Asset
d) Income
17. The beginning balance of “Cash” is placed on which side of the T-account? *
a) Every side
b) Right side
c) Bottom side
d) Left side
18. Entity A has ending total assets of ₱60M and ending total liabilities of ₱45M.
Entity A had a beginning equity of ₱10M. If Entity A earned total income of ₱25M
during the year, how much were the total expenses? *
a) ₱25M
b) ₱0
c) ₱20M
d) ₱15M

19. Which of the following would result to income of ₱320,000? *

a) Total expenses of ₱360,000 and profit of ₱40,000
b) Total expenses of ₱280,000 and loss of ₱40,000
c) Total expenses of ₱220,000 and loss of ₱100,000
d) Total expenses of ₱360,000 and loss of ₱40,000

20. The business makes a ₱3M sale to a customer who orally promises to pay for
the purchase price after 30 days. *
a) Cost of sales Accounts receivable
b) Accounts receivable Owner’s capital
c) Cash Sales
d) Accounts receivable Sales

21. If you pay your tuition fee in school, the school will issue you this document. *
a) Sales invoice
b) Change
c) Official receipt
d) Thank you note

22. Which of the following represents an abnormal balance? *

a) Accounts payable, end. ₱10 (Dr.)
b) All of these look normal to me.
c) Inventory, end. ₱10 (Dr.)
d) Accounts receivable, end. ₱10 (Dr.)
23. If you debit a liability account, what happens? *
a) Its balance increases.
b) Its balance disappears.
c) Nothing!
d) Its balance decreases.

24. It is the step in the accounting cycle where the identified accountable events are
recorded in the journals. *
a) Journalizing
b) Analyzing
c) Accounting
d) Posting
25. Which of the following is the effect of purchasing inventory on account? *
a) Inventory is increased and Accounts payable is decreased
b) Inventory is increased and Accounts payable is increased
c) Inventory is increased and Cash is decreased
d) Inventory is decreased and Accounts payable is increased

26. The business spends ₱1M in marketing and promoting the products. *
a) Advertising expense Cash
b) Accounts payable Cash
c) Accounts receivable Equipment
d) Advertising expense Owner’s capital

27. During the year, you started a sole proprietorship business. You invested ₱10M
cash to the business. *
a) Accounts receivable Owner’s drawings
b) Cash Investment expense
c) Cash Owner’s capital
d) Owner’s capital Owner’s drawings
28. It is a document issued by a buyer to a seller indicating the types, quantities and
agreed prices for products or services that the buyer intends to purchase. *
a) Sales order
b) Purchase order
c) Purchase invoice
d) Buyer document

29. Obtaining a loan results to *

a) A decrease in asset but an increase in liability.
b) Increase in both asset and liability.
c) An increase in asset but a decrease in liability.
d) Decrease in both asset and liability.

30. The business recognizes depreciation of ₱250,000 on the equipment. *

a) Prepaid supplies Equipment
b) Equipment Accumulated depreciation
c) Depreciation expense Equipment
d) Depreciation expense Accumulated depreciation

31. The business purchases inventory costing ₱900K on account or on credit. *

a) Accounts payable Owner’s capital
b) Inventory Accounts payable
c) Cash Accounts payable
d) Inventory Cash

32. This type of journal entry contains only a single debit and a single credit. *
a) One-sided entry
b) Simple entry
c) Single entry
d) Compound entry

33. The main purpose of preparing a trial balance is *

a) To try if total debits equal total credits in the ledger.
b) To annihilate the accounts.
 c) To determine whether transposition or transplacement errors have been
committed.
d) To determine whether the debits and credits in the journal are equal

34. Which of the following statements regarding the trial balance is correct? *
a) A contra asset account would appear in the debit column of the trial balance.
b) Trial balances are prepared to check the equality of debits and credits in the
accounts.
c) A trial balance is one of the components of a complete set of financial
statements. As such, financial reporting requires the preparation of a trial
balance.
d) The accounts are presented on the trial balance according to magnitude, i.e..,
in order of size.

35. The heading of a trial balance does not include which of the following? *
a) Name of the business
b) Type of activity that the business is engaged with
c) Date of the report
d) Title of the report

36. Entity A received a 12%, ₱200,000, one-year, note receivable on October 1,

20x1. Entity A uses a calendar year period. The principal and interest on the note
are due on October 1, 20x2. The adjusting entry to take up accrued interest
income on December 31, 20x1 includes a *
a) Debit to interest receivable for ₱6,000.
b) Credit to interest receivable for ₱12,000.
c) Credit to interest income for ₱12,000.
d) Debit to interest income for ₱6,000.

37. Aling Nena’s Sari-sari Store’s total sales during the period were ₱100M. Of that
amount, ₱60M was on credit. If the total business expenses were ₱70M, how
much is the profit (loss)? *
a) 10M
b) (30M)
c) 30M
d) (10M)
38. Accounts are listed in the trial balance in this sequence. *
a) Asset, Equity, Liabilities, Expense, and Income
b) Asset, Liabilities, Equity, Expense, and Income
c) Asset, Expense, Liabilities, Equity, and Income
d) Asset, Liabilities, Equity, Income, and Expense

39. If you get the balances of the accounts in the general ledger and place them on a
single report, that report would be *
a) Chart of accounts.
b) Ledger report.
c) Trial balance.
d) Financial statements.

40. Which is of the following is a correct sequence of the steps in the accounting
cycle? *
a) Identifying and analyzing, Journalizing, Posting, Trial balance
b) Journalizing, Identifying and analyzing, Trial balance, Posting
c) Posting, Journalizing, Identifying and analyzing, Trial balance
d) Left, right, up and down

41. You recorded a ₱21,000 amount as ₱2,100. You committed an accounting error
called *
a) Transgender error.
b) Transformation error.
c) Transplacement error.
d) Transposition error.

42. This refers to process of transferring the amounts of debits and credits in a
recorded journal entry to the ledger accounts. *
a) Journalizing
b) Posting
c) Analyzing
d) Trial balancing
43. The primary purpose of preparing a trial balance is to *
a) Record transactions as they occur.
b) Check the equality of total debits and total credits in the ledger.
c) Report the processed information to interested users.
d) Classify the effects of the transactions on the accounts.

44. This trial balance is prepared before adjusting entries are made. *
a) Post-closing trial balance
b) Unadjusted trial balance
c) Pre-closing trial balance
d) Adjusted trial balance

45. The primary purpose of posting is to *

a) All of these
b) Summarize transactions in a report form.
c) Record transactions.
d) Classify transactions.

46. On September 1, 2003, Star Promotion made a payment for a 12 months

advertising amounting to P36,000 to Women Fashion Magazine. The initial entry
was debited to Advertising expense. On December 31, 2003, how much is the
amount to be debited to Prepaid Advertising?

 24000

47. The Majestic Printing Press realized after several demand that almost 15% of the
accounts receivable of P75,500 is deemed to be uncollectible. How much is
credited to allowance for bad debts?

 11325

48. A delivery truck in the amount of P235,000 was bought by Quality Freight
Forwarders as of April 1, 2003. It has a scrap value of P35,000 and a useful life
of 5 years. Compute for the depreciation expense to be recorded as adjusting
entry for December 31, 2003.
  30000

49. Milky Way Computer Rentals received P25,000 for printing of wedding invitation
card as of December 16, 2003 and was rendered as credit to income account.
What amount should be debited to income account on December 31, 2003 if
80% of the invitation was already completed and delivered?

 5000

50. On December 1, 2003, a 90-day, 5% interest per annum time deposit in the
amount of P30,000 was placed by Horizon Travels. Compute the interest to be
recorded as adjusting entry on December 31, 2003

 125

QUIZ MODULE 9-10

1. A worksheet is prepared primarily to facilitate the preparation of the financial
statements. *
a) True
b) False

2. All adjusting entries can be reversed *

a) True
b) False

3. The financial statements are prepared only after adjusting entries are made. *
a) True
b) False

4. Under the perpetual inventory system, increases and decreases in inventory are
recorded through the purchases, freight-in, purchase returns, and purchase
discounts accounts *
a) True
b) False
5. Under the perpetual inventory system, the business does not maintain records
that show the running balances of inventory on hand and cost of goods sold as at
any given point of time. *
 a) True
b) False

6. Purchase returns and discounts are deducted from gross purchases when
computing for net purchases *
a) True
b) False

7. Accounts receivable is an example of a real account *

a) True
b) False
8. Closing entries are prepared at the end of the accounting period to “zero out” the
balances of all nominal accounts in the ledger. *
a) True
b) False

9. Beginning inventory less Net purchases less Ending inventory equals Cost of
goods sold *
a) True
b) False

10. Inventory refers to the goods that a merchandising business has purchased with
the main intention of reselling them. *
a) True
b) False

11. On an adjusted trial balance, the capital account reflects? *

a) Increase to revenue and expense
b) Period end balance
c) Results of the adjusting entries
d) Beginning-of-the-period balance

12. Which of the following will have an open account in the post-closing trial
balance?

a) Used supplies
b) Unearned interest income
c) Interest expense
 d) Rent income.

13. The difference between the accounts receivable and the cash collection may be
due to the following reasons except: *
a) Sales allowances
b) Sales returns
c) Trade discount
d) Cash discount

14. One of the accounts is not included in the computation of net purchases but
included in determining the amount of total purchases *
a) Purchase returns
b) Freight-in
c) Purchase allowances
d) Purchase discounts

15. This system of recording goods intended for sale maintains the merchandise
inventory account in every transaction. *
a) Periodic inventory
b) Just-in-time inventory
c) Maintenance inventory
d) Perpetual inventory

16. Which of the following adjustments cannot be reversed in the next accounting
period? *
a) Advanced collections initially recorded using the income method
b) Prepayments initially recorded using the asset method
c) Accruals for income or expense
d) Prepayments initially recorded using the expense method

17. Which of the following is reported as part of the operating expenses? *

a) Cost of sales
b) Freight-in
c) Sales allowance
d) Freight out
18. A series of recurring accounting activities from the beginning to the end of a
given accounting period is called *
a) Accounting entries
b) Accounting period
c) Accounting time line
d) Accounting cycle

19. If debits do not equal credits, the first step to find the error is to *
a) Call your manager and ask for advice.
b) Review the journal entries for errors.
c) Make correcting entries rather than adjusting entries.
d) Add the debit and credit columns again.
20. In which of the following arrangements does the freight become the expense of
the buyer? *
a) FOB shipping point, collect
b) None of the choices
c) FOB destination, prepaid
d) FOB destination, collect

21. Which of the following is equal to the Statement of Financial Position? *

a) Post-closing trial balance
b) Adjusted trial balance
c) Unbalance trial balance
d) Unadjusted trial balance

22. Which of the following accounts is used in merchandising but not in servicing? *
a) Cash discount
b) Purchase discount
c) Sales discount
d) Volume discount
23. Entity A has a beginning inventory of ₱340,000. During the period Entity A
purchased inventories costing ₱990,000. Freight paid on the purchase totaled
₱40,000. The ending inventory was ₱360,000. If the net sales were ₱1,200,000,
how much is the gross profit? *

 190000

24. Entity A sold merchandise at list price of P150,000; 10, 1/10, n/30. If the account
is collected 8 days from the invoice date, Entity A will receive *

 133650

25. If gross purchase is P211,000, purchase discounts is P9,000 and net purchases
is P196,000, purchase returns and allowances is *

 6000
26. If the beginning inventory is P50,000, cost of goods purchased is P280,000, and
the ending inventory is P75,000, cost of goods sold is *

 255000

27. The cost of sale is P250,000. Total purchases amounted to P300,000 which
increased the total goods available for sale to P310,000. The ending inventory *

 60000

28. The purchases of Entity A has a list price of P250,000; terms 10, 5, n/30. How
much is amount of purchases to be recorded? *

 213750
 29. Entity A has a beginning inventory of ₱280,000. During the period Entity A
purchased inventories costing ₱890,000. Freight paid on the purchase totaled
₱30,000. If the ending inventory is ₱220,000, how much is the cost of goods
sold? *

 980000

30. Merchandise was purchased for P60,000 on terms of 2/10, n/30. The seller
advanced shipping charges of P2,000 on shipping terms of FOB shipping point. If
payment was made within the discount period, the cash paid is *

 60800

QUIZ Module 11-12

1. The owner’s capital account is a nominal account which has a normal credit
balance *
o True
o False

2. Interest for use of partner’s capital may be provided for regardless of the
existence of profit because the use of the partner’s capital is independent from
the earnings of profit *
o True
o False

3. As a rule, a partner’s salary and interest on capital are treated as ordinary

operating expenses. *
o True
o False

4. In the absence of partner’s agreement, the partners must contribute the

partnership’s total agreed capitalization equally. *
o True
o False
5. Bonus, as a compensation for good performance, is allowed only when the
partnership has profit *
o True
o False

6. When the income summary account has a debit balance, the amount allocated
to the partners’ capital account will increase their balances. *
o True
o False

7. Bonus, as a compensation for good performance, is allowed only when the

partnership has profit. *
o True
o False

8. The balance of partner’s capital account represents his share in the net income
of the partnership. *
o True
o False

9. A debit to partner’s capital account is made whenever the partner borrowed

substantial amount from the partnership *
o True
o False

10.In the basic accounting equation, the partnership owner’s capital is equal to the
net asset of the partnership business. *
o True
o False

11.When the partner’s investment is a noncash asset, it shall be valued at fair

market value. *
o True
o False
12.The profit and loss ratio agreement should be based on the respective capital
contributions of the partners. *
o True
o False

13.As a rule, a partner’s salary and interest on capital are treated as ordinary
operating expenses *
o True
o False

14.The accrual method of accounting for revenue and expense is most applicable
for sole proprietorship and corporation, but not for partnership *
o True
o False

15.The primary accounting issue for accounting for partnership operations is the
profit determination and distribution to the partners *
o True
o False

16.In partnership, each partner has his own owner’s capital account. *
o True
o False

17.Partner’s salaries and allowances are usually treated as operating expense *

o True
o False

18.Interest for use of partner’s capital may be provided for regardless of the
existence of profit because the use of the partner’s capital is independent from
the earnings of profit. *
o True
o False

19.In the absence of agreement, the capital contribution shall be made equally *
o True
 o False

20.Cash contributions of partners shall be recorded at fair market value. *

o True
o False

21.The schedule shows the modification of the capital interest of each partner
during an accounting period *
a) Statement of Financial Position.
b) Statement of Cash Flows.
c) Statement of Comprehensive Income.
d) Statement of Changes in Partners’ Capital.

22.In the absence of any agreement, profits and losses are divided. *
a) Equally
b) Based on ending capital
c) Based on contributed capital
d) No distribution of profit and loss is to be made

23.What is the valuation if a partner contributes a noncash property to the

partnership? *
a) Acquisition cost of the property
b) Actual amount of the property
c) Fair value of the property
d) Agreed value of the property

24.At what value will cash contributions of a partner be recorded in the partnership
books? *
a) Past value of cash
b) Purchasing value of cash
c) Actual amount of cash
d) Future value of cash

25.This allowance for profit distribution is granted only if there is profit. *

a) Bonus
b) Salary
c) All of the choices
 d) Interes
26.Partner’s investment may include? *
o Noncash assets
o Cash or noncash assets with liabilities assumed by the partnership
o All of the choices
o Cash

27.The account is used to close the revenue and expenses of a partnership *

o Income summary
o Partner’s drawings
o Partner’s capital
o Accumulated earnings

28.A form of business organization that maintains a capital account for each of its
owner is called *
o Cooperative
o Corporation
o Sole proprietorship
o Partnership

29.Which of the following accounts has a normal credit balance? *

o Partner’s drawing
o Loans to partners
o Due from partner
o Partner’s capital

30.If partner’s personal expenses are paid by the partnership, the payment is
charged to the *
o Partnership’s nominal account
o Partner’s drawing account.
o Partnership’s expense account
o Partner’s expense account

31.A partner’s capital with debit balance is called? *

o Partner’s deficit
o Partner’s equity
 o Net operating loss
o Capital loss

32.This account represents the partner’s share in the net assets of the
partnership *
o Drawing account
o Working fund
o Partner’s deficit
o Partner’s capital

33.This item is not treated as operating expense of the partnership. *

o Office supplies used
o Bonus to the managing partner
o Salaries of manager employed by the partnership
o Interest on the partnership’s outstanding loan

34.The accounting method used for partnership operation is: *

o Fair market value method
o Cost method
o Accrual method
o Cash method

35.What kind of business relationship is being depicted by a “loans receivable from

partner’s account?” *
o Employer-employee
o Payor-payee
o Creditor-debtor
o Investor-investee

36.Which of the following is an asset account? *

o Unearned income
o Prepaid expense
o Partner’s capital
o Partner’s drawing
 37.A and B share in the partnership’s profit in the ratio of 2:1, respectively. A
received P245,000 as his share. How much did B receive as his share? *

 122500
b
38.A is trying to decide whether to accept a salary of P80,000 or a salary of
P50,000 plus a bonus of 10% of net income after salary and bonus as a
means of allocating profit among the partners. Salaries traceable to the other
partners are estimated to be P200,000. What amount of partnership profit
would be necessary so that A would consider the choices to be equal? *

 580000

39.A and B are partners who share profits and losses on a 3:1 basis, respectively,
after a salary allowance of ₱15,000 is allocated to partner A. Earnings for the
period total ₱51,000. What will be the total amount credited to the Capital
account of partner A when the Income Summary account is closed? *

 42000

40.A, B and C share in the partnership’s profit and losses in the ratio of 3:4:5.
During the year, the partnership’s distributive income is P1,500,000. What is the
amount of A’s share from the partnership’s income? *

 375000

41.A and B are partners who share profits and losses on a 2:1 basis, respectively,
after a salary allowance of ₱12,000 is allocated to partner B. Earnings for the
period total ₱39,000. What will be the amount credited to the Capital account of
partner A when the books are closed *

 18000
 42.The A and B Partnership has a P450,000 net income during the year. A gets
credit for salary of P120,000. How much of the profit is credited to A if they
share remaining profits in a ratio of 40:60, respectively? *

 252000

MIDTERM EXAM

1. If the “Income summary” account has a credit balance after all income and
expense accounts are closed, there is*
a) loss.
b) profit.
c) Owner’s drawings
d) an error.

2. Which of the following is not an adjusting entry?*

a) An entry to take up depreciation expense for the period.
b) An entry to take up bad debts expense at the end of the period.
c) An entry to record the cash acquisition of equipment.
d) An entry to recognize interest expense for the period.

3. A business sells goods on cash basis. This transaction is most likely recorded
in which of the following special journals?*
a) Purchases journal
b) Sales journal
c) Cash receipts journal
d) Diary journal

4. Which of the following adjustments can be reversed in the next accounting

period?*
a) Adjusting entry to take up depreciation expense
b) Adjusting entry to record bad debts expense
c) All of these
d) Adjusting entry to record accrued interest income

5. The ending equity is ₱9,000. If total income for the period is ₱5,000 while total
expenses are ₱8,000, how much is the beginning balance of equity?*
 a) 9,000
b) 6,000
c) 12,000
d) 0

6. The beginning equity is ₱5,000. If total income for the period is ₱8,000 while
total expenses are ₱6,000, how much is the ending balance of equity?*
a) 3,000
b) 7,000
c) 1,000
d) 5,000

7. This account is used to record payments received from customers prior to the
delivery of goods or rendering of services.*
a) Accounts receivable
b) Prepaid asset
c) Unearned income
d) Accrued income

8. At the start of the period, a business has total assets of ₱500,000 and total
liabilities of ₱300,000. During the period, the business earned total income of
₱1,000,000 and total expenses of ₱640,000. No additional investments or
withdrawals were made by the owner. Total assets at the end of the period
were ₱830,000. How much is the total liabilities at the end of the period?*
a) 280,000
b) 260,000
c) 240,000
d) 270,000

9. The balance of accumulated depreciation in Entity A’s unadjusted trial balance

is ₱100,000. If the adjustments columns in the worksheet show a debit
adjustment of ₱20,000, how much is the balance of accumulated depreciation
that is extended to the adjusted trial balance columns of the worksheet?*
a) 100,000
b) 0
c) 120,000
d) 80,000
10. At the beginning of the period, the owner’s capital account of a business
has a balance of ₱220,000. During the period, the total debits and credits to
that account were ₱60,000 and ₱70,000, respectively. How much is the ending
balance of the owner’s capital account?*
a) 90,000
b) 210,000
c) 230,000
d) 350,000

11. Entity A’s income statement shows a line item described as “Cost of
goods sold.” Entity A is most likely a*
a) service business.
b) merchandising business.
c) sole proprietorship business.
d) partnership business.

12. At the beginning of the period, a business has a cash balance of

₱20,000. During the period, total cash collections and total cash payments
amounted to ₱100,000 and ₱70,000, respectively. How much is the ending
balance of cash?*
a) 10,000
b) 70,000
c) 30,000
d) 50,000

13. The equipment of ABC Co. has a historical cost of ₱500,000 and an
accumulated depreciation of ₱120,000. How much is the carrying amount of the
equipment?*
a) 380,000
b) 620,000
c) 500,000
d) 480,000
14. A chart of accounts is*
a) a listing of all accounts and their balances.
b) a listing of all account titles.
c) a subsidiary ledger.
d) a special journal.

15. Entity A has accounts receivable of ₱500,000 and a related allowance

for bad debts of ₱120,000. How much is the carrying amount of the accounts
receivable?*
a) 480,000
b) 620,000
c) 380,000
d) 500,000

16. Which of the following is not a correct expanded accounting equation?*

a) Assets + Expenses = Liabilities + Equity + Income
b) Assets – Liabilities = Equity + Income - Expenses
c) Assets = Liabilities + Equity + Income - Expenses
d) Assets = Liabilities + Equity + Income + Expenses

17. At the beginning of the period, a business has accounts payable of

₱200,000. During the period, the total debits and credits to the accounts
payable account were ₱100,000 and ₱70,000, respectively. How much is the
ending balance of accounts payable?*
a) 230,000
b) 30,000
c) 370,000
d) 170,000

18. If the BEG balance of accounts payable is ₱100,000 and the total debits
and credits to that account during period were ₱60,000 and ₱40,000,
respectively, the endin balance must be*
a) 20,000
b) 90,000
c) 0
d) 80,000
19. A business has total assets, liabilities, and equity of ₱10,000, ₱7,000
and ₱3,000, respectively, at the beginning of the period. During the period, total
liabilities decreased to ₱4,000 while profit was ₱5,000. How much is the ending
total assets?*
a) 9,000
b) 11,000
c) 7,000
d) 12,000
20. Which of the following is equal to total goods available for sale?*
a) Inventory, end. + Cost of sales
b) Net purchases + Inventory, end.
c) Cost of sales – Inventory, end.
d) Net purchases – Inventory, beg.

21. If the ending balance of accounts receivable is ₱100,000 and the total
debits and credits to that account during period were ₱60,000 and ₱40,000,
respectively, the beginning balance must be*
a) 0
b) 80,000
c) 20,000
d) 120,000

22. Under this concept, the business is treated separately from its owners.*
a) Going concern
b) Matching principle
c) Historical cost concept
d) Separate entity concept

23. This represents the unused portion of rentals that have been paid in
advance.*
a) Travel expense
b) Cost of sales
c) Prepaid rent
d) Rent expense

24. At the beginning of the period, Entity A’s notes payable had a balance of
₱1,200. During the period, Entity A obtained an additional loan of ₱800 and
 made total payments of ₱500. How much is the ending balance of Entity A’s
notes payable?*
a) 1,800
b) 1,500
c) 1,200
d) 900

25. When preparing closing entries, which of the following accounts is

debited when closing to the “Income summary” account?*
a) Owner’s drawings
b) Depreciation expense
c) Sales
d) Salaries payable

26. A business has total assets of ₱640,000 and total equity of ₱360,000 at
the beginning of the period. The business earns income of ₱220,000 during the
period and reports profit of ₱80,000. There were no transactions with the owner
during the period. Total liabilities increased by ₱40,000 by the end of the
period. How much is the total assets at the end of the period?*
a) 820,000
b) 560,000
c) 860,000
d) 440,000

27. Entity A received a 12%, ₱200,000, one-year, note receivable on

October 1, 20x1. Entity A uses a calendar year period. The principal and
interest on the note are due on October 1, 20x2. How much is the interest
income to be accrued on December 31, 20x1?*
a) 12,000
b) 6,000
c) 24,000
d) 0

28. Accounts are listed in the trial balance in this sequence.*

a) Asset, Liabilities, Equity, Expense, and Income
 b) Asset, Equity, Liabilities, Expense, and Income
c) Asset, Expense, Liabilities, Equity, and Income
d) Asset, Liabilities, Equity, Income, and Expense

29. Which of the following is equal to the amount of total goods available for
sale?*
a) Cost of goods sold + Inventory, end.
b) Net purchases + Inventory, end.
c) Cost of goods sold – Inventory, beg.
d) Inventory, beg. + Inventory, end.

30. Inventory, beg. ₱50,000; Net purchases, ₱180,000; Inventory, end.,

₱90,000. How much is the Cost of goods sold?*
a) 140,000
b) 120,000
c) 90,000
d) 180,000

31. Which of the following results to the amount of cost of goods sold?*
a) Inventory, beg. + Net purchases – Inventory, end.
b) Sale price x number of units sold
c) Net purchases – Inventory, end.
d) Inventory, beg. + Inventory, end. – Net purchases

32. Which of the following is a report used in external reporting?*

a) Net purchases + Inventory, end.
b) Statement of cost of goods sold and gross profit
c) Worksheet
d) Balance sheet

33. The account used under the periodic inventory system to record the
transportation costs incurred on purchases.*
a) Purchases-in
b) Freight-in
c) Freight-out
 d) Transportation out

34. Inventory, beg. ₱50,000; Net purchases, ₱120,000; Cost of goods sold,
₱80,000. How much is the Inventory, end.?*
a) 80,000
b) 90,000
c) 70,000
d) 120,000

35. Net sales minus cost of sales equals*

a) Gross profit.
b) Net net sales.
c) Net cost.
d) Net profit.

36. Inventory, end. ₱162,000; Net purchases, ₱216,000; Cost of goods sold,
₱144,000. How much is the Inventory, beg.?*
a) 120,000
b) 80,000
c) 144,000
d) 90,000

37. Cost of goods sold is debited each time a sale is made under which of
the following inventory systems?*
a) Perpetual system
b) COGS system
c) Endocrine system
d) Periodic system

38. Inventory, end. ₱162,000; Net purchases, ₱216,000; Cost of goods sold,
₱144,000. How much is the Total Goods Available for Sale?*
a) 163,000
b) 306,000
c) 280,000
 d) 370,000

39. Inventory, beg. ₱50,000; Cost of goods sold, ₱80,000; Inventory, end.
₱90,000. How much is the Net purchases?*
a) 70,000
b) 90,000
c) 120,000
d) 80,000

40. A and B agreed to form a partnership. A shall contribute ₱60,000 cash

while B shall contribute ₱120,000 cash. However due to the expertise that A will
be bringing to the partnership, the partners agreed that they should initially
have equal interests in the partnership capital. Under the bonus method, how
much is the adjusted capital balance of B immediately after the formation of the
partnership?*
a) C n n
b) 90,000
c) 60,000
d) 150,000

41. A and B formed a partnership: A, to contribute his land (to be valued at

P100,000), and B to contribute cash equivalent to investment of A. The land of
A was acquired by A two years ago at a cost of P80,000. The cash contribution
of B is*
a) 80,000
b) 100,000
c) 120,000
d) 20,000

42. If the partnership's cash is P25,000, the net assets are P250,000, and
the total claim of outside creditors is P200,000, the total amount of the
partnership's noncash assets would be*
a) 275,000
b) 325,000
c) 525,000
 d) 425,000

43. If the net assets of the partnership is P250,000, and the total
partnership's liability is P350,000, the partnership total capital would be*
a) 600,000
b) 100,000
c) 350,000
d) 250,000

44. If the amount of liabilities is P165,000 and the percentage of owner's

claim in the total partnership's assets is 45%, the partnership's total assets
would be*
a) 300,000
b) 200,000
c) 366,667
d) 255,750

45. The amount of partnership total assets is P500,000 and its liabilities
amount to P100,000. How much is the amount of Partner's A capital if his
interest in the partnership is 60%*
a) 240,000
b) 300,000
c) 400,000
d) 160,000

46. How much are the adjusted capital contributions of A and B, respectively?*
a) 670,000; 700,000
b) 670,000; 600,000
c) 670,000; 690,000
d) 660,000; 700,000

47.The partnership agreement provided for a salary allowance of ₱6,000 per

month to partner X, and the balance to be divided equally between partners X
and Y. X made no additional partnership investments during the year, but
withdrew ₱7,000 per month. Profit for the year was ₱120,000. The net change
in X's capital account was a:*
a) ₱54,000 decrease
b) ₱12,000 increase
c) ₱60,000 increase
d) ₱12,000 decrease

48.The A and B Partnership has a P450,000 net income during the year. A gets
credit for salary of P120,000. How much of the profit is credited to B if they
share remaining profits in a ratio of 40:60, respectively*
a) 270,000
b) 120,000
c) 198,000
d) 318,000

49.A, B and C share in the partnership's profit and losses in the ratio 3:4:5. During
the year, the partnership's profit is P1,500,000. What is the amount of C's share
from the partnership's income?*
a) 750,000
b) 500,000
c) 125,000
d) 625,000

50.C, D and E are partners who share profits and losses on a 3:2:1 basis,
respectively, after a salary allowance of ₱2,500 per month is allocated to
partner C. Partnership's net profit for the year total ₱105,000. What will be the
 total amount credited to the Capital account of partner C when the Income
Summary account is closed?*

 67500

51.A and B share in the partnership's profit in the ratio of 2:1 respectively. A
received P245,000 as his share. How much did B receive his share?*

 122500

52. How much are the capital balances of partners’ A, B and C, respectively, right
after the formation of the partnership?*

a) 1,625,000; 2,750,000; 1,625,000

b) 1,500,000; 1,500,000; 1,500,000
c) 1,625,000; 2,750,000; 1,250,000
d) 750,000 ; 1,000,000; 500,000

52.The ABC Co., in which A, B and C are partners, reported profit of ₱90,000. A, B
and C’s profit-sharing agreement is 1:2:3, respectively. How much is C’s share
in the profit?*
  45000

53.A is trying to decide whether to accept a salary of P40,000 or a salary of

P25,000 plus a bonus of 10% of net income after salary and bonus as a means
of allocating profit among the partners. Salaries traceable to the other partners
are estimated to be P100,000. What amount of income would be necessary so
that A would consider to be equal?*

 290000

54.A and B are considering forming a partnership whereby profits will be allocated
through the use of salaries and bonuses. Bonuses will be 10% of net income
after total salaries and bonuses. A will receive a salary of P30,000 and a bonus.
B has the option of receiving a salary of P40,000 and a 10% bonus or simply
receiving a salary of P52,000. Both partners will receive the same amount of
bonus. Determine the level of net income that would be necessary so that B
would be indifferent to the profit sharing option selected*

 334000

55.A and B are partners who share profits and losses on a 2:1 basis, respectively,
after a salary allowance of ₱12,000 is allocated to partner B. Earnings for the
period total ₱39,000. What will be the amount credited to the Capital account of
partner A when the books are closed?*

 18000
QUIZ MODULE 13-16

1. It is the change in the relation of the partners caused by an partner being

disassociated from the business *
a) Operations
b) Formation
c) Dissolution
d) Liquidation

2. Which of the following is correct when a new partner is admitted through purchase
of interest from existing partners? *

a) The incoming partner’s contribution is recorded in the partnership books.

b) Partnership capital is increased by the incoming partner’s contribution
c) The incoming partner’s contribution is not recorded in the partnership
books.
d) This is not allowed under the law. The new partner can only purchase
interest from the partnership and not from the partners themselves.

3. The partner’s capital accounts in AB Partnership before the admission of new

partner in the table below. C acquires 25% interest in the partnership by investing
P100,000 to the business. Using the bonus method, what is the P/L ratio of B after the
admission of C? *
 a) 30%
b) 32%
c) 22%
d) 28%

4. The partner’s capital accounts in AB Partnership before the admission of new

partner in the table below. Before the admission of C, B decides to retire. The
partnership pays B P180,000 as settlement of his partnership interest. How much is
the capital balance of A after the retirement of B? *

a) 200,000
b) 320,000
c) 140,000
d) 260,000

5. The partner’s capital accounts in AB Partnership before the admission of new

partner in the table below. C purchases one-third of A’s and B’s capital interest in the
partnership for P120,000. How much is the total equity of the partnership after the
admission of C? *
 a) 240,000
b) 200,000
c) 320,000
d) 440,000

6. The partner’s capital accounts in AB Partnership before the admission of new

partner in the table below. Before the admission of C, B decides to retire. The
partnership pays B P180,000 as settlement of his partnership interest. How much is
the total equity after the retirement of B? *

a) 320,000
b) 140,000
c) 260,000
d) 200,000

7. The partner’s capital accounts in AB Partnership before the admission of new

partner in the table below. C purchases one-third of A’s and B’s capital interest in the
partnership for P120,000. How much is B’s capital balance after the admission of C
and how much is the total gain (loss) that is recognized in the partnership’s books? *

a) 480,000; 0
b) 80,000; 13,333
c) 60,000; (13,333)
d) 80,000; 0

8. The partner’s capital accounts in AB Partnership before the admission of new

partner in the table below. C purchases one-fourth of A’s capital interest in the
partnership. How much is the capital balance of A after the admission of C? *

a) 150,000
b) 148,000
c) 24,000
d) 96,000

9. The partner’s capital accounts in AB Partnership before the admission of new

partner in the table below. C acquires 25% interest in the partnership by investing
P100,000 to the business. Under the bonus method, how much is the capital balance
of A after the admission of C? *

a) 212,000
b) 194,000 should be 197,000
c) 204,000
d) 206,000

10. The partner’s capital accounts in AB Partnership before the admission of new
partner in the table below. Before the admission of C, B decides to retire. A acquires
B’s interest for P180,000. How much is the capital of A after the retirement of B? *

a) 280,000
b) 264,000
c) 320,000
d) 200,000

11. Partners A, B and C decided to liquidate their partnership. If a cash priority

program prepared, which partner is paid first and how much is the total payments to
that partner before all partners will share on the available cash based on their profit or
loss ratios? *

a) B, P96,000
b) A, P20,000
c) B, P90,000
d) B, P60,000

11. Partners A, B and C decided to liquidate their partnership. One-third of the

noncash assets were sold for P70,000. The partnership paid P8,000 liquidation
expenses. Partner C is insolvent. How much cash did A receive from the settlement of
the partners’ interests? *

a) 13,600
b) 16,800
c) 12,800
d) 12,400

12. A and B decided to liquidate their partnership business. All the noncash assets
were sold for P870,000. The partnership paid P12,000 liquidation expenses. How
much is the carrying amount of the noncash assets? *
 a) 1,020,00
b) 980,000
c) 740,000
d) 860,000

13. Three-fourths (3/4) of the noncash assets were sold for P920,000. The partnership
paid P5,000 transaction costs on the sale. How much cash did A receive from the
settlement of the partners’ interests under the cash priority program? *

a) 493,500
b) 447,500
c) 386,500
d) 306,500

14. A and B decided to liquidate their partnership business. The partners were able to
convert all the assets into P180,000 cash. How much did A and B receive from the
final settlement of their interests, respectively? *

a) 70,000; 30,000
b) 56,667; 43,333
c) 60,000; 40,000
d) 50,000; 50,000

15. A and B decided to liquidate their partnership business. Three-fourths (3/4) of the
noncash assets were sold for P920,000. The partnership paid P5,000 transaction
costs on the sale. How much cash did C receive from the settlement of the partners’
interests? *

a) 193,000
b) 186,000
c) 206,000
d) 163,000

16. A and B decided to liquidate their partnership business. All the noncash assets
were sold for P870,000. The partnership paid P12,000 liquidation expenses. How
much is the loss on the sale of noncash assets, including the effect of liquidation
expenses? *

a) 112,000
b) 98,000
c) 122,000
d) 120,000

17. A and B decided to liquidate their partnership business. All the noncash assets
were sold for P870,000. The partnership paid P12,000 liquidation expenses. How
much cash did A receive from the settlement of the partners’ interests? *
 a) 175,600
b) 149,600
c) 183,400
d) 128,400

18. A and B decided to liquidate their partnership business. The partners were able to
convert all the assets into P90,000 cash. How much did B receive from the final
settlement of his interest? *

a) 35,000
b) 28,000
c) 30,000
d) 36,667

19. A and B decided to liquidate their partnership business. Half of the noncash assets
were sold for P370,000. The partnership paid P2,000 liquidation expenses. How much
cash did B receive from the settlement of the partners’ interests? *
 a) 163,400
b) 136,400
c) 139,600
d) 168,000

20. Which of the following is not a characteristic of the corporate form of

organization? *
a) ownership represented by shares of stock
b) separate legal existence
c) can be easily dissolved by the incapacity of one of the owners
d) unlimited liability of stockholders

21. A corporation reissues 10,000 treasury shares for ₱35 per share. The treasury
shares have a par value per share of ₱20 and have been reacquired in the previous
period for ₱25 per share. The reacquisition has been accounted for using the cost
method. What will be the effect of the reissuance on the total stockholders’ equity? *
a) decrease, ₱50,000.
b) increase, ₱350,000
c) increase, ₱200,000
d) increase, ₱100,000

22. A corporation purchases 10,000 shares of its own ₱20 par common stock for ₱35
per share, recording it at cost. What will be the effect on total stockholders’ equity? *
a) increase, ₱200,000
b) decrease, ₱200,000
c) increase, ₱350,000
d) decrease, ₱350,000

23. The excess of the proceeds from selling treasury stock over its cost should be
accredited to: *
a) Retained Earnings
 b) Premium on Capital Stock
c) Gain from Sale of Treasury Stock
d) Paid-In Capital (Share premium) from Sale of Treasury Stock

24. The entry to record the receipt of donated shares from a shareholder involves a
credit to: *
a) Donated Capital
b) Retained Earnings
c) Treasury Stock
d) None of these

25. Which of the following claims must first be satisfied upon liquidation of a
corporation? *
a) creditors
b) cumulative preferred stockholders
c) common stockholders
d) preferred stockholders

26. A person or an entity that has an interest in a corporation is called a *

a) entrepreneur
b) proprietor
c) stockholder or shareholder
d) partner

27. When a corporation purchases its own stock, what account is debited for the cost
of the stock *
a) Common Stock Subscribed
b) Preferred Stock
c) Common Stock Receivable
d) Treasury Stock

28. Which The amount printed on a stock certificate is known as: *

discount
a) par value
b) premium
c) stated value
29. The entry to record the issuance of common stock at a price above par would
include a credit to: *
a) Donated Capital
b) Retained Earnings
c) Treasury Stock
d) Paid-In Capital in Excess of Par-Common Stock (Share premium)

31.If a corporation does not directly debit retained earnings for the dividends it
declares, the corporation may debit an account called: *
a) Dividends income
b) Dividends.
c) Income summary.
d) Dividends expense.

32.A company with 20,000 authorized shares of ₱20 par common stock (ordinary
shares) issued 12,000 shares at ₱50. Subsequently, the company declared a
5% stock dividend on a date when the market price (fair value) was ₱60 per
share. What is the amount transferred from the retained earnings account to
paid-in capital accounts (share capital and share premium accounts) as a result
of the stock dividend? *
a) ₱6,000
b) ₱30,000
c) ₱36,000
d) ₱12,000

33.An increase in the Dividends account is recorded by *

a) Crediting it
b) Debiting it
c) Accruing a loss
d) Accruing an income

34. If income was ₱70,000, expenses were ₱59,000, and the dividends were
₱25,000, the amount of profit (loss) was: *
a) ₱70,000
b) ₱11,000
 c) (₱59,000)
d) ₱36,000

35.In completing the work sheet, the adjusted amount for the Dividends account is
extended to the: *
a) balance sheet debit column
b) income statement debit column
c) income statement credit column
d) balance sheet credit column

36.Which of the following accounts will be closed at the end of the fiscal year by
debiting Retained Earnings? *
a) Accounts Receivable
b) Salaries Expense
c) Dividends
d) Sales

37.Assume that a corporation has outstanding 5,000 shares of ₱6 cumulative

preferred stock (preference shares) of ₱100 par and dividends have been
passed for the preceding four years. What is the amount of preferred dividends
that must be declared in the current year before a dividend can be declared on
common stock (ordinary shares)? *
a) ₱180,000
b) ₱90,000
c) ₱150,000
d) ₱120,000

38.The Dividends account of a corporation is debited when: *

a) cash is paid to stockholders from earnings retained in the business
b) a liability is paid
c) an expense is paid
d) the stockholders invest cash
 39.The charter of a corporation (articles of incorporation) provides for the issuance
of 100,000 shares of common stock. Assume that 60,000 shares were originally
issued and 5,000 were subsequently reacquired. What is the number of shares
outstanding? *
a) 55,000
b) 5,000
c) 100,000
d) 60,000

40.The normal balance of Retained Earnings is: *

a) credit
b) debit.
c) zero.
d) negative.

FINAL EXAM
1. Financial accounting applies to which of the following:*
a) Businesses
b) All of the above
c) Non-profit organizations
d) Governments

2. Journal entries are recorded in the journal*

a) cutely.
b) chronologically.
c) chromatically.
d) pharmaceutically.

3.
Entity A has gross purchases of 360,000. Freight paid on the purchases amounted to 50,000. Purchase dis
*
a) 375,000
b) 390,000
c) 410,000
d) 445,000

Gross purchases P 360,000

Freight-in 50,000
Less: Purchase discounts (20,000)
Purchase returns (15,000)
NET PURCHASES 375,000
4. Accounts are listed in the trial balance in this sequence.*
a) Asset, Equity, Liabilities, Expense, and Income
b) Asset, Liabilities, Equity, Income, and Expense
c) Asset, Expense, Liabilities, Equity, and Income
d) Asset, Liabilities, Equity, Expense, and Income

5. The heading of a trial balance does not include which of the following?*
a) Type of activity that the business is engaged with
b) Title of the report
c) Name of the business
d) Date of the report

6. Businesses are required by law to file tax returns with this government agency.*
a) Bangko Sentral ng Pilipinas
b) Cooperative Development Authority
c) Bureau of Internal Revenue
d) Security and Exchange Commission

7. Which of the following is not a correct expanded accounting equation?*

a) Assets = Liabilities + Equity + Income + Expenses
b) Assets + Expenses = Liabilities + Equity + Income
c) Assets – Liabilities = Equity + Income - Expenses
d) Assets = Liabilities + Equity + Income – Expenses
8.
If the ending balance of accounts receivable is 100,000 and the total debits and credits to that account du
*
a) 120,000
b) 0
c) 20,000
d) 80,000

9. Under the liability method of initial recording of advanced collections of income,

an end-of-period adjusting entry is needed to recognize the*
a) earned portion of the mixed account.
b) expired portion of the cost.
c) No adjusting entry is needed.
d) unearned portion of the mixed account

10. In accounting, it means the allocation of the cost of an asset over the periods in
which the asset is used.*
a) Allocationing
b) Depreciation
 c) Bad debts
d) Cost spreading

11. The primary purpose of posting is to*

a) record transactions.
b) all of these
c) classify transactions.
d) summarize transactions in a report form.

12. Real accounts are presented in what formal report?*

a) Income statement
b) Worksheet
c) Unadjusted trial balance
d) Balance sheet
13. Which of the following adjustments can be reversed in the next accounting
period?*
a) All of these
b) Adjusting entry to record bad debts expense
c) Adjusting entry to take up depreciation expense
d) Adjusting entry to record accrued interest income
14. You are an accountant. You obtained the source documents for the business
transactions your company has entered into during the day and started
inspecting the documents. What step of the accounting cycle are you
performing?*
a) Posting
b) Journalizing
c) Identifying and analyzing
d) Reading

15. Which of the following is not an external event?*

a) Rendering services to clients
b) Purchase of raw materials for processing
c) Payment of notes payable
d) Production of goods for sale

16. Under the accrual basis of accounting,*

a) all real accounts have normal debit balances.
b) income is recorded in the period it is earned and expense is recorded in the
period it is incurred, irrespective of when cash is received or paid.
c) liabilities, owner's capital, and drawings all have normal credit balances.
d) income is recorded only when cash is received and expenses are recorded
only when cash is paid.

17. Under this concept, assets are initially recorded at their acquisition cost.*
a) Single entity concept
b) Going concern concept
 c) Historical cost concept
d) Matching principle

18. Your business sells goods to a credit customer. Which of the following accounts
is increased?*
a) All of these
b) Cost of sales
c) Accounts receivable
d) Sales

19.
Entity A has a beginning inventory of 340,000. During the period Entity A purchased inventories costing
*
a) 1,200,000
b) 260,000
c) 190,000
d) 1,010,000

20.
Entity A has a beginning inventory of 140,000. During the period Entity A purchased inventories costing
*
a) 880,000
b) 680,000
c) 780,000
d) 700,000

21.
The equipment of ABC Co. has a historical cost of 500,000 and an accumulated depreciation of 120,000.
*
a) 480,000
b) 500,000
c) 620,000
d) 380,000

22. Under this concept, the business is assumed to continue to exist for an indefinite
period of time.*
a) Historical cost concept
b) Matching principle
c) Separate entity concept
d) Going concern

23. What is the normal balance of the sales returns account?*

a) zero
b) credit
 c) none of these
d) debit

24. The branch of accounting that deals with providing financial information to
external decision makers is*
a) Government accounting.
b) Financial accounting.
c) Managerial accounting.
d) Public accounting.

25. It is the official accounting standard setting body in the Philippines.*

a) Philippine Institute of Certified Public Accountants
b) American Accounting Association
c) Accounting Standards Council
d) Financial Reporting Standards Council

26.
The start-up capital of a business consisted of 1,000,000 cash provided by the business owner and an add
*
a) ₱250,000
b) ₱1,000,000
c) ₱750,000
d) ₱1,250,000

27. It is a report that a business sends to its customer listing the transactions with the
customer during a period, the payments made by the customer and any
remaining balance due from the customer. It also serves as a notice of billing.*
a) Statement of account
b) Bank statement
c) Check
d) Delivery receipt

28. The main purpose of accounting is*

a) to account for money so it will not be lost.
b) to safeguard the assets of a company.
c) to provide a clear view of the state of the industry’s economy.
d) to provide information that is useful in making economic decisions..

29. Under this concept, some costs are initially recognized as assets and recognized
only as expenses when the related revenue is recognized.*
a) Historical cost concept
b) Matching principle
c) Going concern
d) Separate entity concept
30. The balance of an accounts receivable from a certain customer at any given
point of time can be determined by referring to the*
a) subsidiary ledger.
b) general journal.
c) financial statements.
d) general ledger.

31.
Entity A has a beginning inventory of 280,000. During the period Entity A purchased inventories costing
*
a) 1,360,000
b) 920,000
c) 950,000
d) 980,000

32. Which of the following is not an example of a source document?*

a) Bank statement
b) Special journal
c) Sales invoice
d) Delivery receipt

33. It is the aggregate of estimated losses from uncollectible accounts receivable.*

a) Bad debts expense
b) Notes receivable
c) Accounts receivable
d) Allowance for bad debts

34.
A and B share in partnership profits and losses on a 40:60 ratio. During the year, A’s capital account has
*
a) 180,000
b) 150,000
c) 200,000
d) 100,000
 A40 B60

Beginning 10,000 -

Share in profit

Withdrawals 60,000

End, capital 60,000

Net increase 50,000

35. The partnership agreement of Axel, Berg & Cobb provides for the year-end
allocation of net income in the following order. What amount should be allocated
to Axel?*

a) 101,000
b) 108,000
c) 110,000
d) 103,000
 Axel Berg cobb

250,000 is to be
allocated

10% of NI up to 10,000
100k

20% over 100k 30,000

210,000 3000 3000

204,000 68,000 68,000 68,000

Total 108,000 71,000 71,000

36. The partnership agreement of A, B and C is presented in below. How much is the
share of Partner C in partnership profit?*
 a) 19,200
b) 47,600
c) 32,200
d) 33,200

A B C

Profit 100,000

salaries 12,000 8,000 20,000

10% bonus 8,000 8000

interest 10,000 6,000 12,000 28,000

remaining 17,600 13,200 13,200 44,000

totals 47,600 19,200 33,200 100,000

37. The partnership agreement of Reid and Simm provides that interest at 10% per
year is to be credited to each partner on the basis of weighted-average capital
balances. A summary of Simm’s capital account for the year ended December
31, 2003, is as follows. What amount of interest should be credited to Simm’s
capital account for 2003?*

a) 16,500
b) 15,375
c) 17,250
d) 15,250
140,000 x 6/12 70,000

180,000 x 1/12 15,000

165,000 x 5/12 68, 750

10% interest 153, 750 = 15375

38.

Mr. A and Ms. B formed a partnership and agreed to divide the initial capital equally even though Mr. A

*
a) 100,000
b) 108,000
c) 92,000
d) 84,000
 A B Partnership

Contribution 100,000 84,000 184,000

16,000 difference 92,000 92,000

39. If the partnership agreement does not specify how income is to be allocated,
profits and loss should be allocated*
a) in accordance with their capital contributions.
b) equitably so that partners are compensated for the time and effort expended
on behalf of the partnership.
c) in proportion to the number of hours they have spent on the business since
partnership formation.
d) Equally.

40. The partnership agreement of A and B provides that interest at 10% per year is
to be credited to each partner on the basis of weighted-average capital balances.
A summary of B’s capital account for the year ended December 31, 20x1 is as
follows. How much is the interest on B’s weighted average capital?*

a) 27,675
b) 37,214
c) 23,322
 d) 33,633

252,000 x 6/12 126,000

324,000 x 1/12 27,000

297,000 x 5/12 123, 750

Totals 276, 750 = 27,650

41. When property other than cash is invested in a partnership, at what amount
should the noncash property be credited to the contributing partner’s capital
account?*
a) Fair value at the date of contribution.
b) Contributing partner’s tax basis.
c) Assessed valuation for property tax purposes.
d) Contributing partner’s original cost.

42.

Red and White formed a partnership in 2003. The partnership agreement provides for annual salary allow

*
a) Red 40,000 White 40,000
b) Red 43,000 White 37,000
c) Red 44,000 White 36,000
d) Red 45,000 White 35,000
 Red White Partnership

Profit 80,000

Salaries 55,000 45,000 100,000

ALLOCATION OF 12,000 8,000

REMAINING
PROFIT.LOSS

AS ALLOCATED 43,000 37,000 80,000

43.
Hamm is admitted as a new partner with a 25% interest in the capital of the new partnership for a cash pa
*
 a) 172,500
b) 160,000
c) 140,000
d) 280,000
Capital beg. 320,000
Hamm’s contribution 140,000
Totals 460,000
Hamm’s interest 25%
Hamm’s capital credit 115,000
Hamm’s actual 140,000
Bonus to other P 25,000

Eddy Fox Grimm Hamm

160,000 96,000 64,000 115,000

25,000 12,500

TOTAL 172,500

44.
A and B formed a partnership. A contributed cash of 500,000 while B contributed land with carrying amo
 *
a) 800,000
b) 400,000
c) 600,000
d) 500,000

A B PARTNERSHIP

Cash 500,000 500,000

Land 800,000 800,000

Mortgage (200,000

Total 800,000

45.
Fox, Greg, and Howe are partners with average capital balances during 2002 of 120,000, 60,000, and 40,
 *
a) 7,000 increase.
b) 35,000 decrease.
c) 11,000 decrease.
d) 42,000 increase.

Fox Greg Howe

Average capital 120,000 60,000 40,000

balances

Loss 33,000

Interes 22,000 12,000 6,000 4,000

Salaries 50,000 30,000 20,000

Total loss 105000

Allocation of loss 35,000 35,000 35,000

Remaining 7000 (29,000) (11,000)

balance

End capital 127,000 31,000 29,000

46.
Mr. A and Ms. B formed a partnership and agreed to divide the initial capital equally even though Mr. A
 *
a) 100,000.
b) 92,000.

c) 108,000.
d) 84,000.

47. Blau and Rubi are partners who share profits and losses in the ratio of 6:4,
respectively. On May 1, 2003, their respective capital accounts were as follows:*

a) 60,000
b) 54,000
c) 56,667
d) 50,000

Lind’s 150k x 1/3 = 50,000

Blau 60% (100 – 1/3) = 40.00000002% = 60,000

Rubi 26.666666668 = 40,000

48.
Eddy decided to retire from the partnership and by mutual agreement is to be paid 180,000 out of partner
*
a) Fox 120,000 Grimm 80,000
b) Fox 102,000 Grimm 68,000
c) Fox 108,000 Grimm 72,000
d) Fox 84,000 Grimm 56,000
 Eddy 50% Fox 30% Grimm 20% Partnership

Capital 160,000 96,000 64,000 320,000

Retirement (180.000) (180,000)

Bonus 20,000 (12,000) (8,000)

Remaining - 84,000 56,000 140,000

balance

49.

Kern and Pate are partners with capital balances of 60,000 and 20,000, respectively. Profits and losses ar

*
a) 12,000
b) 19,000
c) 16,000
d) 15,000

50. The issuance of shares of preferred stock to shareholders*

a) decreases preferred stock authorized.
b) has no effect on preferred stock outstanding.
c) increases preferred stock authorized.
d) increases preferred stock outstanding.
51.

ABC Co. was organized on January 2, 20x1, with 30,000 authorized shares of 10 par ordinary shares. Du

a) 115,000
b) 140,000
c) 100,000
d) 125,000
Unissued share capital 300,000

Authorized Share Capital 300,000

Cash 15 x 20,000 300,000

Unissued Share Capital 200,000

Share Premium- excess of Par 100,000

Treasury Shares 85,000

Cash 85,000

Cash 100,000

Treasury Shares 85,000

Share Premium - Treasury 15,000

52.

ABC Corp. declared a 5% stock (share) dividend on its 10,000 issued and outstanding shares of 2 par val

*
a) 1,000
b) 0
c) 500
d) 2,500

5% stock dividend
Outstanding shares 2 par 10,000 20,000
Fv of 5 pesos per share

Outstanding shares 10,000

Dividends: 5%
Total dividends 500

STOCK DIVIDENDS ACCOUNT IS AND ADJUCT EQUITY ACCOUNT NOT A

LIABILITY

53. On February 1, authorized ordinary share was sold on a subscription basis at a

price in excess of par value, and 20 percent of the subscription price was
collected. On May 1, the remaining 80 percent of the subscription price was
collected. Share premium would increase on*
a) Feb 1 - Yes May 1 - Yes
b) Feb 1 - No May 1 - Yes
c) Feb 1 - No May 1 - No
d) Feb 1 - Yes May 1 – No

54.
ABC.’s outstanding capital stock at December 15, 20x1, consisted of the following: On December 15, 20
*
 a) 34,000
b) 47,500
c) 10,000
d) 40,000

5 % Preference share, P10 par 300,000

Ordinary Shares, P1 par 200,000

Total dividends declared 100000

1) Basic allocation to PS 15,000
2) Basic allocation to OS 10,000
Excess allocated to participation 75,000
1) Participation of PS 45,000
2) Participation of OS 30,000
1.300k x 5%
2.200k x 55
3. 75k x 300k x 500k
4. 75k x 200k x 500k
PS 1 + 3 60,000
OS 2 + 4 40,000
TOTAL DIVIDENDS 100,000

55. Which of the following is an appropriate presentation of treasury stock?*

a) As a deduction at par from total stockholders' equity
b) As a marketable security
c) As a deduction at cost from total contingent liabilities
d) As a deduction at cost from total stockholders' equity
56. Which of the following is not one of the basic shareholders rights?*
a) The right to maintain one's proportional interest in the corporation.
b) The right to participate in earnings.
c) The right to participate in the proceeds of the sale of corporate assets upon
liquidation of the corporation.
d) The right to inspect the accounting records of the corporation.

57. Legal capital is the portion of contributed capital that cannot be distributed to the
owners during the lifetime of the corporation unless the corporation is dissolved
and all of its liabilities are settled first. For no-par value shares, legal capital is*
a) the aggregate market value of shares issued and subscribed.
b) the total consideration received or receivable from shares issued or
subscribed. With no par
c) the aggregate stated value of shares issued and subscribed.
d) the aggregate par value of shares issued and subscribed. With par
 58.

The stockholders' equity section of ABC Corporation's balance sheet at December 31, 20X2, was as follo

a) Share Premium ₱1,900,000; Retained Earnings ₱1,300,000

b) Share Premium ₱ 900,000; Retained Earnings ₱1,300,000
c) Share Premium ₱2,400,000; Retained Earnings ₱ 800,000
d) Share Premium ₱1,400,000; Retained Earnings ₱ 800,000

Share Capital 100k x 10 par 1,000,000

Share prem. Orig issuance 100k x 3 300,000

a) Share prem – treasury
b) Retained earnings (balancing 0 (no given amount)
figure)
Cash
500,000

1,800,000

TOTAL SHARE PREM. B4 RETIREMENT 2,700,000

Divide by : total issued shares b4 retirement 900,000
900k x 10 par/share cap (outstanding shares) / 10 par
SHARE PREM. – ORIG ISSUANCE P3

Share premium, beg 2,700,000 Retained Earnings, beg 1,300,000

Less: share prem, dr 300,000 Less: Retained Earnings, dr 500,000
Share premium, end 2,400,000 Retained Earnings, end 800,000

59.
On December 1, 20x1, ABC Corp. received a donation of 2,000 shares of its 5 par value ordinary shares
*
a) 20,000
b) 0
c) 70,000
d) 50,000

60. The entry to record the issuance of ordinary shares for fully paid share
subscriptions is*
a) Dr. Subscribed Share Capital; Cr. Share Capital
b) Dr. Common Stock Subscribed; Cr. Common Stock; Cr. Additional Paid-In
Capital
c) a memorandum entry.
d) Dr. Subscribed Share Capital; Cr. Subscriptions Receivable