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Professor:
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Financial Accounting & Reporting
FINAL GRADING EXAMINATION
1. 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 original cost.
c. Assessed valuation for property tax purposes.
d. Contributing partner’s tax basis.
2. A and B formed a partnership. A contributed cash of ₱500,000 while B contributed
land with carrying amount of ₱400,000 and fair value of ₱800,000. The land has an
unpaid mortgage of ₱200,000 which is assumed by the partnership. How much is
the correct valuation of B’s capital immediately after the partnership formation?
a. 400,000
b. 500,000
c. 600,000
d. 800,000
3. Mr. A and Ms. B formed a partnership and agreed to divide the initial capital
equally even though Mr. A contributed ₱100,000 and Ms. B contributed ₱84,000 in
identifiable assets. The partners agree that the difference in the amount of
contribution and the amount of credit to the partner’s capital shall be treated as
compensation for the expertise that the partner will be bringing to the partnership.
How much is the correct valuation of A’s capital immediately after the partnership
formation?
a. 84,000
b. 92,000
c. 100,000
d. 108,000
4. A and B formed a partnership. The following are their contributions:
A
B
Cash
500,000
-
Accounts receivable
100,000
700,00
0
Building
Total
A, capital
B, capital
Total
600,000
700,00
0
600,000
700,00
0
1
600,000
700,00
0
2
Additional information:
• The accounts receivable includes a ₱20,000 account that is deemed uncollectible.
• The building is under-depreciated by ₱50,000.
• The building has an unpaid mortgage ₱100,000, but this is not assumed by the
partnership. Partner B promised to pay for the mortgage himself.
How much is the correct valuation of A’s capital immediately after the partnership
formation?
a. 460,000
b. 580,000
c. 650,000
d. 720,000
5. Mr. A and Ms. B formed a partnership and agreed to divide the initial capital
equally even though Mr. A contributed ₱100,000 and Ms. B contributed ₱84,000 in
identifiable assets. The partners agree that the difference in the amount of
contribution and the amount of credit to the partner’s capital shall be treated as
cash settlement between the partners. The compound entry to record the partners’
contributions includes a credit to B’s capital account in the amount of
a. 84,000
b. 92,000
c. 100,000
d. 108,000
6. If the partnership agreement does not specify how income is to be allocated, profits
and loss should be allocated
a. Equally.
b. In proportion to the weighted average of capital invested during the period.
c. Equitably so that partners are compensated for the time and effort expended on
behalf of the partnership.
d. In accordance with their capital contributions.
7. A and B share in partnership profits and losses on a 40:60 ratio. During the year, A’s
capital account has a net increase of ₱50,000. Partner A made contributions of
₱10,000 and capital withdrawals of ₱60,000 during the year. How much was the
share of B in the partnership profit for the year?
a. 100,000
b. 150,000
c. 200,000
d. 180,000
8. The partnership agreement of A, B and C stipulates the following:
• Partners A and C shall receive annual salaries of ₱12,000 and ₱8,000,
respectively.
• A bonus of 10% of profit after salaries but before deduction of bonus shall be
given to Partner A, the managing partner.
• Each partner shall receive 10% interest on average capital investments.
• Any remaining profit or loss shall be shared as follows: 40% to A and 30% each
to B and C.
The average capital investments of partners during the year are as follows:
A
B
C
₱100,000
60,000
120,000
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The partnership earns profit of ₱100,000.
How much is the share of Partner C in the partnership profit?
a. 47,600
b. 32,200
c. 19,200
d.
33,200
9. 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:
Balance, Jan. 1, 20x1
Additional investment,
July 1
00
00
Withdrawal, August 1
00)
Balance, Dec. 31, 20x1
00
252,0
72,0
(27,0
297,0
How much is the interest on B’s weighted average capital?
a. 27,675
b. 33,633
c. 37,214
d. 23,322
10. Red and White formed a partnership in 2003. The partnership agreement provides
for annual salary allowances of ₱55,000 for Red and ₱45,000 for White. The
partners share profits equally and losses in a 60/40 ratio. The partnership had
earnings of ₱80,000 for 2003 before any allowance to partners. What amount of
these earnings should be credited to each partner’s capital account?
Red
White
a. 40,000
40,000
b. 43,000
37,000
c. 44,000
36,000
d. 45,000
35,000
11. Fox, Greg, and Howe are partners with average capital balances during 2002 of
₱120,000, ₱60,000, and ₱40,000, respectively. Partners receive 10% interest on
their average capital balances. After deducting salaries of ₱30,000 to Fox and
₱20,000 to Howe, the residual profit or loss is divided equally. In 2003 the
partnership sustained a ₱33,000 loss before interest and salaries to partners. By
what amount should Fox’s capital account change?
a. 7,000 increase.
b. 11,000 decrease.
c. 35,000 decrease.
d. 42,000 increase.
12. The partnership agreement of Axel, Berg & Cobb provides for the year-end
allocation of net income in the following order:
• First, Axel is to receive 10% of net income up to ₱100,000 and 20% over
₱100,000.
• Second, Berg and Cobb each are to receive 5% of the remaining income over
₱150,000.
4
•
The balance of income is to be allocated equally among the three partners.
The partnership’s 2003 net income was ₱250,000 before any allocations to partners.
What amount should be allocated to Axel?
a. 101,000
b. 103,000
c. 108,000
d. 110,000
13. 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:
Balance, January 1
Additional investment,
July 1
Withdrawal, August 1
Balance, December 31
0
0
140,00
40,00
(15,0
00)
165,00
0
What amount of interest should be credited to Simm’s capital account for 2003?
a. 15,250
b. 15,375
c. 16,500
d. 17,250
14. 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:
Blau
Rubi
60,000
50,000
On that date, Lind was admitted as a partner with a one-third interest in capital and
profits for an investment of ₱40,000. The new partnership began with total capital of
₱150,000. Immediately after Lind’s admission, Blau’s capital should be
a. 50,000
b. 54,000
c. 56,667
d. 60,000
15. Kern and Pate are partners with capital balances of ₱60,000 and ₱20,000,
respectively. Profits and losses are divided in the ratio of 60:40. Kern and Pate
decided to form a new partnership with Grant, who invested land valued at ₱15,000
for a 20% capital interest in the new partnership. Grant’s cost of the land was
₱12,000. The partnership elected to use the bonus method to record the admission
of Grant into the partnership. Grant’s capital account should be credited for
a. 12,000
b. 15,000
c. 16,000
d. 19,000
Use the following information for the next two questions:
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On June 30, 2003, the condensed balance sheet for the partnership of Eddy, Fox, and
Grimm, together with their respective profit and loss sharing percentages were as
follows:
Assets, net of liabilities
Eddy, capital (50%)
Fox, capital (30%)
Grimm, capital (20%)
320,0
00
160,0
00
96,00
0
64,00
0
320,0
00
16. Eddy decided to retire from the partnership and by mutual agreement is to be paid
₱180,000 out of partnership funds for his interest. No goodwill is to be recorded.
After Eddy’s retirement, what are the capital balances of the other partners?
Fox
Grimm
a. 84,000
56,000
b. 102,000
68,000
c. 108,000
72,000
d. 120,000
80,000
17. Assume instead that Eddy remains in the partnership and that Hamm is admitted as
a new partner with a 25% interest in the capital of the new partnership for a cash
payment of ₱140,000. The bonus method shall be used to record the admission of
Hamm. Immediately after admission of Hamm, Eddy’s capital account balance
should be
a. 280,000
b. 172,500
c. 160,000
d. 140,000
The next two items are based on the following information:
The following condensed balance sheet is presented for the partnership of Alfa and
Beda, who share profits and losses in the ratio of 60:40, respectively:
45,0
Cash
00
625,0
Other assets
00
30,0
Beda, loan
00
700,0
00
120,0
Accounts payable
00
348,0
Alfa, capital
00
232,0
Beda, capital
00
700,0
00
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18. The assets and liabilities are fairly valued on the balance sheet. Alfa and Beda
decide to admit Capp as a new partner with 20% interest. No goodwill or bonus is
to be recorded. What amount should Capp contribute in cash or other assets?
a. 110,000
b. 116,000
c. 140,000
d. 145,000
19. Instead of admitting a new partner, Alfa and Beda decide to liquidate the
partnership. If the other assets are sold for ₱500,000, what amount of the available
cash should be distributed to Alfa?
a. 255,000
b. 273,000
c. 327,000
d. 348,000
20. The statement of financial position of the partnership of A, B and C shows the
following information:
Cash
Other assets
Total assets
Liabilities
A, capital (50%)
B, capital (25%)
C, capital (25%)
Total liabilities and
equity
22,
400
212,
000
234,
400
38,
400
76,
000
64,
000
56,
000
234,
400
The partners realized ₱56,000 from the first installment sale of non-cash assets with
total carrying amount of ₱120,000. How much did B receive from the partial
liquidation?
a. 25,000
b. 24,000
c. 16,000
d. 0
21. The statement of financial position of the partnership of A, B and C shows the
following information:
Cash
Other assets
Total assets
Liabilities
40,
000
720,
000
760,
000
300,
000
7
64,
000
20,
000
250,
000
86,
000
40,
000
760,
000
B, loan
C, loan
A, capital (50%)
B, capital (30%)
C, capital (20%)
Total liabilities and
equity
The non-cash assets are sold for ₱320,000. Partner C is the only solvent partner. In the
settlement of the partners’ claims, how much additional contribution is required of
Partner C?
a. 50,000
b. 30,000
c. 20,000
d. None
22. A, B and C are partners. Their respective personal assets, personal liabilities and
partnership capital balances are as follows:
A
Personal assets
Personal
liabilities
Capital
balances
90,
000
75,
000
150,
000
B
240,0
00
150,0
00
(96,0
00)
C
180,
000
216,
000
210,
000
Which of the partners is personally insolvent?
a. A
b. B
c. C
d. B & C
23. The equity section of the statement of financial position of the partnership of A, B
and C shows the following information:
64,
A, capital (40%)
000
B, capital (40%)
000
C, capital (20%)
Total liabilities
equity
800
and
104,
76,
244,
800
Non-cash assets are sold in installment. Cash distributions are made to the partners as
cash becomes available. In the second sale of non-cash assets, the partners received
the same amount of cash in the distribution. In the third sale of non-cash assets, the
amount of cash available for distribution is ₱100,000. The carrying amount of the
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remaining non-cash assets is ₱260,000. Under the cash priority program, how much
cash is distributed to B in the third installment payment?
a. 40,000
b. 38,400
c. 28,200
d. 0
24. 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 par value of shares issued and subscribed.
b. the total consideration received or receivable from shares issued or subscribed.
c. the aggregate stated value of shares issued and subscribed.
d. the aggregate market value of shares issued and subscribed.
25. Which of the following is not one of the basic shareholders rights?
a. The right to participate in earnings.
b. The right to maintain one's proportional interest in the corporation.
c. The right to participate in the proceeds of the sale of corporate assets upon
liquidation of the corporation.
d. The right to inspect the accounting records of the corporation.
26. On February 1, authorized ordinary share was sold on a subscription basis at a
price in excess of par value, and 20 percent of the subscription price was collected.
On May 1, the remaining 80 percent of the subscription price was collected. Share
premium would increase on
February 1 May 1
a. No
Yes
b. No
No
c. Yes
No
d. Yes
Yes
27. The entry to record the issuance of ordinary shares for fully paid share
subscriptions is
a. a memorandum entry.
b. Dr. Common Stock Subscribed; Cr. Common Stock; Cr. Additional Paid-In
Capital
c. Dr. Subscribed Share Capital; Cr. Subscriptions Receivable
d. Dr. Subscribed Share Capital; Cr. Share Capital
28. The issuance of shares of preferred stock to shareholders
a. increases preferred stock outstanding.
b. has no effect on preferred stock outstanding.
c. increases preferred stock authorized.
d. decreases preferred stock authorized.
29. Which of the following is an appropriate presentation of treasury stock?
a. As a marketable security
b. As a deduction at cost from total stockholders' equity
c. As a deduction at cost from total contingent liabilities
d. As a deduction at par from total stockholders' equity
30. Gains and losses on the purchase and resale of treasury stock may be reflected only
in
a. share premium account.
b. share premium and retained earnings accounts.
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c. income, paid-in capital, and retaining earnings accounts.
d. income and paid-in capital accounts.
31. The stockholders' equity section of Peter Corporation's balance sheet at December
31, 20X2, was as follows:
Ordinary shares (₱10 par value, authorized 1,000,000
shares, issued and outstanding 900,000 shares) ₱ 9,000,000
Share premium
2,700,000
Retained earnings
1,300,000
On January 2, 20X3, Peter purchased and retired 100,000 shares of its stock for
₱1,800,000. Immediately after retirement of these 100,000 shares, the balances in the
share premium and retained earnings accounts should be
Share premium
Retained earnings
a. ₱ 900,000
₱1,300,000
b. ₱1,400,000
₱ 800,000
c. ₱1,900,000
₱1,300,000
d. ₱2,400,000
₱ 800,000
32. Asp Co. was organized on January 2, 20x1, with 30,000 authorized shares of ₱10
par ordinary shares. During 20x1 the corporation had the following capital
transactions:
Jan. 5
July 14
Dec. 27
Issued 20,000 shares at ₱15 per share.
Purchased 5,000 shares at ₱17 per share.
Reissued the 5,000 shares held in treasury at ₱20 per share.
Asp used the cost method to record the purchase and reissuance of the treasury
shares. In its December 31, 20x1, balance sheet, what amount should Asp report as
share premium in excess of par?
a. 100,000
b. 125,000
c. 140,000
d. 115,000
33. In 20x0, Newt Corp. acquired 6,000 shares of its own ₱1 par value ordinary share
at ₱18 per share. In 20x1, Newt issued 3,000 of these shares at ₱25 per share.
Newt uses the cost method to account for its treasury stock transactions. What
accounts and amounts should Newt credit in 20x1 to record the issuance of the
3,000 shares?
Treasury sh.
Sh. premium
Retained earnings
Ordinary
sh.
a. ₱54,000
₱21,000
b. ₱54,000
₱21,000
c.
₱72,000
₱3,000
d.
₱51,000
₱21,000
₱3,000
34. On December 1, 20x1, Line Corp. received a donation of 2,000 shares of its ₱5
par value ordinary shares from a shareholder. On that date, the stock’s market
value was ₱35 per share. The stock was originally issued for ₱25 per share. By
what amount would this donation cause total stockholders’ equity to decrease?
a. 70,000
b. 50,000
c. 20,000
d. 0 memo entry
10
35. Nest Co. issued 100,000 shares of common stock (i.e., ordinary shares). Of these,
5,000 were held as treasury stock at December 31, 20x1. During 20x2, transactions
involving Nest's common stock were as follows:
• May 3 - 1,000 shares of treasury stock were sold.
• August 6 - 10,000 shares of previously unissued stock were sold.
• November 18 - a 2-for-1 stock split took effect.
Laws in Nest's state of incorporation protect treasury stock from dilution. At December
31, 20x2, how many shares of Nest's common stock were issued and outstanding?
Shares Issued
Outstanding
a. 220,000
212,000
b. 220,000
216,000
c. 222,000
214,000
d. 222,000
218,000
36. At December 31, 20x0 and 20x1, Carr Corp. had outstanding 4,000 shares of ₱100
par value 6% cumulative preferred stock and 20,000 shares of ₱10 par value
common stock (i.e., ordinary shares). At December 31, 20x0, dividends in arrears
on the preferred stock were ₱12,000. Cash dividends declared in 20x1 totaled
₱44,000. Of the ₱44,000, what amounts were payable on each class of stock?
Preference shares
a. ₱44,000
b. ₱36,000
c. ₱32,000
d. ₱24,000
Ordinary shares
₱
0
₱ 8,000
₱12,000
₱20,000
37. Arp Corp.’s outstanding capital stock at December 15, 20x1, consisted of the
following:
• 30,000, 5% cumulative preference shares, par value ₱10 per share, fully
participating as to dividends. No dividends were in arrears.
• 200,000 ordinary shares, par value ₱1 per share.
On December 15, 20x1, Arp declared dividends of ₱100,000. What was the amount of
dividends payable to Arp’s ordinary stockholders?
a. 10,000
b. 34,000
c. 40,000
d. 47,500
38. The following stock dividends were declared and distributed by Sol Corp.:
Percentage of ordinary shares
outstanding at declaration date
Fair value
Par value
10
₱15,000
₱10,000
28
40,000
30,800
What aggregate amount should be debited to retained earnings for these stock
dividends?
a. 40,800
b. 45,800
c. 50,000
d. 55,000
11
39. Ray Corp. declared a 5% stock dividend on its 10,000 issued and outstanding
shares of ₱2 par value common stock, which had a fair value of ₱5 per share before
the stock dividend was declared. This stock dividend was distributed 60 days after
the declaration date. By what amount did Ray’s current liabilities increase as a
result of the stock dividend declaration?
a. 0
b. 500
c. 1,000
d. 2,500
40. The main purpose of accounting is
a. to account for money so it will not be lost.
b. to provide information that is useful in making economic decisions.
c. to safeguard the assets of a company.
d. to provide a clear view of the state of the industry’s economy.
41. 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. liabilities, owner's capital, and drawings all have normal credit balances.
c. all real accounts have normal debit balances.
d. 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.
42. The branch of accounting that deals with providing financial information to external
decision makers is
a. Public accounting.
b. Government accounting.
c. Financial accounting.
d. Managerial accounting.
43. Financial accounting applies to which of the following:
a. Businesses
b. Non-profit organizations
c. Governments
d. All of the above
44. Under this concept, some costs are initially recognized as assets and recognized
only as expenses when the related revenue is recognized.
a. Separate entity concept
b. Historical cost concept
c. Going concern
d. Matching principle
45. It is the official accounting standard setting body in the Philippines.
a. Philippine Institute of Certified Public Accountants
b. Financial Reporting Standards Council
c. Accounting Standards Council
d. American Accounting Association
46. Businesses are required by to law to file tax returns with this government agency.
a. Security and Exchange Commission
b. Bureau of Internal Revenue
c. Cooperative Development Authority
d. Bangko Sentral ng Pilipinas
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47. Under this concept, assets are initially recorded at their acquisition cost.
a. Single entity concept
b. Historical cost concept
c. Going concern concept
d. Matching principle
48. Under this concept, the business is assumed to continue to exist for an indefinite
period of time.
a. Separate entity concept
b. Historical cost concept
c. Going concern
d. Matching principle
49. 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
50. 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. ₱1,000,000
c. ₱750,000
d. ₱250,000
51. It is the aggregate of estimated losses from uncollectible accounts receivable.
a. Bad debts expense
b. Allowance for bad debts
c. Accounts receivable
d. Notes receivable
52. 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. 20,000
c. 80,000
d. 120,000
53. 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. 620,000
b. 500,000
c. 480,000
d. 380,000
54. Which of the following is not an example of a source document?
a. Delivery receipt
b. Sales invoice
c. Special journal
d. Bank statement
13
55. 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. Check
b. Bank statement
c. Delivery receipt
d. Statement of account
56. Which of the following is not an external event?
a. Rendering services to clients
b. Production of goods for sale
c. Purchase of raw materials for processing
d. Payment of notes payable
57. Journal entries are recorded in the journal
a. chromatically.
b. chronologically.
c. pharmaceutically.
d. cutely.
58. Which of the following is not one of the important parts of a journal entry?
a. Date
b. Account titles and amounts to be debited and credited
c. A detailed narrative of the reason why management entered into the transaction
d. Short description of the transaction
e. All of these
59. The primary purpose of posting is to
a. record transactions.
b. classify transactions.
c. summarize transactions in a report form.
d. all of these
60. The balance of an accounts receivable from a certain customer at any given point of
time can be determined by referring to the
a. general journal.
b. general ledger.
c. subsidiary ledger.
d. financial statements.
61. The heading of a trial balance does not include which of the following?
a. Name of the business
b. Title of the report
c. Type of activity that the business is engaged with
d. Date of the report
62. Which of the following adjustments cannot be reversed in the next accounting
period?
a. Accruals for income or expense
b. Prepayments initially recorded using the expense method
c. Advanced collections initially recorded using the income method
d. Prepayments initially recorded using the asset method
63. Which of the following adjustments can be reversed in the next accounting period?
a. Adjusting entry to take up depreciation expense
14
b. Adjusting entry to record bad debts expense
c. Adjusting entry to record accrued interest income
d. All of these
64. If debits do not equal credits, the first step to find the error is to
a. call your manager and ask for advice.
b. add the debit and credit columns again.
c. review the journal entries for errors.
d. make correcting entries rather than adjusting entries.
65. 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?
a. 1,360,000
b. 980,000
c. 950,000
d. 920,000
66. Entity A has gross purchases of ₱360,000. Freight paid on the purchases amounted
to ₱50,000. Purchase discounts totaled ₱20,000 while purchase returns totaled
₱15,000. How much is the net purchases?
a. 375,000
b. 390,000
c. 410,000
d. 445,000
67. 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?
a. 1,010,000
b. 1,200,000
c. 190,000
d. 260,000
68. Entity A has a beginning inventory of ₱140,000. During the period Entity A
purchased inventories costing ₱790,000. Freight paid on the purchase totaled
₱10,000. The ending inventory was ₱60,000. Gross sales were ₱1,800,000 while
sales returns and discounts totaled ₱220,000. How much is the gross profit?
a. 680,000
b. 700,000
c. 780,000
d. 880,000
69. 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, Liabilities, Equity, Income, and Expense
d. Asset, Expense, Liabilities, Equity, and Income
70. Who was the first Filipino Certified Public Accountant?
a. Lapu-lapu
b. Andres Bonifacio
c. Spongebob Squarepants
d. Don Vincente Fabella
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“Hear my cry, O God; listen to my prayer.” (Psalms 61:1)
- END -
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