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Fundamentals of Accounting 2, R1-UNLOCKED PDF
Fundamentals of Accounting 2, R1-UNLOCKED PDF
1. What is the correct order of the following events in the accounting process?
I. Financial statements are prepared
II. Adjusting entries are recorded
III. Nominal accounts are closed
a. I,II, III
b. II, I, III
c. III,II,I
d. II,III,I
2. The first step in the accounting cycle is to
a. Record transactions in a journal
b. Analyze transactions from source documents
c. Post journal entries to general ledger accounts
d. Adjust the general ledger accounts
3. Which of the following is not characteristic of proprietary theory that influences accounting for partnerships?
a. Partners’ salaries are viewed as a distinguishing of income rather than component of net income.
b. Partnership is not viewed as separate entity, distinct, taxable entity.
c. A partnership is characterized by limited liability.
d. Changes in ownership structure of a partnership result in the dissolution of the partnership.
4. Which of the following statement is correct with respect to a limited partnership?
a. A limited partner may not be an unsecured creditor of the limited partnership.
b. A general may not also be limited partner at the same time.
c. A general partner may be a secured creditor of the limited partnership.
d. A limited partnership can be formed with limited liability for all partners.
5. On January 1, 2006, Atta and Boy agreed to form a partnership contributing their respective assets and equities
subject to adjustments. On that date, the following were provided:
Atta Boy
Cash P 28,000 62,000
Accounts receivable 200,000 600,000
Inventories 120,000 200,000
Land 600,000
Building 500,000
Furniture and fixtures 50,000 35,000
Intangible assets 2,000 3,000
Accounts payable 180,000 250,000
Other liabilities 200,000 350,000
Capital 620,000 800,000
6. When property other than cash is invested in a partnership, at what amount should the non-cost property be
credited to the contributing partners’ 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.
7. May 1, 2006, Cobb and Mott formed a partnership and agreed to share profits and losses in the ratio of 3:7
respectively. Cobb contributed a parcel of land that cost him 10,000.Moth contributed P 40,000 cash. The land
was sold for P 18,000 on May 1, 2006,immediately after formation of the partnership. What amount should be
recorded in Cobb’s capital account on formation of the partnership?
a. P18,000
b. 17,000
c. 15,000
d. 10,000
8. Abel and Carr formed a partnership and agreed to divide initial capital equally, even though Abel contributed
P100, 000 and Carr contributed P84, 000 in identifiable assets. Under the bonus approach to adjust the capital
accounts, Carr’s unidentifiable asset should be debited for
a. P46, 000
b. 16, 000
c. 8, 000
d. 0
9. Mary admits Jane as a partner in the business. Balance sheet accounts of Mary just before the admission of Jane
show: Cash, 26,000. Accounts receivable, 120,000, Merchandise inventory, 180,000 and accounts payable,
62,000. It was agreed that for purposes of establishing Mary’s interest, the following adjustments be made: 1.
an allowance for doubtful accounts of 3% of accounts receivable is to be established. 2. Merchandise inventory
is to be adjusted upward by 25,000 and 3 prepaid expenses of 3,600 and accrued liabilities of 4,000 are to be
recognized.
If Jane is to invest sufficient cost to obtain 2/5 interest in the partnership, how much would Jane contribute to the new
partnership?
a. 176,000
b. 190,000
c. 95,000
d. 113,980
10. If the partnership agreement does not specify how income is to be allocated, profit and loss should be allocated
a. Equally
b. In proportion to weighted average of capital invested during the period.
c. Equitability so that partners are compensated for the time and effort expended on behalf of the
partnership.
d. In accordance with their capital contribution.
11. Which of the following is not a component of the formula used to distribute income?
a. Salary allocation to those partners working.
b. After all other allocation, the remainder divided according to the profit and loss sharing ratio.
c. Interest on the average capital investments.
d. Interest on notes to partners.
12. The ABC partnership reports net income of P60, 000. If partners A, B, and C have income ratio of 50%, 30%, and
20% respectively. What is the share of partner C from the net income of the partnership, if he was given a
capital ratio of 25%?
a. 30,000
b. 12,000
c. 18,000
D. 15,000
13. Which of the following will not comprise financial statements of a partnership business?
a. Statement of Financial Position
b. Statement of Changes in Owner’s Equity
c. Statement of Comprehensive Income
d. Statement of Cash Flow
14. Which of the following can be found in a Statement of Financial Position of a partnership business but not in the
sole proprietorship?
a. Owner’s equity
b. Accumulated Depreciation
c. Partner’s Equity
d. Accounts payable
15. The basic components of financial statements include all of the following, except
a. Statement of Retained Earnings
b. Statement of Changes in Equity
c. Cash Flow statement
d. Statement of recognized gains and losses
16. The elements of financial statements shall be measured in
a. Constant pesos
b. Nominal pesos
c. Fixed pesos
d. Flexible pesos
17. The following information is available from Domi Company’s accounting records for the current year:
Purchases 5,300,000
Purchase discounts 100,000
Beginning inventory 1,600,000
Ending inventory 2, 150,000
Freight out 400,000
36. As of December 31, the books of AME Partnership showed capital balances of A-P40,000; M- P25,000; and E-
P 5,000. The partner’s profit and loss ratio was 3:2:1 respectively. The partners decided to dissolve and
liquidate. They sold all the non-cash assets for P37,000 cash. After settlement of all liabilities amounting to
P12,000, they still have P28,000 cash left for distribution.
The loss on the realization of the non-cash assets was
a. 40,000 c. 44,000
b. 42,000 d. 45,000
37. Assuming in No. 36, that any partner’s capital debit balance is uncollectible, the share of A in the P28,000
cash for distribution would be
a. 19,000 c. 40,000
b. 18,000 d. 17,800
38. The condensed balance sheet of Alex, Jay and John as March 31, 2010 follows:
Cash P 28,000 Liabilities P 48,000
Other assets 265,000 Alex, capital 95,000
Jay, capital 80,000
John, capital 70,000
Total P293,000 Total P 293,000
43. Which of the following are not permitted to issue no-par value shares?
a. Trust companies c. Lending associations
b. Educational institutions d. None of the above
44. When Bradley Company incorporated, it was authorized to issue 1,000,000 shares of common stock. It
immediately issued 50,000 shares. In 2007, it issued an additional 20,000 shares. In 2010, it repurchased
5,000 shares with the intent of reissuing them. On the December 31, 2010, balance sheet, Bradley Company
would show
a. 50,000 shares issued and 45,000 shares outstanding
b. 70,000 shares issued and 65,000 shares outstanding
c. 70,000 shares issued and 70,000 shares outstanding
d. 1,000,000 shares issued and outstanding.
45. Choose a situation which illustrates the minimum requirement of the law to corporate formation:
Authorized Subscribed Pain-in Capital
a. P 100,000 P 25,000 P 5,000
b. 100,000 5,000 5,000
c. 50,000 12,500 3, 125
d. 60,000 15,000 5,000
46. These are persons who bring about or cause to bring about the formation and organization of a corporation
a. Underwriters c. Promoters
b. Subscribers d. Incorporators
47. These represent the record of all business transactions. This normally includes the journal and the ledger.
a. Shareholders’ ledger c. Books of accounts
b. Subscribers’ ledger d. Minutes book
48. This is kind of shares in which a specific amount is fixed in the articles of incorporation and appearing on the
certificate of stock.
a. Par c. No-par
b. Voting d. Non-voting
49. This is a stock that has been issued by the corporations as fully paid and later reacquired but not retired.
a. Promotion shares c. Treasury shares
b. Convertible shares d. De-bawi shares
50. Polar Company issued 20,000 new P100 par ordinary shares at a fair value of P180 each. Polar identified
costs in relation to the shares issue:
Professional fees 400,000
Internal management time in managing the process 300,000
In the statement of changes in equity for 2010, what amount should be reported as dividends?
a. 50,000 c. 850,000
b. 100,000 d. 950,000
71. In computing basic earnings per share, the amount of preference dividends on noncumulative preference
shares shall be
a. Deducted from net income whether declared or not
b. Added to net income only when declared
c. Deducted from net income only when declared
d. Ignored
72. An entity has an ordinary “A” class, nonvoting share, which is entitled to a fixed dividend of 6% per annum.
The “A” class ordinary share will
a. Be included in the “per share” calculation after adjustment for the fixed dividend.
b. Be included in the “per share” calculation for EPS without adjustment for the fixed dividend.
c. Not be included in the “per share” calculation for EPS.
d. Be included in the calculation of diluted EPS.
73. Manufacturing costs would include but
a. Indirect materials used
b. Sales salaries expense
c. Indirect labor cost
d. Depreciation on factory equipment
74. The purchases-raw materials account is debited when
a. Direct materials are purchased
b. indirect materials are purchased
c. direct materials are placed into production
d. indirect materials are placed into production
75. Zew Company has a job costing system and an overhead application rate of 120% of direct labor cost. Job
No. 33 is charged with direct material of P12,000 and overhead of P7,200. Job No. 34 has direct material of
P2,000 and direct labor of P9,000. What amount of direct labor cost has been charged to Job No. 33?
a. 6,000 c. 7,200
b. 8,640 d. 14,400
76. Application rates for factory overhead best reflect anticipated fluctuations in sales over a cycle of years
when they are computed under the concept of
a. Maximum capacity c. Normal capacity
b. Practical capacity d. Expected actual capacity
77. Chorokee Co. applies factory overhead on the basis of direct labor hours. Budget and actual data for direct
labor and overhead for the year are as follows:
Budget Actual
Direct labor hours 600,000 650,000
Factory overhead costs P 720,000 P760,000
The factory overhead for Chorokee for the year is
a. Overapplied by P20,000
b. Overapplied by P40,000
c. Underapplied by P20,000
d. Underapplied by P40,000
78. Worley Co. has underapplied overhead of P45,000 for the year. Before disposition of underapplied
overhead, selected year-end balances form Worley’s accounting records were
Sales P 1,200,000
Cost of Goods Sold 720,000
Direct materials inventory 36,000
Work in process inventory 54,000
Finished goods inventory 90,000
Under Worley’s cost accounting system, over or under applied overhead is assigned to appropriate inventories
and cost of goods sold based on year-end balances. In its year-end income statement, Worley should report cost of
goods sold of
a. 765,000 c. 684,000
b. 757,500 d. 682,500
79. How much is the total manufacturing cost of a product that consume P500,000 of raw materials, 50% of raw
materials equivalent to direct labor and a manufacturing cost of P250,000?
a. P750,000 c. P1,000,000
b. P 500,000 d. P 250,000
80. Under a job order cost system, the peso amount of the general ledger entry involved in the transfer of
inventory from work in process to finished goods is the sum of costs charged to all jobs
a. Completed during the period
b. Completed and sold during the period
c. In process during the period
d. Started in process during the period.
81. What is the difference of the worksheet of a Manufacturing Company from that of other forms of business
organization?
a. It has a purchases account
b. It omits the depreciation and accumulated depreciation account of the company
c. Includes a pair of columns for cost of goods manufactured.
d. It omits the nominal accounts
82. The analysis for financial statement is important for all of the company, there are many bases that can be
used for comparison of this analysis, which one is not being use?
a. Intercompany basis
b. Intracompany basis
c. Industry averages
d. Ratio analysis
83. Provides a rough approximation of the average time that it takes to collect receivables
a. Average age of receivables
b. Inventory turnover
c. Accounts receivable
d. None of the above
84. This is a technique for evaluating a series of financial statement data over a period of time.
a. Horizontal analysis
b. Vertical analysis
c. Intercompany analysis
d. Ratio analysis
85. Assume Company A has a profit of P2,000,000 with net sales of P25,000,000 and Company B has a profit of
P1,800,000 on net sales of P9,000,000. Company A and Company B have profit-to-net-sales ratios of 8% and
20% respectively. If the two company works of the same industry, which of the following is true?
a. Company B is better managed than Company A
b. Company A is quite good than Company A
c. Company A has a higher profit margin
d. All of the above
86. Measures management’s efficiency in using its assets to earn profits
a. Basic earnings per share
b. Return on total assets
c. Return on ordinary equity
d. None of the above
87. You have been asked to evaluate the liquidity position of Kim Fitness Center. The following data are from
Kim’s annual report:
Cash P260,000
Trading Investments 120,000
Accounts Receivable
Jan 1 312,000
Dec 31 428,000
Merchandise Inventory
Jan 1 504,000
Dec 31 372,000
Current Liabilities 480,000
Cost of Goods Sold 6,000,000
Credit Sales 10,000,000
What is the Company’s working capital?
a. P500,000 b. P700,000 c. P350,000 d. P800,000
91. The following data are from the financial statements of FAILA, Inc.:
Dec. 31, 2010 Jan. 1, 2010
Total Assets P 180,000 P140,000
Total Equity 144,000 112,000
Total Preference Equity 30,000 30,000
Preference Dividend Declared 2,400
Profit 20,000
Interest Expense 5,750
93. Cozy is analyzing the earnings performance of the Baliwag Star Transport Corporation. She has gathered the
following data from Baliwag Star’s financial statements and from a report of the closing market prices of shares:
95. Based on Number 93, what is the company’s dividend yield on ordinary share?
a. 3.44% b. 2.5% c. 4.44% d. 1.2%
96. The president of Corpuz, Inc., has asked you to gather some statistics about his company’s solvency. You have
complied the following data:
Profit P900,000
Income Tax Rate 35%
Interest Expense 100,000
Total Liabilities 2,048,000
Total Equity 4,352,000
99. Measures how readily a company can meet interest payments with profit earned from operations
a. times interest earned ratio c. equity to total assets ratio
b. debt to total assets ratio d. none of these