Junior Philippine Institute of Accountants – Bulacan State University

Level 1 Mock Qualifying Examination 2019

Partnership and Corporation
Directions: Use ball pen only. Write your answer in the answer sheet. Strictly NO ERASURES.
1. Naguit Pinoy Bicycle Company reported the following information in its Statement of Financial Position as of December
31, 20x9:

Cash 70,000
Accounts Receivable (35% of it is collectible
after 1 ¾ years) 175,000
Allowance for Bad Debts 25,000
Merchandise Inventory 250,000
Office Supplies 20,000
Prepaid Insurance 30,000
Accounts Payable 80,000
Short – term borrowings 40,000

What is the best way that may be undertaken by the company to ensure that it will have P5.00 of current assets available
to compensate for a peso of current liability?

a. Under principle of conservatism, deliberately understate cash by 20,000; accounts payable by 10,000; and short
– term borrowings by 10,000.
b. Purchase P20,000 worth of office supplies by paying cash.
c. Pay P10,000 of accounts payable and P10,000 of short – term borrowings.
d. Do nothing. The information above is already correct to make the current ratio 5:1.

2. Which of the following statement/s is/are correct regarding partnership?

S1. Bonus cannot be allocated to partner/s if the partnership’s net income, after deducting the salaries and
interest, results to net loss.
S2. Salaries to partners must not be given if the partnership suffers net loss, although it was agreed to be
given as stated in the Articles of Partnership.
S3. Loans payable to a partner may be offset against the latter’s capital deficiency or loss suffered from
disposal of non-cash assets.
S4. If the partnership’s accumulated capital is P1,000,000, the filing fees needed to be reimbursed should be
P1,000.

a. All statements are correct c. One statement is correct

b. Two statements are correct d. Three statements are correct

3. Which of the following is considered as a right of a preference shareholder?

a. Right to vote, elect, and remove directors.
b. Right to be the last priority on claiming assets in the event of corporate liquidation.
c. Right to receive dividends first before ordinary shareholders.
d. All of these are considered as right of a preference shareholder.

4-5. Sanmer Dela Cruz RTW prepares its annual Statement of Financial Position on December 31, 20x0. The following
information appears below:

Cash P380,000
Accounts Receivable 250,000
Allowance for Doubtful Accounts 25,000
Inventories 450,000
Office Supplies 35,000
Prepaid Advertising 10,000
Land 1,500,000
Equipment 700,000
Acc. Dep. – Eqpt. 200,000
Building 1,700,000
Acc. Dep. – Bldg. 300,000
Total Assets P4,500,000
 Accounts Payable 250,000
Notes Payable 200,000
Salaries Payable 50,000
Mortgage Payable 1,500,000
Long – term debt 700,000
Dela Cruz, Capital 1,800,000
Total Liabilities and Owner’s Equity P4,500,000

Gina Collantes wants to form a partnership with Dela Cruz. Collantes will invest an amount of cash equal to 1/5 of the
capital balance of Dela Cruz after revaluation of its assets and liabilities, and the agreed division of profits and losses will
be based on their average capital balances. The following adjustments must be arranged in order to formalize the
establishment of a new partnership:

a. The agreed value of the building is P1,500,000 and the equipment is P500,000 (but the accumulated
depreciation account regarding to bldg. and eqpt. must be eliminated).
b. Land’s value must be diminished by 25%.
c. Allowance for doubtful accounts must be written off.
d. 40% of Dela Cruz’s notes payable are personal notes. All residual liabilities will be assumed by the
partnership.

How much is the portion of notes payable that will be assumed by the new partnership?
a. P80,000 b. P100,000 c. P120,000 d. P200,000

How much is the cash to be contributed by Collantes upon the formation of the partnership?
a. P326,000 b. P330,000 c. P334,000 d. P340,000

6. Your company wants to purchase P30,000 worth of hardware products from my entity on October 5, 20x1. Terms are
2/10, n/30. Before I lend you the goods, I want to know if you will be able to pay your possible debt within a short period
of time without selling all of your inventories. What information can you provide for me to assess your eligibility to
compensate for your payables without realizing your inventories?
a. Current ratio c. Debt to total assets ratio
b. Working capital d. Acid – test ratio

7. VST End Corporation granted 150 share options to each of its 500 employees on Jan 1, 2013. The grant is conditional
upon the employee’s remaining in the entity for the next five years. The fair value of share option at 01/01/13, the grant
date, is P100, and the fair value at vesting date, 12/31/17, is P250. No one left the entity after the vesting period. What
shall be reported as share options outstanding on December 31, 2015?
a. P9,000,000 c. P4,500,000
b. P6,750,000 d. P11,250,000

For items 8-9. John Lloyd and Shaina Padlock Company prepared its Statement of Comprehensive Income as of December
31, 20x0. The following information was given to you:

Net Sales ?
Cost of Goods Sold 6,000,000
Gross Margin (30% based on cost) ?
Operating Expenses 500,000
Finance Costs 300,000

According to the partnership agreement, profit or loss is to be divided among the partners as follows:

1. John Lloyd will be provided with salaries amounting to P50,000.

2. Interest of 10% on original capital balances of both partners. John Lloyd and Shaina have beginning balances of
P200,000 and P250,000, respectively.
3. Bonus of 5% of profit after salaries, interest, and bonus will be given to Shaina. Bonus shall be rounded off to its
nearest ones.
4. Residual profits will be allocated equally.

8. How much is the share of John Lloyd in the partnership profit?

a. P499,047.50 c. P522,500.00
b. P500,952.50 d. P477,500.00
9. Assuming that both partners are entitled to temporarily withdraw P60,000 each per annum, how much is their
respective capital balances?
a. John Lloyd, P640,952.50; Shaina, P689,047.50
b. John Lloyd, P700,952.50; Shaina, P749,047.50
c. John Lloyd, P662,500.00; Shaina, P667,500.00
d. John Lloyd, P722,500.00; Shaina, P727,500.00

10. The pre-emptive right of a common stockholder is the right to

a. Share proportionately in corporate assets upon liquidation.
b. Exclude preference shareholders from voting rights.
c. Receive dividends first before preferred shareholders.
d. Share proportionately in any issues of stock of the same class.

11. Dividend – on
a. Is the transaction of selling shares after the date of record but before the date of payment.
b. Does not carry the buyer the right to receive dividends.
c. Both a and b.
d. Implies that the right to receive dividends will be transferred to the buyer upon selling the owner’s shares after
the date of declaration but prior to record date.

12. The partner which is most vulnerable to losses upon liquidation

a. Possesses the highest loss absorption balance.
b. Becomes the first priority in receiving cash in able to avoid further losses.
c. Have the lowest loss absorption balance among the partners.
d. None of these.

13. Net assets of a partnership

a. Current assets minus non-current assets
b. Non-current assets minus total liabilities
c. Total assets minus total liabilities
d. Remaining amount of assets after disposal and obsolescence

14. In revaluating assets and liabilities upon forming of a partnership, the capital account
a. Must be debited for decrease in asset, increase in liability, and decrease in contra-asset
b. Must be debited to decrease in asset, increase in liability, and increase in contra-asset
c. Must be credited to increase in asset, increase in liability, and decrease in contra-asset
d. Must be credited for asset decrease, liability decrease, and contra-asset decrease

15. Which of the following statement/s is/are incorrect regarding share splits?

S1. Total amount of ordinary shares will decrease if the corporation declared split – ups.
S2. Memorandum entry is sufficient to recognize split – ups or split – downs.
S3. If the corporation declared a share split of 1:7, the par value will decrease and the number of ordinary
shares will increase, but no changes in the total amount of ordinary shares.
S4. Split-up adjusts the market price of the corporation’s shares to a level where more individuals can afford
to invest in stocks.

a. All statements are incorrect c. One statement is incorrect

b. Two statements are incorrect d. Three statements are incorrect

16. Retained earnings

a. Is required by Philippine Accounting Standards No. 1 to be presented its own statement, namely “Statement of
Retained Earnings.”
b. Is debited for understatement of profit and credited for overstatement of profit in prior periods.
c. Is credited when a corporation reports net loss because the normal balance of it is debit.
d. None of these.

17. Dagondon wants to purchase 25% of Gravador’s capital interest directly for P300,000. Gravador’s capital balance is
amounted to P900,000. What will be Dagondon’s amount of investment and the gain/loss that will be recognized in the
books of the partnership?
a. P225,000; P75,000 gain c. P225,000; no gain or loss
b. P225,000; P75,000 loss d. P300,000; P75,000 gain
18. Which of the following is an advantage of a partnership over corporation?
a. Easier and less expensive to organize.
b. General partner’s liability is at the extent only of his/her investment.
c. There is a right of succession, unlike corporation.
d. All of these are advantages of partnership over corporation.

19. When will a preference shareholder be able to acquire the right to vote?
a. If preference shares will be converted into ordinary shares, even if convertibility is not provided in the articles of
incorporation.
b. If conversion of those shares into ordinary shares will be indicated in the articles of incorporation, and the required
amendment is made in it.
c. After receiving its dividend before ordinary shareholders.
d. If ordinary shareholders holding shares equal to his/her number of preference shares will convert their stocks into
preference shares.

20 – 21. Fedelin, Brillantes, and Diaz are partners with capital balances of P200,000, P400,000, and P400,000, respectively.
They share in profits or losses in the ratio of 5:3:2, respectively. They also agreed to admit Echarri in the partnership by
investing P500,000 for a 25% interest in the business.

How much is Echarri’s agreed capital in the partnership and the new profit or loss ratio?
a. P375,000; 5:3:2:1
b. P375,000; 6:4:3:1
c. P375,000; 1.25:0.75:0.5:0.25
d. P375,000; 15:9:6:10

An independent appraiser revalued the partnership’s land which costs P500,000 at P350,000. The decrease in its value are
allocated base on their established P&L ratio. Suddenly, Brillantes died because of breast cancer and her heir requested
to withdraw her capital equal to her interest in the partnership. How much will be recognized as Brillantes’ permanent
withdrawal?
a. P403,750 c. P453,750
b. P437,500 d. P497,500

22. Naguit, Dionicio, and Villena Partnership provided to you the following information as of December 31, 20x0 before
liquidation:

Cash P125,000
Non – cash assets 325,000
Liabilities 162,500
Loans Payable – Naguit 43,750
Naguit, Capital 125,000
Dionicio, Capital 21,875
Villena, Capital 96,875

They share profits and losses in the ratio of 1:2:1. The liquidation expense is estimated to be P5,000. On January 20x1,
non – cash assets worth P200,000 were sold for P170,000. On February 20x1, the remaining non – cash assets of P125,000
were realized for P150,000.

Using schedule of safe payments, how much cash will Dionicio receive at January 31, 20x1?
a. P99,687.50 c. P27,812.50
b. P6,875.00 d. 0

23-24. JLG Corporation presented the following information below:

Ordinary Shares, P1 par P4,300,000
Share Premium – Ordinary Shares 550,000
8.5% Preference Shares, P50 par 2,000,000
Share Premium – Preference Shares 400,000
Retained Earnings 1,500,000
Treasury Shares (at cost) 150,000
The total stockholders’ equity of JLG Corporation is
a. P8,600,000 c. P7,100,000
b. P8,750,000 d. P7,250,000
How much is the total cash collected for issuance of preference shares?
a. P2,250,000 c. P2,400,000
b. P2,300,000 d. P2,950,000

25. Nepomuceno Corporation had the following information in its financial statements for the years ended 20x8 and 20x9:

Cash dividends for 20x9 P8,000

Net income for 20x9 93,000
Market value of shares, 20x8 10
Market value of shares, 20x9 12
Common stockholders’ equity, 20x9 1,800,000
Outstanding shares, 20x9 150,000
Preferred dividends for 20x9 15,000

What is the book value per share for Nepomuceno Corporation for 20x9?
a. P11.90 c. P11.33
b. P12.00 d. P10.67

26 – 27. Munoz Corporation declared and distributed cash dividends for 20x1 amounting to P200,000. The preferred stock
is cumulative and non – participating. The partial equity structure of Munoz is as follows:

10% Preference Shares, P10 par,

30,000 shares outstanding P300,000
Ordinary Shares, P10 par,
20,000 shares outstanding 200,000
Retained Earnings 300,000
Dividends were in arrears for 2 years.

How much is the cash dividends payable to preference shareholders?

a. P60,000 c. P110,000
b. P90,000 d. P30,000

How much is the dividend per ordinary share?

a. P5.50 c. P8.50
b. P7.50 d. P6.00

Gadon Company provided the following information to you:

Accounts Receivable, 01/01/2019 P200,000

Credit Sales 2,000,000
Sales Returns and Allowances 300,000
Sales Discounts 200,000
Write – off 50,000
Collections 800,000
Inventory, 12/31/2019 900,000
Cash 300,000

How many times does the average balance of accounts receivable is collected in 2019?
a. 2.86 times c. 3.56 times
b. 3 times d. 4 times

29. Chong Company’s recent net sales figures are as follows:

20x1 P2,000,000
20x2 P2,256,987
20x3 P2,753,029
20x4 P1,174,330
Using 20x1 as the base year, how many percent of increase/decrease shall be reported as of 20x4?
a. 41% increase c. 70% decrease
b. 41% decrease d. 70% increase
30. Pringle Company reported debt to total assets ratio of 20%. Total equity amounts to P500,000. Non – current assets
are 25% of the total assets. How much is the current assets of Pringle?
a. P156,250 b. P1,875,000 c. P468,750 d. P625,000

END
“Be strong and courageous; do not be frightened or dismayed, for the Lord your God is with you
wherever you go.” – Joshua 1:9
Name: Date:

Course, Year & Section: Score:

1. 11. 21.

2. 12. 22.

3. 13. 23.

4. 14. 24.

5. 15. 25.

6. 16. 26.

7. 17. 27.

8. 18. 28.

9. 19. 29.

10. 20. 30.