Polytechnic University of the Philippines

College of Accountancy and Finance

Junior Philippine Institute of Accountants
SIMULATED FINAL EXAMINATION
Fundamentals of Accounting, Part 2

THEORIES (1 pt.)

1. A corporation is an artificial being

a. Created by operation of law.
b. Having the right of succession.
c. That has powers, attributes, and properties authorized by law.
d. All of the given.
e. None of the given.

2. Which of the following statements is incorrect regarding classes of corporation as to membership holdings?
a. A nonstock corporation is a private corporation in which capital comes from fees paid by individuals composing it.
b. The owners of a nonstock corporation are called members.
c. A stock corporation is not authorized to distribute corporate earnings to holders on the basis of the shares held.
d. The owners of a stock corporation are called shareholders.
e. All of the above statements are correct.

3. One of the requisites in the incorporation stage of corporation formation is that

a. 25% of the authorized share capital has been subscribed.
b. 25% of the authorized share capital has been issued.
c. 25% of the authorized share capital has been subscribed and 25% of which should have been paid up.
d. 25% of the authorized share capital has been issued and 25% of which should have been paid up.
e. None of the given.

*Under the RA 11232 also known as the Revised Corporation Code signed into law in 2019, every corporation is not required
anymore to have a minimum capital stock.

4. Which of the following statements best describes a participating preference share?

a. This entitles the holders to the receipt of the previous years’ unpaid dividends before any payment to ordinary shareholders
upon dividend declaration.
b. This entitles the holders to the receipt of additional dividend after holders of both preference and ordinary shares have
been paid up to the current year’s dividend.
c. This entitles the holders the option to exchange the shares for some other securities of the issuing corporation, normally
ordinary_ shares.
d. This entitles the issuing corporation the option to redeem the shares at a certain price.
e. None of the given.

5. Select the best answer. The computation of tax due of every corporation for 2019 and next year is the same.
a. True.
b. Not the same because it the BIR’s discretion on how much they will charge the corporation for its tax liability.
c. Not the same because your income this year maybe different from the subsequent year.
d. Cannot be determined.
e. None of the given.

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6. A share capital issued to a shareholder is called
a. An outstanding share, and the major issue on the issuance of share capital is the basis for amortization under IFRS 2, Share-
Based Payments.
b. An authorized share, and the major issue on the issuance of share capital is the basis for measurement under IFRS 2, Share-
Based Payments.
c. An outstanding share, and the major issue on the issuance of share capital is the basis for measurement under IFRS 3,
Business Combinations.
d. An authorized share, and the major issue on the issuance of share capital is the basis for amortization under IFRS 3, Business
Combinations.
e. None of the given.

7. In which of the following process statements may be use to obtain the par value of the share capital for problem-solving purposes?
a. The total amount of ordinary share premium divided by number of outstanding ordinary shares.
b. The amount of Preference Share Capital to be seen on the face of the Statement of Financial Position divided by the number
of authorized preference shares.
c. The total amount of ordinary share capital subscribed divided by the number of ordinary shares subscribed.
d. The amount of total shareholders’ equity divided by the number of outstanding ordinary and preference shares.
e. None of the given.

8. When a certain number of outstanding shares and its corresponding par value will be subject to 5-for-2 stock split
a. The number of outstanding shares will increase and the par value will decrease.
b. The number of outstanding shares will decrease and the par value will increase.
c. The number of outstanding shares and the par value will both increase.
d. The number of outstanding shares and the par value will both decrease.
e. None of the given.

9. A debit balance in the retained earnings account

a. Is called accumulated profits.
b. Is called accumulated losses.
c. Is called deficit.
d. Is called deficiency.
e. Both C and D.

10. Assume that on December 1, 2018, the manager declared a cash dividend. Shareholders of record will be on December 29, 2018
and payable on January 12, 2019. Which of the following statements is correct regarding the foregoing?
a. Retained Earnings will be debited on December 1, 2018.
b. Dividends Payable will be debited on December 29, 2018.
c. Retained Earnings will not be credited on January 12, 2019.
d. Dividends Payable will not be credited on January 12, 2019.
e. None of the given.

*It should be, in accordance with the law, the Board of Directors (BOD) that will declare dividends.

11. The difference between the retirement price and the original issuance price of the share capital retired
a. Should not be recognized as a gain or loss.
b. Should be recognized as a gain or loss.
c. Should be credited to retained earnings.
d. Should not be credited to retained earnings.
e. None of the given.

12. The reacquisition of a company’s own shares

a. Reduces the number of outstanding shares.
b. Doesn’t affect the number of issued shares.
c. Decreases the Treasury Shares account.
d. Both A and B.
e. None of the given.

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 13. Which of the following is/are a type/s of appropriation of Retained Earnings?
a. Legal restrictions on Retained Earnings.
b. Contractual restrictions on Retained Earnings.
c. Discretionary actions by the Board of Directors in the presentation of Retained Earnings.
d. Both B and C.
e. A, B, and C.

15. Which of the following statement/s is/are correct?

I. One of the characteristics of a contract of partnership is consensual.

II. If in a certain problem there is no given par value of an ordinary share but has stated value, still, the account Ordinary
Share Premium will be credited for the amount of the selling price in excess of the stated value.
III. The law governing private corporations is the Revised Corporation Code of the Philippines.
IV. A corporation can be a stockholder of another corporation but a partnership cannot be a partner of another partnership.
V. An auditing company is not subject to tax.

a. I, II, and V.
b. I, III, and V.
c. I and IV.
d. II, III, and IV.
e. All of the statements are incorrect.

*II: False, because there will be no share premium in the event of no par value share was issued.
IV: False, a stockholder and a partner may be a juridical entity.

PARTNERSHIP

1. If the partnership agreement does not specify how income is to be allocated, profits should be allocated
a. Equally.
b. In proportion to the weighted-average of capital invested during the period.
c. In accordance with the partner’s initial investment ratio.
d. In accordance with an established ratio.
e. None of the given.

2. The law governing partnerships in the Philippines is

a. Civil Code of the Philippines.
b. Philippine Accountancy Act.
c. Corporation Code of the Philippines.
d. Philippine Constitution.
e. None of the given.

3. Which of the following statement/s is/are correct?

I. A limited partnership cannot be created by mere agreement.

II. An Ostensible Partner is one who takes active part in the management of the firm and is known to the public as a partner
in the business.
III. A partnership may be constituted in any form, either written or orally, even where immovable property is contributed
thereto.

a. Only I.
b. I & II.
c. I, II, & III.
d. II & III
e. None of the given.

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4. The minimum capital in money or property except when immovable property or real rights thereto are contributed, that will require
the contract of partnership to be in a public instrument and be registered with the Securities and Exchange Commission (SEC).
a. P 3,000.
b. P 5,000.
c. P 10,000.
d. P 50,000.
e. None of the given.

5. In a limited partnership, a general partner

a. Has limited liability for partnership debt.
b. Has unlimited liability for partnership debt.
c. Is excluded from the management.
d. Is excluded from the partnership.
e. None of the given.

6. One which has complied with all the legal requirements for its existence.
a. De jure partnership.
b. De facto partnership.
c. De fury partnership.
d. All of the foregoing.
e. None of the given.

7. The non-cash contributions of the partners to form a partnership are recorded at their
a. Agreed Value.
b. Original cost.
c. Carrying amount as of the date of formation.
d. Fair Market Value.
e. None of the given.

8. Adrian and Pat formed a partnership, each contributing assets to the partnership. Adrian contributed merchandise with a fair market
value in excess of its carrying value. On the other hand, Pat contributed building with a carrying amount in excess of its market value.
At what amount should the partnership record each of the following assets?
Merchandise Inventory Building
a. Fair Value Carrying Value
b. Carrying Value Fair Value
c. Carrying Value Carrying Value
d. Fair Value Fair Value

9. Refer to the two statements below:

I. A newly organized partnership should always open a new set of books.

II. Contra-accounts on non-cash assets invested by partners are always carried in the partnership books.

a. Both statements are true.

b. Both statements are false.
c. Only statement I is true.
d. Only statement II is true.
e. Cannot be determined.

10. Which of the following is false?

a. A capital account exists for each partner in a partnership.
b. The personal assets and liabilities of a partner should be combined with the partnership assets and liabilities.
c. When industry or service is contributed into the partnership, only a memorandum entry is required.
d. A partnership may assume the business liabilities of an incoming partner.
e. All of the foregoing is true.

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 11. Which of the following is incorrect regarding a partner’s capital interest and profit and loss interest?
a. A partner’s capital interest is the percentage of equity that a partner has on the net assets.
b. A partner’s profit and loss interest determines how the partner’s capital interest will increase/decrease as a result of
subsequent operations.
c. A partner’s capital interest and profit and loss interest may not be the same.
d. A partner’s profit and loss interest must always be proportionate to his/her capital contribution.
e. None of the given.

12. When property other than cash is invested in a partnership, at what amount should the non-cash property be credited to the
contributing partner’s capital account?
a. Fair Value at the date of recognition.
b. Contributing partner’s original cost.
c. Assessed valuation for property tax purposes.
d. Contributing Partner’s tax basis.
e. None of the given.

13. Which of the following contra-accounts is presented in the partnership’s balance sheet upon formation?
a. Allowance for Bad Debts.
b. Accumulated Depreciation.
c. Purchase Discounts.
d. Sales Returns and Allowances.
e. None of the given.

Use the following information for nos. 9 through 13:

A and B formed a partnership on January 1 of the current year. A’s contribution is more than B’s contribution. Their partnership agreement
provides that A and B share on profit and loss in the ratio of 2:1. Respectively.

14. A’s capital account on January 1 should be

a. equal to his contribution.
b. proportionate to his profit and loss ratio of 2/3 or 66.67%.
c. Equal to B’s capital on January 1.
d. Less than B’s capital account on January 1.
e. Cannot be determined because of insufficient information.

15. Assuming that the partnership agreement provides that the partners initially should have an interest in partnership capital
proportionate to their profit and loss ratio. B’s capital account on January 1 should be
a. equal to his contribution.
b. equal to A’s capital on January 1.
c. Less than A’s capital on January 1.
d. More than A’s capital on January 1.
e. None of the given.

16. In relation to item no. 15, the effect of the bonus on capital of the partners is
A B
a. Increase Increase
b. Decrease Decrease
c. Increase Decrease
d. Decrease Increase
e. Cannot be determined.

17. Assuming that the partnership agreement provides that the partners initially should have an equal interest in partnership capital.
A’s capital account on January 1 should be
a. equal to his contribution.
b. equal to B’s capital on January 1.
c. less than B’s capital on January 1.
d. more than B’s capital on January 1.
e. None of the given.

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18. In the formation of a partnership, the total of the assets contributed by a partner higher than the amount credited to his capital.
Which of the following explanation is allowed by our GAAP here in the Philippines?
a. That partner’s contribution is subject to asset revaluation.
b. That partner gave bonus to the other partner/s.
c. That partner received bonus from the other partner/s.
d. That partner has a bad reputation to the other partners so they assigned him a lower capital than his contribution.
e. None of the given.

Use the following information for nos. 19 through 23:

Victor Magtanggol and Cardo Dalisay formed a partnership on January 1, 20xx. The former contributed cash of P20,000, inventory
valued at P30,000, and an equipment with a fair value of P120,000 and agreed value of P117,000 while the latter contributed land
and building with an agreed value of P200,000 and a fair value of P180,000. The equipment is subject to an installment note of
P60,000 while that land and the building is subject to a mortgage of P100,000. Their partnership agreement provides that Victor
Magtanggol and Cardo Dalisay share on profit and loss in the ratio of 7:3, respectively.

19. Assuming the partnership assume both liabilities, which of the following is correct?
a. The capital credited to Victor Magtanggol’s capital on January 1 is higher than that of Cardo Dalisay’s.
b. The capital credited to Cardo Dalisay’s capital on January 1 is higher than that of Victor Magtanggol’s.
c. Cardo Dalisay transferred a portion of her capital to Victor Magtanggol on January 1 to make their capital balances
proportionate to their profit and loss ratio.
d. Victor Magtanggol transferred a portion of his capital to Cardo Dalisay on January 1 to make their capital balances proportionate
to their profit and loss ratio.
e. None of the given.

20. Assuming the partnership did not assume both liabilities, which of the following is incorrect?
a. The capital credited to Cardo Dalisay’s capital on January 1 is higher than that of Victor Magtanggol’s.
b. The capital credited to Victor Magtanggol’s capital on January 1 is higher than that of Cardo Dalisay’s.
c. Cardo Dalisay transferred a portion of her capital to Victor Magtanggol on January 1 to make their capital balances
proportionate to their profit and loss ratio.
d. Victor Magtanggol transferred a portion of his capital to Cardo Dalisay on January 1 to make their capital balances proportionate
to their profit and loss ratio.
e. Choices B, C, and D are incorrect.

21. Assuming the partnership assume both liabilities and that the partnership agreement provides that the partners initially should have
an equal interest in partnership capital. How much is the bonus to be credited to Victor Magtanggol?
a. P 3,500.
b. P 16,500.
c. P 19,900.
d. P 0.
e. None of the given.

22. In relation to item no. 21 except that the partnership did not assume both liabilities, which of the following is correct?
a. The bonus to be credited to Victor Magtanggol is P 3,500.
b. The bonus to be credited to Victor Magtanggol is P 16,500.
c. The bonus to be credited to Cardo Dalisay is P 3,500.
d. The bonus to be credited to Cardo Dalisay is P 16,500.
e. None of the given.

23. Assuming the partnership only assumed the liability on the equipment and that the partnership agreement provides that the partners
initially should have an equal interest in partnership capital. What is the total partnership capital upon formation?
a. P 307,000.
b. P 267,000.
c. P 207,000.
d. P 367,000.
e. P 290,000.

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 24. A partner contributed a building with an agreed value of P 1,000,000 and a fair market value of P 1,200,000, which has been
mortgaged for P 500,000. The partnership will assume the mortgage on the building. The value assigned to the building account is?
a. P 1,200,000.
b. P 1,000,000.
c. P 700,000.
d. P 500,000.
e. None of the given.

25. A partner contributed an equipment with a depreciable amount of P 570,000 and accumulated depreciation of P 180,000. The
partners agreed that the equipment was under-depreciated by P20,000. The value to be credited to the accumulated depreciation
account in the partnership books is?
a. P 200,000.
b. P 180,000.
c. P 160,000.
d. P 20,000.
e. P 0.

Huwag na huwag mong hahayaang dumating yung araw na sasabihin mo sa sarili mong, ‘Sana ginalingan ko pala’.

Prepared by:

(Sgd.)
JESSMAR G. INSIGNE
Vice President for Academic Affairs
PUP JPIA Manila 2018-2019

(Sgd.)
JAYSON PATRICK C. ISAGON
Associate Vice President for Academic Affairs
PUP JPIA Manila 2018-2019

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