QUIZBOWL PRACTICE

BUSINESS LAW
1. Whenever in an obligation a period is designated, it is presumed to have been established for the
benefit of the:
a. debtor c. both the debtor and the creditor
b. creditor d. none C
2. A sold his land to B. Although the sale was made orally, B still paid A the agreed the price. Later, B
wanted to have the sale registered but he needed a public instrument. What can B do?
a. B may compel A to execute the public instrument because the contract is valid
b. B cannot compel A to return the price because the contract is not enforceable
c. B may only sue A to return the price because no one may enrich himself at the expense of
another
d. B may occupy and use A’s land as a buyer in good faith A
3. X, after the death of his father, sold his inheritance though its amount has not yet been determined
to B, for a consideration of P50,000.
a. the contract is valid only if the inheritance values at least equal to or more than P50,000
b. the contract is rescissible
c. the contract is valid eventhough nothing remains of the inheritance to be turned over to B
d. contract is void, future inheritance cannot be the object of sale C
4. P appointed A as his special agent to sell a specific land for P10,000. P sends A his papers of
appointment including a letter addressed to X notifying the latter of the appointment of A as his
agent. Ten days after, P revoked the agency and published it in a newspaper of general circulation.
X did not read the newspaper publication, but has got actual knowledge of the revocation. Later, A
and X transacted business. Is the act of A binding against P?
a. yes, because A and X are in good faith
b. no, X having knowledge of the revocation is considered in bad faith
c. yes, because X was not given a special notice of revocation
d. yes, since the appointment of A is by special information, the revocation must also be by
special information B
5. Effect of sale on the thing pledged if it is less than the principal obligation:
a. creditor cannot recover the deficiency
b. creditor can recover the deficiency
c. creditor cannot recover the deficiency even if there is stipulation
d. creditor can recover the deficiency if there is stipulation C
6. If a partner is insolvent, the first order of preference in the distribution of his assets is:
a. partner’s contribution to the partnership
b. partnership creditor
c. separate creditor of the partner
d. pro-rata between the separate creditors and partnership creditors C

7. Where a director, by virtue of his office, acquired for himself a business opportunity which belongs to
the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to
the latter for all such profits by refunding the same, unless his act is ratified by:
a. a vote at a regular or special meeting by stockholders owning or representing a majority of
the outstanding capital stock
b. a vote of the stockholders owning or representing at least one-third (1/3) of the outstanding
capital stock
c. a vote of the stockholders owning or representing at least two-thirds of the outstanding
capital stock
d. a unanimous vote of all stockholders of the corporation C
8. Which of the following instruments is not negotiable for the reason that the promise or order is not
unconditional?
a. pay to B or order the sum of P1,000 and reimburse yourself out of the money in your hands
b. pay to B or order the sum of P1,000 on account of contract between you and the CDCP
c. pay to B or order the sum of P25,000 in payment of the car I bought from him last week
d. pay to B or order the sum of P1,000 out of my money in your hands D
9. Which of the following is not negotiation of a negotiable instrument?
a. delivery to the payee
b. delivery of a bearer instrument
c. endorsement completed by delivery of an instrument payable to order
d. assignment D
10. An endorsement which restrains the negotiability of the instrument to a particular person or for a
particular purpose is called:
a. blank endorsement c. conditional endorsement
b. qualified endorsement d. restrictive endorsement D
MANAGEMENT ADVISORY SERVICES

1. Which of the following is true for a firm that uses variable costing?
a. the cost of a unit of product changes because of changes in number of units
manufactured
b. profits fluctuate with sales
c. an idle facility variation is calculated
d. product costs include variable administrative costs B
2. A, Inc. planned and actually manufactured 200,000 units of its single product. In 23003, its first year
of operations, variable manufacturing costs were P30 per unit of product. Planned and actual fixed
manufacturing costs were P600,000 and selling and administrative costs totaled P400,000. In 2003,
A sold 120,000 units of product at a selling price of P40 per unit. A’s 2003 operating income using
absorption costing is:
a. P200,000 b. P440,000 c. P600,000 d. P840,000 B
3. The master budget process usually begins with the:
a. production budget c. financial budget
b. operating budget d. sales budget D
4. Super Drive, a computer disk storage and back-up company, uses accrual accounting. The
company’s balance sheet for the year ended November 30, 2003 is as follows:
Assets:
Cash P 52,000
Accounts receivable, net 150,000
Inventory 315,000
Property 1,000,000
Total assets P1,517,000
Liabilities and equity:
Accounts payable P 175,000
Common stock 900,000
Retained earnings 442,000
Total liabilities and equity P1,517,000
Additional information regarding the company’s operations include the following:
 sales are budgeted at P520,000 for December 2003 and P500,000 for January 2004.
 collections are expected to be 60% in the month of sale and 40% in the month following the
sale.
 80% of the disk drive components are purchased in the month prior to the month of sale, and
20% are purchased in the month of sale. Purchased components are 40% of the cost of goods
sold.
 payment for the components is made in the month following the purchase.
 cost of goods sold is 80% of sales.
The budgeted cash collections for the month of December 2003 are:
a. P200,000 b. P520,000 c. P402,000 d. P462,000 D
5. If the average age of inventory is 90 days, the average age of accounts payable is 60 days, and the
average age of accounts receivable is 65 days, the number of days in the cash flow cycle is:
a. 215 days b. 150 days c. 95 days d. 85 days C
6. During 2003, Mase Company’s current assets increased by P120, current liabilities decreased by P50,
and net working capital:
a. increased by P70 c. decreased by P170
b. did not change d. increased by P170 D
7. Early decision models used with structured decisions, such as inventory recording and production
scheduling, emphasized finding the structure of the decision and programming as much of it as
possible. More recent models have been developed to support unstructured decision processes.
Models of the latter type are called:
a. decision support system c. systems analysis technique
b. management information system d. rational decision models A
8. Software offered to users on a “try before you buy” basis is called:
a. shareware c. middleware
b. firmware d. freeware A
9. Banks are required to process many transactions from paper documents (e.g. checks, deposit slips)
during the course of an average business day. This requires a reliable, yet economical form of input.
The most common source automation device used by bank is:
a. a disk pack c. bar coding
b. magnetic tape d. magnetic ink character recognition D
10. Expert system consists of:
a. software packages with the ability to make judgment decisions
b. a panel of outside consultants
c. hardware designed to make judgment decisions
d. hardware and software used to automate routine tasks A
AUDITING THEORY

1. Modern computer technology makes it possible to perform paperless audits. For example, in an audit
of computer-processed customer accounts receivable balances, an auditor might use a personal
computer to access the accounts receivable files directly and copy selected customer records into the
computer for audit analysis. Which of the following is an advantage of this type of paperless audit of
accounts receivable balances?
a. it reduces the amount of substantive testing required
b. it allows immediate processing of audit data on a spreadsheet working paper
c. it increases the amount of technical skill required of the auditor
d. it allows direct confirmation of customer account balances B
2. A corporation has numerous customers. A customer file is kept on disk storage. Each customer
record contains the name, address, credit limit, and account balance. The auditor wishes to test this
file to determine whether credit limits are being exceeded. The best procedure for the auditor to
follow is to:
a. develop test data that would cause some account balances to exceed the credit limit and
determine if the system properly detects such situations
d. develop a program to compare credit limits with account balances and print out the details of any
account with a balance exceeding its credit limit
c. request a printout of all account balances so they can be manually checked against the credit
limits
d. request a printout of a sample of account balances so they can be individually checked against
the credit limits B

3. The element of audit planning process most likely to be agreed with the client before implementation
of the audit strategy is the determination of the:
a. timing of inventory observation procedures to be performed
b. evidence to be gathered to provide a sufficient basis for the auditor’s opinion
c. procedures to be undertaken to discover litigation, claims and assessment
d. pending legal matters to be included in the inquiry of the client’s attorney A

4. If an independent audit leading to an opinion on financial statements causes the auditor to believe
that material fraud exists, he should first:
a. consider the implication for other aspects of the audit and discuss the matter with appropriate
levels of management
b. make the investigation necessary to determine whether fraud has in fact occurred
c. request that management investigate to determine whether fraud has in fact occurred
d. consider whether fraud was the result of a failure by employees to comply with existing controls A

5. If the auditor considers an illegal act to be sufficiently serious to warrant withdrawing from the
engagement, the auditor will likely:
a. notify all parties who may rely upon the company’s financial statements of the company’s illegal
act
b. consult with legal counsel as to what other action, if any, should be taken
c. return all incriminating evidence and working papers to the client’s audit committee for follow-up
d. contact the successor auditor to make the successor aware of the possible consequences of
relying on management’s representations B

6. Which of the following professional services would be considered an attest engagement?

a. a consulting service engagement to provide computer processing advice to a client
b. an engagement to report on compliance with statutory requirements
c. an income tax engagement to prepare the income tax returns
d. the compilation of financial statements from a client’s accounting records B

7. When engaged to compile unaudited financial statements for a private company, the accountant’s
responsibility to detect errors, irregularities, and illegal acts:
a. does not exist unless the parties have a written agreement
b. arises from the accountant’s obligation to apply normal auditing procedures
c. is to design procedures to provide reasonable assurance of detecting material misstatements
d. is limited to informing the client that the engagement cannot be relied upon to disclose fraud D

8. The profession’s ethical standards most likely are violated when a CPA represents that specific
consulting services will be performed for a stated fee and is apparent at the time of the
representation that the:
a. actual fee will be substantially higher
b. actual fee will be substantially lower than the fees charged by other CPA s for comparable
services
c. CPA will not be independent
d. fee is a competitive bid A
9. Which of the following is an engagement attribute for an audit of an entity that processes most of its
financial data in electronic form without any paper documentation?
a. discrete phases of planning, interim, and year-end field work
b. increased effort to search for evidence of management fraud
c. performance of audit tests on a continuous basis
d. increased emphasis on the completeness assertion C

10. According to the standards of the profession, which of the following events would require a CPA
performing a consulting services engagement for a non-audit client to withdraw from the
engagement?
I. The CPA has a conflict of interest that is disclosed to the client, and the client consents to the
CPA’s continuing the engagement.
II. The CPA fails to obtain a written understanding from the client concerning the scope of the
engagement.
a. I only c. both I and II
b. II only d. neither I and II D
THEORY OF ACCOUNTS

1. Which of the following statements is false?

a. segment information is not required to be disclosed in interim reports
b. earnings per share should be computed for each interim period presented
c. both dipping into the LIFO base at interim date and lower of cost or market losses at
interim date can be ignored if recovery is expected by year-end
d. if a company has stock traded publicly, both interim and annual financial reports must be
audited D
2. Minimum disclosures are not required as part of interim reporting for:
a. sales or gross revenue
b. primary and fully diluted earnings per share
c. contingent items
d. segment information D
3. Which of the following inventory procedures cannot be applied for interim reporting?
a. estimation of inventory using gross profit method
b. delayed recognition of permanent losses from inventory market declines
c. delayed recognition of temporary inventory market declines
d. delayed recognition of temporary LIFO liquidations B
4. When a segment of a business has been discontinued during the year, the gain or loss on disposal
should:
a. include operating losses of the current period up to the measurement date
b. be net of applicable income taxes
c. be reported as an extraordinary item
d. exclude operating losses during the phaseout period B
5. When stock rights are issued to current stockholders, the number of rights to be issued per existing
share will:
a. be the number of rights needed to obtain one additional share of stock multiplied by the
number or shares already held
b. vary depending on the number per share of stock already held, as determined and
announced by the corporation
c. usually be only one right per share of stock already held
d. depend on the number purchased by existing shareholders C
6. Identify the missing component (x) in the following equation:
Retained earnings, ending balance = net income to date + prior period adjustments to date –
cash and property dividends to date - x
a. stock dividends to date
b. stock dividends and splits to date
c. stock splits to date
d. net unrealized gain or loss on securities available for sale A
7. A lessee wants to lease an asset on a long-term noncancelable lease, but wants to avoid capitalizing
the lease. Which of the following strategies has the best chance of achieving the lessee’s goal?
a. use a lessee guarantee of residual value
b. make it impossible for the lessee, who has a very low borrowing rate, to determine the
lessor’s implicit rate, which is much higher than the lessee’s borrowing rate
c. include a bargain purchase option in the lease agreement
d. use a third-party guarantee of residual value D
8. When a segment of a business has been discontinued during the year and is sold at the end of the
year, the income or loss from the discontinued operations, one of the two amounts typically reported
in the income statement, includes:
a. the income or loss from operating segment the entire year
b. the income or loss from operating the segment from that date the decision was made to
dispose of the segment to the end of the year
c. the income or loss from operating the segment from the beginning of the year to the
date the decision was made to dispose of the segment
d. the difference between the sales price of the segment and the segment’s book value B
9. A company uses a perpetual inventory system. They discover that a P60,000 sale was recorded on
December 28, 2004, when the invoice was sent. But the item was not shipped until January, 2005.
Cost of goods sold was P42,000. The books have been closed for 2004. Which line item should
appear in the correcting entry, if any?
a. none, no entry needed c. credit cost of goods sold for P42,000
b. debit sales for P60,000 d. debit prior period adjustment for P18,000 D
10. Which of the following statements is false?
a. Adjustments for bad debts, depreciation expense, and accruals are required at each interim date.
b. The cumulative effect of change in accounting policy (net of income taxes) should be disclosed in
the first interim period, even if the change was made in the second, third, or fourth interim
period.
c. Each interim period should be viewed as a basic accounting period and the results of operations
should be determined in essentially the same way as if the interim period were an annual
accounting period.
d. Extraordinary gains and losses occurring in one interim period should not be allocated to several
interim periods. C
PRACTICAL ACCOUNTING 1

1. At the end of the accounting year, December 31, 2003, Jane’s records reflected the following:
(a) Common stock, no par, 5,000 shares issued, issue price P12 per share
(b) Preferred stock, par P5, 1,000 shares issued and outstanding; issue price, P15 per share
(c) Unrealized gain, securities available for sale, P18,000
(d) Retained earnings, P20,000 (unappropriated)
(e) Preferred stock, par P5, subscribed (not yet issued), 400 shares; subscription price P20 per share
(f) Subscriptions receivable on the preferred stock P5,000 to be collected on January 1, 2004
(g) Reserve for bond sinking fund, P15,000
(h) Treasury stock, common stock, 1,000 shares, cost P10 per share
Total stockholders’ equity is:
a. P120,000. c. P126,000.
b. P121,000. d. P125,000. C

2. On July 8, 2003, Geo Company issued for P525,000 a total of 5,000 shares of P100 par value, 7
percent noncumulative preferred stock along with one detachable warrant for each shares issued.
Each warrant contains a right to purchase one share of Geo’s P10 par value common stock for P15 a
share. The market price of the rights of July 1, 2003, was P2.25 per right. On October 31, 2003,
when the market price of the common stock was P19 per share and the market value of the rights
was P3 per right, 4,500 rights were exercised. As a result of the exercise of the 4,500 rights and the
issuance of the related common stock , what journal entry would Geo make?
Debit Credit
a. Cash P67,500
Common stock 40,000
Additional paid-in capital 27,500

b. Cash 67,500
Common stock rights outstanding 9,000
Common stock 45,000
Additional paid-in capital 31,500

c. Cash 67,500
Common stock rights outstanding 11,250
Common stock 45,000
Additional paid-in capital 33,750

d. Cash 67,500
Common stock rights outstanding 10,125
Common stock 45,000
Additional paid-in capital 32,625 D

3. Cute had the following shares outstanding:

Preferred stock, 6%, P50 par value, 2,000 shares
Common stock, P100 par value, 2,000 shares
The preferred stock is cumulative, fully participating; dividends are three years in arrears, excluding
the current year, dividends declared in the current year amount to P42,000. The total amount of
dividends to which common stockholders are entitled is:
a. P16,000 b. P20,000 c. P24,500 d. P26,000 A

4. Jar had a P5,400 temporary tax difference resulting from using an accelerated depreciation method
for tax purposes at the end of 2004. This temporary difference will reverse equally during 2005,
2006, and 2007. The currently enacted tax rates are: 2004 – 25%; 2005 – 30%; 2006 – 26%; and
2007 – 25%. The related deferred tax liability at the end of 2004 would be:
a. P1,350 b. P1,404 c. P1,431 d. P1,458 D

5. Fred had a P1,200 temporary difference for deferred gross margin on installment sales at the end o
2004. This temporary difference will reverse equally during 2005, 2006 and 2007. The enacted
corporate income tax rate is 48% and Congress is discussing a reduction in the corporate income tax
rates for 2006 and 2007 to 38%. The deferred tax liability related to this temporary difference at the
end of 2004 would be:
a. P192 b. P248 c. P516 d. P576 D

6. Kim had taxable income of P1,500 during 2003. Kim used accelerated depreciation for tax purposes
(P2,000) and straight-line depreciation for financial accounting purposes (P800). On December 30,
2003, Kim collected January 2004’s P600 rent on a lot it rents on a month-by-month basis to Mile.
Kim’s pretax accounting income for 2003 would be:
a. P900 b. P2,100 c. P3,300 d. P3,700 B
7. On June1, Jeremiah Corporation established a defined benefit pension plan for its employees. The
following information was available on May 31, 2003:
Projected benefit obligation P 3,625,000
Accumulated benefit obligation 3,000,000
Unfunded accrued pension cost 50,000
Plan assets at fair market value 1,750,000
Unrecognized prior service cost 637,500

To report the proper pension liability in Jeremiah’s May 31, 2003, balance sheet, what is the required
balance in additional minimum pension liability?
a. P562,500 b. P1,187,500 c. P1,200,000 d. P1,825,000 C

8. Oak Company sponsors a defined benefit plan covering all employees. Benefits are based on years of
service and compensation levels at the time of retirement. Oak determined that as of September 30,
2003, its accumulated benefit obligation was P380,000 and its plan assets had a P290,000 fair value.
Oak’s September 30, 2003, trial balance showed prepaid pension cost of P20,000. As of September
30, 2003, what is the balance of additional minimum pension liability?
a. P110,000 b. P360,000 c. P90,000 d. P400,000 A

9. The following information pertains to Prim Corporation’s defined benefit plan for 2003:
Service cost P 160,000
Actual and expected gain on plan assets 35,000
Unexpected increase in PBO incurred during 2003 40,000
Amortization of unrecognized prior service cost 5,000
Annual interest on pension obligation 50,000
What amount should Prim report as pension expense in its 2003 income statement?
a. P250,000 b. P220,000 c. P210,000 d. P180,000 D

10. Mike leased a new machine from Lime on July 1, 2004, under a lease with the following pertinent
information:
Lease term 10 years
Annual rental payable at the beginning of each lease year P30,000
Useful life of the machine 12 years
Implicit interest rate 14%
Present value of an annuity of P1 in advance for 10 periods at 14% 5.95
Present value of P1 for 10 periods at 14% 0.27
Mike has the option to purchase the machine at the end of the lease term, by paying P40,000, which
approximates the expected fair value of the machine on the option exercise date. The cost of the
machine on Lime’s accounting records is P150,000. On July 1, 2004, Mike should record a net
capitalized leased asset of:
a. P150,000 b. P178,500 c. P189,300 d. P190,000 B
PRACTICAL ACCOUNTING 2

1. The Articles of Partnership of A and E had the following provisions stipulated:

(a) Annual salary of P60,000 each.
(b) Bonus to A of 20% of the net income after partners’ salaries, the bonus being treated as an
expense.
(c) Balance to be divided equally.
The partnership reported a net income of P360,000 after partners’ salaries but before bonus. How
much is the share of E in the profit?
(a) P60,000 (b) P90,000 (c) P150,000 (d) P210,000 D

2. The following condensed balance sheet is presented for the partnership of A and B, who share profits
and losses in the ratio of 60:40, respectively:
Cash P 45,000 Accounts payable P120,000
Other assets 625,000 A, Capital 348,000
B, Loan 30,000 B, Capital 232,000
P700,000 P700,000
The assets and liabilities are fairly valued on the balance sheet. A and B decide to admit C as a new
partner with a 20% interest. No goodwill or bonus is to be recorded. What amount should C
contribute in cash or other assets?
(a) P110,000 (b) P116,000 (c) P140,000 (d) P145,000 D

3. J, S and H, partners, share net income and losses in the ratio 5:3:2. The partners decided to
liquidate the partnership. Their balance sheet prior to liquidation is:
Cash P 40,000 Liabilities P 60,000
Other assets 210,000 J, Loan 8,000
J, Capital 40,000
S, Capital 72,000
H, Capital 70,000
Total P250,000 Total P250,000
The partnership is to be liquidated by installment. The first sale of non-cash assets with a
carrying amount of P120,000 realized P90,000. Liquidation expenses paid amounted to P2,000. How
much cash should be distributed to each partner, respectively?
(a) P 0, P35,400, P45,600 (c) P 0, P 9,600, P28,400
(b) P32,000, P62,400, P63,600 (d) P 0, P27,600, P40,400 D

4. T Co. bills its branch for merchandise shipments at 125% of cost. As of cut off date, December 31,
2000, the following data were available:
Merchandise from Merchandise
Home Office (at purchased (in
billed price) outside) Total
Merchandise, Dec. 1 P300,000 P120,000 P420,000
Addition to stock, Dec. 1 – 31 450,000 360,000 810,000
Merchandise, Dec. 31 420,000 150,000 570,000
The branch returned P15,000 merchandise to the home office acquired at billed price. The
amount of the allowance for overvaluation account that was realized as income in view of branch for
the month of December was:
(a) P63,000 (b) P66,000 (c) P87,500 (d) P84,000 A

5. At the end of 1997, the branch reported an inventory of P 15,625.00. The home office bills this
branch at 125% of cost. During 1998, goods costing P300,000.00 were shipped to the branch. The
account “allowance for overvaluation of branch inventory” after adjustment, shows a balance of
P16,250.00 at the end of the year. What was the amount of inventory at January 1, 1998 at cost?
(a) P12,500 (b) P15,625 (c) P19,531 (d) P28,125 A

6. Kuh Company which began operations on January 1, 2000, appropriately uses the installment method
of accounting. The following information is available for 2000:
Installment accounts receivable, Dec. 31, 2000 P400,000
Deferred gross profit, Dec. 31 (before recognition
of realized profit for 2000) 280,000
Gross profit on sales 40%
For the year ended December 31, 2000, cash collections and realized gross profit on sales should be:
Cash Realized Cash Realized
Collections Gross Profit Collections Gross Profit
(a) P300,000 P120,000 (c) P200,000 P120,000
(b) P300,000 P160,000 (d) P200,000 P160,000 A
7. On April 7, 1998, Dart Co. paid P620,000 for all the issued and outstanding common stock of Wall
Corp. in a transaction properly accounted as a purchase. The recorded assets and liabilities of Wall
Corp. on April 1, 1998:
Cash P 60,000
Inventory 180,000
Property & Equipment (net of accumulated
depreciation of P220,000) 320,000
Goodwill ( net of accumulated amortization of
P50,000 100,000
Liabilities (120,000)
Net Assets P540,000
On April 1, 1998, Wall’s inventory had a fair value of P150,00 and the property and equipment (net)
had a fair value of P380,000. What is the amount of goodwill resulting from the business combination?
(a) P150,000 (b) P 120,000 (c) P50,000 (d)P20,000 A

8. Slashers Co. issued 100,000 shares of its P100 par value common stock, with market value of P360
per share in acquiring all of MBA Co.’s common shares issued and outstanding with a par value P100,
in a business combination appropriately accounted as a pooling of interest. At the date of business
combination, the following equity accounts of the combining companies follow:
Slashers Co. MBA Co.
Capital stock P30,000,000 P15,000,000
Additional paid in capital 13,000,000 1,500,000
Retained earning 25,000,000 8,500,000
What is the amount of the total additional paid in capital in the consolidated balance sheet
immediately after the combination?
(a) P5,000,000 (b) P 21,000,000 (c) P19,500,000 (d) P35,500,000 C

9. Ash completed 20,000 units, had beginning inventory of 5,000 units 40% complete, and ending
inventory of 2,000 units 20% complete. Weighted average equivalent units of production was:
(a) 18,400 (b) 20,000 (c) 20,400 (d) P22,000 C

10. Ax has a weighted average equivalent units of production of 61,000 units. Beginning inventory was
8,000 units 30% complete; ending inventory was 10,000 units 60% complete. FIFO equivalent units
of production is:
(a) 58,600 (b) 63,000 (c) 55,400 (d) 61,000 A