Mary the Queen College of Pampanga

Accountancy
Final Examinations
Financial Accounting

Name: Quiambao, Alyssa R. SECTION: BSA 1 Penafrancai Score: _________

Grade in CFAS (Accounting 1 ) 83

Instructions. Answer the questions by writing the letter of your choice on the space provided before each
number. After accomplishing all the numbers, transfer your final answers (without erasures) on the answer
sheet provided on this page. Use ballpens (no friction pens) for your final answers. If you have any concern,
approach the proctor and not your seatmates. (70 points)
Test 1: True or False.
The first twenty number should be answered using the following choices:

A. Only the first statement is true.

B. Only the second statement is true.
C. Both statements are true.
D. Both statements are false.

B1. A partnership has an unlimited life. 

A partnership is an unincorporated association of two or more people who agree to carry on a business as co-
owners for the purpose of earning profit.

A2.  Mutual agency means each partner can commit/ bind the partnership to any contract within the scope of the
partnership business. 
Accounting procedures for all items are the same for both sole proprietorship and partnership forms of
businesses.

A3. In the absence of a partnership agreement, the law says that income of a partnership will be shared equally by
the partners. .
If partners devote their time and services to their partnership, their salaries are expensed on the income
statement. 

A4. When a partner leaves a partnership, the present partnership ends

To buy a partner’s interest in an existing partnership, the new partner must contribute cash to the partnership. 

A5. The statement of changes in partners' equity shows the beginning balance in the capital and drawing account (if
this was not closed), plus investments, less withdrawals, plus or minus allocated income or loss resulting from
the period’s operation.
The equity section of the partnership’s statement of financial position may not report separately the capital
account balances of each partner

C6. When a partnership is liquidated, its business is ended.

A capital deficiency can arise from liquidation losses, excessive withdrawals before liquidation, or recurring
losses in prior periods. 

B7. If at the time of partnership liquidation, a partner has a P5,000 capital deficiency which he pays out of personal
assets, then that partner is entitled to share in the final distribution of cash. 
If a partner's investment in a partnership consists of equipment that has accumulated depreciation of P8,000, it
would not be appropriate for the partnership to record the accumulated depreciation.

D8. If a partner's investment in a partnership consists of Accounts Receivable of P25,000 and an Allowance for
Doubtful Accounts of P7,000, it would not be appropriate for the partnership to record the Allowance for
Doubtful Accounts.

If partnership agreement requires a 10% bonus to a managing partner, this should be given whether the business
operation resulted in a profit or a loss.

A9. If a partnership incurs a loss for the period, the closing entry to transfer the loss to the partners will require a credit
to the Income Summary account.

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 The income earned by a partnership will always be greater than the income earned by a proprietorship because in
a partnership there is more than one owner contributing to the success of the business.

A10. Total partners' equity of a partnership is equal to the sum of all partners' capital account balances.
The distribution of cash to partners in a partnership liquidation is always made based on the partners' income
sharing ratio.

A11. If a new partner is admitted into a partnership by investment, the total assets and total capital will change.
A bonus to old partners results when the new partner's capital credit on the date of admittance is greater than his
or her investment in the firm.

B12. A corporation is a separate entity for accounting purposes but not for legal purposes.
The financial loss that each shareholder can incur is usually limited to the investment made by the
shareholder.

D13.The number of outstanding shares of stock is equal to the number of shares authorized minus the number of
shares issued.
The amount of capital paid in by the shareholders is called legal capital.

C14. As soon as a corporation is authorized to sell stock, under the journal entry method, an entry should be made
recording the total value of the shares authorized.
When no-par value stock does not have a stated value, the entire proceeds from the issuance of the stock becomes
legal capital.

D15. Each shareholder has a separate capital account in the shareholders' equity section of the Statement of
Financial Position.
The number of ordinary shares outstanding can never be greater than the number of shares issued.

A16.Although preferred shareholders have a greater chance of receiving a regular dividend, ordinary shareholders
have a greater chance of receiving large dividends.
When the Board of Directors declares a cash or stock dividend, this action decreases assets and retained earnings.

.  A17.Paid-in capital is the total amount of cash and other assets the corporation receives from its stockholders in
exchange for ordinary stock.
Authorized stock is the total number of shares outstanding. 

C18. If a corporation is authorized to issue 1,000 shares of P50 ordinary stock, it is said to have P50,000 of stock
outstanding. 
Minimum legal capital requirements are intended to protect creditors by requiring a minimum level of net assets.  

D19. The amount of a cash dividend liability is recorded on the date of record because it is on that date that the
persons or entities who will receive the dividend are identified.
A 10% stock dividend will increase the number of shares outstanding but the book value per share will decrease.

A20. Organizational expenses of a corporation often include legal fees and promoter fees. 
Ordinary shareholders always share equally with all other shareholders in all dividends. 

Test 2: Multiple Choice:

C21. The Metro Manila partnership owned by Mary and Cane is terminated when creditor claims exceed
partnership assets by P40,000. Partner Cane is a millionaire and Mary has no personal assets. Mary’s' partnership
interest is 75% and Cane's is 25%. Creditors
a. must collect their claims equally from Mary and Cane.
b. may collect the entire P40,000 from Cane.
c. must collect their claims 75% from Mary and 25% from Cane.
d. may not require Cane to use his personal assets to satisfy the P40,000 in claims.

B22. Which of the following statements about partnerships is incorrect?

a. Partnership assets are co-owned by partners.
b. If a partnership is terminated, the assets do not legally revert to the original contributor.
c. Right over profits and right over assets represent claims of partners that are allocated based on partners’
capital accounts.
d. The industrial partner does not share in the losses of the partnership.

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B23.  In the absence of a partnership agreement, the law says that income (and loss) should beallocated based on: 
a. Interest allowances
b.  The ratio of capital investments.
c. Salary allowances.
d. Equal shares.

A24. In the liquidation of a partnership, any partner who has a capital deficiency
a. has a personal debt to the partnership for the amount of the deficiency.
b. is automatically terminated as a partner.
c. will receive a cash distribution only on the basis of his or her income-sharing ratio.
d. it may be written off to a “Loss” account

C25. The admission of a new partner to an existing partnership

a. may be accomplished only by investing assets in the partnership.
b. requires purchasing the interest of one or more existing partners.
c. causes a legal dissolution of the existing partnership.
d. is almost always accompanied by the liquidation of the business

B26. Which of the following is correct when admitting a new partner into an existing partnership?
Purchase of an Interest Admission by Investment
a. Total net assetsunchanged unchanged
b. Total capitalincreased unchanged
c. Total net assetsunchanged increased
d. Total capitalunchanged unchanged

C27. When admitting a new partner by investment, a bonus to old partners

a. is usually unjustified because book values clearly reflect partnership net worth.
b. is sometimes justified because goodwill may exist and it is not reflected in the accounts.
c. results if the debit to cash is more than the new partner's capital credit.
d. results if the debit to cash is equal to the new partner's capital credit.

D28. An upward adjustment of partnership assets is implied before a new partner is admitted
a. this is prohibited by GAAP.
b. when the new partner's capital credit is greater than his or her investment of assets in the firm.
c. when recorded book values are greater than market values.
d. when total contributions is lesser than total agreed equity and the new partner's capital credit is the
same as his or her investment of assets in the firm.

D29. An entry is not required in the liquidation of a partnership to record the

a. payment of cash to creditors.
b. distribution of cash to the partners.
c. sale of noncash assets.
d. allocation of a capital deficiency to partners with credit balances when the deficient partner is expected
to pay the deficiency.

C30. Total shareholders' equity represents

a. a claim to specific assets contributed by the owners.
b. the maximum amount that can be borrowed by the enterprise.
c. a claim against a portion of the total assets of an enterprise.
d. only the amount of earnings that have been retained in the business.

D31. Shareholders' equity is generally classified into two major categories:

a. contributed capital and appropriated capital.
b. appropriated capital and retained earnings.
c. retained earnings and unappropriated capital.
d. contributed capital and earned capital.

D32. When a corporation issues its capital stock in payment for services, the best appropriate basis for recording
the transaction is the
a. market value of the services received.
b. par value of the shares issued.
c. market value of the shares issued if market value of services received is not known.
d. Any of these provides an appropriate basis for recording the transaction.

C33. When treasury share is purchased for more than the par value of the stock and the cost method is used to
account for treasury share, what account(s) should be debited?

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 a. Treasury share for the par value and paid-in capital in excess of par for the excess of the purchase price over
the par value.
b. Paid-in capital in excess of par for the purchase price.
c. Treasury share for the purchase price.
d. Treasury share for the par value and retained earnings for the excess of the purchase price over the par value.

B34. Two financial requirements that the Board of Directors must consider when declaring cash dividends are
a.
sufficient retained earnings and no treasury shares
b.
sufficient cash and sufficient retained earnings
c.
sufficient cash and sufficient additional paid in capital
d.
sufficient retained earnings and sufficient premium on stock
B35. Which dividends do not reduce shareholders' equity?
a.Cash dividends
b.Property dividends
c.Stock dividends
d. Liquidating dividend

D36. The balance in Ordinary Share Dividend Payable should be reported as a(n)
a.reduction from ordinary shares issued.
b.addition to ordinary share capital.
c. current liability.
d. contra current asset.

B37. How should a "gain" from the sale of treasury stock be reflected when using the cost method of recording
treasury stock transactions?
a.As paid-in capital from treasury stock transactions.
b. As ordinary earnings shown on the income statement.
c.As an increase in the amount shown for common stock.
d.As an extraordinary item shown on the income statement.

B38. At the date of the financial statements, ordinary shares issued would exceed outstanding common stock
shares because of the
a.subscription price being higher than the par value
b. declaration of a stock dividend.
c.purchase of treasury shares.
d.payment in full of subscribed stock.

B39. If Victory Corporation issues 2,000 ordinary shares of P5 par value stock for P140,000,
a. Common Stock will be credited for P140,000.
b. Paid-In Capital in Excess of Par Value will be credited for P10,000.
c. Paid-In Capital in Excess of Par Value will be credited for P130,000.
d. Cash will be debited for P130,000

D40. Which of the following represents the largest number of ordinary shares?
a Treasury shares
b.Issued shares
c. Outstanding shares
d.Authorized shares

A41. When preference shares share ratably with the ordinary shareholders in any profit distributions beyond the
prescribed rate this is known as the
a. Cumulative feature.
b. Callable feature
c. Participating feature.
d. Redeemable feature.

C42. Quirk Corporation issued a 100% share dividend of its ordinary shares which had a par value of P10 and a
fair value of P12 on declaration date and P14 on payment date. At what amount should retained earnings be
capitalized for the additional shares issued?
a. No capitalization of retained earnings.
b. Par value
c. Fair value on the declaration date
d. Fair value on the payment date

B43. How would the declaration and subsequent issuance of a 10% share dividend by the issuer affect each of the
following when the fair value of the shares exceeds the par value of the shares?
Share Capital Share Premium

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 a. No effect No effect
b. No effect Increase
c. Increase No effect
d. Increase Increase

B44. An ordinary shareholder has the pre-emptive right to

a. share proportionately in company assets upon liquidation.
b. share proportionately in any new issues of shares of the same class.
c. receive cash dividends before they are distributed to preference shareholders.
d. exclude preference shareholders from voting rights.

D45. Dividends are not paid on

a. noncumulative preference shares.
b. nonparticipating preference shares.
c. treasury shares.
d. Dividends are paid on all of these.

B46. Sun Corporation was organized on January 1, 2013, with an authorization of 400,000 ordinary shares of stock
with a par value of P6 per share. During 2013, the corporation had the following capital transactions:
January 5 - issued 225,000 shares @ P10 per share
July 28 - issued 30,000 shares for land acquired with an appraised value of P250,000
August 15 - issued 10,000 shares for consultancy services rendered by Trias Consultancy
Services for a bill received by Sun Corporation for P120,000.
What is the total amount of additional paid-in capital as of December 31, 2014?
a. P900,000
b. P1,030,000
c. P70,000
d. P60,000

Use the following information for questions 47&48:

Tommy, Inc. has outstanding 200,000 shares of P2 par ordinary shares and 40,000 shares of no-par 8% preferred stock
with a stated value of P5. The preferred stock is cumulative and nonparticipating. Dividends have been paid yearly
except for the past two years and the current year.
B47. Assuming that P100,000 will be distributed as a dividend in the current year, how much will the ordinary
shareholders receive?
a. Zero.
b. P52,000.
c. P68,000.
d. P84,000.

D48. Assuming that P42,000 will be distributed as a dividend in the current year, how much will the preferred
sharehollders receive?
a. P14,000.
b. P16,000.
c. P32,000.
d. P42,000.

D49. On June 30, 2019, when Vida Corporation’s stock was selling at P65 per share, its equity accounts were as
follows:
Share Capital par value P25; 40,000 shares issued P1,000,000
Premium on share capital 600,000
Retained earnings 4,200,000

If a 100% stock dividend were declared and distributed, share capital will become
a. P1,000,000.
b. P2,600,000.
c. P2,000,000.
d. P3,200,000.

B50. The shareholders' equity section of Melrose Corporation as of December 31, 2018, was as follows:
Ordinary share capital, par value P2; authorized 20,000 shares;
issued and outstanding 10,000 shares P 20,000
Paid-in capital in excess of par 30,000
Retained earnings 90,000
P140,000

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On March 1, 2019, the board of directors declared a 10% stock dividend, and accordingly 1,000 additional shares were
issued. On March 1, 2019, the fair market value of the stock was P6 per share. For the two months ended February
28, 2019, Melrose sustained a net loss of P10,000.
What amount should Melrose report as retained earnings as of March 1, 2019?
a. P74,000.
b. P78,000.
c. P84,000.
d. P88,000.

Prepared by: Approved by: Received by:

Dr. Antonieta P. Tungcab, CPA, MBA,AFBE William I. Asenci, CPA, MBA Nikee Guevarra
Faculty Dean Printing

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