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Name: ______________________________ Score: ____________________

Year/Course/Section: _______________ Schedule:__________________

PRACTICAL ACCOUNTING 1 (FINALS)

MULTIPLE CHOICE: Encircle the best answer

1. Multinational Company provided the following balances on December 31, 2017:

Accounts payable P 500,000
Accrued taxes 100,000
Ordinary share capital 5,000,000
Dividends—ordinary shares 1,000,000
Dividends—preference shares 500,000
Mortgage payable (P500,000 due in six months) 4,000,000
Note payable, due, January 31, 2019 2,000,000
Share premium 500,000
Preference share capital 3,000,000
Premium on note payable 200,000
Income summary—credit balance 4,000,000
Retained earnings—1/1/2017 2,500,000
Unamortized issue cost on note payable 50,000
Unearned rent income 150,000
What is the total shareholders’ equity on December 31, 2017?
a. 15,000,000 c. 9,500,000
b. 13,500,000 d. 8,500,000

2. Lincoln Company provided the following account balances on December 31, 2016:
Accounts payable, P125,000; Accrued taxes, P50,000; Cash surrender value, P30,000;
Ordinary share capital, P1,000,000; Dividends-preference, P150,000; Mortgage payable
(200,000 due in six months), P1,200,000; Notes payable-20%, due on January 2, 2017,
P1,500,000; Shares premium, P250,000; Preference share capital, P450,000; Income
summary-credit balance, P500,000; Accumulated profits-December 31, 2016, P550,000;
Unearned rent income, P25,000; Dividends-ordinary, P100,000
How much should Lincoln Company report as Shareholders’ equity on December 31,
2016?
a. 1,450,000 c. 2,250,000
b. 1,650,000 d. 2,500,000

3. Party Company reported an total assets of P1,050,000 and total liabilities of P680,000 in
its December 31, 2015 balance sheet. The following transactions occurred during 2016:
 On August 1, Party Company issued an additional 5,000 ordinary shares at P25 per
share
 The company paid dividends totaling P80,000
 Net income during the year was P110,000
 Reacquired treasury shares of 2,000 at P30; subsequently, reissued 1,000 for P39,
per share
 No other changes occurred in Shareholders’ Equity during the year
What is the balance of Party’s Shareholders’ Equity section in its December 31, 2016
balance sheet?
a. 400,000 c. 525,000
b. 504,000 d. 685,000

4. The adjusted trial balance of Kalinga Company at December 31, 2017, includes the
following accounts:
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Share capital P15,000,000

Share premium 5,000,000
Treasury shares, at cost 2,000,000
Unrealized loss on AFS securities 1,000,000
Retained earnings unappropriated 6,000,000
Retained earnings appropriated 3,000,000
Revaluation surplus 4,000,000
Cumulative translation adjustment—credit 1,500,000
What amount should be reported as total stockholders’ equity
a. 31,500,000 c. 28,500,000
b. 32,500,000 d. 25,500,000

5. Silver Company provided the following information on December 31, 2017:

Share premium P 1,000,000
Accounts payable 1,100,000
Preference share capital, at par 2,000,000
Ordinary share capital, at par 3,000,000
Sales 10,000,000
Total expenses 7,800,000
Treasury share—ordinary 500,000
Dividends 700,000
Retained earnings—January 1, 2017: 1,000,000
The total shareholders’ equity should be reported on December 31, 2017 at:
a. 8,000,000 c. 5,800,000
b. 8,500,000 d. 8,700,000

6. Hallway Company issued 20,000 shares of its P10 par value ordinary share and P40,000 of
its P10 par value convertible preference share for a total amount of P1,800,000. At this
date, Hallway’s ordinary share was selling P20 per share and the convertible preference
share was selling for P30 per share. What amount of the proceeds should be allocated to
the ordinary share?
a. 400,000 c. 600,000
b. 450,000 d. 1,350,000

7. Corridor Company issued 6,000 shares of its P10 par ordinary share to Max L as
compensation for 1,000 hours of legal services performed. Max L usually bills P500 per
hour for legal services. On this date of issuance, the share was selling at a public trading
at P150 per share. By what amount should the share premium account of Corridor
Company increase as a result of the issuance of those shares?
a. 60,000 c. 900,000
b. 840,000 d. 3,000,000

8. Martyr Company issued 15,000 shares of its P100 par ordinary share in acquiring a land
that was recently appraised at P1,700,000. The ordinary share is actively selling at P120
per share. What is the amount of share premium to be credited on the issuance of shares?
a. 200,000 c. 500,000
b. 300,000 d. 600,000

9. Ribbon Company issued 10,000 of its 6% preference share; par P100, at 125 per share.
Each share carried a detachable share warrant for one share of Ribbon’s ordinary share,
P40 par, at a specified option price of P50 per share. Immediately after issuance, the
market value of Ribbon’s preference share was P1,140,000 and the warrants was P60,000.
What portion of the proceeds should be credited to ordinary share warrants outstanding?
a. 0 c. 62,500
b. 60,000 d. 250,000

10. The shareholders’ equity section of Fan Company revealed the following information on
December 31, 2016: preference share (P100 par), P2,300,000; share premium in excess of
par-preference, P805,000; ordinary share (15 par), P5,250,000; share premium in excess
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of par-ordinary, P2,750,000; subscribed ordinary share, P50,000; accumulated profits and

losses, P1,900,000; and subscription receivable-ordinary, P400,000. How much is the legal
capital?
a. 7,550,000 c. 11,150,000
b. 7,600,000 d. 13,055,000

11. The Goat Corporation is authorized to issue 100,000 shares at P20 par ordinary share. At
the beginning of 2016, 18,000 ordinary shares were issued and outstanding. These shares
had been issued at P27 per share. During 2016, the company entered into the following
transactions:
January 4 Issued 1,300 ordinary shares at P28, per share
Mar 19 Exchanged 12,000 ordinary shares for a machine
The ordinary share was selling at P30 per share
May 19 Reacquired 500 ordinary shares at P29 per share
July 19 Accepted subscriptions for 1,000 ordinary shares at P31 per share.
The contract called for 10% down payment with the balance due on
December 1
September 4 Sold 500 of treasury share at P32 per share
December 31 Collected the balance due on July 19 subscriptions and issued the
stock certificate
How much is the total contributed capital for December 31, 2016?
a. 846,000 c. 929,400
b. 914,900 d. 943,900

12. On July 1, 2016, Solo Company has 200,000 shares of P10 par ordinary share outstanding
and the market price of the share is P12 per share. On the same date, Solo declared a 1
for 2 reverse stock split. The par of the stock was increased from P10 to P20. Immediately
before the split, the total share Premium was P900,000. What would be the balance in
Solo’s share premium account after the reverse stock split is affected?
a. 0 c. 1,300,000
b. 900,000 d. 1,700,000

13. The following capital accounts are shown in the balance sheet of Laughing Corporation:
Ordinary share, 10,000, par value P100 P1,000,000
Premium on ordinary share 20,000
Share premium from treasury share 30,000
Accumulated profits and losses 750,000
Treasury share, 2,000 shares at cost 250,000
The entire 2,000 treasury shares were sold for P200,000. What would be the balance of
the accumulated profits and losses account after this sale?
a. 250,000 c. 730,000
b. 700,000 d. 750,000

14. The analysis of shareholders’ equity of P Company at January 1, 2016 showed the
following:
Ordinary share, par value P20 authorized 200,000
shares, issued and outstanding, 120,000 shares P2,400,000
Share premium 480,000
Accumulated profits 1,540,000
The company uses the cost method of accounting for treasury shares and the following
transactions took place:
Acquired 2,000 shares of its shares for P70,000. Sold 1,200 treasury shares at P40 per
share. Retired the remaining treasury shares.
What is the amount of the share premium at the end of the accounting period?
a. 462,000 c. 476,800
b. 474,000 d. 480,000

15. Leave Company was organized on January 2, 2014 at which date it issued 200,000 shares
at P10 par ordinary share at P15 per share. During the period January 2, 2014 to
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December 31, 2016, Leave reported net income of P900,000 and paid cash dividends of
P460,000. On January 2, 2016, Leave purchased 12,000 of its ordinary share at P12 per
share. On December 31, 2016, Leave sold 8,000 treasury shares at P8 per share. What is
the total shareholders’ equity at December 31, 2016?
a. 3,360,000 c. 3,408,000
b. 3,376,000 d. 3,440,000

16. Gasoline Company reported revenue of P3,100,000 in its accrual basis income statement
for the year ended December 31, 2016. Additional information were as follows:
Accounts receivable, December 31, 2015 P 700,000
Accounts receivable, December 31, 2016 1,100,000
Under the cash basis, how much should Gasoline report as revenue for 2016?
a. 2,000,000 c. 2,700,000
b. 2,400,000 d. 3,500,000

17. Tarzana Company reported total purchases of P3,200,000 in its accrual basis financial
statement on December 31, 2016. Additional information revealed the following:
Accounts payable, December 31, 2015 P 900,000
Accounts payable, December 31, 2016 1,250,000
What is the amount of purchases under the cash basis on December 31, 2016?
a. 2,850,000 c. 4,100,000
b. 3,550,000 d. 4,450,000

18. Under the accrual basis, rental income of Diesel Company for the calendar year 2016 is
P600,000. Additional information regarding rental income are presented below:
Unearned rental income, January 1, 2016 P50,000
Unearned rental income, December 31, 2016 75,000
Accrued rental income, January 1, 2016 30,000
Accrued rental income, December 31, 2016 40,000
Under the cash basis, how much rental income should be reported?
a. 585,000 c. 625,000
b. 615,000 d. 655,000

19. Hardy Boys Corporation acquires copyright from authors, paying advance royalties in
some cases and in others, paying royalties within 30 days of year-end. Hardy boys
reported royalty expense of P375,000 for the year ended December 31, 2016. The
following data are included in the corporation’s December 31 balance sheet:
2015 2016
Prepaid royalties P60,000 P50,000
Royalties payable 75,000 90,000
How much would be the royalty payments for the year?
a. 350,000 c. 380,000
b. 370,000 d. 400,000

20. The following information were obtained from the incomplete records of Tanker related to
its operating expenses:
Dec. 31, 2015 Dec. 31, 2016
Total payments made P670,000
Total operating expenses 690,000
Prepaid operating expenses P120,000 ???????
Accrued operating expenses 230,000 190,000
What is the balance of the prepaid operating expenses account on December 31, 2016
a. 20,000 c. 100,000
b. 60,000 d. 150,000
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21. On September 1, 2016, Windburn began a service proprietorship with an initial investment
of P400,000. Windburn provided P800,000 of services during September. Collections were
made except for P200,000 which were paid the following month. Expenses were incurred
in the amount of P400,000, including P100,000 which are to be paid next month.
Windburn withdrew P60,000 against the capital account. In September 30, 2016 financial
statement, what amount of capital should be reported under the cash basis accounting?
a. 640,000 c. 800,000
b. 740,000 d. 840,000

22. Passion Corporation maintains its accounting records on the cash basis but restates its
financial statements to the accrual method of accounting. Passion had P600,000 in cash-
basis pretax income for 2016. The following information pertains to Passion’s operations
for the years ended December 31, 2016 and 2015:
2016 2015
Accounts receivable P400,000 P200,000
Accounts payable 150,000 300,000
Under the accrual method, what amount of income before taxes should Passion report in
its December 31, 2016 income statement?
a. 250,000 c. 650,000
b. 550,000 d. 950,000

23. Groom Company’s professional fees expense account had a balance of P164,000 on
December 31, 2016 before considering year-end adjustments relating to the following:
 Consultants were hired for a special project at a total fee not to exceed P130,000.
Groom has recorded P110,000 of this fee based on billings for work performed in
2016.
 The attorney’s letter requested by the auditors dated January 30, 2016 indicated
that legal fees of P12,000 were billed on January 15, 2017 for work performed in
November 2016 and unbilled fees for December 2016 were P14,000
What amount of professional fees expense should Groom report for the year ended
December 31, 2016?
a. 164,000 c. 190,000
b. 176,000 d. 210,000

24. In 2014, Power Designs Corporation sold a layout design to Mass, Inc. and will receive
royalties of 20% of future revenues associated with the said layout design. On December
31, 2015, Power Designs reported royalties receivable of P75,000 from Mass, Inc. During
2016, Power Designs received royalty payments of P200,000. Mass, Inc. reported revenues
of P1,500,000 in 2016 from the layout design. In its 2016 income statement, what amount
should Power Designs report as royalty revenue?
a. 125,000 c. 200,000
b. 175,000 d. 300,000

25. The December 31, 2016 and 2015 comparative financial statements of World Gallery
Company showed equipment with an original cost P379,000 and P344,000 with
accumulated depreciation of P153,000 and P128,000 respectively. During 2016, the
company purchased equipment costing P50,000, and sold equipment with a carrying value
of P9,000. What amount should the company report as depreciation expense for 2016?
a. 19,000 c. 31,000
b. 25,000 d. 34,000

26. At December 31, 2016, the advertising expense account of Starlight Company had a
balance of P146,000 before any year-end adjustment relating to the following:
 Brochures and leaflets for a sales promotional campaign in January 1, 2017
amounting to P15,000 was included in the P146,000 balance
 Airtime for the radio advertisement during December 2016 for 9,000 was billed to
Starlight on January 2, 2017. Starlight paid the full amount on January 9, 2017.
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What amount should Starlight report as advertising expense in its income statement for
the year ended December 31, 2016?
a. 122,000 c. 140,000
b. 131,000 d. 155,000

27. To maintain sufficient operating cash, Infantry Company frequently borrows from a bank.
Below is the summary of loans granted to Infantry with 12% interest rate. The principal
and the related interest are payable at maturity and Infantry was able to repay the loans
on scheduled maturity date:
Date of Loan Amount Maturity Date Term of Loan
Nov. 1, 2015 P300,000 Oct. 31, 2016 1 year
Feb. 1, 2016 900,000 July 31, 2016 6 months
May 1, 2016 480,000 Jan. 31, 2017 9 months
Infantry records interest expense when the loans are repaid. Accordingly, interest expense
of P90,000 was recorded in 2016. If no correction is made, by what amount would 2016
interest expense be understated?
a. 32,400 c. 38,400
b. 37,200 d. 42,000

28. Holiness Company owns an office building and leases the offices under a variety of rental
agreements involving rent paid in advance monthly or annually. Not all tenants make
timely payments of their rent. The following data were taken from the balance sheets of
Holiness Company: Rentals receivable were P96,000 and P124,000 for 2015 and 2016,
respectively; unearned rentals were P320,000 and P240,000 for 2015 and 2016
respectively. During 2016, Holiness received P800,000 cash from tenants. What amount of
rental revenue should Holiness record for 2016?
a. 692,000 c. 852,000
b. 748,000 d. 908,000

29. Graphic Publishers offered a contest in which the winner would receive P1,000,000
payable over 20 years. on December 31, 2016, Graphic announced the winner of the
contest and signed a note payable to the winner for P1,000,000 payable in P50,000
installments every January 2. Also, on December 31, 2016, Graphic purchased an annuity
for P418,250 to provide the P950,000 prize monies remaining after the first P50,000
installments, which was paid on January 2, 2016. In its income statement, what should
Graphic report as contest prize expense?
a. 0 c. 468,250
b. 418,250 d. 1,000,000

30. Palace started operating a service proprietorship on April 1, 2016 with an initial cash
investment of P120,000. The business provided P38,400 of services in April and received
full payment in May. The business incurred expenses of P18,000 in April which paid in
June. During May, Palace drew P6,000 against his capital account. What was the income
for the two months ended May 31, 2016 under the following method of accounting?
Cash Basis Accrual Basis
a. 14,400 14,400
b. 20,400 20,400
c. 32,400 14,400
d. 38,400 20,400

31. Charade Company uses the direct method to prepare its statements of cash flows.
Charade had the following cash flows during 2015:
Cash receipts from issuance of ordinary shares P800,000
Cash receipts from customers 400,000
Cash receipts from dividends on long-term investments 60,000
Cash receipts from repayment of loan made to another company 440,000
Cash payments for wages and other operating expenses 240,000
Cash payments for insurance 20,000
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Cash payments for dividends 40,000

Cash payment for taxes 80,000
Cash payment for land 160,000
What is the net cash provided (used) from operating activities?
a. (40,000) c. 80,000
b. 60,000 d. 120,000

32. Carnival Company uses the direct method to prepare its statements of cash flows.
Carnival had the following cash flows during 2015:
Cash receipts from sale of an old van P 160,000
Cash receipts from issuance of ordinary shares 2,000,000
Cash receipts from issuance of 10%, 10-year bonds 1,500,000
Cash receipts from customers 1,000,000
Cash receipts from repayment of loan made to other company 1,200,000
Cash payments for dividends 150,000
Cash payments as interest 150,000
Cash payments for operating expenses 650,000
Cash payments for taxes 300,000
Cash payments for equity securities bought 900,000
Cash payments for equipment purchased 300,000
Cash payments for land acquired 1,200,000
What is the net cash provided (used) from investing activities?
a. (1,040,000) c. 1,940,000
b. 1,640,000 d. (2,240,000)

33. Pale Company uses the direct method to prepare its statements of cash flows. Pale had
the following cash flows during 2016:
Cash receipts from issuance of bonds P 800,000
Cash receipts from issuance of ordinary shares 1,400,000
Cash receipts from customers 700,000
Cash receipts from dividends on long-term investments 105,000
Cash receipts from repayment of loan made to another company 660,000
Cash payments for wages and other operating expenses 420,000
Cash payments for reacquisition of treasury shares 250,000
Cash payments for dividends 70,000
Cash payments for taxes 140,000
Cash payments for purchase land 280,000

What is the net cash provided (used) from financing activities?

a. 1,530,000 c. 1,880,000
b. 1,670,000 d. 1,950,000

34. Using the information given below, determine the cash provided by operating activities
during 2016 under indirect method. Net income during 2016 is P648,000:
12.31.15 12.31.16
Accrued interest payable recognized P 40,000 P 50,000
Depreciation expense recognized 72,800 75,600
Prepaid expense recognized 3,100 4,940
a. 637,040 c. 731,760
b. 637,080 d. 735,440

35. The net income for the year ended December 31, 2016 for Knot Corporation was
P3,520,000. Additional data follow:
Purchases of plant assets P2,800,000
Depreciation of plant assets 1,480,000
Dividends declared on plant assets 970,000
Net decrease in non-cash current assets 290,000
Loss on sale of equipment 130,000
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What should be the cash provided from operating activities in Knot’s statement of cash
flows for the year ended December 31, 2016?
a. 5,130,000 c. 5,420,000
b. 5,290,000 d. 7,250,000

36. The net income for the year ended December 31, 2016 for Dwarf Company was
P1,800,000. Additional information follow:
Depreciation on plant assets P900,000
Depreciation on leasehold improvements 510,000
Provision for doubtful account on short-term receivables 180,000
Provision for doubtful account on long-term receivables 150,000
Interest paid on short-term borrowings 120,000
Interest paid on long-term borrowings 90,000
Based on the information given, what should be the net cash provided by operating
activities in the statement of cash flows for the year ended December 31, 2016?
a. 3,390,000 c. 3,540,000
b. 3,510,000 d. 3,750,000

37. The net cash provided by operating activities in Brand Company’s statement of cash flows
for 2016 was P770,000. For 2016, depreciation of plant assets was P300,000, impairment
of goodwill was P50,000 and cash dividends paid on ordinary share was P360,000. Based
only on the information given above, how much is Brand’s 2016 net income?
a. 60,000 c. 770,000
b. 420,000 d. 780,000

38. During 2016, Search Company which uses the allowance method of accounting for
doubtful accounts, recorded a provision for doubtful accounts expense of P30,000 and in
addition, it wrote off as uncollectible accounts receivable of P12,000. As a result of these
transactions, net cash flow from operating activities would be calculated by adjusting net
income with a (an):
a. 12,000 increase c. 18,000 increase
b. 18,000 decrease d. 30,000 decrease

39. The following information is available about the transactions of Mortal Company for the
year ended December 31, 2016:
Depreciation P 880,000
Cash paid for expenses 2,270,000
Increase in inventories 370,000
Cash paid to employees 2,820,000
Decrease in receivables 280,000
Cash paid to suppliers 4,940,000
Decrease in payables 390,000
Cash received from customers 12,800,000
Net profit before taxation 2 ,370,000
Mortal Company has no interest payable or investment income. How much is the net cash
flows from operating activities using the indirect approach?
a. 2,270,000 c. 3,250,000
b. 2,770,000 d. 3,730,000

40. Option Corporation sold some of its plant assets during 2016. The original cost of the plant
assets was P600,000 and the accumulated depreciation at the date of sale was P560,000.
The proceeds from the sale of the plant assets were P85,000. The information concerning
the sale of the plant assets should shown on Option’s statement of cash flows (indirect
method) for the year ended December 31, 2016 as:
a. A subtraction from net income of P45,000 and a P40,000 increase in cash flow from
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financing activities
b. An addition to net income fo P45,000 and an P85,000 increase in cash flow from
investing activities
c. A subtraction from net income of P45,000 and an P85,000 increase in cash flow from
investing activities
d. An addition of P85,000 to net income

41. In 2016, a typhoon completely destroyed a building belonging to Carpet Corporation. The
building cost P2,500,000 and had accumulated depreciation of P1,200,000 at the time of
the loss. Carpet received a cash settlement from the insurance company and reported a
loss of P525,000. In Carpet’s 2016 cash flow statement, how much would be the net
changes that would be reported in the cash flows from investing activities section?
a. 250,000 increase c. 775,000 increase
b. 525,000 increase d. 1,300,000 increase

42. Groovy Corporation provided the following information on selected transactions during
2016: Purchase of land by issuing bonds, P400,000; proceeds from issuing bonds,
P800,000; purchases of inventories, P1,520,000; purchases of treasury shares, P240,000;
loans made to affiliated corporations, P560,000; dividends paid to preference
shareholders, P160,000; proceeds from issuing preference share, P640,000; and proceeds
from sale of equipment, P80,000. How much would be the net cash provided (used by
investing activities during 2016?
a. (480,000) c. (880,000)
b. 80,000 d. (2,000,000)

43. The balance in accumulated profits and losses at December 31, 2015 was P720,000 and at
December 31, 2016 was P582,000. Net income for 2016 was P500,000. A stock dividend
was declared and distributed which increased ordinary share by P200,000 and share
premium by P110,000. A cash dividend was declared and paid. What is the amount of cash
dividends being declared and paid?
a. 248,000 c. 442,000
b. 328,000 d. 638,000

44. During 2016, Brownies Company had the following activities related to its financial
operations:
Payment for the early retirement of long-term bond
payable (carrying value, P1,110,000) P1,125,000
Distribution in 2016 of cash dividends declared in
2015 to preference shareholders 93,000
Carrying value of convertible preference share
converted into ordinary share 180,000
Proceeds from sale of treasury share (carrying value
at cost, (P129,000) 142,500
In Brownies Company’s 2016 statement of cash flows, how much net cash used in
financing activities should be shown?
a. 802,500 c. 1,074,000
b. 895,500 d. (1,075,500)

45. The following information is available about the transactions of Mortal Company for the
year ended December 31, 2016:
Depreciation P 880,000
Cash paid for expenses 2,270,000
Increase in inventories 370,000
Cash paid to employees 2,820,000
Decrease in receivables 280,000
Cash paid to suppliers 4,940,000
Decrease in payables 390,000
Cash received from customers 12,800,000
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Net profit before taxation 2 ,370,000

Mortal Company has no interest payable or investment income. How much is the net cash
flows from operating activities using the direct approach?
a. 2,270,000 c. 3,250,000
b. 2,770,000 d. 3,730,000

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