Professional Documents
Culture Documents
Matching Questions
17. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms.
Match each phrase with the correct term by placing the letter designating the best term in the space provided by
the phrase.
18. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms.
Match each phrase with the correct term by placing the letter designating the best term in the space provided by
the phrase.
Reports operating, investing, and financing
1. Balance sheet activities.
Records internal transactions not previously
2. Adjusting entries reported.
3. Expenses Portrays financial position at a point in time.
4. Statement of cash Represents outflows of resources incurred to
flows generate revenues.
5. Post-closing trial
balance The last step in the accounting processing cycle.
19. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms.
Match each phrase with the correct term by placing the letter designating the best term in the space provided by
the phrase.
Recorded when there are dispositions of assets for
1. Periodic consideration in excess of book
system values.
Recorded when there are dispositions of assets for
2. Prepayments consideration less than book values.
3. Perpetual Requires adjusting entries to update the inventory
system account.
Requires entries to cost of goods sold account when
4. Losses merchandise is sold.
When cash flow precedes either expense or revenue
5. Gains recognition.
20. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms.
Match each phrase with the correct term by placing the letter designating the best term in the space provided by
the phrase.
1. General ledger Refers to the right side of an account.
Asset and expense accounts normally have this type of
2. Credit balance.
3. General Used to record any type of transaction in chronological
journal order.
4. Debit Contains all the accounts of an entity.
5. Closing entries Used to reset temporary accounts to a zero balance.
21. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms.
Match each phrase with the correct term by placing the letter designating the best term in the space provided by
the phrase.
1. Liabilities Transfer balances from journals to ledgers.
2. Retained Record chronologically the effects of transactions in
earnings debit/credit form.
3. Journalize Refers to nonowners' claims against the assets of a firm.
Represents the cumulative amount of net income, less
4. Post distributions to shareholders.
5. Special
journals Used to record repetitive types of transactions.
22. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms.
Match each phrase with the correct term by placing the letter designating the best term in the space provided by
the phrase.
23. Listed below are ten terms followed by a list of phrases that describe or characterize the terms. Match each
phrase with the correct term by placing the letter designating the best term in the space provided by the phrase.
1. Unadjusted trial Refers to inflows of assets from the sale of goods
balance and services.
2. Accrued receivables Records the effects of internal transactions.
Cash received from a customer in advance of
3. Unearned revenues providing a good or service.
4. Temporary accounts Last step in the accounting processing cycle.
Changes in the retained earnings component of
5. Accrued liabilities shareholders' equity.
6. Adjusting entries Collection of storage areas, called accounts.
Asset recorded when an expense is paid for in
7. Prepaid Expense advance.
8. General ledger Revenue earned before cash is received.
A list of the general ledger accounts and their
9. Revenues balances.
10. Post-closing trial
balance Expenses incurred but not yet paid.
Multiple Choice Questions
24. The accounting equation can be stated as:
A. A + L-OE = 0.
B. A-L + OE = 0.
C. -A + L-OE = 0.
D. A-L-OE = 0.
30. Mary Parker Co. invested P15,000 in ABC Corporation and received capital stock in exchange. Mary Parker
Co.'s journal entry to record this transaction would include a:
A. Debit to investments.
B. Credit to retained earnings.
C. Credit to capital stock.
D. Debit to expense.
31. Hughes Aircraft sold a four-passenger airplane for P380,000, receiving a P50,000 down payment and a
12% note for the balance. The journal entry to record this sale would include a:
A. Credit to cash.
B. Debit to cash discount.
C. Debit to note receivable.
D. Credit to note receivable.
32. Somerset Leasing received P12,000 for 24 months rent in advance. How should Somerset record this
transaction?
A. Option A
B. Option B
C. Option C
D. Option D
33. Davis Hardware Company uses a perpetual inventory system. How should Davis record the sale of
merchandise, costing P620, and sold for P960 on account?
A. Option A
B. Option B
C. Option C
D. Option D
34. Ace Bonding Company purchased merchandise inventory on account. The inventory costs P2,000 and is
expected to sell for P3,000. How should Ace record the purchase?
A. Option A
B. Option B
C. Option C
D. Option D
35. Which of the following accounts has a debit balance?
A. Accounts payable.
B. Accrued taxes.
C. Accumulated depreciation.
D. Bad debt expense.
38. Recording revenue earned from a customer, but not yet collected, is an example of:
A. A prepaid expense transaction.
B. An unearned revenue transaction.
C. An accrued liability transaction.
D. An accrued receivable transaction.
40. On December 31, 2011, Coolwear, Inc. had balances in its accounts receivable and allowance for
uncollectible accounts of P48,400 and P0, respectively. No receivables were written off during the year. At the
end of 2011, Coolwear estimated that P2,100 in receivables would not be collected. Bad debt expense for 2011
would be:
A. P0.
B. P46,300.
C. P1,050.
D. P2,100.
Bad debt expense = estimated bad debts = P2,100
44. On December 31, 2011, the end of Larry's Used Cars first year of operations, the accounts receivable was
P53,600. The company estimates that P1,200 of the year-end receivables will not be collected. Accounts
receivable in the 2011 balance sheet will be valued at:
A. P53,600.
B. P54,800.
C. P52,400.
D. P1,200.
45. Cal Farms reported supplies expense of P2,000,000 this year. The supplies account decreased by P200,000
during the year to an ending balance of P400,000. What was the cost of supplies the Cal Farms purchased
during the year?
A. P1,600,000.
B. P1,800,000.
C. P2,200,000.
D. P2,400,000.
A. Option A
B. Option B
C. Option C
D. Option D
47. The adjusting entry required when amounts previously recorded as unearned revenues are earned includes:
A. A debit to a liability.
B. A debit to an asset.
C. A credit to a liability.
D. A credit to an asset.
49. When a tenant makes an end-of-period adjusting entry credit to the "Prepaid rent" account:
A. (S)he usually debits cash.
B. (S)he usually debits an expense account.
C. (S)he debits a liability account.
D. (S)he does none of the above.
50. When a business makes an end-of-period adjusting entry with a debit to supplies expense, the usual credit
entry is made to:
A. Accounts payable.
B. Supplies.
C. Cash.
D. Retained earnings.
52. Carolina Mills purchased P270,000 in supplies this year. The supplies account increased by P10,000 during
the year to an ending balance of P66,000. What was supplies expense for Carolina Mills during the year?
A. P300,000.
B. P280,000.
C. P260,000.
D. P240,000.
53. Yummy Foods purchased a two-year fire and extended coverage insurance policy on August 1, 2011, and
charged the P4,200 premium to Insurance expense. At its December 31, 2011, year-end, Yummy Foods would
record which of the following adjusting entries?
A. Option A
B. Option B
C. Option C
D. Option D
54. The employees of Neat Clothes work Monday through Friday. Every other Friday the company issues
payroll checks totaling P32,000. The current pay period ends on Friday, July 3. Neat Clothes is now preparing
quarterly financial statements for the three months ended June 30. What is the adjusting entry to record accrued
salaries at the end of June?
A. Option A
B. Option B
C. Option C
D. Option D
55. On September 1, 2011, Fortune Magazine sold 600 one-year subscriptions for P81 each. The total amount
received was credited to unearned subscriptions revenue. What would be the required adjusting entry at
December 31, 2011?
A. Option A
B. Option B
C. Option C
D. Option D
56. Mama's Pizza Shoppe borrowed P8,000 at 9% interest on May 1, 2011, with principal and interest due on
October 31, 2012. The company's fiscal year ends June 30, 2011. What adjusting entry would the company
record on June 30, 2011?
A. Option A
B. Option B
C. Option C
D. Option D
57. On September 15, 2011, Oliver's Mortuary received a P6,000, nine-month note bearing interest at an annual
rate of 10% from the estate of Jay Hendrix for services rendered. Oliver's has a December 31 year-end. What
adjusting entry would the company record on December 31, 2011?
A. Option A
B. Option B
C. Option C
D. Option D
58. In
its first year of operations Acme Corp. had income before tax of P400,000. Acme made income tax
payments totaling P150,000 during the year and has an income tax rate of 40%. What would be the balance in
income tax payable at the end of the year?
A. P160,000 credit.
B. P150,000 credit.
C. P10,000 credit.
D. P10,000 debit.
59. Eve's Apples opened business on January 1, 2011, and paid for two insurance policies effective that date.
The liability policy was P36,000 for eighteen months, and the crop damage policy was P12,000 for a two-year
term. What was the balance in Eve's prepaid insurance as of December 31, 2011?
A. P9,000.
B. P18,000.
C. P30,000.
D. P48,000.
60. Fink Insurance collected premiums of P18,000,000 from its customers during the current year. The adjusted
balance in the unearned premiums account increased from P6 million to P8 million dollars during the year.
What was Fink's revenue from earned insurance premiums for the current year?
A. P10,000,000.
B. P16,000,000.
C. P18,000,000.
D. P20,000,000.
13. Use I = Increase, D = Decrease, or N = No effect, to indicate the effect on retained earnings for each of the
listed transactions.
dividend).
treasury stock sales.
1. Decrease A net loss for the year. 1
2. Decrease A stock split effected in the form of a stock dividend. 1
A stock split in which the par per share is reduced (but not
3. Decrease effected in the form of a stock 4
4. No effect Declaration of a 5% stock dividend. 1
5. No effect Declaration of a cash dividend. 1
6. No effect Issue stock for noncash assets. 4
7. Decrease Payment of previously declared cash dividend. 4
Retirement of common stock at a cost greater than the original
8. Decrease issue price. 1
Retirement of common stock at a cost less than the original
9. No effect issue price. 4
Resale of treasury stock for less than carrying value assuming
10. Decrease no previous 1
21. Two of the three primary account classifications within shareholders' equity are:
A. Preferred stock and retained earnings.
B. The par value of common stock and retained earnings.
C. Paid-in capital and retained earnings.
D. Preferred and common stock.
The following partial information is taken from the comparative balance sheet of Levi Corporation:
5 million shares were outstanding at this date (9 million were issued, and 4 million shares were in the treasury).
32. What was the average price (rounded to the nearest dollar) of the additional shares issued by Levi in 2011?
A. P5 per share
B. P26 per share
C. P39 per share
D. Cannot be determined from the given information.
33. Whatwas the average price of the additional treasury shares purchased by Levi during 2011?
A. P11 per share
B. P12 per share
C. P12.50 per share
D. None of the above is correct.
34. What was the amount of net income earned by Levi during 2011?
A. P0
B. P40 million
C. P62 million
D. Cannot be determined from the given information.
The increase in retained earnings is a composite of net income and changes due to dividends. You cannot
determine the portion due to net income unless you have information about the dividends.
35. Roberto Corporation was organized on January 1, 2011. The firm was authorized to issue 100,000 shares of
P5 par common stock. During 2011, Roberto had the following transactions relating to shareholders' equity:
Issued 10,000 shares of common stock at P7 per share.
Issued 20,000 shares of common stock at P8 per share.
Reported a net income of P100,000.
Paid dividends of P50,000.
Purchased 3,000 shares of treasury stock at P10 (part of the 20,000 shares issued at P8).
What is total shareholders' equity at the end of 2011?
A. P270,000.
B. P300,000.
C. P250,000.
D. P200,000.
36. Heidi Aurora Imports issued shares of the company's Class B stock. Heidi Aurora Imports should report the
stock in the company's statement of financial position
A. among liabilities if the shares are mandatorily redeemable or redeemable at the option of the shareholder.
B. as equity unless the shares are mandatorily redeemable.
C. as equity unless the shares are redeemable at the option of the issuer.
D. among liabilities unless the shares are mandatorily redeemable.
37. The changes in account balances for Elder Company for 2011 are as follows:
Assuming the only changes in retained earnings in 2011 were for net income and a P50,000 dividend, what was
net income for 2011?
A. P40,000.
B. P60,000.
C. P70,000.
D. P90,000.
38. The changes in account balances for Allen Inc. for 2011 are as follows:
Assuming the only changes in retained earnings in 2011 were for net income and a P25,000 dividend, what was
net income for 2011?
A. P30,000
B. P20,000
C. P15,000
D. P5,000
During 2012, half of the treasury stock was resold for P240,000; net income was P600,000; cash dividends
declared were P1,500,000; and stock dividends declared were P500,000.
41. The 2012 sale of half of the treasury stock would:
A. Reduce income before tax by P60,000.
B. Reduce retained earnings by P60,000.
C. Increase total shareholders' equity by P300,000.
D. Decrease retained earnings by P40,000.
BlackEnterprises reported the following (P in 000s) as of December 31, 2011. All accounts have normal
balances.
During 2012 (P in 000s), net income was P9,000; 25% of the treasury stock was resold for P450; cash dividends
declared were P600; cash dividends paid were P500; and all of the stock options expired.
48. Characteristics of the corporate form that have led to the growth of this form of business ownership include
all of the following except:
A. Ease of raising capital.
B. Low government regulation.
C. Limited liability.
D. Ease of ownership transfer.
56. Share issue costs refer to the costs of obtaining the legal, promotional, and accounting services necessary to
effect the sale of shares. The costs reduce the net cash proceeds from selling the shares and thus paid-in capital -
excess of par, and are:
A. not recorded separately.
B. recorded as an asset.
C. recorded as a liability.
D. amortized over time.
57. When stock is issued in exchange for property, the best evidence of fair value might be any of the following
except:
A. The appraised value of the property received.
B. The selling price of the stock in a recent transaction.
C. The price of the stock quoted on the stock exchange.
D. The average book value of outstanding stock.
58. When more than one security is sold for a single price and the total selling price is not equal to the sum of
the market prices, the cash received is allocated between the securities based on:
A. Relative book values.
B. Par values.
C. Relative market values.
D. The earnings per share.
59. The owners of a corporation are its shareholders. If a corporation has only one class of shares, they typically
are labeled common shares. Each of the following are ownership rights held by common shareholders, unless
specifically withheld by agreement except:
A. The right to vote on policy issues.
B. The right to share in profits when dividends are declared (in proportion to the percentage of shares owned by
the shareholder).
C. The right to dividends equal to a stated rate time par value (if dividends are paid).
D. The right to share in the distribution of any assets remaining at liquidation after other claims are satisfied.
60. In January, 2011, Despot recorded a transaction with this journal entry:
The transaction was for the:
A. Issue of 2 million shares of common stock at par value.
B. Issue of common stock for P150 million in cash.
C. Receipt of P20 per share for a new stock issue.
D. All of the above are correct.
61. In February, 2011, Despot declared cash dividends of P12 million to be paid in April of that year. What
effect did the April transaction have on Despot's accounts?
A. Decreased assets and liabilities.
B. Decreased assets and shareholders' equity.
C. Increased liabilities and decreased shareholders' equity.
D. None of the above is correct.
62. Despot declared a property dividend to give marketable securities to its common stockholders. The
securities had cost Despot P7 million and currently have a fair value of P16 million. Which of the following
would be included in recording the property dividend declaration?
A. Increase in a liability for P16 million.
B. Decrease in retained earnings for P7 million.
C. Decrease in marketable securities by P16 million.
D. All of the above are correct.
63. The shareholders' equity of Green Corporation includes P200,000 of P1 par common stock and P400,000 of
6% cumulative preferred stock. The board of directors of Green declared cash dividends of P50,000 in 2011
after paying P20,000 cash dividends in each of 2010 and 2009. What is the amount of dividends common
shareholders will receive in 2011?
A. P18,000.
B. P26,000.
C. P28,000.
D. P32,000.
Green's common shareholders' will receive dividends of P18,000 as a result of the 2011 distribution.
65. Rick Co. had 30 million shares of P1 par common stock outstanding at January 1, 2011. In October, 2011,
Rick Co.'s Board of Directors declared and distributed a 1% common stock dividend when the market value of
its common stock was P60 per share. In recording this transaction, Rick would:
A. Debit retained earnings for P18 million.
B. Credit paid-in capital - excess of par for P18 million.
C. Credit common stock for P18 million.
D. None of the above is correct.
68. Olsson Corporation received a check from its underwriters for P72 million. This was for the issue of one
million of its P5 par stock that the underwriters expect to sell for P52 per share. Which is the correct entry to
record the issue of the stock?
A. Option a
B. Option b
C. Option c
D. Option d
69. Montgomery & Co., a well established law firm, provided 500 hours of its time to Fink Corporation in
exchange for 1,000 shares of Fink's P5 par common stock. Mitchell's usual billing rate is P700 per hour, and
Fink's stock has a book value of P250 per share. By what amount will Fink's Paid-in capital - excess of par
increase for this transaction?
A. P345,000.
B. P295,000.
C. P350,000.
D. P300,000.
70. In 2009, Winn, Inc. issued P1 par value common stock for P35 per share. No other common stock
transactions occurred until July 31, 2011, when Winn acquired some of the issued shares for P30 per share and
retired them. Which of the following statements correctly states an effect of this acquisition and retirement?
A. 2011 net income is decreased.
B. Additional paid-in capital is decreased.
C. 2011 net income is increased.
D. Retained earnings is increased.
The entries to record the stock issuance and subsequent acquisition and retirement (per share) are as follows:
The net result is a decrease in additional paid-in capital of P29 per share retired.
72. Coy, Inc. initially issued 200,000 shares of P1 par value stock for P1,000,000 in 2009. In 2010, the company
repurchased 20,000 shares for P200,000. In 2011, 10,000 of the repurchased shares were resold for P160,000. In
its balance sheet dated December 31, 2011, Coy, Inc.'s treasury stock account shows a balance of:
A. P0.
B. P40,000.
C. P100,000.
D. P200,000.
A treasury stock account is created when a company reacquires its own stock as treasury stock. The full
purchase price (cost) is debited to Treasury Stock. When treasury stock is sold, the Treasury Stock account is
credited for the cost per share, with an additional credit to Paid-in Capital, Treasury Stock (or Paid-in Capital -
Repurchased Shares), if the sale price exceeds the reacquisition price. The 2010 repurchase is accounted for
with a debit to Treasury Stock for P200,000. When half of the treasury stock is resold, P100,000 is credited to
Treasury Stock and P60,000 is credited to Paid-In Capital, Treasury Stock. The balance in the Treasury Stock
account is (P200,000 - P100,000 = ) P100,000.
74. When treasury shares are resold at a price below cost:
A. Paid-in capital and/or retained earnings is reduced.
B. Paid-in capital and/or retained earnings is increased.
C. Retained earnings is always reduced.
D. A loss is taken on the income statement.
75. When treasury stock is purchased for an amount greater than its par value, what is the effect on total
shareholders' equity?
A. Increase.
B. Decrease.
C. No effect.
D. Cannot tell from the given information.
79. The retained earnings balance reported in the balance sheet typically is not affected by:
A. Net income.
B. A prior period adjustment.
C. Dividends paid.
D. Restrictions.
80. Boxer Company owned 20,000 shares of King Company that were purchased in 2009 for P500,000. On
May 1, 2011, Boxer declared a property dividend of 1 share of King for every 10 shares of Boxer stock. On that
date, there were 50,000 shares of Boxer stock outstanding. The market value of the King stock was P30 per
share on the date of declaration and P32 per share on the date of distribution. By how much is retained earnings
reduced by the property dividend?
A. P0.
B. P150,000.
C. P160,000.
D. P300,000.
81. On October 1, 2011, Chief Corporation declared and issued a 10% stock dividend. Prior to this date, Chief
had 80,000 shares of P5 par common stock outstanding. The market value of Chief Corporation on the date of
declaration was P10 per share. As a result of this dividend, Chief's retained earnings will:
A. Decrease by P80,000.
B. Not change.
C. Decrease by P40,000.
D. Increase by P80,000.
82. Preferred stock is called preferred because it usually has two preferences. These preferences relate to:
A. Dividends and voting rights.
B. Par value and dividends.
C. The preemptive right and voting rights.
D. Assets at liquidation and dividends.
86. Which of the following statements is true when dividends are not declared or paid on cumulative preferred
stock?
A. The shareholders must be allowed to convert their shares to common stock.
B. The unpaid dividends are accrued as a liability.
C. The unpaid dividends are reported in a note to the financial statements.
D. The unpaid dividends accrue interest until paid.
89. When a property dividend is declared, the property to be distributed should be revalued to fair value as of
the:
A. Record date.
B. Date of distribution.
C. Date of declaration.
D. Announcement date.
91. Pug Corporation has 10,000 shares of P10 par common stock outstanding and 20,000 shares of P100 par,
6% noncumulative, nonparticipating preferred stock outstanding. Dividends have not been paid for the past two
years. This year, a P150,000 dividend will be paid. What are the dividends per share for preferred and common,
respectively?
A. P7.50; P0.
B. P6; P3.
C. P6; P1.50.
D. None of the above is correct.
Preferred: P6 per share x 20,000 = P120,000; P120,000 / 20,000 shares = P6 per share
Common: (P150,000 - P120,000)/10,000 = P3 per share
92. Beagle Corporation has 20,000 shares of P10 par common stock outstanding and 10,000 shares of P100 par,
6% cumulative, nonparticipating preferred stock outstanding. Dividends have not been paid for the past two
years. This year, a P300,000 dividend will be paid. What are the dividends per share payable to preferred and
common, respectively?
A. P6; P12.
B. P18; P6.
C. P6; P6.
D. None of the above is correct.
93. On January 1, 2011, the board of directors of Goby Inc. declared a P540,000 dividend. The following data
are from the balance sheet of Goby on that date:
How much is the liquidating dividend?
A. P140,000
B. P240,000
C. P290,000
D. None of the above is correct.
94. ABC declared a property dividend. The dividend consisted of 10,000 common shares of its investment in
XYZ Company. The shares had originally been purchased at P4 per share and had a P1 par value. The value of
the shares on the declaration date is P7 per share. What is the first entry that should be recorded related to this
dividend?
A. Option A
B. Option B
C. Option C
D. Option D
95. The board of directors of Capstone Inc. declared a P0.60 per share cash dividend on its P1 par common
stock. On the date of declaration, there were 50,000 shares authorized, 20,000 shares issued, and 5,000 shares
held as treasury stock. What is the entry for the dividend declaration?
A. Option A
B. Option B
C. Option C
D. Option D