ACCTG 12 PREMIDTERM EXAM

General Instructions: Read each requirement carefully.

Use the google form as an answer sheet.
Computations/explanations should be submitted to
https://www.facebook.com/michaelangelo.mateo.50 (Messenger) on or
before 12:00 PM.

NO CHEATING! PRACTICE INTEGRITY AND HONESTY.

Part I. Multiple Choice Questions. Choose the letter of your best choice. Provide necessary
computations/solutions.

1. Which of the following may be reversed in the next accounting reporting period?
A. An adjusting entry to adjust the unearned income account for the earned portion of
advance collections during the year.
B. An adjusting entry to record bad debts expense on accounts receivables.
C. An adjusting entry to record depreciation expense
D. An adjusting entry to take up the unexpired portion of prepayments during the year

2. If an entity uses the income method of initial recording of income, the year-end adjusting
entry involves
A. crediting an income account for the earned portion of the advance payment received
B. debiting a liability account for the earned portion of the advance payment received
C. debiting an income account for the earned portion of the advance payment received
D. crediting a liability account for the unearned portion of the advance payment received

3. What is the proper arrangement of the following steps in the accounting cycle?
I. Preparing the adjusting entries
II. Closing the books
III. Posting
IV. Preparing the reversing entries
V. Preparing the financial statements (worksheet preparation)
A. I, II, III, IV, V
B. I, III, V, II, lV
C. III, I, V, II, IV
D. III, I, II, V, II, IV

4. Which of the following is NOT an optional step in the accounting cycle?

(1) Posting to ledgers.
(2) Closing entries
(3) Reversing entries
A. 3
B. 1 and 2
C. 2 and 3
D. 3 only
E. 2 and 3

5. The normal balance of an account is on the

A. Debit side of the account
 B. Credit side of the account
C. Side represented by increases in the account balance
D. Side represented by decreases in the account balance

6. This concept views each transaction as having a two-fold effect on values - a value received
and a value parted Q with, and each transaction is recorded using at least two accounts.
A. Equilibrium
B. Duality
C. Double-entry.
D. Twins concept

7. Which of the following is a real account?

(1) Depreciation expense
(2) Unearned income
(3) Sales
(4) Accrued expense
A. 1 and 4
B. 2 and 4
C. 1, 3 and 4
D. 4 only
E. 3 and 4

8. Which of the following errors may be revealed by a trial balance?

A. A debit to salaries expense was posted in the ledger as debit to insurance expense.
B. Expense already incurred was not recorded
C. The debit and credit posting of a credit sale were omitted
D. The credit posting of a payment of account payable was omitted

9. Which of the following errors will cause an imbalance in the trial balance?
A. Omission of a transaction in the journal.
B. Posting an entire journal entry twice to the ledger.
C. Posting a credit to accounts payable as a credit to accounts receivable.
D. Listing the balance of an account with a debit balance in the credit column of the trial
balance.

10. Which of the following statements is false regarding adjusting entries?

A. Adjusting entries involve accruals or deferrals.
B. Cash is neither debited nor credited as a result of adjusting entries.
C. Each adjusting entry affects one revenue account and one expense account
D. Each adjusting entry affects one statement of financial position account and one income
statement account.

11. The balancing figure in the worksheet is net loss if

A. The total of the credits exceeds the total of the debits in the income statement columns.
B. The total of the credits is the same as the total of the debits in the income statement
columns.
C. In the statement of financial position columns, the total of the debits exceeds the total of
the credits
D. In the statement of financial position columns, the total of the credits exceeds the total of
the debits.

12. Olive V Traders purchased merchandise from San Jose suppliers for P3, 600 list price,
subject to a trade discount of 25%. The goods were purchased on terms of 2/10, n/30, FOB

2
 destination. V paid P100 transportation costs. V returned P400 (list price) of the merchandise
to San Jose and later paid the amount due within the discount period. The amount paid is

a. P2, 254
b. P2, 252
c. P2, 246
d. P2, 352

13. The periodic inventory system is used most commonly by companies that sell
a. Low-priced, high volume merchandise
b. Low-priced, low volume merchandise
c. High-priced, low volume merchandise
d. High-priced, high volume merchandise

Use the following information to answer question 14-15 below:

Account name Debit Credit

Sales P750, 000

Sales returns and allowances P15, 000
Sales discounts 10,000
Purchases 170,000
Purchases returns and allowances 20,000
Freight in 30,000
Selling expenses 75,000
General and administrative expenses 275,000

In addition, beginning merchandise inventory was P55, 000 and ending merchandise
inventory was P35, 000.

14. Cost of goods sold for the period was

a. P235, 000
b. P160, 000
c. P200, 000
d. P170, 000

15. Profit for the period was

a. P525, 000
b. P450, 000
c. P250, 000
d. P175, 000

16. In the absence of partnership profit agreement to the contrary, how shall industrial partner
share in partnership's profit?
A. Equal to the share of the least capitalist partner
B. Equal to the share of the highest capitalist partner
C. Just and equitable share
D. Equal to the average share capitalist partners

3
 17. In the absence of partnership profit agreement to the contrary, how shall the remaining
partnership's profit be distributed to the capitalist partners after distributing the share of
industrial partner?
A. Based on capital contribution ratio
B. Based on loss agreement ratio
C. Equally
D. Equal to share of industrial partner

18. In the absence of partnership loss agreement to the contrary, how shall industrial partner
share in partnership's loss?
A. Equal to the share of the least capitalist partner
B. Based on profit agreement ratio
C. Just and equitable share
D. None

19. In the absence of partnership loss agreement to the contrary, how shall capitalist partners
share in partnership's loss?
A. Based on capital contribution ratio
B. Based on profit agreement ratio
C. Just and equitable share
D. Equally

20. Which of the following transactions will decrease the capital balance of a partner?
A. Additional investment by said partner
B. Share in partnership's profit
C. Drawings by said partner
D. Answer not given

For the year ended December 31, 2021, Gels, David, and Nuki partnership has a net income of
P2,000,000. As of December 31, 2021, the capital balances of Gels, David, and Nuki are
P400,000, P1,000,000 and P600,000, respectively. The partners divide profits as follows:
• Quarterly salary of P10,000, P20,000 and P60,000
• 20% interest on ending capital
• 25% bonus to Gels on net income after bonus
• The remainder profits to be divided in the ratio of 2:3:5, respectively.
21. What is the share in net profit by Gels for the year 2021?
A. 688,000
B. 768,000
C. 980,000
D. 578,000

22. On January 1, 2021, Harry, Ron, and Hermione formed a partnership through a respective
capital contribution of P2,000,000, P3,000,000 and P4,000,000 with profit or loss ratio of
5:3:2. During the year, Harry, Ron, and Hermione made additional respective investment of
P500,000, P300,000 and P200,000. Before the end of the year, Harry made withdrawals of
P300,000. On December 31, 2021, the capital balances of Harry, Ron, and Hermione are
reported at P2,000,000, P2,500,000 and P3,100,000, respectively.
How much is the withdrawal made Hermione respectively, during 2021?
A. 300,000
B. 1,100,000
C. 80,000

4
 D. 600,000

23. Two individuals who were previously sole proprietors formed a partnership. Property other
than cash which is part of the initial investment in the partnership would be recorded for
financial accounting purposes at the

a. Proprietors’ book values or the fair value of the property at the date of the
investment, whichever is higher.
b. Proprietors’ book values or the fair value of the property at the date of the
investment, whichever is lower.
c. Proprietors’ book values of the property at the date of the investment.
d. Fair value of the property at the date of the investment.

On April 30, 2021, Bautista, Jimenez and Laxamana formed a partnership by

combining their separate business proprietorships. Bautista contributed cash of P100,000.
Jimenez contributed property with a carrying amount of P72,000, original cost of
P80,000, and fair value of P160,000. The partnership accepted responsibility for the
P70,000 mortgage attached to the property. Laxamana contributed equipment with a
carrying amount of P60,000, original cost of P150,000, and fair value of 110,000. The
partnership agreement specifies that profits and losses are to be shared equally but is
silent regarding capital contributions.

24. Which partner has the largest capital account balance as of April 30, 2021?

a. Bautista c. Laxamana
b. Jimenez d. All capital account balances are equal

On March 1, 2021, Z Roxas and B. Solomon decided to combine their business and
form a partnership. The balance sheet of Roxas and Solomon on March 1, before
adjustment is presented below.
Roxas Solomon

Cash P 9,000 P 3,750

Accounts Receivable 18,500 13,500
Inventories 30,000 19,500
Furniture and fixtures (net) 30,000 9,000
Office Equipment (net) 11,500 2,750
Prepaid Expenses 6,375 3,000
P105,375 P51,500

Accounts Payable P 45,750 P 18,000

Z. Roxas, Capital 59,625
B. Solomon, Capital 33,500
P105,375 P 51,500

They agreed to provide 3% for doubtful accounts on their accounts receivable and
found Solomon’s furniture to be underdepreciated by P900.

5
25. The capital accounts of Roxas and Solomon would be:

a. P58,170 and P33,095 respectively

b. P58,320 and P32,945 respectively
c. P59,070 and P32,195 respectively
d. P104,820 and P50,195 respectively

N. Bruno and A. Carlos are combining their separate businesses to form a

partnership. Cash and noncash assets are to be contributed for a total capital of
P300,000. The noncash assets to be contributed and the liabilities to be assumed are:

Bruno Carlos
BV FMV BV FMV
Accounts receivable P20,000 P20,000
Inventories 30,000 40,000 P 20,000 P25,000
Equipment 60,000 45,000 40,000 50,000
Accounts payable 15,000 15,000 10,000 10,000

The partners’ capital accounts are to be equal after all the contribution of assets and the
assumption of liabilities.

26. The amount of cash to be contributed by Bruno is

a. P150,000 c. P210,000
b. P 60,000 d. P 85,000

27. The total assets of the partnership is

a . P325,000 c. P170,000
b. P180,000 d. P315,000

ABC’s partnership agreed for the following distribution of profit and losses:

 First, Alberto is to receive 10% of the net income up to P1,000,000 and 20% on
the amount in excess thereof;
 Second, Bustamante and Cancio each are to receive 5% of the remaining
income in excess of P1, 500,000 after Alberto’s share as per above; and
 The balance is to be divided equally among the partners.

For the year just ended, the partnership realized a net income of P2,500,000 before
distribution to partners.

28. How much is the share of Alberto in the income of the partnership?
a. P1,000,000 c. P1,080,000
b. P1,300,000 d. P1,100,000

G. Rante, E. Dela Cruz and M. Ocampo are partners with average capital balances
in 2021 of P240,000, P120,000, and P80,000 respectively. Partners receive 10% interest

6
 on their average capital balances. Salaries of P60,000 to Rante and P40,000 to Dela Cruz.
The residual profit or loss is divided equally. In 2021, the partnership sustained a P66,000
loss.

29. By what amount should Rante’s capital account change?

a. P14,000 increase c. P70,000 decrease
b. P22,000 decrease d. P84,000 decrease

M. Singson, C. Torralba and A. Verrano are partners in an accounting firm. Their

capital account balances at year-end were: Singson, P50,000; Torralba, P110,000; Verrano,
P50,000. They share profit and losses on a 4:4:2 ratio, after the following terms.

a. Partners Verrano is to receive a bonus of 10% of net income after bonus.

b. Interest of 10% shall be paid on ending capital balances
c. Salaries of P10,000 and P12,000 shall be paid to partners Singson and Verrano
respectively.

30. Assuming a net income of P44,000 for the year, the total profit share of Verrano was:

a. P7,800 c. P20,400
b. P16,800 d. P19,800

Tayag, Unso, and Vidal, a partnership formed on January 1, 2021 had the
following initial investment:

R. Tayag P100,000
J. Unso 150,000
T. Vidal 225,000
The partnership agreement stated that profits and losses are to be shared equally by
the partners after the consideration is made by the following:

 Salaries allowed to partners: P60,000 for Tayag; P48,000 for Unso and P36,000
for Vidal.
 Average partner’s capital balances during the year shall be allowed 10%.

Additional information:
 On June 30, 2021, Tayag, invested an additional P60,000.
 Vidal withdrew P70,000 from the partnership on Sept. 30, 2019.

31. Interest on average capital balances of the partners totaled:

a. P48,750 c. P57,625
b. P53,750 d. P60,625

A. Anton, C. Briones, and C. Camba are partners with average capital balances
during 2021 of P472,500, P238,650, and P162,350 respectively. The partners receive
10% interest on their average capital balances. Salaries of P122,325 to Anton and
P82,625 to Camba. The residual profit or loss is divided equally.

In 2021, the partnership had a net loss of P125,624 before the interest and salaries
to partners.

7
32. By what amount should Anton’s and Camba’s capital account change?

Anton’s capital account Camba’s capital account

a. P40,844 decrease P31,237 decrease
b. P28,358 increase P32,458 increase
c. P29,476 increase P17,536 increase
d. P30,267 increase P40,448 decrease

Capital balance information for 2021 is as follows:

A. Puno B. Quirino C.Romero

Beginning capital balance, Jan.1, 2021 P10,000 P6,000 P40,000
Withdrawal of capital, April 1, 2021 ( 1,000) --- ( 2,000)
Capital investment, July 1, 2021 2,000 4,000 15,000
Withdrawal of capital, Oct. 1, 2021 ( 1,000) ( 2,000)

 Each partner is to receive 10% interest on the weighted average capital

balance.
 Withdrawals are considered to be reduction of capital for purposes of interest
calculations.

33. Average capital balances of the partners totaled:

a. P63,500 c. P56,000
b. P6,350 d. P72,000

34. A 1:3:2 ratio is the same as

a. 10%:30%:20%.
b. 1/10:3/10:2/10.
c. 1/6:1/2:1/3.
d. 20%:50%:30%.

35. Parducho had a P500,000 capital balance for eight months and a P650,000 balance for four
months. Burgos had a P380,000 capital balance for five months and a P500,000 balance for
seven months. How much of the year's P800,000 profit should Parducho receive if profits
and losses are distributed based on the ratio of their average capital balances?
a. P453,200
b. P440,000
c. P387,500
d. P360,000

36. Arzadon, Ballada and Castro are partners. Their contributions are as follows: Arzadon,
P600,000; Ballada, P400,000 and Castro, services. The partners did not agree on how to
divide profits or losses. If there is a loss of P100,000, how should the loss be shared by the
partners?
a. Arzadon, P30,000; Ballada, P20,000 and Castro, P50,000.
b. Arzadon, P35,000; Ballada, P25,000 and Castro, P40,000.
c. Arzadon, P35,000; Ballada, P35,000 and Castro, P30,000.
d. Arzadon, P60,000; Ballada, P40,000 and Castro, nothing.

8
 37. Which of the following distributions would be made last in dividing profits to the partners
when interest on capital balances and salary allowances are involved?
a. Salary allowances.
b. Equally.
c. Specified ratio.
d. Interest on capital balances.

38. Which of the following is not a component of the formula used to distribute profit?
a. After all other allocations, the remainder divided according to the profit and loss sharing
ratio.
b. Salary allowances to the managing partners.
c. Interest on the average capital investments.
d. Interest on notes to partners.

39. Closing entries of a partnership include entries to

a. record distribution of cash to the partners.
b. eliminate the capital accounts and record the distribution of assets to partners to effect
the partnership, termination and liquidation.
c. close income and expense accounts to the income summary account; and then close the
profits or losses to the drawing accounts.
d. close the profits or losses and dividends declared accounts to retained earnings.

40. Opiso, Bombeo and Palatino are partners. Their contributions are as follows: Opiso,
P600,000; Bombeo, P400,000 and Palatino, services. The partners agreed to divide profits
or losses in the following percentages: Opiso, 35%; Bombeo, 25% and Palatino, 40%. if
there is a profit of P100,000, how should the profit be distributed among the partners?
a. Opiso, P35,000; Bombeo, P35,000 and Palatino, P30,000.
b. Opiso, P30,000; Bombeo, P20,000 and Palatino, P50,000.
c. Opiso, P35,000; Bombeo, P25,000 and Palatino, P40,000.
d. Opiso, P60,000; Bombeo, P40,000 and Palatino, nothing.

Part II. TRUE OR FALSE. Answer "AGREE" if the statement is true, otherwise "DISAGREE." If
you disagree, briefly explain why (Write your explanations in a sheet of paper).

1. In a contract of partnership, one or more person bind themselves to contribute

money, property, or industry to a common fund, with the intention of dividing the profit
among themselves.

2. A silent partner takes active part in the business of the partnership and is not known by
outsiders to be a partner.

3. A partner's capital account is credited to reflect assets permanently withdrawn.

4. A limited partnership must have at least one general partner.

5. A partnership may be established for charity.

6. Assets invested in the partnership should be recorded at their cost to the partner.

7. All partnerships have a limited life and assets are co-owned by the partners.

9
8. A disadvantage of partnerships over corporations is the partners' limited liability.

9. There is no income tax imposed on a partnership.

10. A partnership has a juridical personality separate and distinct from that of each of the
partners.

11. A partnership must always have two or more owners.

12. One of the partners in a proposed partnership is a multi-millionaire. The stipulation in the
articles of partnership that this partner shall be excluded from sharing in the profits of the
partnership is valid.

13. A dormant partner is one who does not take active part in the partnership
business though may be known as a partner.

14. A partner usually retains title to assets contributed to a partnership, so that certain
assets may be identified as belonging to a given partner.

15. The basis of valuation for non-cash investment should be at values agreed upon by
the partners.

16. A partnership has limited life because any change in the relationship of the partners
dissolves the partnership.

17. The partners' capital account is debited for the debit balance of the drawing account at the
end of the period.

18. A partner by estoppel is one who is actually not a partner but who represents himself as
one.

19. The partner's capital account is debited for additional investment and credited for his
share in profit.

20. A partnership is created by mere agreement of the partners.

21. A partnership with a capital of less than P3,000 is void if it is unregistered with the
Securities and Exchange Commission.

22. Work or services that may either be personal manual efforts or intellectual may also
contributed to a partnership.

23. Ownership is easily transferred in a partnership.

24. A partnership cannot be established for religious purposes.

25. Partner's drawing accounts have normal balances of credit balances.

26. A partnership should always be constituted in writing.

10
27. A public instrument needs to be executed when immovable property or real rights
are contributed to the partnership.

28. Mutual agency means that each partner has the right to bind the partnership to contracts.

29. As long as the action is within the scope of the partnership, any partner can bind the
partnership.

30. Two or more persons may form a partnership for the exercise of a profession.

31. The use of salaries in the allocation of profit or loss allows for the differences in the
services that partners provide the business.

32. A partnership contract should, be drawn up at the end of each year, prior to distributing
profit to the partners.

33. A stipulation that excludes one or more partners from any share in the profits or losses is
valid.

34. In certain cases when distribution of profits or losses involves salary and interest
allowances, some partners may receive an increase in equity and others may suffer a
decrease.

35. It is possible for a partner's capital account to increase as a result of the allocation of a
loss.

36. Salary and interest allowances are reported in the statement of comprehensive income as
salaries and interest expenses.

37. It is possible to allocate profit or loss to partners based solely on average capital balances.

38. The industrial partner is not liable for losses because he cannot withdraw the work or
labor already done by him.

39. When salary and interest allocations exceed profit, a loss has occurred.

40. Profits or losses are divided equally among the partners unless the partnership agreement
specifies otherwise.

Nothing Follows

11